The Economist: What was Mercantilism?/ Rise of Capitalism
Mercantilism dominated European thought between the 16th and 18th centuries. At the heart of
mercantilism is the view that countries should increase and maximize their exports (goods sold to other
countries) which is the best route to national prosperity.
Simplified, mercantilism is “bullionism”: the idea that the only true measure of a country’s wealth and
success was the amount of precious metals (gold, silver, etc…) that it had. If one country had more gold
than another, it was necessarily better off. This idea had important consequences for economic policy. The
best way of ensuring a country’s prosperity was to make few imports (goods bought from other countries)
and many exports, thereby generating an inflow of foreign exchange and maximizing the country’s
precious metals.
Such ideas were attractive to some governments. Accumulating gold was thought to be necessary for a
strong, powerful state. Countries such as Britain implemented policies which were designed to protect its
traders and maximize income.
The Age of Exploration brought wealth to European countries. Colonial powers imported (brought in)
inexpensive raw materials and exported (sold) expensive manufactured goods back to their colonies.
Private companies like the British or Dutch East India Company grew very wealthy and powerful. Other
companies throughout Europe began opening businesses throughout the world to trade goods. These
companies competed with one another which led to Capitalism, which is also referred to as the "market
economy" because buyers and sellers are free to exchange goods and services and compete.