7.5: Mercantilism

From the 1500s to the 1700s, many European nations followed an economic system known as mercantilism, which was based on the belief that a country’s strength depended on its wealth—measured primarily in gold and silver. Governments focused on bringing in as much of these precious metals as possible.

Mercantilism was built on a zero-sum view of the world economy. Mercantilists believed global wealth was fixed—like a single pie—so one nation could grow richer only if another became poorer. As a result, international trade was seen not as cooperation but as competition and conflict, driving policies that aimed to benefit one nation at others’ expense.

To increase wealth, countries encouraged exports and restricted imports, seeking a trade surplus that would bring in gold and silver. Colonies played a vital role by supplying raw materials, such as sugar, coffee, and iron, to the home country, where these were transformed into finished goods and often sold back to the colonies.

Governments also imposed tariffs on imported goods to protect domestic industries, promoting local production and self-sufficiency. Some nations, like the Netherlands, prospered by strengthening trade routes and shipping, even without large colonies.

Although mercantilism is no longer practiced, it shaped early modern ideas about trade, control, and power, illustrating how closely economic policy and national strength were linked.

Mercantilism was the dominant set of policies in Europe from the 16th to the 18th centuries. It was based on the belief that a nation’s strength came from its wealth and economic control.

To build national power, mercantilist governments sought to increase wealth through various strategies.

One major approach was accumulating precious metals, especially gold and silver. Wealth was increasingly measured by the bullion stored in national treasuries, symbolizing strength and stability.

Another key practice was expanding colonial holdings to secure resources and control trade. Colonies supplied raw materials and served as captive markets. British North America, for example, exported cotton and timber to Britain and was required to import British-manufactured goods.

Mercantilists also emphasized maintaining a favorable trade balance. By exporting more than they imported, nations ensured a steady inflow of bullion. In 17th-century France, Jean-Baptiste Colbert advanced this policy by promoting domestic industries and imposing tariffs on imports.

In the end, mercantilism functioned as a dominant set of policies shaping national economic strategy.