HIST363: Global Perspectives on Industrialization

A painting of a French seaport from 1638, at the height of mercantilism.

Mercantilism was a political movement and an economic theory, dominant in Europe between 1600 and 1800. The term "mercantilism" was not in fact coined until 1763, by Victor de Riqueti, marquis de Mirabeau, and was popularized by Adam Smith in 1776. In fact, Adam Smith was the first person to organize formally most of the contributions of mercantilists in his book The Wealth of Nations.

No general definition of mercantilism is entirely satisfactory, since it was not as much a school of thought as a collection of policies intended to keep the state prosperous by economic regulation. Philipp von Hörnigk (1640-1712) laid out one of the clearest statements of mercantile policy in his 1684 Österreich Über Alles, Wenn Sie Nur Will (Austria Over All, If She Only Will). There, he listed nine principle rules:

To inspect the country's soil with the greatest care, and not to leave the agricultural possibilities of a single corner or clod of earth unconsidered… All commodities found in a country, which cannot be used in their natural state, should be worked up within the country… Attention should be given to the population, that it may be as large as the country can support… gold and silver once in the country are under no circumstances to be taken out for any purpose… The inhabitants should make every effort to get along with their domestic products… [Foreign commodities] should be obtained not for gold or silver, but in exchange for other domestic wares… and should be imported in unfinished form, and worked up within the country… Opportunities should be sought night and day for selling the country's superfluous goods to these foreigners in manufactured form… No importation should be allowed under any circumstances of which there is a sufficient supply of suitable quality at home.

The "mercantile system" developed logically from the changes inherent in the decline of feudalism, the rise of strong nation-states, and the development of a world market economy. Mercantilists advocated the use of the state's military power to ensure local markets and supply sources were protected.

Generally, mercantilism holds the prosperity of a nation dependent upon its supply of capital, and assumes that the global volume of trade is "unchangeable". In other words a positive balance of trade ought to be maintained, with a surplus of exports. The following ideas, and the underlying principles, may be called mercantilism:

1. The economic health or wealth of a nation can be measured by the amount of precious metal, gold, or silver, which it possessed.
2. A favorable balance of trade is essential.
3. Each nation should strive for economic self-sufficiency, increasing domestic production, and founding new home industries.
4. Agriculture should be encouraged, reducing the need to import food.
5. Tariffs should be high on imported manufactured goods and low on imported raw material.
6. A merchant fleet is of vital importance, avoiding the need for foreign assistance in transporting goods and raw materials.
7. Colonies should provide markets for manufactured goods and sources of raw material.
8. A large population is important to provide a domestic labor force and to people colonies.
9. The crown or state should be heavily involved in regulating the economy.