Mercantilism

Definition

Mercantilism is an economic theory and practice that emphasizes the importance of accumulating wealth, primarily gold and silver, through a positive balance of trade. This system promotes government intervention in the economy to enhance national power and economic strength, which was especially significant during the transition from feudal economies to more centralized state systems in Europe. Mercantilist policies led to increased exploration and colonization as nations sought new resources and markets, and this had lasting effects on urban life and the growth of cities during the Renaissance.

5 Must Know Facts For Your Next Test

1. Mercantilism flourished from the 16th to the 18th centuries, significantly influencing European economies during this period.
2. One key feature of mercantilism was the establishment of monopolies over trade routes and goods, enabling states to control valuable resources.
3. Governments enacted tariffs and trade restrictions to protect their economies and maintain favorable trade balances under mercantilist policies.
4. Colonial expansion was driven by mercantilist goals, as European powers sought to acquire raw materials from colonies while creating markets for their manufactured goods.
5. The decline of mercantilism in the late 18th century gave way to classical economics, which advocated for free trade and limited government intervention in the economy.

Review Questions

• How did mercantilism contribute to the political and economic changes in late medieval Europe?
  • Mercantilism played a crucial role in transforming economies from feudal systems to centralized states by promoting state control over trade and commerce. It encouraged nations to seek self-sufficiency and accumulate wealth through a favorable balance of trade. This shift led to increased government involvement in economic affairs, establishing stronger national identities and enabling states to finance military campaigns and assert power in international relations.
• Discuss the consequences of mercantilist policies on European exploration during the age of discovery.
  • Mercantilist policies were a driving force behind European exploration as nations sought new sources of wealth. The desire for gold, silver, and new markets led countries like Spain, Portugal, France, and England to explore uncharted territories. The establishment of colonies was often justified by the need to secure resources and markets for domestic goods, thus resulting in extensive overseas empires that had significant economic implications for Europe.
• Evaluate the impact of mercantilism on urban life and the growth of cities during the Renaissance.
  • Mercantilism significantly impacted urban life by promoting commerce and trade within cities. As nations adopted mercantilist policies, cities became centers of economic activity where merchants congregated to facilitate trade. This growth fostered an increase in population as people moved to urban areas for jobs related to commerce, manufacturing, and administration. Furthermore, the wealth generated through mercantilist practices contributed to cultural developments during the Renaissance, as cities became hubs for art, science, and intellectual exchange.

Related terms

Protectionism: An economic policy that restricts imports from other countries to protect domestic industries from foreign competition.

Colonialism: The practice of acquiring full or partial control over another country, occupying it with settlers, and exploiting it economically.

Balance of Trade: The difference between a country's exports and imports, which mercantilists aimed to keep positive by maximizing exports and minimizing imports.