Mercantilism

Definition

Mercantilism is an economic theory and practice that emerged in Europe during the late Middle Ages and dominated the early modern period, emphasizing the importance of accumulating wealth through trade and the belief that national strength could be maximized by limiting imports via tariffs and maximizing exports. This system viewed global wealth as static, meaning one nation’s gain was another nation’s loss, leading to competitive colonization and trade policies.

5 Must Know Facts For Your Next Test

1. Mercantilism played a significant role in shaping colonial policies, as nations sought to acquire colonies rich in resources to enhance their wealth and power.
2. The focus on a favorable balance of trade led to intense competition among European powers, prompting conflicts over colonies and trade routes.
3. Joint-stock companies emerged as a financial instrument to fund exploration and colonization under mercantilist ideas, allowing for shared risk and profit.
4. Mercantilist policies often led to tariffs on imported goods, encouraging local production and limiting dependence on foreign markets.
5. Critiques of mercantilism arose during the Enlightenment, with thinkers like Adam Smith arguing for free trade and market economy principles instead.

Review Questions

• How did mercantilism influence European colonial expansion during the early modern period?
  • Mercantilism significantly influenced European colonial expansion by encouraging nations to seek new territories rich in resources that could enhance their wealth. Countries aimed to establish colonies that could provide raw materials while serving as markets for their finished goods. This led to intense competition among European powers for control over strategic territories, fostering an environment ripe for exploration and conflict.
• Analyze the relationship between mercantilism and the rise of joint-stock companies in the context of early modern Europe.
  • The rise of joint-stock companies was closely linked to mercantilism as these organizations provided the necessary capital for exploration and colonization efforts. Under mercantilist principles, countries needed to establish profitable trade routes and colonies, which required substantial financial investment. Joint-stock companies allowed investors to pool resources while sharing risks and profits, facilitating the establishment of overseas ventures that were crucial for national economies operating under mercantilist doctrines.
• Evaluate how mercantilism shaped economic policies in England during the 17th century and its long-term implications on global trade dynamics.
  • Mercantilism shaped economic policies in England during the 17th century through stringent regulations like the Navigation Acts, which prioritized British shipping and restricted foreign competition. This not only strengthened England's economic position but also fostered a sense of national identity rooted in economic self-sufficiency. The long-term implications included established trade monopolies that spurred colonial expansion and eventually laid the groundwork for conflicts over trade practices. Over time, these policies contributed to an evolving global trade dynamic that sparked debates about free trade versus protectionism.

Related terms

Bullionism: An economic doctrine that emphasizes the importance of accumulating precious metals like gold and silver as a measure of national wealth.

Navigation Acts: A series of laws enacted by England that regulated colonial trade and enabled England to collect taxes from its colonies, reflecting mercantilist principles.

Colony: A territory controlled by a foreign power, often established to benefit the home country economically, in line with mercantilist policies.