Age of Mercantilism

Definition

The Age of Mercantilism refers to the economic theory and practice that dominated European economic policy from the 16th to the 18th centuries, emphasizing the role of the state in managing the economy to increase national wealth through trade, colonization, and the accumulation of precious metals. This period is marked by strong government intervention in economic affairs, protectionist policies, and the establishment of colonial empires as nations sought to become self-sufficient and limit imports.

5 Must Know Facts For Your Next Test

1. Mercantilist policies led to the establishment of monopolies and chartered companies, allowing states to control trade routes and resources more effectively.
2. Nations believed that a favorable balance of trade, where exports exceeded imports, was crucial for increasing wealth and power.
3. The Age of Mercantilism coincided with the rise of powerful nation-states in Europe, leading to intense competition for colonies and trade dominance.
4. Mercantilist thought influenced naval power, as strong fleets were essential for protecting trade routes and asserting national interests abroad.
5. The decline of mercantilism in the late 18th century paved the way for classical economics and ideas favoring free trade and limited government intervention.

Review Questions

• How did mercantilist policies influence European colonial expansion during the Age of Mercantilism?
  • Mercantilist policies significantly influenced European colonial expansion by promoting the idea that colonies were essential for increasing national wealth. European nations sought to acquire colonies to provide raw materials for their industries and markets for their finished goods. This led to fierce competition among powers like Spain, Britain, and France to establish and maintain colonies, ultimately shaping global trade networks that favored the metropole's economic interests.
• Evaluate the impact of protectionist policies on domestic industries during the Age of Mercantilism.
  • Protectionist policies during the Age of Mercantilism aimed to shield domestic industries from foreign competition by imposing tariffs and regulations on imports. While these measures did help some local businesses thrive by reducing competition, they often led to higher prices for consumers and inefficiencies in production. Additionally, such policies sometimes sparked trade disputes and retaliation from other nations, highlighting the tension between national interests and global trade dynamics.
• Assess how the transition from mercantilist thought to classical economics changed European economic policies in the late 18th century.
  • The transition from mercantilist thought to classical economics marked a significant shift in European economic policies by advocating for free trade and limited government intervention. Economists like Adam Smith argued against protectionist measures and emphasized the benefits of competition and market forces. This change not only influenced national policies but also encouraged international cooperation and trade agreements, leading to a more interconnected global economy that prioritized efficiency over state-controlled wealth accumulation.

Related terms

Colonialism: The practice of acquiring and maintaining colonies or territories by a dominant power for economic exploitation and political control.

Protectionism: Economic policy aimed at restricting imports from other countries through tariffs and regulations to protect domestic industries.

Bullionism: An economic theory that emphasized the importance of accumulating precious metals, such as gold and silver, as a measure of national wealth.