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Mercantilism: Triumph or Travesty

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Gabrielle Matthews
Dr. Staneck
History 107
March 20, 2015

Mercantilism: Triumph or
Travesty
Mercantilism existed and was pushed as an economic system by
powerful European countries from about the early 1500s to the late
1800s. In allowing trade between countries via the shipping system,
Europe and the colonies changed from a land based feudal and guild
crafts production system to a monetary economy much more based on
trade between countries (Griffin). Basically, foreign trade became a
prevalent industrial system based on money rather then only products
(Griffin).
Mercantilism would hopefully make countries more wealthy and thus,
more powerful. It helped bring money into countries with imports as
well as helping populations stay employed (Griffin). A main tenant was
that any economy needed to export more than it imported to become a
politically and economically viable nation (Griffin).
In the early history, the colonies traded mainly with Britain and a
few other European countries (Griffin). However, it also created cause
for wars between Spain, England, France and Holland in their quest for
goods, services, gold and other metals (Griffin). Traders paid large

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tariffs and levies, which in turn supported each nations army and navy.
In doing this, they were to be protected from outside competition
(Griffin).
Adam Smith coined the term mercantile system as the political
economy seeking to enrich a political economy of a country by
restraining imports and encouraging exports (LaHaye). Europe did
wish to have a favorable balance of trade to help bring more gold and
silver into the country. Another hope was to increase domestic
employment (LaHaye). In this manner, mercantilism served both the
merchants and the producers. Because commerce and industry
related to agriculture increased particularly in the colonies, trade
increased, metallic monetary systems also increased changing the
older barter system (LaHaye). Smith was very critical that the
accumulation of wealth or gold and the class bias system, the
monopoly of trade routes that he felt was working against the
economic interests of the merchant class (Magnussen). It was also
seen as a tight alliance between powerful merchants and the monarchs
of the powerful countries (Magnussen).
Mercantilism really benefitted large companies such as the British
East India Company. This company was protected over trade groups
that were also maintained by certain companies (Viner). Again, if
these companies were protected, more gold would be accumulated by
merchants exporting more and then gaining surplus profits (Viner).

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Raw materials were imported into large countries, but they did not
control production, rather were concerned with buying and selling
(Spiegel). Finished goods would be exported and sold for a higher
price relative to their lower original cost (Spiegel). A shift came into
focus from just trading to more interest in production and the
accumulation of capital (Viner). More than anything this pushed into
the forefront a greater idea of more open and free trade (Magnussen).
Mercantilists pushed exports except those things such as
machinery, plants or equipment that could possibly aid other foreign
competitors (Viner). Most continued to discourage imports with the
exception of those raw materials they needed for products or precious
metals that would never be refused (Magnussen).
Colonies became one of the biggest exporters of raw materials but
did not necessarily make needed profits. They also needed a free flow
of money that could possibly result in a better balance of trade
between the larger companies as well as the colonies (Griffin).
However, if mercantilism became the only prevalent system, too much
money would be chasing too few goods. That would mean a rise in
prices, then money flowing out resulting then in more falling prices.
Nobody wins at that point (Viner).
Mercantilist policy did break up old feudal outlooks on economic
systems (Magnussen). It also fostered a growth of foreign trade which
remains today. Additionally, raw materials and precious metals are

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exported to other countries, thus bringing in more products such as


textiles that could not be cheaply produced in our own country
(Spiegel). However, mercantilism decreased products the colonies
could sell to nations other than Britain. They became the producer of
raw materials, then the buyers of the products Britain sent back to the
colonies (Spiegel). It kept any competition of manufacturing on a
limited scale as Britain did not wish competition from the colonies
(Griffin). The colony of Virginia specifically came about in about 1607
for the British to make more profits from tobacco crops (Pecquet). The
crop not only benefitted the British, but became the monetary
exchange for the Virgina region. In this manner other artisans,
innkeepers and non-farmers simply planted tobacco to have extra cash
on hand (Pecquet). In 1621 a bill was introduced into the British
Parliament disallowing planting tobacco at all in Britain. It also stopped
all importing of tobacco from anywhere except The British West Indies
or Virginia (Pecquet). This finally gave colonists incentive to fight back
to decrease mercantilist policies and begin to have their own industries
and products to readily compete with foreign nations (Pecquet). They
had finally begun to see that they had the ability to control some
aspects of trade and actually make money. Mercantilism was not the
best policy, but it was the beginning of the trade process that
ultimately set the stage for better trade among countries in the future

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as restrictive laws were diminished and a free market economy


emerged.

Works Cited
Griffin, David. Demand Media.
LaHaye, Laurie. "Mercantilism." The Concise Encyclopedia of
Economics (2008).
Magnussen, Lars. Mercantilism: The Shaping of Economic Language.
London: Routledge, 1994.
Pecquet, Gary, M. "British Mercantilism and Crop Controls in the
Tabacco Colonies." CATO Journal (2003).
Spiegel, Henry. The Growth of Economic Thought. Durham: Duke
University Press, 1983.
Viner, Jacob. Essays on the Intellectual History of Economics. Princeton:
Princeton University Press, 1991.

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