Mercantilism

Mercantilism was an economic theory and practice that was dominant in Western Europe during the 15th to the mid-18th centuries. Mercantilism is a form of economic nationalism. Its goal is to enrich and empower the nation and state to the maximum degree, by acquiring and retaining as much economic activity as possible within the nation's borders. Manufacturing and industry, particularly of goods with military applications, were prioritized. Mercantilism sought to ensure the nation produced as much volume and variety of output as possible, so as to limit its dependence upon foreign suppliers. Economic autarky was a critical element of mercantilism. These aims were primarily accomplished by:

These policies generally resulted in a positive balance of trade, which led to the accumulation of precious metals, which is how accounts used to be balanced.

Historically, such policies sometimes led to war and may have motivated colonial expansion. Indeed, with the establishment of overseas colonies by northern Europe powers early in the 17th century, mercantile theory gained a new and wider significance, in which its aim and ideal became both national and imperialistic. While it has been noted that both the United States under the American System, and Imperial China under the Canton System, pursued de facto mercantile policies, they did not engage in significant colonial activities. High tariffs, especially on manufactured goods, are an almost universal feature of mercantilist policy. Other policies have included:

Mercantilism has been linked to bullionism ever since Adam Smith made the accusation. However, due to the fact that no author self-consciously used the label to refer to their own thoughts mercantilist authors can only be identified retrospectively. There are exceptions, for example, Antoine de Montchrestien, the "godfather" of French mercantilism, wrote:

it is not the abundance of gold and silver, the quantity of pearls and diamonds, which makes states opulent... it is the supply of things necessary for life and suitable for clothing.

John Maynard Keynes observed that the accumulation of gold may have served an important purpose in states before the advent of fiat money, since it increased liquidity in currency-starved early modern markets. The core of mercantile policy was a coherent national industrial policy, which was aimed at generating as much material wealth within the nation as possible. Doing so, it was thought, was the best way to increase the state's military and political power.

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