Mercantilism | An in-depth history of European imperial economics

Summary

In 1621 London, Thomas Munn penned 'England's Treasure by Forraign Trade,' establishing mercantilism as a dominant economic theory for centuries. Mercantilism focused on achieving a positive trade balance and a heavily regulated domestic economy to strengthen national industries. It advocated for high tariffs, colonial exploitation, and state control over trade companies. However, by the 18th century, critics like Adam Smith challenged mercantilism, advocating for free trade and the benefits of competition. The theory's decline coincided with broader intellectual shifts towards economic liberalism and the rise of citizens' rights.

Takeaways

• 📜 Thomas Mun's work during the early 17th century in London laid the foundation for mercantilism, an economic theory that would dominate Western economic thinking for centuries.
• 🌐 Mercantilism emerged as a response to economic depression caused by English manufacturers being out-competed by cheaper goods from India, particularly affecting the East India Trading Company.
• 💡 The core of mercantilism was the pursuit of a positive balance of trade, where exports exceeded imports, to strengthen national industries and increase government revenue through taxation.
• 🏛️ Mercantilists advocated for a heavily regulated domestic economy to prevent overproduction and maintain a balance that would support national industries against foreign competition.
• 🌱 The theory recognized the importance of agriculture for self-sufficiency and proposed state intervention to modernize farming practices and increase food production.
• 🏭 Mercantilism encouraged state support for industries through subsidies and favorable loans, aiming to create larger, more efficient companies that could compete internationally.
• 🛡️ National trade companies, like the English East India Trading Company, were established with military and economic power to expand trade and enforce mercantilist policies.
• 🌍 Colonies were seen as extensions of the mother country's economy, sources of raw materials, and markets for manufactured goods, essential for maintaining a positive balance of trade.
• 👥 Mercantilism was closely tied to elitist views of society, where the common folk's economic aspirations were restricted for the perceived greater good of the nation.
• ⚖️ Adam Smith's 'Wealth of Nations' criticized mercantilism for its focus on gold and precious metals as measures of wealth and advocated for free trade as a means to mutual benefit.
• 🔄 The shift towards economic liberalism in the late 18th and 19th centuries, along with social and political changes, led to the decline of mercantilism as the dominant economic system.

Q & A

What was the economic situation in England in 1621 that led to the development of mercantilism?

England in 1621 was experiencing a harsh depression due to English manufacturers being out-competed by cheap goods from India, leading to public ire directed at the East India Trading Company, which was seen as the main culprit of the crisis.

Who was Thomas Munn and what role did he play in the establishment of mercantilism?

Thomas Munn was the director of the East India Trading Company. He played a pivotal role in the establishment of mercantilism by writing a work that not only saved the company's reputation but also laid down the first formulation of mercantilism, an economic stream that dominated Western economic thinking for nearly two centuries.

What were the two main pillars of early modern mercantile economics?

The two main pillars of early modern mercantile economics were the establishment of a positive balance of trade and a heavily regulated domestic economy.

How did mercantilists view the relationship between trade and a nation's prosperity?

Mercantilists believed that trade had the potential to enrich a country and make it stronger, but it could also harm a country's economy if not managed properly. They emphasized the need for a positive trade balance, where exports exceeded imports, to strengthen national industries and increase government revenue through taxation.

What was the mercantilist perspective on the influx of capital and its reinvestment?

Mercantilists viewed the influx of capital as positive for a country, but only if the wealth was reinvested into the nation's industries. They were aware of the dangers of hoarding capital and believed that reinvestment was crucial for economic growth and competitiveness.

How did mercantilists analyze the downfall of Spain as an empire?

Mercantilists analyzed the downfall of Spain by pointing out that the influx of gold and silver from its colonies led to skyrocketing prices, creating incentives to import cheaper products. They also noted that Spain's feudal system and the nobility's control over land prevented industrial innovation, leading to a reliance on exporting raw materials and importing manufactured goods.

What strategies did mercantilist thinkers advocate for securing a positive balance of trade?

Mercantilist thinkers advocated for high tariffs on imported goods, the creation of new laws and regulations to restrict foreign products, and the establishment of colonies to control territories for raw material production and as markets for domestic industrial products.

How did national trade companies like the East India Company contribute to mercantilism?

National trade companies, such as the East India Company, contributed to mercantilism by receiving privileges and subsidies from their states to establish and maintain trade that would benefit their mother countries. They also had military might to enforce trade and protect their interests.

What was the mercantilist view on domestic market competition and how did they propose to regulate it?

Mercantilists viewed competition in the domestic market as detrimental to economic growth, leading to inefficiencies and higher wages. They proposed heavy regulation, including special privileges for factory owners and state control over guilds, to prevent over-competition and ensure industries could compete internationally.

How did mercantilists approach agriculture in relation to national prosperity?

Mercantilists believed that a nation's agriculture needed to be self-sufficient to avoid jeopardizing the balance of trade. They advocated for state intervention to merge landlots into larger arable areas, allowing for innovation in agricultural production and increasing the nation's food production and workforce.

What were the underlying ideological streams associated with mercantilism?

The underlying ideological streams associated with mercantilism included elitism, viewing the common folk as needing guidance from the rational elite; the state society idea, where different social classes had predetermined roles; and realism in foreign affairs, viewing international relations as a zero-sum competition.

Outlines

00:00

📜 The Emergence of Mercantilism

In 1621 London, Thomas Munn writes about the economic depression caused by English manufacturers being out-competed by cheap Indian goods. Munn, as the director of the East India Trading Company, fights to clear the company's name and writes a work that not only saves the company but also lays the foundation for mercantilism, an economic theory that would dominate Western economic thinking for centuries. Mercantilism's history is complex, as the term wasn't used by its proponents, and its practices may have predated its theory. The early 17th century is considered the starting point for mercantilism, influencing the economic policies of many European states. The theory focuses on establishing a positive balance of trade and heavily regulating the domestic economy. Trade was seen as a means to enrich a nation, but only if exports exceeded imports, leading to a strong industry and higher taxes for the government.

05:00

🏛️ Mercantilism and the Fall of Spain

Mercantilist economics is often mischaracterized as focusing solely on accumulating capital and precious metals. However, mercantilists believed that capital influx was beneficial only if reinvested into industries. They analyzed the downfall of Spain, which despite its vast colonial empire, suffered from high prices due to an influx of gold and silver, leading to a reliance on imported goods. Mercantilists criticized Spain's feudal system and the nobility's control over land, which stifled industrial innovation. Spain's situation was paradoxical, being a colony in all but name to other European powers, exporting raw materials and importing manufactured goods. Mercantilists advocated for policies like high tariffs on imports and the creation of laws to protect domestic industries, such as the English Navigation Act of 1651. They also supported the establishment of colonies and national trade companies to control trade and production, with companies like the English East India Trading Company amassing significant military power.

10:02

🛠️ Domestic Regulation and State Intervention

Mercantilists believed in state intervention to protect and strengthen domestic industries. They opposed free markets, fearing that competition would lead to inefficiencies and high wages, undermining the ability to compete internationally. To ensure a positive balance of trade, mercantilists advocated for high tariffs on imports and regulations to restrict the import of foreign products. They also supported the creation of colonies to control the production of raw materials and the sale of manufactured goods. National trade companies played a crucial role in this strategy, receiving state subsidies and privileges to maintain beneficial trade relations. Mercantilists also emphasized the need for state regulation of domestic industries, including the number of factory owners and the control of guilds, to prevent overproduction and ensure the reinvestment of capital into technological improvements and production efficiency.

15:03

🌾 Agriculture and Self-Sufficiency

Agriculture was an important aspect of mercantilist thought, as a nation's ability to feed itself was crucial for self-sufficiency and a positive balance of trade. Mercantilists argued for the consolidation of land to create larger, more efficient farms that could adopt new technologies and increase food production. This would, in turn, support a larger workforce and enable the state to mobilize more resources. Mercantilism's focus on the state's power and prosperity often led to the secondary consideration of workers' well-being, with some even suggesting that the working class's poverty was necessary for national strength. The concept of work specialization was also important, with mercantilists advocating for clear divisions between economic sectors to ensure efficiency and prevent the dilution of expertise.

20:05

🏛️ Elitism and the Critique of Mercantilism

Mercantilist thought was closely tied to elitist views of society, where the nobility and wealthy were seen as rational and capable of guiding the nation's long-term interests, while the common folk were regarded as greedy and prone to irrational impulses. Mercantilists believed that the state should restrict the economic aspirations of the common people for the greater good. The idea of a state society, where different classes had predetermined roles, was also a key part of mercantilism. However, by the mid to late 18th century, mercantilism began to face criticism, with economists like Adam Smith arguing for free trade and the benefits of specialization. The heavy regulations and privileges granted to certain industrialists were seen as corrupt and not truly beneficial to the nation. As the 18th century progressed, the intellectual currents that supported mercantilism began to wane, with the rise of economic liberalism and the idea of universal rights for citizens, leading to a shift away from mercantilist policies.

Keywords

💡Mercantilism

Mercantilism is an economic theory and practice that dominated Western economic thinking from the early 16th to the late 18th century. It emphasizes the importance of a positive balance of trade, meaning a nation should export more than it imports, to accumulate wealth and strengthen its economy. In the video, mercantilism is portrayed as a reaction to economic depression and competition from foreign goods, particularly from India. It is highlighted as a strategy to protect and promote national industries and wealth, with examples such as the English Navigation Act of 1651 and the establishment of national trade companies like the East India Company.

💡Balance of Trade

The balance of trade refers to the difference between a country's exports and imports. A positive balance of trade indicates that a country exports more than it imports, which was seen as economically beneficial during the mercantilist era. The video explains how mercantilists believed in promoting exports and limiting imports to enrich a nation and strengthen its industries, as illustrated by the efforts to establish colonies and control trade through national trade companies.

💡National Trade Companies

National trade companies, such as the East India Company, were chartered by states to conduct trade and maintain colonies for the benefit of the mother country. These companies received privileges and subsidies to ensure that their activities would lead to a positive balance of trade and strengthen the nation's economy. The video mentions how these companies were not only economic entities but also had significant military power, reflecting the close ties between economic and military power in mercantilist thinking.

💡Colonies

Colonies were territories controlled by a foreign power, often used to supply raw materials and markets for manufactured goods. In the context of mercantilism, colonies were seen as extensions of the mother country's economy, providing resources and markets that could be exploited to ensure a positive balance of trade. The video discusses how European powers like England and Holland used their colonies in the Americas and the East Indies to produce raw materials and consume their industrial products.

💡Economic Regulation

Economic regulation refers to the control and management of economic activities by the state. Mercantilists advocated for heavy regulation of domestic economies to protect and promote national industries. The video describes how mercantilists believed in controlling the number of factory owners, setting up special privileges for certain industries, and regulating guilds to ensure efficiency and competitiveness in the domestic market.

💡Adam Smith

Adam Smith was an 18th-century economist who is considered one of the first modern economists and a major critic of mercantilism. In his book 'The Wealth of Nations,' he critiqued mercantilist policies, advocating for free trade and the invisible hand of the market. The video mentions Smith's critique of mercantilism, arguing that trade should not be a zero-sum game and that free trade could benefit all parties involved.

💡Realism

Realism is a theory of international relations that views the global system as anarchic, with states competing for power and survival. This perspective aligns with mercantilist thinking, which sees trade as a zero-sum game where one party's gain is another's loss. The video connects mercantilist economics with the realist view of international relations, emphasizing the competitive nature of economic interactions between states.

💡Elitism

Elitism is the belief that a select group of people, often the nobility or the wealthy, should have greater power and influence because they are considered more rational and capable of making decisions for the greater good. In the video, mercantilist thinking is tied to elitism, as it suggests that the common folk's economic aspirations should be restricted by the state, which is controlled by the elite, for the nation's prosperity.

💡State Society

The state society concept refers to the idea that different people have different roles and tasks in society, determined by their social class. Mercantilists believed that certain roles, such as factory ownership, should be reserved for specific social classes. The video discusses how mercantilist policies were designed to maintain social hierarchies and control economic activities based on one's social status.

💡Work Specialization

Work specialization is the practice of dividing labor into specific tasks, with each worker focusing on a particular job. Mercantilists argued for work specialization to increase efficiency in economic sectors. The video describes how mercantilists opposed the multitasking of common people, such as farmers conducting minor craftsmanship, as it was seen as a hindrance to specialization and overall economic efficiency.

💡Agriculture

Agriculture was considered crucial in mercantilist economics for a nation's self-sufficiency and balance of trade. The video explains that mercantilists were interested in improving agricultural production to ensure a nation could feed itself and not rely on imports. It also discusses the idea of consolidating land to create larger, more efficient farms as a way to increase food production and strengthen the nation.

Highlights

Thomas Mun, in 1621, wrote a work that saved the East India Trading Company and established the first formulation of mercantilism.

Mercantilism was not a term used by its associated thinkers and its practices predated the theory.

The rise of modern states led to increased state control over trade and industry.

Mercantilism is best traced back to the early 17th century as a coherent economic thought stream.

Mercantilism focused on achieving a positive balance of trade and heavily regulating domestic economy.

A positive trade balance meant exports exceeded imports, strengthening national industries.

Mercantilists advocated for the reinvestment of capital into national industries rather than hoarding.

Spain's colonial wealth led to high prices and import reliance, illustrating mercantilist concerns.

Mercantilists supported high tariffs on imports and regulations to limit foreign competition.

Colonies were seen as sources of raw materials and markets for manufactured goods.

National trade companies like the East India Company were used to extend state power and trade.

Mercantilists believed in state regulation to prevent overproduction and maintain industry profitability.

Agriculture was considered as important as industry for national prosperity and self-sufficiency.

Mercantilists argued for land consolidation to improve agricultural efficiency and food production.

Work specialization was seen as crucial for economic efficiency in mercantilist thought.

Mercantilism was tied to elitist views, where the common folk's desires were to be controlled for national good.

Mercantilists were influenced by realism in foreign affairs, viewing international relations as zero-sum.

Adam Smith criticized mercantilism for misunderstanding the nature of wealth and the benefits of free trade.

Critics argued mercantile policies led to corruption and did not actually benefit the nation.

The rise of economic liberalism and universal rights理念 contributed to the decline of mercantilism.

Transcripts

london

1621

in the light of a lonely candle thomas

munn hastily scribbles away at the white

pages

england is in the midst of a harsh

depression brought on by english

manufacturers being out-competed by

cheap goods from india

enraged by this state of affairs the ire

of the english public is aimed at what

is thought to be the crisis main culprit

the east india trading company

as the company's director

moon is in a desperate struggle to clear

his name as well as that of the

cooperation and in doing so he writes a

work which not only manages to save the

company but in which he establishes the

first formulation of an intellectual

stream that would come to dominate

western economic thinking for nearly two

centuries

mercantilism the economics of empires

[Music]

the immediate problem one runs into when

writing a history or mercantilism is

that it's not really obvious where to

begin

the term itself was never used by any of

the people it's associated with and one

could also argue that a mercantile

economic practice existed before the

existence of any sort of mercantile

theory

as usual we will try to tackle the

history of mercantilism by trying to

place it within its historical

background

trade craftsmanship and industry have

been domains that for most of western

history have been under strict

regulations

as europe entered into the high middle

ages at the turn of the millennia the

right to carry out trade or

craftsmanship such as smitting or

tanning was often restricted to a

special sort of people living in the

cities

this way the people with the right

privileges could avoid unwanted

competition while the crown could

control and tax trade more easily

with the rise of the modern state

the power of europe's monarchs gradually

started to increase

and with it the fingers of the state

grew deeper into europe's early modern

economies

since trade and industry to some degree

always had been regulated since the

middle ages it's not easy to draw a

clear line from when mercantilism is

supposed to have emerged

however while the line may be blurry i

think the best time to point to the

establishment of what traditionally have

been seen as mercantilism is in the

early 17th century since this is the age

when i think we can truly speak about a

somewhat coherent stream of thought that

can be called mercantilism

it is also from the early 17th century

forward that this stream of thought

starts to heavily affect the economic

policy of many early modern european

states

so what was this dream of thinking and

what effect did it have on early modern

european economic history

early modern mercantile economics was

centered around two main pillars which

were heavily intertwined the

establishment of a positive balance of

trade and a heavily regulated domestic

economy

trade and its effect on a nation's

prosperity was a primary interest among

early modern mercantile thinkers

trade has the potential to enrich a

country and make it stronger but at the

same time it can also harm a country's

economy and thus be a detriment

in order for trade to enrich a nation

the land needs to have a positive trade

balance in which the country's exports

are higher than its imports

if this is the case the nation's

industries will be strong

and able to make more profit that can be

taxed by the government if the balance

of trade is negative however

the land's industries will be weakened

and eventually out-competed with money

and capital flowing out across the

borders into foreign countries

this attitude towards foreign trade has

often been characterized as booleanism

that is defining a country's wealth

based on the amount of capital and

precious metals it's able to accumulate

that is however a mischaracterization of

mercantilist economics

very few if any early modern mercantile

thinkers defined a nation's wealth this

way and many of them were well aware of

the dangers of hoarding capital

to the mercantilists the influx of

capital was something a country should

aim for

yet it was only considered a positive

provided that the wealth was reinvested

into the nation's industries

something that clearly manifested in the

mercantilist's analysis of the downfall

of one of early modern europe's greatest

empires

spain

through its exploration and colonization

of the new world spain had established

an expansive overseas empire from which

mountains of gold and silver were

shipped back to the mother country

something that many mercantile thinkers

were quick to point out ultimately would

not be to spain's benefit

the influx of precious metals caused

spanish prices to skyrocket which in

turn created incentives to import

cheaper products from abroad

in addition did many mercantile thinkers

also recognize that spain's static

feudal system made it next to impossible

for spanish industries to flourish

since its founding

spain like several other early modern

countries was an absolute monarchy

in which the power of the king in theory

was absolute

in practice however

this state of affairs came with a heavy

price

for in order to have its power

recognized by the spanish elite

namely the spanish nobility

the crown had to swear to protect the

nobilities rights and privileges

this resulted in large swaths of the

country being owned by aristocrats who

prefer to use the land as rental income

for serfs and tenant farmers the

aristocrats use of the land made spain

more prone to export raw material like

wool and agricultural products rather

than invest resources into industrial

innovation since such investments could

give rise to a strong middle class that

would threaten the nobility's hegemony

this state of affairs created a rather

bizarre situation

in which spain possessed europe's

largest colonial empire while at the

same time practically being a colony in

relation to europe's other powers

a poor

underdeveloped country that exported

sheep raw material while importing

expensive manufactured goods from its

rivals

something that is frustratingly

reflected in the words of a 17th century

spanish mercantile thinker

in order to secure a positive balance of

trade mercantile thinkers shunned the id

of free markets and instead advocated

for high tariffs on imported goods

as well as for the creation of new laws

and regulations to make it harder for

merchants to import foreign products

an example of such a law was the english

navigation act of 1651 which among other

things prohibited foreign merchants from

selling goods in british harbors that

were not from their home countries

creating a situation in which french

merchants only were allowed to import

french goods while dutch merchants only

were allowed to import goods from the

netherlands

another strategy that several european

powers used to improve their balance of

trade was by seizing foreign land in

america and the east indies by

establishing colonies

through acquiring colonies countries

like england and holland controlled

territories that they could force to

specialize in producing raw material

like cotton and sugar to sell to their

mother countries while at the same time

functioning like foreign markets to

which the motherland's industries could

sell their industrial products

a tool that several early modern states

used to establish and maintain colonies

as well as trade with distant countries

was national trade companies such as

east india companies and african

companies

these trading companies received

considerable privileges as well as

subsidies from their respective states

to establish and maintain trade with

distant countries that would be to the

benefit of their mother country

unlike modern corporations the mission

of early modern trading companies was

not simply to conduct trade

but also if necessary to force foreign

states to partake in it

this is well reflected in the sheer

military might that some of these

companies manage to amass

the most notable example being the

english east india trading company which

at the height of its power in the late

18th century is estimated to have

possessed a military force numbering

around two hundred thousand

[Music]

in order to create a positive balance of

trades mercantile thinkers thought that

it's not only necessary to protect

domestic production but that it's also

necessary for the state to take measures

to strengthen the nation's industries

in modern economic thinking competition

between different corporations is

generally thought to be positive for

economic growth since competition

incentivizes innovation and efficiency

this is a view that few mercantile

thinkers shared

instead of viewing competition as a

boost to economic growth a free domestic

market was believed to lead to the

creation of many small companies that

all would be too inefficient to be

profitable

due to an imbalance between the amount

of employers and employees

if a town for example had too many

factories the mercantilists argued that

it would lead to a situation that would

enable workers to demand higher salaries

which the mercantilists in turn thought

would lead to domestic industries being

unable to undercut foreign competition

and thus be unable to make profit

to avoid this situation mercantilist

thinking prescribed that the nation's

economy

needs to be heavily regulated especially

when it came to the number of factory

owners in each town and in each industry

this led many early modern states to

create special privileges that were

required to run a factory in a certain

industry in addition did many states

also give out favorable loans and

subsidies to the country's

industrialists with the intention that

the money would be invested in the

business

with a regulated market and great sums

of capital the mercantilists argue that

the land's factory owners would be able

to invest in better technology and learn

how to improve production in a way that

was needed to compete with foreign

competitors

in addition to having industries

regulated mercantile thinkers also

argued that the nation's guilds needed

to come under the control of state

regulation which led to the creation of

several new laws controlling the amount

of guild masters and apprentices allowed

by the state

beyond the guilds and the industries

early modern mercantile thinkers were

also interested in agriculture

unless a nation's agriculture produces

enough food to feed the country it would

need to import food from other countries

which in turn would jeopardize a

country's self-sufficiency as well as be

negative for the balance of trade

something that mercantilists could not

tolerate

while mercantile thinking primarily was

focused around industries there always

existed some interest in agriculture

which would become particularly strong

in the 18th century

it needs to be noted that the

relationship between industries and

agriculture was not one of mutual

exclusion

since mercantilism mainly was prevalent

prior to the industrial revolution there

never existed any question regarding

whether a country primarily should be an

industrial or an agricultural country

both industries and agriculture were

needed for a country to be prosperous in

mercantile economics

since the middle ages european

agriculture had primarily been focused

on self-sufficiency

which meant that most farmers mainly

grew crops to sustain themselves and pay

taxes

while some agricultural products were

sold on the market the system can hardly

be considered commercial agriculture

in order to change this

some mercantile thinkers argued that the

state should work to merge the landslots

distributed among the peasants into

large arable land areas that could be

run by fewer people who would be able to

innovate the agricultural production by

adopting new farming technologies

this would in turn increase the nation's

food production which in turn will

increase the nation's workforce as well

as strengthen the state by enabling it

to mobilize more resources and recruit

larger armies which in many ways is the

end goal of mercantilism

when mercantile thinkers thought of a

nation being rich and prosperous they

mainly referred to the prosperity of the

state in terms of its ability to

dominate and protect itself against

other states

the well-being of workers and the common

folk was secondary for most mercantile

thinkers and some even went so far as to

claim that the poverty of the working

class was a requirement for a country to

be powerful

a final aspect of mercantile domestic

policy that i think is relevant to bring

up is that of work specialization

in order for the different economic

sectors in society like agriculture and

manufacturing to be efficient mercantile

thinkers argued that they needed to

focus on different things and not tread

outside their designated fields

this tendency became prevalent in

several european countries in the 18th

century and especially when it came to

the relationship between cities and the

countryside in the middle ages and much

of the early modern period many european

cities had owned the farmland

surrounding the city in order to make

sure that the city would be able to feed

its inhabitants

in similar fashion did most farmers

conduct

minor craftsmanship during the winter

months when they didn't need to work in

the fields like creating their own tools

and suing their own clothes

this state of affairs angered many 18th

century mercantile thinkers who

condemned the common folks multitasking

for preventing work specialization in

the economy and thus being a detriment

to the nation

while there wasn't any way to outlaw the

farmer's home craft the mercantilists in

some countries were able to affect the

city's agricultural production

example of this is the swedish

government which in the 18th century

prohibited its cities from purchasing

new farmland to support themselves when

they expanded

[Music]

while trade and domestic economics are

important subjects to understand

mercantilism in order to fully get a

sense of the mercantile rationale in the

context of early modern europe it's

necessary to cover some of the

underlying ideological streams of

thought that mercantile economics is

associated with

as you probably have noticed did many

mercantile thinkers view workers and the

common folk very unsympathetically

a man working in a factory should

according to the mercantilists not be

given the opportunity to argue for

better wages or be able to start his own

company

nor should he be allowed to save money

by producing his own food and

necessities this unsympathetic view

towards ordinary people is closely tied

to the elitist views of society that

dominated large parts of europe

throughout the early modern period

common people such as peasants and

workers are generally seen as simple

greedy and naturally inclined to act on

irrational impulses at expense of their

nation

the elite on the other hand which is to

say the nobility and the wealthy burgess

are in contrast instead thought of as

rational virtuous well-educated and able

to see the greater picture and thus able

to prioritize the country's long-term

interests

in order for a country to be prosperous

the ill-guided will of the common folk

needed to be curbed by the elite and if

the elite left the commoners to their

own devices it was generally thought to

lead to disarray and disaster

similarly to how a young child would

hurt both itself as well as the people

around it if left without the guidance

of good parents

as such the economic aspirations of the

common folk were seen by the

mercantilists as something that needed

to be restricted by the state for the

greater good of the nation

another prominent id that mercantile

economics was closely tied to was the id

of the state society

that is to say the idea that different

people have different tasks in society

that are determined by their social

class which they accept in the rare

circumstances are born into

this is especially reflected in how the

mercantilists emphasized that only

certain people should have the right to

become factory owners

similarly to how only some people were

allowed to be nobles or guild members

the last and according to me

usually least emphasized ideological

stream associated with mercantile

thinking is that of the foreign affairs

theory called realism

the theory dates back to at least the

5th century bc and while it did not

become an officially formulated theory

until the 20th century it is well

reflected in much early modern political

writing

in this view of international relations

the global system is characterized by

anarchy with different states competing

against each other for power and

survival in such an environment any sort

of transaction is zero sum and there is

no room for peaceful cooperation

the way this thinking corresponds well

to mercantilism is in the way

mercantilists emphasize that trade and

economics is zero sum

if one actor wins on a transaction the

other must necessarily be worse off

while the principles of mercantilism

would be unchallenged in european

economic thinking throughout most of the

early modern era mercantile economics

would not reign supreme forever

by the mid to late 18th century there

started to emerge a growing stream of

criticism

towards the mercantile system with many

people arguing that it had several

severe shortcomings

the most famous of these critics was the

18th century economist adam smith who in

his famous book wealth of nations

gave sharp criticism against mercantile

economic thinking

his first critique which is actually a

misunderstanding of mercantile economics

is that the nation's wealth is not

measured by its amount of gold and

precious metals

but by its amount of goods and products

as pointed out in our coverage of the

mercantilists analysis of spain is this

something that the mercantilists did not

believe

though it's understandable why smith

would think this given the

mercantilist's heavy emphasis on the

influx of capital and a positive balance

of trade

the way smith would associate

mercantilism with bullionism would stick

however and has been part of the

understanding of mercantilism within

intellectual history until the late 20th

century

smith's second critique on mercantilism

is that trade between different

countries is not a zero-sum game but

something that will benefit both parties

free trade smith argued would lead to

countries specializing in different

things which will lead to all countries

receiving more goods and thus be

wealthier this is a critique that smith

was not alone in

similar critiques were given by many

18th century economists who pointed out

that heavy tariffs and harsh

restrictions on foreign merchants led

many countries industries to not having

enough people to sell their goods to

since the tariffs led to fewer trade

ships deciding to dock in foreign

harbors

one final critique given to the

mercantile economic system was that the

heavy regulations and the generous

benefits given to a select few

industrialists did not actually benefit

the country but instead was a sign of

corruption

many economic thinkers as well as

politicians argued that the system of

privileges and benefits seldom was given

out with the intention to improve the

country but instead functioned as a way

for corrupt politicians to benefit their

associates as the 18th century passed

into the 19th century the crowd of

critics grew and with revolutionary

transformative events like the

industrial revolution

the french revolution and the napoleonic

wars

the old mercantile economic system came

to give way to economic liberalism both

on an intellectual level as well as in

practice

not only did the critics give skating

critiques to the outcome of mercantile

economics but they also think an

important factor to the fall of

mercantilism is the gradual collapse of

the intellectual currents it's

associated with the late 18th and early

19th century did not simply see the rise

of economic liberalism but also the rise

of the idea that ordinary people are

citizens with universal rights and that

citizens have a right to have a say in

the affairs of state

rather than simply being subjects whose

desires should be controlled by the

state

in such an intellectual climate it's

much harder to argue that some people

should have the legal right to own a

factory like it would have been

throughout most of the early modern

periods

you