MERCANTILISM. The system of economic policy evolved by the European States after the decay of the feudal system. In essence it repre sented a transition from local and territorial to national economy. In the earlier period each town had regulated industry in the exclusive interest of its own inhabitants, treating the citi zen; of other towns as aliens who could trade in the town only after to such re striction; as the town government chose to innpo-e. It was the purpose of the mercantilist statesmen to break down the harriers to internal intercourse, and to unite the State in a single economic organism in rivalry with other States. The practical measures by which the mercan tilist statesmen sought to attain national power were: (1) the aecumulation within the State of a large amount of the precious metals; (2) the encouragement of agriculture; (3) the develop ment of manufactures; and (4) the creation of a mercantile marine. In the writings of the ex ponents of mercantilist doctrine especial emphasis was devoted to the acquisition of treasure. Tice European States were rapidly passing from au economic order in which payments in kind pre vailed to an economy based upon money trans actions, and as a consequence the great impor tance of a sufficient stock of the precious metals occupied a large share of the attention of states men. In the earlier mercantile period an effort had been made to prevent the exportation of bul lion altogether. Later it came to be recognized that bullion sent abroad in the way of exchange might result in an ultimate increase in the stock of bullion at home. Statesmen then concentrated their attention upon securing a favorable balance of trade. One way of attaining this end was to encourage the exportation of finished com modities and the importation of raw materials, since in this way a greater value would be ex ported than imported.
]Manufactures were encouraged because they furnished materials for commerce, helping there by to secure the so-called favorable balance of trade. Agriculture also took a subordinate posi tion, and was encouraged as a source of abun dance of raw material. The growth of popula tion was desired in order to have an ample sup ply of cheap labor power. Cheap agricultural products and cheap labor were aims, and herein we see a difference between mercantilism and modern protectionism, the avowed claims of which are high prices for the products and high wages for labor. In England the earlier prohibi
tion of exportation of grain, which had been cal culated to favor the consumer, was succeeded by prohibition of importation when prices fell below a certain figure, in order that tillage might be uniformly profitable. Manufactures were stimu lated by high duties, or even by prohibition of imports, and by numerous sumptuary laws favor ing domestic manufactures. The aim here was twofold: to attain national economic indepen dence and to prevent the export of bullion in pay ment for foreign goods. Finally, the encourage ment of shipping was naturally regarded as of the greatest consequence at the time, since the new trade with America and the Orient rapidly enriched the nations which controlled it. Fo• the mercantilist navigation policy, see NAVIGATION LAWS.
Mercantilism as a definite policy first appears in English history at the end of the fourteenth century; not mneh late• it was also the settled policy of France. In England it reached its height under Elizabeth; in France under Colbert in the seventeenth century. From that time pure mercantilism rapidly decayed, degenerating into a complicated system of discriminating duties designed to favor private interests instead of those of the State as a whole. It was mercan tilism of this kind against which Adam Smith directed his critieisms,which prejudiced economic writers for a century against the system. Re cent historical investigations have, however, dem onstrated that at its best mercantilism repre sented a great advance in economic policy, and that it was effective in bringing shout national unity and independence. See TRADE; PROTECTION; BALANCE OE TRADE; PHYSI OCRATS; NAVIGATION LAWS.
BIBLIOGRAPHY. Perhaps the best presentation Bibliography. Perhaps the best presentation of a moderate mercantilism by all advocate is that found in Sir 'lames Steuart's 1 mini r.lt into t he f'iivoiplc.s of l'ol it tell/ Ec•uatutelc/ (London. 1767). For tine older critical attitude toward mercantilism, consult .\dam Smith, Wca/ik of Yea tones. look iv. By far the best statement of the modern vices is Se11111011er'S .11e:retinal,: ys It In (Eng. trans., New York, 1;391_0..