MercantilismFrom Wikipedia, the free encyclopedia

An imaginary seaport with a transposed Villa Medici, painted by Claude Lorrain around 1637, at the height of mercantilism

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Mercantilism is the economic doctrine that government control of foreign trade is of paramount importance for

ensuring the military security of the country. In particular, it demands a positive balance of trade. Mercantilism

dominated Western European economic policy and discourse from the 16th to late-18th centuries.[1] Mercantilism was a cause of frequent European wars in that time and motivated colonial expansion.

Mercantilist theory varied in sophistication from one writer to another and evolved over time. Favours for

powerful interests were often defended with mercantilist reasoning.

High tariffs, especially on manufactured goods, are an almost universal feature of mercantilist policy. Other

policies have included:

Building a network of overseas colonies;

Forbidding colonies to trade with other nations;

Monopolizing markets with staple ports;

Banning the export of gold and silver, even for payments;

Forbidding trade to be carried in foreign ships;

Export subsidies;

Promoting manufacturing with research or direct subsidies;

Limiting wages;

Maximizing the use of domestic resources;

Restricting domestic consumption with non-tariff barriers to trade.

Mercantilism in its simplest form was naive bullionism, but mercantilist writers emphasized the circulation of

money and rejected hoarding. Their emphasis on monetary metals accords with current ideas regarding the

money supply, such as the stimulative effect of a growing money supply. Specie concerns have since been

rendered moot by fiat money and floating exchange rates. In time, the heavy emphasis on money was

supplanted by industrial policy, accompanied by a shift in focus from the capacity to carry on wars to promoting

general prosperity. Mature neomercantilist theory recommends selective high tariffs for "infant" industries or to

promote the mutual growth of countries through national industrial specialization. Currently, advocacy of

mercantilist methods for maintaining high wages in advanced economies are popular among workers in those

economies, but such ideas are rejected by most policymakers and economists.