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What is mercantilism? Where did the ideas of mercantilism come from?

Mercantilism was both a political and an economic doctrine which believed that the power and prestige of any nation depended on its accumulation of gold and silver. This is also known as the mercantile doctrine.

Western Europe was primarily an agrarian society in 1500. About 85 percent of the people were farmers. The rest were farmers, craftsmen, shopkeepers, or servants of the rich. With few exception, household or cottage industries were the most dominant manufacturing activities. The merchant capitalists supplied raw wool to the homes of spinners and weavers; collected the crude cloth and let other workers finish the product; and then they market the final product. In some cases, the capitalists provided the raw materials, tools of production and building for the workers.

Trade during the 15th century was mainly confined to towns and the adjacent villages in view of the limited incomes of the people which were only enough for basic needs like food, clothing and shelter. However, in the 16th century, there was a steady increase in intra-European trade. The discovery of the Americas and colonial expansion in other parts of the globe accelerated trade between the West and the East. Such favorable conditions for the trader paved the way for the rise of the new capitalist class to positions of power and prominence. The feudal lords and the Church were relegated to the background. The revival of learning or Renaissance, contributed many inventions such as the telescope, barometer and sextant (a guide in navigation), and generated materialistic attitudes. These were all favorable to the further expansion of international trade. Likewise, the appearance of powerful national states like England, France, Spain, and Netherlands provided effective leadership in the expansion of international trade. The states encouraged money-making activities like manufacture, trade, and banking.

Ideas of Mercantilism

During the ancient times, the Mediterranean Sea was the trading center. The powerful Romans dominated the Mediterranean trade. In fact, said sea was called as the "Roman Lake". However, with the downfall of the Roman Empire, trade and industry were greatly reduced. Merchants and artisans disappeared. The circulation of money became minimal. The barbarians destroyed all traces of civilization - including trade and commerce.

The fall of Roman Empire was the birth of Christianity, and the beginning of the Medieval Ages. People returned to the farms and became the slaves of the feudal lords. During the later part of the Medieval Ages, the Church emerged as the most powerful institution. It even participated actively in trade which had been revived in 1100 with the reopening of the Mediterranean Sea to western trade from Constantinople to the Strait of Gibraltar.

A group of thinkers greatly contributed to the development of capitalism. Their mercantilistic thoughts were opposed by the landed nobility and the churchmen. Niccolo Machiavelli, a statesman of Florence, and the intellectual leader of the Renaissance, supported the idea of the supremacy of the state over all other sources of power, including the church. He was in favor of a benevolent dictator who could achieve material prosperity for his powerful national state in order to maintain order and facilitate the creation and accumulation of wealth. Another supporters of trade, Antonio Serra wrote A Brief Treatise on the Causes which can Make Gold and Silver Plentiful in Kingdoms Where There are No Mines. He maintained the superiority of industrial products over those of agriculture as far as exports and profits were concerned.

Most of the ideas of mercantilism came from Thomas Mun. He authored one of the classics of economics, England's Treasure by Foreign Trade. Mun argued that the ordinary way to increase our wealth and treasure is to sell more to foreigners than we buy from them. This refers to favorable foreign trade in which the amounts in the exports of goods and services are greater than the amounts in the imports of goods and services. Mun further stated that such favorable trade could be attained by encouraging exports and at the same time by discouraging imports.

Thanks for reading!

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Comments (5)

I hate AP (Araling Panlipunan), some terms are transliterated that I can't even understand what it means in English. Thank you for teaching me the English term for merkantilismo.

Excellent work.

Thanks. :)

Great discussion on this one!

Nice job on the research. Voted up.