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Mercantilism describes the economic policies of the major European states from the sixteenth to the eighteenth centuries, in a period when rivalries among new national monarchies were increasing along with Europe’s role in world trade. A variety of sixteenth- and seventeenth-century thinkers defined the principles of mercantilist economics.
The sixteenth- and seventeenth-century thinkers who shaped the concept of mercantilism—and the economic policies it instituted in the European states affected by rival monarchies and increasing trade—argued that there was a fixed amount of wealth in the world. Each country should obtain as large a share of this wealth as possible, by active government policies that limited imports and sought to promote exports. High tariffs were an essential part of the mercantilist strategy. Pursuit of colonies played a role as well, while also dictating that the colonies be made insofar as possible a source of raw materials (which would therefore no longer have to be imported from outside the national system). Mercantilist ideas also prompted efforts by the British to reduce the import of manufactured goods from territories like India, in favor of their own production. Mercantilist policies prompted governments to try to set up new manufacturing plants that could both satisfy national needs and provide possible exports. In the absolutism of late-seventeenth-century France, the state undertook some of these ventures directly. Mercantilism also influenced the creation of some of the great state-affiliated commercial ventures, like the East India companies of Britain, Holland, and France, designed to push colonial acquisitions and expand secure sources of supply.
Many states participated in mercantilism because of its military implications: successful acquisition of a larger share of the world’s wealth would enhance the tax base and at the same time weaken competitors. Other states, less aggressive, pursued mercantilism for its presumed economic benefits, as in eighteenth-century Sweden, which actively encouraged exports and set up colonial commercial companies to trade with Africa and the West Indies. Switzerland in the eighteenth century translated mercantilism into government efforts to encourage sheep growing, to reduce dependence on imports of wool. The approach, in other words, had wide applicability and credence in early modern Europe. Mercantilism also related to government efforts to encourage population growth (a larger labor force would contribute to the national economic effort) and to import skilled foreign workers and businessmen.
The most systematic implementation of mercantilism undoubtedly occurred in the seventeenth century under Jean-Baptist Colbert in France, where it resulted in high tariffs, promotion of internal industry, and an effort to reduce internal barriers to trade. Many historians have argued that mercantilist burdens help explain why French economic dynamism began to lag in comparison with Britain, which was also affected by mercantilist thinking but less committed to state regulation. But mercantilism defined key Prussian policies under Frederick the Great and also affected eighteenth-century Austria, where its principles were expressed in the related movement called cameralism. Efforts to enforce mercantilist policies more fully on colonial North America increased tensions between Britain and the colonists after 1763. Mercantilist thinking showed up again in Napoleon’s construction of his Continental System, designed to use tariffs to attack British economic and military power.
Economic theorists began to attack mercantilist assumptions in the mid-eighteenth century, arguing that too much state regulation hurt rather than helped the economy and that the idea of a finite amount of world wealth was false. Debates over mercantilism spurred the rise of laissez-faire or liberal economic thinking. But mercantilist impulses continued to affect European policies, as in a penchant for high tariffs and continued colonialism. Some historians have dubbed the policies of the nineteenth-century decades of imperialism “neo-mercantilist” because of their relationship to older assumptions about state regulation and about the relationship between military and economic competition.
- Cole, C. (1971). French mercantilism. New York: Octagon.
- Crowley, J. F. (1993). The privileges of independence: Neomercantilism and the American Revolution. Baltimore: Johns Hopkins University Press.
- Koehn, N. (1994). The power of commerce: Economy and governance in the first British Empire. Ithaca, NY: Cornell University Press.
- Heckscher, E. (1962). Mercantilism. London: Allen and Unwin.
- Wallerstein, I. (1980). The modern world system: Vol. 2. Mercantilism and the consolidation of the European world economy. New York: Academic Press.
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