Mercantilism

Definition

Mercantilism is an economic theory and practice that dominated European thought from the 16th to the 18th centuries, emphasizing the role of the state in managing the economy to increase national wealth through a favorable balance of trade. This system prioritized exports over imports and sought to accumulate precious metals like gold and silver, which were seen as essential indicators of a nation’s strength. It also laid the groundwork for colonial expansion, as countries sought to control resources and markets to bolster their economies.

5 Must Know Facts For Your Next Test

1. Mercantilism was a response to the changing economic landscape in Europe during the transition from feudalism to a market economy, reflecting a shift toward state intervention in the economy.
2. Countries under mercantilist policies often engaged in imperial expansion, establishing colonies to access raw materials and create new markets for their finished goods.
3. The mercantilist system fostered intense competition among European powers, leading to conflicts over trade routes, colonies, and resources.
4. Mercantilist ideas influenced the art and culture of the Dutch Golden Age, as wealthy merchants became patrons of artists like Rembrandt and Vermeer, supporting an environment of creativity fueled by economic prosperity.
5. The decline of mercantilism in the late 18th century was partly due to the rise of free market theories, such as those proposed by Adam Smith, who argued against strict government control over trade.

Review Questions

• How did mercantilism influence trade practices during the Dutch Golden Age?
  • During the Dutch Golden Age, mercantilism significantly shaped trade practices as the Dutch Republic established itself as a dominant trading power. The focus on accumulating wealth through exports led to innovations in shipping and trade routes, allowing for greater access to markets across Europe and Asia. The success of Dutch merchants not only boosted the economy but also encouraged artistic patronage, enabling artists like Rembrandt and Vermeer to thrive.
• Analyze how mercantilist policies contributed to the emergence of wealthy merchant classes in Dutch society.
  • Mercantilist policies facilitated the growth of a wealthy merchant class in Dutch society by promoting trade and commerce as means to achieve national prosperity. These policies encouraged merchants to invest in shipping and trading ventures, leading to significant profits. As merchants accumulated wealth, they gained social status and influence, which allowed them to become important patrons of the arts, supporting renowned artists like Vermeer who depicted their prosperous lifestyles in genre paintings.
• Evaluate the impact of mercantilism on cultural developments during the Dutch Golden Age and its legacy in modern economic thought.
  • Mercantilism played a crucial role in cultural developments during the Dutch Golden Age by fostering an environment where wealth from trade allowed for extensive investment in the arts. Artists were supported by affluent patrons who desired to showcase their success through art. This cultural flourishing laid foundations for modern economic thought by highlighting how government policies can influence economic activity. The eventual transition away from mercantilist thinking towards free-market ideologies marks a significant shift in understanding economic principles that continue to inform current economic strategies.

Related terms

Balance of Trade: The difference between the value of a country's exports and imports over a given period, with a favorable balance indicating more exports than imports.

Colonialism: The practice of acquiring and maintaining colonies or territories, often for economic exploitation and resource extraction, linked closely to mercantilist policies.

Navigation Acts: A series of laws passed by England that regulated colonial trade and enabled the mother country to collect duties on goods imported into the colonies, embodying mercantilist principles.