Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the importance of accumulating wealth, particularly gold and silver, through a favorable balance of trade. This system was prevalent from the 16th to the 18th centuries and significantly influenced European powers' policies, trade practices, and colonial expansion during the English Renaissance.

5 Must Know Facts For Your Next Test

1. Mercantilism promoted government intervention in the economy, advocating for policies that would protect and enhance national economic interests.
2. During this period, European nations established colonies to secure resources and markets for their goods, leading to fierce competition among empires.
3. The belief was that a nation's strength depended on its wealth, leading to policies aimed at limiting imports and maximizing exports.
4. Mercantilism laid the groundwork for modern economic practices, influencing later theories such as capitalism and protectionism.
5. Key figures, like Thomas Mun, were instrumental in articulating mercantilist thought, advocating for trade policies that favored national interests.

Review Questions

• How did mercantilism influence the trade policies of European nations during the English Renaissance?
  • Mercantilism shaped the trade policies of European nations by promoting the idea that accumulating wealth was essential for national strength. Governments sought to enhance their economies through a favorable balance of trade, encouraging exports while restricting imports. This led to protective tariffs and regulations that favored domestic industries, allowing countries to compete aggressively for resources and markets during the English Renaissance.
• Evaluate the role of colonies in the mercantilist system and how this impacted England's economic growth during the Renaissance.
  • Colonies played a crucial role in the mercantilist system by providing raw materials that were not readily available in Europe and serving as markets for manufactured goods. England's colonial expansion allowed it to secure valuable resources such as tobacco, sugar, and cotton, which fueled economic growth. This relationship between colonies and the mother country exemplified the mercantilist principle of using overseas territories to enhance national wealth and power.
• Synthesize how mercantilist thought contributed to later economic theories and practices, particularly capitalism.
  • Mercantilist thought laid foundational ideas that would influence later economic theories, especially capitalism. The emphasis on trade expansion, resource accumulation, and government involvement in economic affairs paved the way for capitalist principles that prioritize market competition and individual entrepreneurship. As nations transitioned from mercantilism to capitalism, many policies shifted from state control towards free-market approaches, demonstrating an evolution in economic thinking sparked by mercantilist practices.

Related terms

Favorable Balance of Trade: A situation in which a country exports more than it imports, leading to a net inflow of wealth.

Colonialism:

The practice of acquiring full or partial political control over another country, often by settling and exploiting its resources.

Bullionism: A subset of mercantilism that focuses specifically on the accumulation of precious metals as a measure of national wealth.