(mūr“kntlzm) (KEY) ,
economic system of the major trading nations during the 16th, 17th, and 18th
cent., based on the premise that national wealth and power were best served
by increasing exports and collecting precious metals in return. It superseded
the medieval feudal organization in Western Europe, especially in Holland,
France, and England. The period 1500–1800 was one of religious and commercial
wars, and large revenues were needed to maintain armies and pay the growing
costs of civil government. Mercantilist nations were impressed by the fact
that the precious metals, especially gold, were in universal demand as the
ready means of obtaining other commodities; hence they tended to identify
money with wealth. As the best means of acquiring bullion, foreign trade
was favored above domestic trade, and manufacturing or processing, which
provided the goods for foreign trade, was favored at the expense of the extractive
industries (e.g., agriculture). State action, an essential feature of the
mercantile system, was used to accomplish its purposes. Under a mercantilist
policy a nation sought to sell more than it bought so as to accumulate bullion.
Besides bullion, raw materials for domestic manufacturers were also sought,
and duties were levied on the importation of such goods in order to provide
revenue for the government. The state exercised much control over economic
life, chiefly through corporations and trading companies. Production was
carefully regulated with the object of securing goods of high quality and
low cost, thus enabling the nation to hold its place in foreign markets.
Treaties were made to obtain exclusive trading privileges, and the commerce
of colonies was exploited for the benefit of the mother country. In England
mercantilist policies were effective in creating a skilled industrial population
and a large shipping industry. Through a series of Navigation Acts
England finally destroyed the commerce of Holland, its chief rival. As the
classical economists were later to point out, however, even a successful
mercantilist policy was not likely to be beneficial, because it produced
an oversupply of money and, with it, serious inflation. Mercantilist ideas
did not decline until the coming of the Industrial Revolution and of laissez-faire.
Henry VIII, Elizabeth I, and Oliver Cromwell conformed their policies to
mercantilism. In France its chief exponent was Jean Baptiste Colbert.
See J. W. Horrocks, A Short History of Mercantilism (1925); D. C. Coleman, ed., Revisions in Mercantilism (1969); R. B. Ekelund, Jr., and R. D. Tollison, Mercantilists as a Rent-Seeking Society (1982); J. C. Miller, Way of Death: Merchant Capitalism and the Angolan Slave Trade (1988).