16 th to 18 th century
 Mercantilism is the economic doctrine in which
government control of foreign trade is of paramount
importance for ensuring the prosperity and military
security of the state. In particular, it demands a
positive balance of trade.
 Mercantilism dominated Western European economic
policy and discourse from the 16th to late-18th centuries
 Mercantilism was a cause of frequent European wars in that
time and motivated colonial expansion.
 Favours for powerful interests were often defended with
mercantilist reasoning.
 Building a network of overseas colonies
 Forbidding colonies to trade with other nations
 Monopolizing markets with staple ports;
 Promote accumulation of gold and silver
 Forbidding trade to be carried in foreign ships;
 Export subsidies;
 Maximizing the use of domestic resources;
 Restricting domestic consumption with non-tariff
barriers to trade.
 Jean-Baptiste Colbert's work in seventeenth century
France exemplified classical mercantilism. In the
English-speaking world its ideas were criticized
by Adam Smith with the publication of The Wealth of
Nations in 1776 and later David Ricardo with his
explanation of comparative advantage.
 Mercantilism was rejected by Britain and France by the
mid-19th century. The British Empire embraced freetrade and used its power as the financial centre of the
world to promote the same.
 Mercantilism was the dominant school of thought in
Europe throughout the late Renaissance and early
modern period (from the 15th to the 18th century).
Mercantilism encouraged the many intraEuropean wars of the period and arguably fuelled
European expansion and imperialism — both in
Europe and throughout the rest of the world — until
the 19th century or early 20th century.
 Mercantilism helped
create trade patterns
such as the triangular
trade in the North
Atlantic, in which raw
materials were
imported to the
metropolis and then
processed and
redistributed to other
colonies.
 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 centered in England and France, and
it was in these states that mercantilist polices were
most often enacted.
 England began the first large-scale and integrative
approach to mercantilism during the Elizabethan
Era (1558–1603). An early statement on national
balance of trade appeared in Discourse of the Common
Weal 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.
 France
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
importation of woollen goods from Spain and some parts
of Flanders. The next year, a number of restrictions were
imposed on the export of bullion.
 Spain
Spanish mercantilism had its basis on gold and silver from
America and the prohibition of buying anything which
didn’t come from Spain in America, or selling anything but
Spain. To sum up, Spanish economy was based not in
production but on precious metals.
 Louis XIV – “L’Etat, c’est moi”
 King on Earth and God in heaven
Can you ad some characteristics of
Absolutism? Read pp. 192
 One big State (fixed




marriages)
Diplomacy (foreign
affairs)
Guilds
Powerful Army
Full power over economy
(Taxes)
 Contrary to Absolutism,
Parlamentarism didn’t agree with
the King as absolute ruler.
 The King had to share power with
the Parlament whose members
were in charge of writing laws and
controlling the government.
 John Locke explained that people
had elected the Parlament
representatives and they could
rebel themselves to the authority
of the king.
 Mercantilism was economic warfare and was well
suited to an era of military warfare. Since the level of
world trade was viewed as fixed, it followed that the
only way to increase a nation's trade was to take it from
another.
 A number of wars, most notably the Anglo-Dutch
Wars and the Franco-Dutch Wars, can be linked
directly to mercantilist theories. Most wars had other
causes but they reinforced mercantilism by clearly
defining the enemy, and justified damage to the
enemy's economy.
 What is the difference between Absolutism and
Enlightened Despotism?
 Define the last one.
 Read pp. 193 and solve page 195.
 Before next class read from pp. 194 to 200
 Mercantilism foundation is the belief that trading is the source of a
nation wealth. For example, countries such as Spain and Portugal got
gold and silver from America which was useful to buy commodities and
supplies for war. On the other hand, countries such as England,
Holland and France encouraged their national industry, and achieved a
positive trade balance. This means they produced and exported more
goods than the ones they imported from other countries. Therefore,
they supplied the European market with their production. In
conclusion, Mercantilism was an economical system where nation’s
economy was based on how much they produced and not on how
much gold and silver they had.