Mercantilism Economic

Mercantilism Economic

Mercantilism, the economic philosophy of merchants and statesmen during the sixteenth and seventeenth centuries. Its background was the 'commercial revolution' of this period: the transition from local to national economies, feudalism to merchant capitalism, rudimentary foreign trade to extensive international commerce. The overseas discoveries towards the end of the fifteenth century and the opening of silver mines in America during the sixteenth not only stimulated foreign trade but also produced an abundant flow of metal suitable for use as money, which encouraged the development of an economy based on money and prices. The increased use of money, the expansion of commerce, the revolution in agrarian production and the decline of subsistence production hastened the weakening in the authority of the Church and of canon law and accelerated the growth of private enterprise and the emergence of the merchant capitalist as a dominating force in the economy.

These political and economic changes were expressed in mercantilism. The term does not indicate a set of rigid doctrines. Mercantilism developed over a long period of changing conditions and reflected a wide variety of ideas. But the basic similarity in the notions which appeared in several European countries at about the same time, and which underlay official policy for a long period, makes it possible to regard them as a single body of thought.

Mercantilist doctrine centred on the power of the state, which it was designed to strengthen. A strong central authority was regarded as essential for the expansion of markets and the protection of commercial interests. The interests of the individual were regarded as subservient to those of the state. Accordingly the regulation of wages and interest, the ordering of industry by the grant of monopoly privileges, the use of protective devices and general restrictions on the activities of individuals were accepted and encouraged. The desire for a strong nation-state also underlay the emphasis on 'treasure', i.e. the accumulation of precious metals (then generally regarded as the most desirable form of wealth). It was thought desirable both as a source of power and as a stimulus to trade. Since non-producers of precious metals could increase their stock only by a continuing surplus of exports over imports, questions of foreign trade and in particular of the balance of trade were prominent in mercantile' writings.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this site is therefore not a final statement of economic doctrine.

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