Mercantilism

Mercantilism is a national economic policy that is

designed to maximize the exports, and minimize the
imports, of a nation. These policies aim to reduce a
possible current account deficit or reach a current
account surplus. Mercantilism includes a national
economic policy aimed at accumulating monetary
reserves through a positive balance of trade,
especially of finished goods. Historically, such
policies frequently led to war and also motivated
colonial expansion.[1] Mercantilist theory varies in
sophistication from one writer to another and has
evolved over time.
Seaport at sunrise, a French seaport painted by
Claude Lorrain in 1639, at the height of
Mercantilism was dominant in modernized parts of
mercantilism
Europe from the 16th to the 18th centuries, a period
of proto-industrialization,[2] before falling into
decline, although some commentators argue that it is still practiced in the economies of industrializing
countries,[3] in the form of economic interventionism.[4][5][6][7][8] 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 an almost universal feature of mercantilist policy.[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.

Contents
History
Theory
Policies
France
New France
Great Britain
Other countries
Wars and imperialism Merchants in Venice

Origins
End of mercantilism
Legacy
See also
References
Further reading
 External links

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.[9] 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 (reigned 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. A systematic and
coherent explanation of balance of trade emerged in Thomas Mun's argument England's Treasure by
Forraign Trade or the Balance of our Forraign Trade is The Rule of Our Treasure - written in the 1620s
and published in 1664.[12]

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 Forraign Trade or the Balance of Forraign 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, which was the most important state economically in
Europe at the time. 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.[13]

In Europe, academic belief in mercantilism began to fade in the late-18th century after the British seized
control of the Mughal Bengal,[14][15] a major trading nation, and the establishment of the British India
through the activities of the East India Company,[16] in light of the arguments of Adam Smith (1723-
1790) and of the classical economists.[17] 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
Most of the European economists who wrote between 1500 and 1750 are today generally considered
mercantilists; this term was initially used solely by critics, such as Mirabeau and Smith, but was quickly
adopted by historians. Originally the standard English term was "mercantile system". The word
"mercantilism" was introduced into English from German in the early 19th century.

The bulk of what is commonly called "mercantilist literature" appeared in the 1620s in Great Britain.[18]
Smith saw the English merchant Thomas Mun (1571–1641) as a major creator of the mercantile system,
especially in his posthumously published Treasure by Foreign Trade (1664), which Smith considered the
archetype or manifesto of the movement.[19] Perhaps the last major mercantilist work was James
Steuart's Principles of Political Economy, published in 1767.[18]

Mercantilist literature also extended beyond England. Italy and France produced noted writers of
mercantilist themes, including Italy's Giovanni Botero (1544–1617) and Antonio Serra (1580–?) and, in
France, Jean Bodin and Colbert. Themes also existed in writers from the German historical school from
List, as well as followers of the American system and British free-trade imperialism, thus stretching the
system into the 19th century. However, many British writers, including Mun and Misselden, were
merchants, while many of the writers from other countries were public officials. Beyond mercantilism as
a way of understanding the wealth and power of nations, Mun and Misselden are noted for their
viewpoints on a wide range of economic matters.[20]

The Austrian lawyer and scholar Philipp Wilhelm von Hornick, one of the pioneers of Cameralism,
detailed a nine-point program of what he deemed effective national economy in his Austria Over All, If
She Only Will of 1684, which comprehensively sums up the tenets of mercantilism:[21]

That every little bit of a country's soil be utilized for agriculture, mining or manufacturing.
That all raw materials found in a country be used in domestic manufacture, since finished
goods have a higher value than raw materials.
That a large, working population be encouraged.
That all exports of gold and silver be prohibited and all domestic money be kept in
circulation.
That all imports of foreign goods be discouraged as much as possible.
That where certain imports are indispensable they be obtained at first hand, in exchange for
other domestic goods instead of gold and silver.
That as much as possible, imports be confined to raw materials that can be finished [in the
home country].
That opportunities be constantly sought for selling a country's surplus manufactures to
foreigners, so far as necessary, for gold and silver.
 That no importation be allowed if such goods are sufficiently and suitably supplied at home.
Other than Von Hornick, there were no mercantilist writers presenting an overarching scheme for the
ideal economy, as Adam Smith would later do for classical economics. Rather, each mercantilist writer
tended to focus on a single area of the economy.[22] Only later did non-mercantilist scholars integrate
these "diverse" ideas into what they called mercantilism. Some scholars thus reject the idea of
mercantilism completely, arguing that it gives "a false unity to disparate events". Smith saw the
mercantile system as an enormous conspiracy by manufacturers and merchants against consumers, a
view that has led some authors, especially Robert E. Ekelund and Robert D. Tollison, to call mercantilism
"a rent-seeking society". To a certain extent, mercantilist doctrine itself made a general theory of
economics impossible.[23] Mercantilists viewed the economic system as a zero-sum game, in which any
gain by one party required a loss by another.[24] Thus, any system of policies that benefited one group
would by definition harm the other, and there was no possibility of economics being used to maximize
the commonwealth, or common good.[25] Mercantilists' writings were also generally created to
rationalize particular practices rather than as investigations into the best policies.[26]

Mercantilist domestic policy was more fragmented than its trade policy. While Adam Smith portrayed
mercantilism as supportive of strict controls over the economy, many mercantilists disagreed. The early
modern era was one of letters patent and government-imposed monopolies; some mercantilists supported
these, but others acknowledged the corruption and inefficiency of such systems. Many mercantilists also
realized that the inevitable results of quotas and price ceilings were black markets. One notion that
mercantilists widely agreed upon was the need for economic oppression of the working population;
laborers and farmers were to live at the "margins of subsistence". The goal was to maximize production,
with no concern for consumption. Extra money, free time, and education for the lower classes were seen
to inevitably lead to vice and laziness, and would result in harm to the economy.[27]

The mercantilists saw a large population as a form of wealth that made possible the development of
bigger markets and armies. Opposite to mercantilism was the doctrine of physiocracy, which predicted
that mankind would outgrow its resources. The idea of mercantilism was to protect the markets as well as
maintain agriculture and those who were dependent upon it.

Policies
Mercantilist ideas were the dominant economic ideology of all of Europe in the early modern period, and
most states embraced it to a certain degree. Mercantilism was centred on England and France, and it was
in these states that mercantilist policies were most often enacted.

The policies have included:

High tariffs, especially on manufactured goods.

Forbidding colonies to trade with other nations.
Monopolizing markets with staple ports.
Banning the export of gold and silver, even for payments.
Forbidding trade to be carried in foreign ships, as per, for example, the Navigation Acts.
Subsidies on exports.
Promoting manufacturing and industry through research or direct subsidies.
Limiting wages.
Maximizing the use of domestic resources.
Restricting domestic consumption through non-tariff barriers to trade.
France
Mercantilism arose in France in the early 16th century soon after
the monarchy had become the dominant force in French politics.
In 1539, an important decree banned the import of woolen goods
from Spain and some parts of Flanders. The next year, a number
of restrictions were imposed on the export of bullion.[28]

Over the rest of the 16th century, further protectionist measures

were introduced. The height of French mercantilism is closely
associated with Jean-Baptiste Colbert, finance minister for 22
years in the 17th century, to the extent that French mercantilism
is sometimes called Colbertism. Under Colbert, the French
government became deeply involved in the economy in order to
increase exports. Protectionist policies were enacted that limited
imports and favored exports. Industries were organized into
guilds and monopolies, and production was regulated by the state
through a series of more than one thousand directives outlining French finance minister and
how different products should be produced.[29] mercantilist Jean-Baptiste Colbert
served for over 20 years.
To encourage industry, foreign artisans and craftsmen were
imported. Colbert also worked to decrease internal barriers to
trade, reducing internal tariffs and building an extensive network of roads and canals. Colbert's policies
were quite successful, and France's industrial output and the economy grew considerably during this
period, as France became the dominant European power. He was less successful in turning France into a
major trading power, and Britain and the Netherlands remained supreme in this field.[29]

New France
France imposed its mercantilist philosophy on its colonies in North America, especially New France. It
sought to derive the maximum material benefit from the colony, for the homeland, with a minimum of
imperial investment in the colony itself. The ideology was embodied in New France through the
establishment under Royal Charter of a number of corporate trading monopolies including La Compagnie
des Marchands, which operated from 1613 to 1621, and the Compagnie de Montmorency, from that date
until 1627. It was in turn replaced by La Compagnie des Cent-Associés, created in 1627 by King Louis
XIII, and the Communauté des habitants in 1643. These were the first corporations to operate in what is
now Canada.

Great Britain
In England, mercantilism reached its peak during the Long Parliament government (1640–60).
Mercantilist policies were also embraced throughout much of the Tudor and Stuart periods, with Robert
Walpole being another major proponent. In Britain, government control over the domestic economy was
far less extensive than on the Continent, limited by common law and the steadily increasing power of
Parliament.[30] Government-controlled monopolies were common, especially before the English Civil
War, but were often controversial.[31]
 With respect to its colonies, British mercantilism meant that
the government and the merchants became partners with the
goal of increasing political power and private wealth, to the
exclusion of other empires. The government protected its
merchants—and kept others out—through trade barriers,
regulations, and subsidies to domestic industries in order to
maximize exports from and minimize imports to the realm.
The government had to fight smuggling, which became a
The Anglo-Dutch Wars were fought
favorite American technique in the 18th century to
between the English and the Dutch for
control over the seas and trade routes. circumvent the restrictions on trading with the French,
Spanish, or Dutch. The goal of mercantilism was to run trade
surpluses so that gold and silver would pour into London.
The government took its share through duties and taxes, with the remainder going to merchants in
Britain. The government spent much of its revenue on a superb Royal Navy, which not only protected the
British colonies but threatened the colonies of the other empires, and sometimes seized them. Thus the
British Navy captured New Amsterdam (New York) in 1664. The colonies were captive markets for
British industry, and the goal was to enrich the mother country.[32]

British mercantilist writers were themselves divided on whether domestic controls were necessary.
British mercantilism thus mainly took the form of efforts to control trade. A wide array of regulations
were put in place to encourage exports and discourage imports. Tariffs were placed on imports and
bounties given for exports, and the export of some raw materials was banned completely. The Navigation
Acts expelled foreign merchants from England's domestic trade. The nation aggressively sought colonies
and once under British control, regulations were imposed that allowed the colony to only produce raw
materials and to only trade with Britain. This led to friction with the inhabitants of these colonies, and
mercantilist policies (such as forbidding trade with other empires and controls over smuggling) were a
major irritant leading to the American Revolution.[33]

Mercantilism taught that trade was a zero-sum game, with one country's gain equivalent to a loss
sustained by the trading partner. Overall, however, mercantilist policies had a positive impact on Britain
helping turn it into the world's dominant trader and the global hegemon.[34] One domestic policy that had
a lasting impact was the conversion of "wastelands" to agricultural use. Mercantilists believed that to
maximize a nation's power, all land and resources had to be used to their highest and best use, and this
era thus saw projects like the draining of The Fens.[35]

Other countries
The other nations of Europe also embraced mercantilism to varying degrees. The Netherlands, which had
become the financial centre of Europe by being its most efficient trader, had little interest in seeing trade
restricted and adopted few mercantilist policies. Mercantilism became prominent in Central Europe and
Scandinavia after the Thirty Years' War (1618–48), with Christina of Sweden, Jacob Kettler of Courland,
and Christian IV of Denmark being notable proponents.

The Habsburg Holy Roman Emperors had long been interested in mercantilist policies, but the vast and
decentralized nature of their empire made implementing such notions difficult. Some constituent states of
the empire did embrace Mercantilism, most notably Prussia, which under Frederick the Great had
perhaps the most rigidly controlled economy in Europe.
Spain benefited from mercantilism early on as it brought a
large amount of precious metals such as gold and silver into
their treasury by way of the new world. In the long run,
Spain’s economy collapsed as it was unable to adjust to the
inflation that came with the large influx of bullion. Heavy
intervention from the crown put crippling laws for the
protection of Spanish goods and services. Mercantilist
protectionist policy in Spain caused the long-run failure of
the Castilian textile industry as the efficiency severely
dropped off with each passing year due to the production Mercantilism helped create trade patterns
being held at a specific level. Spain’s heavily protected such as the triangular trade in the North
industries led to famines as much of its agricultural land was Atlantic, in which raw materials were
required to be used for sheep instead of grain. Much of their imported to the metropolis and then
grain was imported from the Baltic region of Europe which processed and redistributed to other
colonies.
caused a shortage of food in the inner regions of Spain.
Spain limiting the trade of their colonies is one of the causes
that lead to the separation of the Dutch from the Spanish Empire. The culmination of all of these policies
lead to Spain defaulting in 1557, 1575, and 1596.[36]

During the economic collapse of the 17th century, Spain had little coherent economic policy, but French
mercantilist policies were imported by Philip V with some success. Russia under Peter I (Peter the Great)
attempted to pursue mercantilism, but had little success because of Russia's lack of a large merchant class
or an industrial base.

Wars and imperialism

Mercantilism was the economic version of warfare using economics as a tool for warfare by other means
backed up by the state apparatus and was well suited to an era of military warfare.[37] Since the level of
world trade was viewed as fixed, it followed that the only way to increase a nation's trade was to take it
from another. A number of wars, most notably the Anglo-Dutch Wars and the Franco-Dutch Wars, can be
linked directly to mercantilist theories. Most wars had other causes but they reinforced mercantilism by
clearly defining the enemy, and justified damage to the enemy's economy.

Mercantilism fueled the imperialism of this era, as many nations expended significant effort to conquer
new colonies that would be sources of gold (as in Mexico) or sugar (as in the West Indies), as well as
becoming exclusive markets. European power spread around the globe, often under the aegis of
companies with government-guaranteed monopolies in certain defined geographical regions, such as the
Dutch East India Company or the British Hudson's Bay Company (operating in present-day Canada).

With the establishment of overseas colonies by European powers early in the 17th century, mercantile
theory gained a new and wider significance, in which its aim and ideal became both national and
imperialistic.[38]

Mercantilism as a weapon has continued to be used by nations through the 21st century by way of
modern tariffs as it puts smaller economies in a position to conform to the larger economies goals or risk
economic ruin due to an imbalance in trade. Trade wars are often dependent on such tariffs and
restrictions hurting the opposing economy.
Origins
The term "mercantile system" was used by its foremost critic, Adam Smith,[39] but Mirabeau (1715–
1789) had used "mercantilism" earlier.

Mercantilism functioned as the economic counterpart of the older version of political power: divine right
of kings and absolute monarchy.[40]

Scholars debate over why mercantilism dominated economic ideology for 250 years.[41] One group,
represented by Jacob Viner, sees mercantilism as simply a straightforward, common-sense system whose
logical fallacies remained opaque to people at the time, as they simply lacked the required analytical
tools.

The second school, supported by scholars such as Robert B. Ekelund, portrays mercantilism not as a
mistake, but rather as the best possible system for those who developed it. This school argues that rent-
seeking merchants and governments developed and enforced mercantilist policies. Merchants benefited
greatly from the enforced monopolies, bans on foreign competition, and poverty of the workers.
Governments benefited from the high tariffs and payments from the merchants. Whereas later economic
ideas were often developed by academics and philosophers, almost all mercantilist writers were
merchants or government officials.[42]

Monetarism offers a third explanation for mercantilism. European trade exported bullion to pay for goods
from Asia, thus reducing the money supply and putting downward pressure on prices and economic
activity. The evidence for this hypothesis is the lack of inflation in the British economy until the
Revolutionary and Napoleonic Wars, when paper money came into vogue.

A fourth explanation lies in the increasing professionalisation and technification of the wars of the era,
which turned the maintenance of adequate reserve funds (in the prospect of war) into a more and more
expensive and eventually competitive business.

Mercantilism developed at a time of transition for the European economy. Isolated feudal estates were
being replaced by centralized nation-states as the focus of power. Technological changes in shipping and
the growth of urban centers led to a rapid increase in international trade.[43] Mercantilism focused on
how this trade could best aid the states. Another important change was the introduction of double-entry
bookkeeping and modern accounting. This accounting made extremely clear the inflow and outflow of
trade, contributing to the close scrutiny given to the balance of trade.[44] Of course, the impact of the
discovery of America cannot be ignored. New markets and new mines propelled foreign trade to
previously inconceivable volumes, resulting in "the great upward movement in prices" and an increase in
"the volume of merchant activity itself".[45]

Prior to mercantilism, the most important economic work done in Europe was by the medieval scholastic
theorists. The goal of these thinkers was to find an economic system compatible with Christian doctrines
of piety and justice. They focused mainly on microeconomics and on local exchanges between
individuals. Mercantilism was closely aligned with the other theories and ideas that began to replace the
medieval worldview. This period saw the adoption of the very Machiavellian realpolitik and the primacy
of the raison d'état in international relations. The mercantilist idea of all trade as a zero-sum game, in
which each side was trying to best the other in a ruthless competition, was integrated into the works of
Thomas Hobbes. This dark view of human nature also fit well with the Puritan view of the world, and
some of the most stridently mercantilist legislation, such as the Navigation Ordinance of 1651, was
enacted by the government of Oliver Cromwell.[46]

Jean-Baptiste Colbert's work in 17th-century France came to exemplify classical mercantilism. In the
English-speaking world, its ideas were criticized by Adam Smith with the publication of The Wealth of
Nations in 1776 and later by David Ricardo with his explanation of comparative advantage. Mercantilism
was rejected by Britain and France by the mid-19th century. The British Empire embraced free trade and
used its power as the financial center of the world to promote the same. The Guyanese historian Walter
Rodney describes mercantilism as the period of the worldwide development of European commerce,
which began in the 15th century with the voyages of Portuguese and Spanish explorers to Africa, Asia,
and the New World.

End of mercantilism
Adam Smith and David Hume were the founding fathers of anti-mercantilist thought. A number of
scholars found important flaws with mercantilism long before Smith developed an ideology that could
fully replace it. Critics like Hume, Dudley North and John Locke undermined much of mercantilism and
it steadily lost favor during the 18th century.

In 1690, Locke argued that prices vary in proportion to the quantity of money. Locke's Second Treatise
also points towards the heart of the anti-mercantilist critique: that the wealth of the world is not fixed, but
is created by human labor (represented embryonically by Locke's labor theory of value). Mercantilists
failed to understand the notions of absolute advantage and comparative advantage (although this idea was
only fully fleshed out in 1817 by David Ricardo) and the benefits of trade.[47]

For instance, imagine that Portugal was a more efficient producer of wine than England, yet in England,
cloth could be produced more efficiently than it could in Portugal. Thus if Portugal specialized in wine
and England in cloth, both states would end up better off if they traded. This is an example of the
reciprocal benefits of trade (whether due to comparative or absolute advantage). In modern economic
theory, trade is not a zero-sum game of cutthroat competition, because both sides can benefit from it.

Hume famously noted the impossibility of the mercantilists' goal of a

constant positive balance of trade. As bullion flowed into one country,
the supply would increase, and the value of bullion in that state would
steadily decline relative to other goods. Conversely, in the state exporting
bullion, its value would slowly rise. Eventually, it would no longer be
cost-effective to export goods from the high-price country to the low-
price country, and the balance of trade would reverse. Mercantilists
fundamentally misunderstood this, long arguing that an increase in the
money supply simply meant that everyone gets richer.[48]

The importance placed on bullion was also a central target, even if many
mercantilists had themselves begun to de-emphasize the importance of
gold and silver. Adam Smith noted that at the core of the mercantile
Much of Adam Smith's The system was the "popular folly of confusing wealth with money", that
Wealth of Nations is an bullion was just the same as any other commodity, and that there was no
attack on mercantilism.
reason to give it special treatment.[18] More recently, scholars have
discounted the accuracy of this critique. They believe Mun and
Misselden were not making this mistake in the 1620s, and point to their followers Josiah Child and
Charles Davenant, who in 1699 wrote, "Gold and Silver are indeed the Measures of Trade, but that the
Spring and Original of it, in all nations is the Natural or Artificial Product of the Country; that is to say,
what this Land or what this Labour and Industry Produces."[49] The critique that mercantilism was a form
of rent seeking has also seen criticism, as scholars such Jacob Viner in the 1930s pointed out that
merchant mercantilists such as Mun understood that they would not gain by higher prices for English
wares abroad.[50]

The first school to completely reject mercantilism was the physiocrats, who developed their theories in
France. Their theories also had several important problems, and the replacement of mercantilism did not
come until Adam Smith published The Wealth of Nations in 1776. This book outlines the basics of what
is today known as classical economics. Smith spent a considerable portion of the book rebutting the
arguments of the mercantilists, though often these are simplified or exaggerated versions of mercantilist
thought.[42]

Scholars are also divided over the cause of mercantilism's end. Those who believe the theory was simply
an error hold that its replacement was inevitable as soon as Smith's more accurate ideas were unveiled.
Those who feel that mercantilism amounted to rent-seeking hold that it ended only when major power
shifts occurred. In Britain, mercantilism faded as the Parliament gained the monarch's power to grant
monopolies. While the wealthy capitalists who controlled the House of Commons benefited from these
monopolies, Parliament found it difficult to implement them because of the high cost of group decision
making.[51]

Mercantilist regulations were steadily removed over the course of the 18th century in Britain, and during
the 19th century, the British government fully embraced free trade and Smith's laissez-faire economics.
On the continent, the process was somewhat different. In France, economic control remained in the hands
of the royal family, and mercantilism continued until the French Revolution. In Germany, mercantilism
remained an important ideology in the 19th and early 20th centuries, when the historical school of
economics was paramount.[52]

Legacy
Adam Smith rejected the mercantilist focus on production, arguing that consumption was paramount to
production. He added that mercantilism was popular among merchants because it was what is now called
rent seeking.[53] John Maynard Keynes argued that encouraging production was just as important as
encouraging consumption, and he favored the "new mercantilism". Keynes also noted that in the early
modern period the focus on the bullion supplies was reasonable. In an era before paper money, an
increase in bullion was one of the few ways to increase the money supply. Keynes said mercantilist
policies generally improved both domestic and foreign investment—domestic because the policies
lowered the domestic rate of interest, and investment by foreigners by tending to create a favorable
balance of trade.[54] Keynes and other economists of the 20th century also realized that the balance of
payments is an important concern. Keynes also supported government intervention in the economy as
necessity, as did mercantilism.[55]

As of 2010, the word "mercantilism" remains a pejorative term, often used to attack various forms of
protectionism.[56] The similarities between Keynesianism (and its successor ideas) and mercantilism
have sometimes led critics to call them neo-mercantilism.
Paul Samuelson, writing within a Keynesian framework, wrote of mercantilism, "With employment less
than full and Net National Product suboptimal, all the debunked mercantilist arguments turn out to be
valid."[57]

Some other systems that copy several mercantilist policies, such as Japan's economic system, are also
sometimes called neo-mercantilist.[58] In an essay appearing in the 14 May 2007 issue of Newsweek,
business columnist Robert J. Samuelson wrote that China was pursuing an essentially neo-mercantilist
trade policy that threatened to undermine the post–World War II international economic structure.[3]

Murray Rothbard, representing the Austrian School of economics, describes it this way:

Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth
centuries, was a system of statism which employed economic fallacy to build up a structure
of imperial state power, as well as special subsidy and monopolistic privilege to individuals
or groups favored by the state. Thus, mercantilism held exports should be encouraged by the
government and imports discouraged.[59]

In specific instances, protectionist mercantilist policies also had an important and positive impact on the
state that enacted them. Adam Smith, for instance, praised the Navigation Acts, as they greatly expanded
the British merchant fleet and played a central role in turning Britain into the world's naval and economic
superpower from the 18th century onward.[60] Some economists thus feel that protecting infant
industries, while causing short-term harm, can be beneficial in the long term.

See also
Money-free market
Neorealism (international relations)
Taxation as theft

References
1. Johnson et al. History of the domestic and foreign commerce of the United States p. 37.
2. "Mercantilism," Laura LaHaye The Concise Encyclopedia of Economics (2008)
3. Samuelson 2007.
4. kanopiadmin (2017-02-15). "Mercantilism: A Lesson for Our Times? | Murray N. Rothbard"
([Link] Mises Institute. Retrieved
2018-09-11.
5. [Link]
mercantilism/?
mtrref=[Link]&mtrref=[Link]&gwh=4FBA77E3C830475DD4B
6. [Link]
against-chinese-mercantilism-idUSKBN16N0YJ
7. [Link]
china/#51d9ae1e4ac8
8. [Link]
9. John J. McCusker, Mercantilism and the Economic History of the Early Modern Atlantic
World (Cambridge UP, 2001)
10. Friedrich List (1916). The National System of Political Economy ([Link]
ooks?id=4uuc7tdk0Z8C). A.M. Kelley. p. 265.
11. Now attributed to Sir Thomas Smith; quoted in Braudel (1979), p. 204.
12. David Onnekink; Gijs Rommelse (2011), Ideology and Foreign Policy in Early Modern
Europe (1650–1750) ([Link]
Ashgate Publishing, Ltd., p. 257, ISBN 9781409419143
13. Jerome Blum et al. The European World: A history (1970) p 279.
14. Giorgio Riello, Tirthankar Roy (2009). How India Clothed the World: The World of South
Asian Textiles, 1500-1850 ([Link]
74). Brill Publishers. p. 174. ISBN 9789047429975.
15. Abhay Kumar Singh (2006). Modern World System and Indian Proto-industrialization:
Bengal 1650-1800, (Volume 1). Northern Book Centre. ISBN 9788172112011.
16. Sanjay Subrahmanyam (1998). Money and the Market in India, 1100–1700. Oxford
University Press. ISBN 9780521257589.
17. Humphrey, Thomas M. "Insights From Doctrinal History. MERCANTILISTS. CLASSICALS"
([Link]
1998/pdf/[Link]) (PDF). Richmond Federal Reserve. Retrieved 14 June 2018. "[...] the
mercantilism of John Law and Sir James Steuart gave way to the classicism of David Hume
and David Ricardo [...]."
18. Magnusson 2003, p. 46.
19. Magnusson 2003, p. 47.
20. Magnusson 2003, p. 50.
21. Ekelund & Hébert 1997, pp. 40–41.
22. Landreth & Colander 2002, p. 44.
23. Ekelund & Tollison 1981, p. 154.
24. Ekelund & Tollison 1981, p. 9.
25. Landreth & Colander 2002, p. 48.
26. Landes 1997, p. 31.
27. Ekelund & Hébert 1975, p. 46.
28. Kellenbenz 1976, p. 29.
29. Williams 1999, pp. 177–83.
30. Hansen 2001, p. 65.
31. Hill 1980, p. 32.
32. Nester 2000, p. 54.
33. Max Savelle, Seeds of Liberty: The Genesis of the American Mind (1948) pp. 204ff. (https://
[Link]/books?id=hIgl_HNozQsC&pg=PA204)
34. Jeffry A. Frieden et al. eds. (2002). International Political Economy: Perspectives on Global
Power and Wealth ([Link]
Routledge. pp. 128ff. ISBN 9781134595952.
35. Wilson 1963, p. 15.
36. Rothbard, Murray (2010). "Mercantilism in Spain" ([Link]
in). Mises Institute.
37. Spiegel 1991, pp. 93–118.
38. Emory Richard Johnson; et al. (1915). History of domestic and foreign commerce of the
United States ([Link] Carnegie
Institution of Washington. pp. 35–37.
39. Gauci, Perry (2011). Regulating the British Economy, 1660-1850. Farnham: Ashgate Pub.
p. 83. ISBN 9780754697626.
40. editors, Encyclopædia Britannica (2014) ([Link]
8/mercantilism)
41. Ekelund & Hébert 1975, p. 61.
42. Niehans 1990, p. 19.
43. Landreth & Colander 2002, p. 43.
44. Wilson 1963, p. 10.
45. Galbraith 1987, pp. 33–34.
46. Landreth & Colander 2002, p. 53.
47. Spiegel 1991, ch. 8.
48. Ekelund & Hébert 1975, p. 43.
49. Referenced to Davenant, 1771 [1699], p. 171, in Magnusson 2003, p. 53.
50. Magnusson 2003, p. 54.
51. Ekelund & Tollison 1981.
52. Wilson 1963, p. 6.
53. Brezis 2003, vol. 2, p. 484.
54. Harris 1950, p. 321.
55. See Markwell 2006.
56. Wilson 1963, p. 3.
57. Samuelson 1964.
58. Walters & Blake 1976.
59. Rothbard 1997, p. 43.
60. Hansen 2001, p. 64.

Further reading
Ames, Glenn J. (1996), Colbert, Mercantilism and the French Quest for the Asian Trade
Braudel, Fernand (1979), "The Wheels of Commerce", Civilization and Capitalism 15th–
18th Century
Brezis, Elise S. (2003), "Mercantilism", The Oxford Encyclopedia of Economic History,
Oxford University Press
editors (2014), "Mercantilism" ([Link]
lism), Encyclopædia Britannica, Oxford University Press
Ekelund, Robert B.; Hébert, Robert F. (1975), A History of Economic Theory and Method (ht
tps://[Link]/details/historyofeconomi0000ekel_j2f0), New York: McGraw–Hill,
ISBN 978-0-07-019143-3
Ekelund, Robert B., Jr.; Hébert, Robert F. (1997), A History of Economic Theory and Method
(4th ed.), Long Grove, Illinois: Waveland Press, ISBN 978-1-57766-381-2
Ekelund, Robert B.; Tollison, Robert D. (1981), Mercantilism as a Rent-Seeking Society:
Economic Regulation in Historical Perspective, College Station, TX: Texas A&M University
Press, ISBN 978-0-89096-120-9
Galbraith, John Kenneth (1987), Economics in Perspective: A Critical History ([Link]
[Link]/details/economicsinpersp00galb_0), Boston: Houghton Mifflin, ISBN 978-0-395-
35572-5
Grant, R. George (2009), Tackling the Poverty of Nations: Why So Many Are Poor and What
We Can Do About It, Xlibris, ISBN 978-1-4363-3582-9
Hansen, E. Damsgaard (2001), European Economic History: From Mercantilism to
Maastricht and Beyond (1st ed.), Copenhagen Business School Press, ISBN 978-87-630-
0017-8
Harris, Seymour E. (1950), New Economics: Keynes' Influence on Theory And Public Policy
Heckscher, Eli F. (1935), Mercantilism, London: Allen & Unwin
Hill, Christopher (1980) [1961], The Century of Revolution, 1603–1714 (2nd ed.), ISBN 978-
0-17-712002-2
Johnson, Harky G. (March 1974), "Mercantilism: Past, Present and Future" ([Link]
[Link]/doi/10.1111/[Link]-1/issuetoc), The Manchester School, 42: 1–
17, doi:10.1111/j.1467-9957.1974.tb00098.x ([Link]
b00098.x)
Kellenbenz, Hermann (1976), The rise of the European economy: an economic history of
continental Europe from the fifteenth to the eighteenth century, New York: Holmes & Meier
Publishers
Keynes, John Maynard (1936), "Notes on Mercantilism, the Usury Laws, Stamped Money
and the Theories of Under-Consumption" ([Link]
p://[Link]/k/keynes/john_maynard/k44g/[Link]), The General
Theory of Employment, Interest, and Money, London: Palgrave Macmillan, archived from
the original ([Link]
l) on 2008-12-19
Landes, David S. (1997), The Unbound Prometheus: Technological Change and Industrial
Development in Western Europe from 1750 to the Present, Cambridge: Cambridge
University Press, ISBN 978-0-521-09418-4
Landreth, Harry; Colander, David C. (2002), History of Economic Thought (4th ed.), Boston:
Houghton Mifflin, ISBN 978-0-618-13394-9
Letwin, William (2003) [1963], The Origins of Scientific Economics: English Economic
Thought 1660–1776, London: Routledge, ISBN 978-0-415-31329-2
Magnusson, Lars G. (2003), "Mercantilism", in Samuels, Warren J.; Biddle, Jeff E.; Davis,
Jon B. (eds.), A Companion to the History of Economic Thought, Malden, MA: Blackwell
Publishing, ISBN 978-0-631-22573-7
Markwell, Donald (2006), John Maynard Keynes and International Relations: Economic
Paths to War and Peace, Oxford & New York: Oxford University Press, ISBN 978-0-19-
829236-4
Nester, R. (2000), The Great Frontier War: Britain, France, and the Imperial Struggle for
North America, 1607–1755, Praeger, ISBN 978-0-275-96772-7
Niehans, Jürg (1990), A History of Economic Theory: Classic Contributions, 1720–1980,
Baltimore, MD: Johns Hopkins University Press, ISBN 978-0-8018-3834-7
Omrund, David (2003), The rise of commercial empires: England and the Netherlands in the
Age of Mercantilism, 1650–1770
Rees, J. F. "Mercantilism" History 24#94 (1939), pp. 129–135 online ([Link]
able/24401676); historiography
Rothbard, Murray (1997), Mercantilism: A Lesson for Our Times? ([Link]
04), Cheltenham, England: Edward Elgar
Samuelson, Paul (May 1964), "Theoretical notes on trade problems", The Review of
Economics and Statistics, 46 (2): 145–154, doi:10.2307/1928178 ([Link]
F1928178), JSTOR 1928178 ([Link]
Samuelson, Robert J. (17 May 2007), China's Wrong Turn on Trade ([Link]
com/id/34952), Newsweek, retrieved 2007-12-06
Smith, George H. (2008). "Mercantilism" ([Link]
C). In Hamowy, Ronald (ed.). The Encyclopedia of Libertarianism. Thousand Oaks, CA:
SAGE; Cato Institute. pp. 326–28. doi:10.4135/9781412965811.n198 ([Link]
5%2F9781412965811.n198). ISBN 978-1412965804. LCCN 2008009151 ([Link]
ov/2008009151). OCLC 750831024 ([Link]
 Spiegel, Henry William (1991), The growth of economic thought (3rd ed.), Duke University
Press, ISBN 978-0-8223-0973-4
Vaggi, Gianni; Groenewegen, Peter (2003), A Concise History of Economic Thought: From
Mercantilism to Monetarism, New York: Palgrave Macmillan, ISBN 978-0-333-99936-3
Walters, Robert S.; Blake, David H. (1976), The Politics of Global Economic Relations,
Englewood Cliffs, NJ: Prentice-Hall, ISBN 978-0-13-684712-0
Williams, E. N. (1999), The Ancién Regime in Europe: government and society in the major
states 1648–1789, London: Pimlico, ISBN 978-0-7126-5934-5
Wilson, Charles (1963) [1958], Mercantilism, London: Routledge and Kegan Paul

External links
Thomas Mun's Englands Treasure by Forraign Trade ([Link]
[Link])
An Inquiry Into the Nature and Causes of the Wealth of Nations at Project Gutenberg: Adam
Smith's Wealth of Nations

Retrieved from "[Link]

This page was last edited on 2 March 2020, at 14:47 (UTC).

Text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. By using
this site, you agree to the Terms of Use and Privacy Policy. Wikipedia® is a registered trademark of the Wikimedia
Foundation, Inc., a non-profit organization.