History
What is Mercantilism?
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.
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Watch a 2-minute lesson with voice + animation that explains mercantilism.
Key things to understand
- 1It treated global wealth as roughly fixed — something to win at others' expense.
- 2Nations aimed to export more than they imported to pile up gold and silver.
- 3Governments tightly controlled trade with tariffs, monopolies, and colonies.
- 4Colonies existed to supply cheap raw materials and buy the mother country's goods.
- 5It was later challenged by free-trade ideas, notably from Adam Smith.
Frequently asked questions
- 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.