Mercantilism

Mercantilism was an economic system of trade that spanned the 16th century to the
18th century. Mercantilism was based on the principle that the world's wealth was static,
and consequently, governments had to regulate trade to build their wealth and national
power. Many European nations attempted to accumulate the largest possible share of
that wealth by maximizing their exports and limiting their imports via tariffs. Its goal was
to increase the supply of a state's gold and silver with exports rather than to deplete it
through imports. It also sought to support domestic employment. Mercantilism centered
on the interests of merchants and producers (such as England's East India Company
and the Dutch East India Company) and protected their activities as necessary.
Here are some characteristics of it:
1. The Belief in the Static Nature of Wealth
Financial wealth was considered limited (due to the rarity of precious metals). Nations
that sought prosperity and power needed to secure as much wealth as possible, at the
expense of other nations.
2. The Need to Increase the Supply of Gold
Gold represented wealth and power. It could pay for soldiers, seafaring exploration for
natural resources, and expanding empires. It could also protect against invasion. A lack
of gold meant the downfall of a nation.
3. The Need to Maintain a Trade Surplus
This was integral to building wealth. Nations needed to focus on selling their exports
(and collecting the associated revenue) more than on spending on imports (and sending
gold out of countries).

4. The Importance of a Large Population
Large populations represented wealth. Increasing a nation's population was integral to
supplying a labor force, supporting domestic commerce, and maintaining armies.
5. The Use of Colonies to Support Wealth
Some nations needed colonies for raw materials, a labor supply, and a way to keep
wealth within its control (by selling colonies the products their raw materials helped to
produce). Essentially, colonies increased a nation's wealth-building power and national
security.
6. The Use of Protectionism
Protecting a nation's ability to build and maintain trade surpluses encompassed
prohibiting colonies from trading with other nations and imposing tariffs on imported
goods.
Mercantilism replaced the feudal economic system in Western Europe. At the time,
England was the epicenter of the British Empire but had relatively few natural
resources.
To grow its wealth, England introduced fiscal policies that discouraged colonists from
buying foreign products and created incentives to buy only British goods. For example,
the Sugar Act of 1764 raised duties on foreign refined sugar and molasses imported by
the colonies. This increased taxation was meant to give British sugar growers in the
West Indies a monopoly on the colonial market.
Similarly, the Navigation Act of 1651 forbade foreign vessels from trading along the
British coast and required colonial exports to first pass through British control before
being redistributed throughout Europe.

Programs like these resulted in a favorable balance of trade that increased Great
Britain's national wealth.