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Mercantilism; A Brief Note

Updated on May 23, 2015
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IRSHAD CV has been a student in Economics. Now he is doing Masters in Economics. He completed B.A. Economics from the University of Calicut.


The study of human history is very interesting one. which help us to acquire many valuable information regarding the social, political and economical practices of that time. Further the comparison study of present with past is also very interesting field, which enable us to analyze the progress of humanity. The history of economic thought is the area of studying the social and economical culture of humanity of different times. There are many civilizations, which disclose different kind of social life. Ancient economic thought consist ancient Indian economic thought, Greek thought and so on.

Here this hub is a brief note on Mercantilism, one of the most popular economic thought prevalent in Europe during the end of medieval period.

Mercantilism and its Origin

Mercantilism is an important economic idea existed in Europe in between 15th and 18th century. It spread all over Europe including Spain, Germany, …. Even Russia also. The same idea was envisaged by by different countries in different names. For instance, the term ‘Kameralism’ was represented for Mercantilism in Germany, ‘Colabertism’ in France etc. But the idea was the same. The core belief of Mercantilism was, only bullion (gold and silver) will increase the wealth of nation. So, it is also known as ‘Bullionism’. For acquiring wealth they gave priority for trade. They also believed that external sector and industrial sectors are the most productive sector of the nation.

Reasons for the Raising of Mercantilism

Till the end of medieval period, feudalism was the social system of the majority part of the world. but Mercantilism put an end to feudalism. They gave more superiority for King. There are many reasons for the raising of Mercantilism. Some of them are briefly explained below.

Renunciation and Reformation : There were many thinkers in Europe who conducted renunciation and reformation activities. As a part of this the feudalistic society began to collapse and after king got domination in the country.

Invention of printing machine : The working of reformation and renunciation was highly supported with printing technology. It helped to spread ideas with public. So, the invention of printing machine ensured the fast growing of mercantilism.

Nationalism : The people were highly addicted to their home countries. They saw the neighboring countries as rivals. So, that every one tried to build a strong nation with aiming self sufficiency. Further they wanted to earn more bullion by activating in stiff competitive trade.

Finding of new mines : during the period of mercantilism, there discovered many mines. Which increased the supply of gold ad silver. So, every one tried to ensure the wealth of nation by acquiring more bullion.

Scarcity of money : During that time money was scarce in supply. So, the volume of exchanges and economic transactions were lower. To make more exchanges, money or wealth was very essential one. So, it also lead to the raising of ideas of mercantilism. Because every country began to acquire wealth by bagging more bullion.

Main Ideas of Mercantilism

The core idea of mercantilism was to build a strong and self sufficient state. Since wealth is the most important matter which determines the strength of a country, they were highly addicted to acquiring more and more wealth. Money, gold, silver etc were the signs of wealth. That is why mercantilism aimed to collect more bullion. If a country enriched with mines, they exploited the natural resources to strengthen the country. on the other side, if a country lacked mines, they gained more bullion through international trade. Mercantilism always suggested for favorable Balance of Trade, that is the surplus Balance of Trade. For that, they put restrictions on imports along with liberating the export activities. These states were also tried to capture more colonies. They used colonies for collecting raw materials as well as selling their finished goods. Following are the major ideas of Mercantilism.

i) Money and Wealth: During the period of mercantilism, money and wealth were regarded as the important things which widely used for strengthening of states. During the time, metallic money was circulated. So, gold and silver played an essential role in the wealth of nations. In short, they put regulations on importing of foreign goods and liberalized the export sector to build a state with having more bullion or wealth.

ii) Population : Mercantilism followed a population policy to increase their population. This is because they believed that, large number of population will help to increase the demand for commodities as well as supply of commodities. Since, large population will help to supply a mass labor force with cheap wage rate, they can easily compete with foreign countries. Further the national security also ensure through generating large army force.

iii) Interest Rate : Since lower level of prices will tend to deflation, it is not good for the economy to attain growth and development. So, they followed a policy of charging of small rate of interest. They also believed that, lower rate of interest is must for the development and growth of the country.

iv) Trade : As mentioned above, mercantilism gave more importance to foreign trade. The ultimate aim of foreign trade was to enrich the country with gaining more bullion. They were also followed a favourable Balance of Trade. That is the excess of exports over imports. so, that they can increase the inflow of income. On the other side they deliberately neglected the agricultural field. They believed that agricultural sector as lower productive sector.

Writers of Merchentilism

Mercentilism came in to reality because of the influence of many philosophers, writers etc. Jean Bodin and Machiavelli were the two philosophers who put forwarded the initial idea of merchentilism. There were many writers also who disclose about merchentilism. Following table showing a very brief note about them and their contributions.

Sl No
Thomas Mun
1571 – 1641
i) “England’s Treasure of Foreign Trade” (book) ii) Suggested 12 methods to improve treasury
Willian Petty
1623 – 1685
i) “The Treatise of Taxes and Contribution” (book) ii) Mentioned about public finance
David Hume
i) “Political Discourse” (book) ii) Mentioned about the functions of money
Richard Cantillon
1680 - 1734
i) “Nature of Commerce in General” (essay) ii) mentioned about circular flow of economic activity


Mercantilism was an important economic idea prevalent in European continent in between 15th and 18th century. The idea created a wide revolution not only in Europe, but also in the rest of the world. The idea gave more importance on nationalism, self sufficiency, acquisition of wealth etc. Colonialism was also an outcome of mercantilism. In short, the ultimate aim of mercantilism was the enrichment of wealth of countries. So, that they ignore the agricultural sector and gave importance to trade and industrial sector.


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