What is Mercantilism?

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What is Mercantilism?
Mercantilism is an economic system adopted by countries whose governments want control over the economy. The basis of this system involves wealth accumulation, establishment of favorable trade with other countries, and development of internal resources in the manufacturing and agriculture sectors.

Mercantilism has been practiced in Europe as early as the 16th century. Big countries such as Britain, France, Spain, and Portugal generated much wealth from this system through the establishment of colonies in other acquired lands. These colonies were tasked to maximize available resources to generate more money. Plantations and precious metal mines were built to increase existing resources. A collection system is then put in place for these colonies to pay taxes and remit money to the ruling governments or home countries. This cycle was favorable to the top ruling governments in terms of resources and capital.

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The basic concept of mercantilism in terms of trading is to make sure that the country’s own resources are exported to other countries in higher volumes or amounts compared to the goods imported, which are kept to a minimum level. Trading is said to be “balanced” if a country exports more than it imports. Through this system, resources will increase and there will be a surplus on gold reserves.

But many people do not propose the idea of mercantilism, as it does not promote free enterprise and free movement of goods and people. And instead it allowed colonialism and monopoly of businesses and trade practices. Objectives were simply to generate wealth for the upper class and merchant class. The working people were exploited and were even made as slaves with very low wages.

Though mercantilism did benefit only some groups of people in the upper levels of society, it also paved the way for the economic transition to capitalism which allowed for free trade between countries.

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