Before you read on: in the 1600s, what did European governments treat as the core of a nation's wealth?
Mercantilists put gold and silver at the centre of national wealth and power. Adam Smith later judged wealth by what people can consume.
- When
- Europe, from the 16th century to the late 18th century
- Key figures
- Thomas Mun in England, Jean-Baptiste Colbert in France and Antonio Serra in Italy; none of them called himself a mercantilist
- Key work
- Thomas Mun's England's Treasure by Forraign Trade, published in 1664, after his death in 1641
- Where it shaped policy
- Western Europe, including Britain, France, Spain, Portugal and the Netherlands, and their colonies
- The name
- Adam Smith called it the mercantile system in The Wealth of Nations (1776), and his label stuck
What it was reacting to
Mercantilism grew up as European states competed for power, trade and colonies. Rulers needed gold and silver to pay for full-time armies and navies, and a country without mines could get these metals only through trade.
In England and the Netherlands most of the writers were merchants. Thomas Mun worked in the East India Company's trade. They treated trade as what economists now call zero-sum: a gain in gold for one nation meant an equal loss for another.
The key ideas
Can you name the four key ideas of mercantilism?
Mercantilists treated a nation's stock of gold and silver as the measure of its wealth and the source of its power.
Can you think of an example?
A kingdom with no silver mines plans for war, so its ministers look for ways to bring coin in to pay soldiers and sailors.
Selling more abroad than you buy, measured by value. The gap is paid in gold and silver, adding to the nation's stock of money.
Can you think of an example?
Mun's own sum: if England sells goods abroad worth £2.2 million a year and buys £2 million, it gains £200,000 a year in treasure.
Governments shielded their own producers with tariffs (taxes on imports), quotas and bans on imports. They gave new industries capital, tax exemptions and monopolies, and banned the export of tools and the emigration of skilled workers.
Can you think of an example?
Colbert raised the duties charged to foreign ships in French ports and paid bounties to French shipbuilders.
Colonies supplied raw materials, bought the home country's goods and were barred from manufacturing. Trade with them was reserved for the home country, and chartered companies held monopolies.
Can you think of an example?
Under England's Navigation Act of 1651, only English or colonial ships could carry goods between England and its colonies.