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What is mercantilism?
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Quick answer
Mercantilism was an economic theory popular in Europe from the 1500s to the 1700s, which held that a nation's wealth depended on accumulating gold and silver by exporting more than it imported. It drove colonial expansion and tight trade controls.
Key things to understand
- It treated global wealth as roughly fixed — something to win at others' expense.
- Nations aimed to export more than they imported to pile up gold and silver.
- Governments tightly controlled trade with tariffs, monopolies, and colonies.
- Colonies existed to supply cheap raw materials and buy the mother country's goods.
- It was later challenged by free-trade ideas, notably from Adam Smith.
People also ask
How is mercantilism different from capitalism?
Mercantilism sees trade as a zero-sum contest for gold, heavily controlled by the state; modern capitalism emphasizes free markets and the idea that trade can benefit both sides.
How did mercantilism relate to colonialism?
Colonies were central to it — they supplied cheap raw materials and a captive market for the colonizing nation's manufactured goods, boosting its trade surplus.
Why did mercantilism decline?
Free-trade thinkers like Adam Smith argued that wealth comes from production and mutually beneficial exchange, not hoarding gold — ideas that reshaped economics.