List of Partners vendors. Mercantilism was an economic system of trade that spanned from the 16th century to the 18th century. Mercantilism is based on the principle that the world's wealth was static, and consequently, many European nations attempted to accumulate the largest possible share of that wealth by maximizing their exports and by limiting their imports via tariffs.
First popularized in Europe during the s, mercantilism was based on the idea that a nation's wealth and power were best served by increasing exports, in an effort to collect precious metals like gold and silver.
Mercantilism replaced the feudal economic system in Western Europe. At the time, England was the epicenter of the British Empire but had relatively few natural resources.
To grow its wealth, England introduced fiscal policies that discouraged colonists from buying foreign products, while creating incentives to only buy British goods. For example, the Sugar Act of raised duties on foreign refined sugar and molasses imported by the colonies, in an effort to give British sugar growers in the West Indies a monopoly on the colonial market.
Similarly, the Navigation Act of forbade foreign vessels from trading along the British coast and required colonial exports to first pass through British control before being redistributed throughout Europe. Programs like these resulted in a favorable balance of trade that increased Great Britain's national wealth. Under mercantilism, nations frequently engaged their military might to ensure local markets and supply sources were protected, to support the idea that a nation's economic health heavily relied on its supply of capital.
Mercantilists also believed that a nation's economic health could be assessed by its levels of ownership of precious metals, like gold or silver, which tended to rise with increased new home construction, increased agricultural output, and a strong merchant fleet to provide additional markets with goods and raw materials. Arguably the most influential proponent of mercantilism, French Controller General of Finance Jean-Baptiste Colbert studied foreign-trade economic theories and was uniquely positioned to execute these ideas.
As a devout monarchist, Colbert called for an economic strategy that protected the French crown from a rising Dutch mercantile class. Colbert also increased the size of the French navy, on the belief that France had to control its trade routes to increase its wealth. Although his practices ultimately proved unsuccessful, his ideas were hugely popular, until they were overshadowed by the theory of free-market economics.
The British colonies were subject to the direct and indirect effects of mercantilist policy at home. Below are several examples:. Defenders of mercantilism argued that the economic system created stronger economies by marrying the concerns of colonies with those of their founding countries.
In theory, when colonists create their own products and obtain others in the trade from their founding nation, they remain independent from the influence of hostile nations. Meanwhile, founding countries benefit from receiving large amounts of raw material from the colonists, necessary for a productive manufacturing sector. Critics of the economic philosophy believed the restriction on international trade increased expenses, because all imports, regardless of product origin, had to be shipped by British ships from Great Britain.
This radically spiked the costs of goods for the colonists, who believed the disadvantages of this system outweighed the benefits of affiliating with Great Britain. After a costly war with France, the British Empire, hungry to replenish revenue, raised taxes on colonists, who rebelled by boycotting British products, consequently slashing imports by a full one-third.
You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Related Articles. International Markets Hong Kong vs. Mainland China: Understanding the Differences. Partner Links. Related Terms Mercantilism Mercantilism was the primary economic system of trade between the 16th and the 18th centuries with theorists believing that the amount of wealth in the world was static. Commodity Market A commodity market is a physical or virtual marketplace for buying, selling, and trading commodities.
Discover how investors profit from the commodity market. Celtic Tiger Definition Celtic Tiger refers to the country of Ireland during its economic boom years between and around What Is Aggregate Demand? Aggregate demand is the total amount of goods and services demanded in the economy at a given overall price level at a given time. Investopedia is part of the Dotdash publishing family. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.
Mercantilism is a form of protectionism that was practiced throughout the Age of Discovery 16th — 18th Centuries. It became popular among the seafaring nations of Europe as it discovered the other nations of the world. Notable examples include Spain, Britain, France, and Portugal. In , the British government, led by Oliver Cromwell, introduced a legislation that made it illegal for any foreign ship to carry goods from or to any of its colonies.
All trade was to be conducted by a British ship, with a British owner, master, and majority crew. It refers to the number of mercantilist policies implemented during his time in office. He introduced tariffs, encouraged public works programs, and set up the France merchant navy — in the bid to expand exports abroad.
Whilst privately owned, it was granted monopoly powers in the market until the British government revoked these in This not only brought gold back to Britain, but also helped establish a strong and permanent trade route between Britain and her colonies.
The arbitristas were a group of reformists in Spain who were concerned about the decline of their country. The Spanish people were suffering and domestic business was suffering due to imports. In turn, the arbitristas suggested stricter regulations on imports and tax subsidies to agriculture workers. At the heart of mercantilism is the idea that wealth is centered around the accumulation of gold and other precious metals. Today, we consider the wealth of a nation to derive from its GDP, or economic output.
This is because true wealth is based on what the land and labour are producing — not how much gold it has. Gold is unable to cure hunger unless it is exchanged for food. However, mercantilists prefer to be self-sufficient and refuse to import.
Yet some nations are unable to grow enough to feed themselves, which is exactly what happened in Spain. Although it had a high level of gold, the majority of its population went hungry. A nation that is unable to provide basic necessities for itself can hardly be considered wealthy. At the same time, the monopolies that the state granted prevented domestic firms from competition.
By placing high tariffs and restrictions on imports, domestic firms are largely insulated from competitive pressures. These pressures would create an incentive for firms to improve the efficiency of production in order to produce at a lower price.
The attack against imports was based on the principle that wealth is set and cannot increase. Yet this assumption is false. These four factors of production are:. Mercantilism establishes monopolies, grants tax-free status, and grants pensions to favored industries.
It imposes tariffs on imports. It also prohibits the emigration of skilled labor, capital, and tools. It doesn't allow anything that could help foreign companies.
In return, businesses funnel the riches from foreign expansion back to their governments. Its taxes pay for increase national growth and political power. Mercantilism was the dominant theory in Europe between and Countries all wanted to export more than they imported. In return, they received gold.
It powered the evolution of nation-states out of the ashes of feudalism. Holland, France, Spain, and England competed on the economic and military fronts. These countries created skilled labor forces and armed forces. Before that, people focused on their local town, kingdom, or even religion. Each municipality levied its tariff on any goods that passed through its borders. The nation-state began in with the Treaty of Westphalia. The advent of industrialization and capitalism set the stage for mercantilism.
This phase strengthened the need for a self-governing nation to protect business rights. So, merchants supported national governments to help them beat foreign competitors. It then plundered their riches as the British government protected the company's interests. Many members of Parliament owned stock in the company.
As a result, its victories lined their pockets. Mercantilism depended upon colonialism as the government would use military power to conquer foreign lands. Businesses would exploit natural and human resources. The profits fueled further expansion, benefiting both the merchants and the nation. Mercantilism also worked hand-in-hand with the gold standard.
Countries paid each other in gold for exports. The nations with the most gold were the richest. They could hire mercenaries and explorers to expand their empires. They also funded wars against other nations who wanted to exploit them.
As a result, all countries wanted a trade surplus rather than a deficit. Mercantilism relied upon shipping. Control of the world's waterways was vital to national interests. Countries developed strong merchant marines and imposed high port taxes on foreign ships.
England required all imports from Europe to come in its own vessels, or in a vessel registered in the country where the goods originated.
0コメント