Mercantilism

Mercantilism is an economic policy that is designed to maximize the exports and minimize the
imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded
goods to achieve that goal. The policy aims to reduce a possible current account deficit or reach
a current account surplus, and it includes measures aimed at accumulating monetary reserves
by a positive balance of trade, especially of finished goods. Historically, such policies frequently
led to war and motivated colonial expansion.[1] Mercantilist theory varies in sophistication from
one writer to another and has evolved over time.

Seaport at sunset, a French seaport painted by Claude Lorrain in 1639, at the height of mercantilism
It promotes government regulation of a nation's economy for the purpose of augmenting state
power at the expense of rival national powers. High tariffs, especially on manufactured goods,
were almost universally a feature of mercantilist policy.[2] Before it fell into decline, mercantilism
was dominant in modernized parts of Europe and some areas in Africa from the 16th to the 19th
centuries, a period of proto-industrialization.[3] Some commentators argue that it is still
practised in the economies of industrializing countries,[4] in the form of economic
interventionism.[5][6][7][8][9]

With the efforts of supranational organizations such as the World Trade Organization to reduce
tariffs globally, non-tariff barriers to trade have assumed a greater importance in
neomercantilism.

Merchants in Venice

History

Mercantilism became the dominant school of economic thought in Europe throughout the late
Renaissance and the early-modern period (from the 15th to the 18th centuries). Evidence of
mercantilistic practices appeared in early-modern Venice, Genoa, and Pisa regarding control of
the Mediterranean trade in bullion. However, the empiricism of the Renaissance, which first
began to quantify large-scale trade accurately, marked mercantilism's birth as a codified school
of economic theories.[2] The Italian economist and mercantilist Antonio Serra is considered to
have written one of the first treatises on political economy with his 1613 work, A Short Treatise
on the Wealth and Poverty of Nations.[10]
Mercantilism in its simplest form is bullionism, yet mercantilist writers emphasize the circulation
of money and reject hoarding. Their emphasis on monetary metals accords with current ideas
regarding the money supply, such as the stimulative effect of a growing money-supply. Fiat
money and floating exchange rates have since rendered specie concerns irrelevant. In time,
industrial policy supplanted the heavy emphasis on money, accompanied by a shift in focus
from the capacity to carry on wars to promoting general prosperity. Mature neomercantilist
theory recommends selective high tariffs for "infant" industries or the promotion of the mutual
growth of countries through national industrial specialization.

England began the first large-scale and integrative approach to mercantilism during the
Elizabethan Era (1558–1603). An early statement on national balance of trade appeared in
Discourse of the Common Weal of this Realm of England, 1549: "We must always take heed that
we buy no more from strangers than we sell them, for so should we impoverish ourselves and
enrich them."[11] The period featured various but often disjointed efforts by the court of Queen
Elizabeth (r. 1558–1603) to develop a naval and merchant fleet capable of challenging the
Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth
promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the
protection and promotion of English shipping.

Elizabeth's efforts organized national resources sufficiently in the defense of England against
the far larger and more powerful Spanish Empire, and in turn, paved the foundation for
establishing a global empire in the 19th century. Authors noted most for establishing the English
mercantilist system include Gerard de Malynes (fl. 1585–1641) and Thomas Mun (1571–1641),
who first articulated the Elizabethan system (England's Treasure by Foreign Trade or the Balance
of Foreign Trade is the Rule of Our Treasure), which Josiah Child (c. 1630/31–1699) then
developed further. Numerous French authors helped cement French policy around mercantilism
in the 17th century. Jean-Baptiste Colbert (Intendant général, 1661–1665; Contrôleur général
des finances, 1661–1683) best articulated this French mercantilism. French economic policy
liberalized greatly under Napoleon (in power from 1799 to 1814/1815)

Many nations applied the theory, notably France. King Louis XIV (reigned 1643–1715) followed
the guidance of Jean Baptiste Colbert, his Controller-General of Finances from 1665 to 1683. It
was determined that the state should rule in the economic realm as it did in the diplomatic, and
that the interests of the state as identified by the king were superior to those of merchants and
of everyone else. Mercantilist economic policies aimed to build up the state, especially in an age
of incessant warfare, and theorists charged the state with looking for ways to strengthen the
economy and to weaken foreign adversaries.[12]
In Europe, academic belief in mercantilism began to fade in the late-18th century after the East
India Company annexed the Mughal Bengal,[13][14] a major trading nation, and the establishment
of the British India through the activities of the East India Company,[15] in light of the arguments
of Adam Smith (1723–1790) and of the classical economists.[16]
The British Parliament's repeal
of the Corn Laws under Robert Peel in 1846 symbolized the emergence of free trade as an
alternative system.

Theory

Policies

Wars and imperialism

Origins

End of mercantilism

Legacy

See also

Notes

References

Further reading

External links
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Last edited 1 day ago by TartarTorte