The concept aims to reduce a possiblecurrent account deficit or reach a current account surplus, and it includes measures aimed at accumulatingmonetary reserves by a positivebalance of trade, especially offinished goods. Historically, such policies may have contributed to war and motivatedcolonial expansion.[1] Mercantilist theory varies in sophistication from one writer to another and has evolved over time.
Mercantilism promotes government regulation of a nation's economy for the purpose of augmenting and bolstering state power at the expense of rival national powers. Hightariffs, especially on manufactured goods, were almost universally a feature of mercantilist policy.[2] Before it fell into decline, mercantilism was dominant in modernized parts of Europe and some areas in Africa from the 16th to the 19th centuries, a period ofproto-industrialization.[3] Some commentators argue that it is still practised in the economies of industrializing countries[4] in the form ofeconomic interventionism.[5][6][7][8][9]
Mercantilism became the dominant school of economic thought in Europe throughout the lateRenaissance and theearly modern period (from the 15th to the 18th centuries) before advent ofClassical liberalism. Evidence of mercantilistic practices appeared in early modernVenice,Genoa, andPisa regarding control of the Mediterranean trade inbullion. However, theempiricism of theRenaissance, which first began to quantify large-scale trade accurately, marked the beginning of mercantilism as a codified school of economic theories.[2] The Italian economist and mercantilistAntonio Serra is considered to have written one of the first treatises on political economy in his 1613 work,A Short Treatise on the Wealth and Poverty of Nations.[10]
Mercantilism, in its simplest form, is all about bullionism, or the theory that a nation's wealth is measured in terms of how much precious metal, particularly gold and silver, it possesses. Mercantilist authors were concerned with the movement of money, however, more than with the hoarding of it. They felt that money needed to move through the economy to induce trade and economic activity, a concept different from that of simply amassing wealth. This focus on money's role, specifically precious metals, mirrors modern discussions of the money supply and its implications for economic growth, i.e., how money supply expansion can stimulate economic activity. However, with the advent of fiat money (money not backed by a physical commodity) and floating exchange rates, the importance of specie (gold and silver) in economic systems has diminished. Progressively, the focus shifted from the handling of money to the implementation of industrial policies that placed greater economic goals, e.g., stimulating general prosperity and supporting technological and industrial advancement, above the financing of war.
England began the first large-scale and integrative approach to mercantilism during theElizabethan Era (1558–1603). An early statement on national balance of trade appeared inDiscourse of the Common Wealth 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 ofQueen Elizabeth I (r. 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 trade and navigation acts in Parliament and issued orders to her navy for the protection and promotion of English shipping.[citation needed] The firstNavigation Acts regulating trade were passed by Parliament in 1651 and 1652, during theEnglish Commonwealth.
Numerous French authors helped cement French policy aroundstatist mercantilism in the 17th century, asKing Louis XIV (reigned 1643–1715) followed the guidance ofJean Baptiste Colbert, hisController-General of Finances from 1665 to 1683 who revised the tariff system and expanded industrial policy.Colbertism was based on the principle 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.[12][need quotation to verify]
In Europe, academic belief in mercantilism began to fade in the late 18th century after theEast India Company annexedMughal Bengal,[13][14] a major trading nation, and the establishment ofBritish India through the activities of the East India Company,[15] in light of the arguments ofAdam Smith (1723–1790) and of theclassical economists.[16] French economic policy liberalized greatly underNapoleon (in power from 1799 to 1814/1815). The British Parliament's repeal of theCorn Laws underRobert Peel in 1846 symbolized the emergence offree trade as an alternative system.
Most of the European economists who wrote between 1500 and 1750 are today generally described as mercantilists; this term was initially used solely by critics, such as Mirabeau and Smith, but historians proved quick to adopt it. Originally the standard English term was "mercantile system". The word "mercantilism" came into English fromGerman in the early-19th century.
The bulk of what is commonly called "mercantilist literature" appeared in the 1620s in Great Britain.[17] Smith saw the English merchantThomas Mun (1571–1641) as a major creator of the mercantile system, especially in his posthumously publishedTreasure by Foreign Trade (1664), which Smith considered the archetype or manifesto of the movement.[18] Perhaps the last major mercantilist work wasJames Steuart'sPrinciples of Political Economy, published in 1767.[17]
Mercantilist literature also extended beyond England. Italy and France produced noted writers of mercantilist themes, including Italy'sGiovanni Botero (1544–1617) andAntonio Serra (fl. 16th–17th centuries) and, in France,Jean Bodin andJean-Baptiste Colbert. Themes also existed in writers from the German historical school from List, as well as followers of the American and British systems of free-trade, thus stretching the system into the 19th century. However, many British writers, including Mun andEdward 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.[19]
The Austrian lawyer and scholarPhilipp Wilhelm von Hornick, one of the pioneers ofcameralism, detailed a nine-point program of what he deemed effective national economy in hisAustria Over All, If She Only Will of 1684, which comprehensively sums up the tenets of mercantilism:[20]
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, asAdam Smith would later do for classical economics. Rather, each mercantilist writer tended to focus on a single area of the economy.[21] 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 "arent-seeking society". To a certain extent, mercantilist doctrine itself made a general theory of economics impossible.[22] Mercantilists viewed the economic system as azero-sum game, in which any gain by one party required a loss by another.[23] 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.[24] Mercantilists' writings were also generally created to rationalize particular practices rather than as investigations into the best policies.[25]
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 ofletters patent and government-imposedmonopolies; some mercantilists supported these, but others acknowledged the corruption and inefficiency of such systems. Many mercantilists also realized that the inevitable results ofquotas and price ceilings wereblack markets. One notion that mercantilists widely agreed upon was the need foreconomic oppression of the working population; laborers and farmers were to live at the "margins ofsubsistence". The goal was to maximize production, with no concern forconsumption. Extra money, free time, and education for thelower classes were seen to inevitably lead to vice and laziness, and would result in harm to the economy.[26]
The mercantilists saw a large population as a form of wealth that made possible the development of biggermarkets andarmies. Opposite to mercantilism was the doctrine ofphysiocracy, 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.
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 United States, a former British colony, has also employed mercantilist policies at times in its economic history.
French finance minister and mercantilistJean-Baptiste Colbert served for over 20 years.
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 fromSpain and some parts ofFlanders. The next year, a number of restrictions were imposed on the export of bullion.[27]
Over the rest of the 16th century, further protectionist measures were introduced. The height of French mercantilism is closely associated withJean-Baptiste Colbert, finance minister for 22 years in the 17th century, to the extent that French mercantilism is sometimes calledColbertism. 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 how different products should be produced.[28]
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 Dutch Republic remained supreme in this field.[28]
France imposed its mercantilist philosophy on its colonies in North America, especiallyNew France. It sought to derive the maximum material benefit from the colony, for the homeland, with a minimum of colonial 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 LaCompagnie 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.
In England, mercantilism reached its peak during theLong Parliament government (1640–60). Mercantilist policies were also embraced throughout much of theTudor andStuart periods, withRobert Walpole being another major proponent. In Britain, government control over the domestic economy was far less extensive than on theContinent, limited bycommon law and the steadily increasing power of Parliament.[29] Government-controlled monopolies were common, especially before theEnglish Civil War, but were often controversial.[30]
TheAnglo-Dutch Wars were fought between the English and the Dutch for control over the seas and trade routes.
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 European powers. The government protected its merchants—and kept foreign ones 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 favourite American technique in the 18th century to circumvent the restrictions on trading with the French, Spanish, or Dutch. The goal of mercantilism was to run trade surpluses to benefit the government. 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 theRoyal Navy, which both protected the colonies of Britain but was vital in capturing the colonies of other European powers.[31][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. TheNavigation Acts removed foreign merchants from being involved England's domestic trade. British policies in theirAmerican colonies led to friction with the inhabitants of theThirteen Colonies, and mercantilist policies (such as forbidding trade with other European powers and enforcing bans on smuggling) were a major irritant leading to theAmerican Revolution.[32][33]
Mercantilism taught that trade was a zero-sum game, with one country's gain equivalent to a loss sustained by the trading partner. Some have argued that mercantilist policies had a positive impact on Britain, helping to transform the nation into the world's dominant trading power and aglobal hegemon.[33] 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 theirhighest and best use, and this era thus saw projects like the draining ofThe Fens.[34]
The American School of economics dominatedUnited States national policies from the time of theAmerican Civil War until the mid-20th century.[35][36][37][38][39][40] It is closely related to mercantilism, and it can be seen as contrary toclassical economics. It consisted of these three core policies:
Protecting industry through selective high tariffs (especially 1861–1932) and through subsidies (especially 1932–1970).
Government investments in infrastructure creating targetedinternal improvements (especially in transportation).
A nationalbank with policies that promote the growth of productive enterprises rather than speculation.[41][42][43][44]
Mercantilism helped create trade patterns such as thetriangular trade in the North Atlantic, in which raw materials were imported to themother country and then processed and redistributed to other colonies.
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 theThirty Years' War (1618–48), withChristina of Sweden,Jacob Kettler of Courland, andChristian IV of Denmark being notable proponents.
The HabsburgHoly 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 notablyPrussia, which underFrederick 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 being held at a specific level. Spain's heavily protected industries led to famines as much of its agricultural land was required to be used for sheep instead of grain. Much of their grain was imported from the Baltic region of Europe which caused a shortage of food in the inner regions of Spain. Spain limiting the trade of their colonies is one of the causes that led to theseparation of the Dutch from theSpanish Empire. The culmination of all of these policies led to Spain defaulting in 1557, 1575, and 1596.[45]
During the economic collapse of the 17th century, Spain had little coherent economic policy, but French mercantilist policies were imported byPhilip V with some success. Ottoman Grand VizierKemankeş Kara Mustafa Pasha also followed some mercantilist financial policies during the reign ofIbrahim I.Russia underPeter 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.
Mercantilism was the economic version of warfare backed up by the state apparatus, and was well suited to an era of military warfare.[46] If authorities viewed the level of world trade as fixed, it followed that the only way to increase a polity's trade was to take it from another. A number of wars, most notably the fourAnglo-Dutch Wars (from 1652 to 1784) and theFranco-Dutch Wars (as from 1672 to 1678), can be linked directly to mercantilist theories.[47] Most wars had other causes but they reinforced mercantilism by clearly defining the enemy, and justified damage to the enemy's economy.
Mercantilism fueled theimperialism 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 theDutch East India Company or theHudson's Bay Company (operating in present-dayCanada).
With the establishment of overseascolonies by European powers, especially from the 17th century, mercantile theory gained a new and wider significance, in which its aim and ideal became both national and imperialistic.[48][need quotation to verify][49]
The connection between Marxist theory and mercantilism has been explored by Marxist economist and sociologistGiovanni Arrighi (1937-2009), who analyzed mercantilism as having three components: "settler colonialism, capitalistslavery, andeconomic nationalism", and further noted that slavery was "partly a condition and partly a result of the success of settler colonialism."[50]
In the French economy, thetriangular trade method was integral in the continuation of mercantilism throughout the 17th and 18th centuries.[51] In order to maximize exports and minimize imports, France worked on a strict Atlantic route: France, to Africa, to the Americas and then back to France.[50] By bringing African slaves to labor in the New World, their labor value increased, and France capitalized upon the market resources produced by slave labor.[51]
Mercantilism as a weapon has continued to be used by countries through the 21st century by way of modern tariffs, as it puts smaller economies in a position where they may need 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 an opposing economy.
Scholars debate why mercantilism dominated economic ideology for 250 years.[54] One group, represented byJacob Viner, sees mercantilism as simply a straightforward, common-sense system whoselogical fallacies remained opaque to people at the time. This, he argues, was because people lacked the necessary analytical tools.
The second school, supported by scholars such asRobert B. Ekelund, portrays mercantilism not as a mistake, but rather as the best possible system for those who developed it. This school argues thatrent-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.[55]
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, whenpaper money came into vogue.[citation needed]
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. Isolatedfeudal estates were being replaced by centralizednation-states as the focus of power. Technological changes in shipping and the growth of urban centers led to a rapid increase in international trade.[56] Mercantilism focused on how this trade could best aid the states. Another important change was the introduction ofdouble-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.[57] 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".[58]
Before mercantilism, the most important work in economics in Europe was that of the medievalscholastic theorists. The goal of these thinkers was to find an economic system compatible with Christian doctrines of piety and justice. They focused mainly onmicroeconomics 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 ofMachiavellianrealpolitik and the primacy of theraison d'état ininternational 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 integral to the works ofThomas Hobbes. This dark view of human nature also fit well with thePuritan view of the world, and some of the most stridently mercantilist legislation, such as theNavigation Ordinance of 1651, was enacted by the government ofOliver Cromwell.[59]
Jean-Baptiste Colbert's work in 17th-century France came to exemplify classical mercantilism. In the English-speaking world, its ideas were criticized byAdam Smith with the publication ofThe Wealth of Nations in 1776 and later byDavid Ricardo with his explanation ofcomparative advantage. Mercantilism was rejected by Britain and France by the mid-19th century. The British Empire embracedfree trade and used its power as the financial center of the world to promote the same. The Guyanese historianWalter 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.
Adam Smith,David Hume,Edward Gibbon,Voltaire andJean-Jacques Rousseau were the founding fathers of anti-mercantilist thought. A number of scholars found important flaws in mercantilism long before Smith developed an ideology that could fully replace it. Critics such as Hume,Dudley North andJohn 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'sSecond 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'slabor theory of value). Mercantilists failed to understand the notions ofabsolute advantage andcomparative advantage (this idea was only fully fleshed out in 1817 byDavid Ricardo) and the benefits of trade.[60][note 1]
Hume famously noted the impossibility of the mercantilists' goal of a constant positive balance of trade.[61] 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.[62]
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 system was the "popular folly of confusing wealth with money", that bullion was just the same as any other commodity, and that there was no reason to give it special treatment.[17] 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 andCharles 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."[63] The critique that mercantilism was a form of rent seeking has also seen criticism, as scholars such asJacob 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.[64]
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 publishedThe Wealth of Nations in 1776. This book outlines the basics of what is today known asclassical 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.[55]
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 ofgroup decision making.[65]
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'slaissez-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 theFrench Revolution. In Germany, mercantilism remained an important ideology in the 19th and early 20th centuries, when thehistorical school of economics was paramount.[66]
Adam Smith criticized the mercantile doctrine that prioritized production in the economy; he maintained that consumption was of prime significance. Additionally, the mercantile system was well-liked by the traders as it involved what is now referred to asrent seeking.[67]
In specific instances, protectionist mercantilist policies also had an important and positive impact on the state that enacted them. Adam Smith, for instance, praised England'sNavigation Acts of 1660 to 1760, as they greatly fostered the expansion of 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.[68] Some economists thus feel that protectinginfant industries, while causing short-term harm, can be beneficial to a specific economy in the long term.
In the 20th century,John Maynard Keynes (1883-1946) affirmed that motivating the production process was as significant as encouraging consumption, which benefited the new mercantilism. Keynes also affirmed that in the post-classical period the primary focus on gold- and silver-supplies (bullion) was rational. During the era beforepaper money, an increase in gold and silver was one of the ways of mercantilism increasing an economy's reserve or thesupply of money. Keynes reiterated that the doctrines advocated by mercantilism aided the improvement of both the domestic and foreign outlay — domestic because the policies lowered the domestic rate of interest, and investment by foreigners by tending to create a favorable balance of trade.[69] Keynes and other economists of the 20th century also realized that thebalance of payments is an important concern. Keynes also supportedgovernment intervention in the economy as necessary, as did mercantilism.[70]
As of 2010[update], the word "mercantilism" remained a pejorative term, often used to attack various forms ofprotectionism.[71]
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."[72]
Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth centuries, was a system ofstatism 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.[73]
Rothbard viewed mercantilism not as a coherent economic theory but rather as a series of post-hoc rationalizations for various economic policies by interested parties.
After the re-election ofDonald Trump as president of the United States in 2024, Serbian-American economistBranko Milanović described Trump's policies of implementing tariffs on imports, trade blocs, and other barriers against China as "neo-mercantilism", stating that it "marks a symbolic end to globalneoliberalism"[75][76]
Michael Strain of the conservative think-tank theAmerican Enterprise Institute also described Trump's policy as a return to mercantilism: "We are seeing a combination of true-believing mercantilism, shocking ignorance about how the global economy works, and shocking incompetence in the planning and execution of economic policy."[77]
^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 upbetter off if they traded. This is an example of the reciprocal benefits of trade (whether due tocomparative orabsolute advantage). In modern economic theory, trade isnot a zero-sum game of cutthroat competition because both sides can benefit from it.
^Johnson et alHistory of the domestic and foreign commerce of the United States p. 37.
^abRoseveare, Henry (2001). "Property versus commerce in the mid-eighteenth-century port of London". InMcCusker, John J.; Morgan, Kenneth (eds.).The Early Modern Atlantic Economy. Cambridge, England:Cambridge University Press. p. 172.ISBN978-0521782494.
^Singh, Abhay Kumar (2006).Modern World System and Indian Proto-industrialization: Bengal 1650–1800. Vol. 1. Northern Book Centre.ISBN978-81-7211-201-1.
^Magnusson 2003, p. 47. "According to Adam Smith, the main architect of the mercantile system of economic thinking was the English writer and tradesman Thomas Mun (1571–1641). His main published writings appear in two short treatises,A Discourse of Trade from England unto the East Indies (1621) and perhaps the more importantEngland's Treasure by Forraign Trade (1664). Adam Smith picked out this last tract – published posthumously after Mun's death, but probably written during the late 1620s – as the archetype of mercantilist texts; its manifesto."
^ANDREWS, E. Benjamin,p. 180 ofScribner's Magazine Volume 18 #1 (January–June 1896); "A History of the Last Quarter-Century".
^Lind, Michael: "Lincoln and his successors in the Republican party of 1865–1932, by presiding over the industrialization of the United States, foreclosed the option that the United States would remain a rural society with an agrarian economy, as so many Jeffersonians had hoped." and "...Hamiltonian side ... the Federalists; the National Republicans; the Whigs, the Republicans; the Progressives." — "Hamilton's Republic" Introduction pp. xiv–xv. Free Press, Simon & Schuster: 1997.ISBN0-684-83160-0.
^Lind, Michael: "During the nineteenth century the dominant school of American political economy was the "American School" of developmental economic nationalism ... The patron saint of the American School was Alexander Hamilton, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods ... The American School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the "American System" of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican party well into the twentieth century." — "Hamilton's Republic" Part III "The American School of National Economy" pp. 229–30. Free Press, Simon & Schuster: 1997.ISBN0-684-83160-0.
^Richardson, Heather Cox: "By 1865, the Republicans had developed a series of high tariffs and taxes that reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising thestandard of living for everyone. As a Republican concluded ... "Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes ... for ordinary expenses of Government." — "The Greatest Nation of the Earth" Chapter 4, "Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation" pp. 136–37. President and Fellows of Harvard College: 1997.ISBN0-674-36213-6.
^Boritt, Gabor S: "Lincoln thus had the pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leonard P. Curry, the historian of the legislation has aptly written, amounted to a "blueprint for modern America." and "The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate variety on economics, one whom Joseph Dorfman could even describe as 'a good Hamiltonian, and a western progressive of the Lincoln stamp in everything from a tariff to a national bank.'" — "Lincoln and the Economics of the American Dream" Chapter 14, "The Whig in the White House" pp. 196–97. Memphis State University Press: 1994.ISBN0-87870-043-9.
^Gijs, Rommelse (August 2010). "The role of mercantilism in Anglo‐Dutch political relations, 1650–74".The Economic History Review.63 (3):591–611.doi:10.1111/j.1468-0289.2009.00491.x.
^Peet, Richard; Hartwick, Elaine (February 23, 2009) [1999]. "Marxism, Socialism, and Development".Theories of Development: Contentions, Arguments, Alternatives (2nd ed.). New York: Guilford Press. p. 162.ISBN9781606233979. RetrievedAugust 23, 2025.[...] from the 15th to the 19th centuries,mercantilist imperialism saw the European conquest of most of the Americas and significant control over much of southern and southeast Asia. Conquest and control involved the plundering of ancient stockpiles of wealth from precapitalist civilizations, the establishment of unequal trading relations with dominated societies, and the production of bullion and exotic commodities, using coerced (often slave) labor in colonized societies.
^abMiller, C. L. 2008. "Introduction." p. 14 inThe French Atlantic triangle: literature and culture of the slave trade. Duke University Press.
^abMiller, C. L. 2008. "Introduction." pp. 1–39 inThe French Atlantic triangle: literature and culture of the slave trade. Duke University Press.
^Gauci, Perry (2011).Regulating the British Economy, 1660–1850. Farnham: Ashgate Pub. p. 83.ISBN978-0-7546-9762-6.
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