Mercantilism was the dominant economic theory and practice in Europe from the 16th to the 18th centuries, particularly during the Age of Exploration and Colonialism. It emphasized national wealth accumulation, particularly through government intervention in trade to maximize exports and minimize imports.
Key Features of Mercantilism:
1. Wealth = Gold & Silver (Bullionism)
- Nations believed that precious metals (gold & silver) were the primary measures of wealth.
- Governments aimed to accumulate bullion through a favorable balance of trade (exporting more than importing).
2. Protectionist Trade Policies
- High tariffs & restrictions on imports to reduce foreign competition.
- Subsidies & monopolies for domestic industries to boost exports.
- Colonial exploitation (e.g., raw materials from colonies sent to the mother country).
3. Government Intervention
- Strong state control over the economy.
- Navigation Acts (e.g., Britain forcing colonies to trade only with the mother country).
4. Zero-Sum Game Mentality
- Mercantilists believed that global wealth was fixed, so one nation’s gain was another’s loss.
Decline of Mercantilism:
- Adam Smith’s The Wealth of Nations (1776) criticized mercantilism, arguing for free trade and market competition (classical economics).
- Industrial Revolution shifted focus to production efficiency rather than just hoarding gold.
Modern Legacy:
Some policies (e.g., tariffs, trade surpluses) still reflect mercantilist ideas (e.g., China’s export-driven growth, U.S.-China trade wars).
