Mercantilism facts for kids

A painting of the French seaport by Claude Lorrain from 1638, when mercantilism was very popular

Mercantilism was an important way of thinking about economics that was popular in most parts of Europe from the 1500s to the 1700s. It was a system where countries tried to become as rich and powerful as possible.

The idea behind mercantilism was that a country's power came from its wealth, especially from having lots of gold and silver. To get more gold and silver, countries believed they needed to export (sell to other countries) more goods than they imported (bought from other countries). This was called having a "positive balance of trade".

The term "mercantilism" was first used by a French writer named Marquis de Mirabeau in 1763. Later, a famous economist named Adam Smith helped make the idea widely known in 1776, even though he disagreed with it.

What Was Mercantilism?

Mercantilism was a system where governments played a very active role in their country's economy. They believed that the total amount of wealth in the world was limited. This meant that for one country to get richer, another country had to get poorer.

Because of this idea, countries competed fiercely to gain more wealth. They wanted to have more gold and silver than their rivals. This led to many rules and policies designed to help their own country's trade and industries.

Why Did Mercantilism Start?

During the 16th to 18th centuries, many European countries were ruled by absolute monarchs. These kings and queens had a lot of power. They needed huge amounts of money for several reasons:

• To pay for large armies and navies.
• To fund their governments and the many people who worked for them.
• To support their own fancy lifestyles and royal courts.

These governments were also very focused on their own nation's strength and importance. This is why mercantilism is often seen as a form of economic nationalism, where a country's economic policies are designed to make it strong and independent.

How Did Mercantilism Work?

Mercantilist governments used several strategies to try and make their countries rich:

Encouraging Exports

Governments wanted their country to sell as many goods as possible to other nations. They would often give money or special benefits, called subsidies, to businesses that produced goods for export. This made it cheaper for these businesses to make and sell their products abroad.

Discouraging Imports

To keep gold and silver inside the country, governments tried to limit imports. They did this by adding extra taxes on imported goods. These taxes are called tariffs. Tariffs made foreign goods more expensive, so people would buy goods made in their own country instead. This approach is known as protectionism.

Controlling Colonies

Many European countries had colonies around the world. Mercantilism meant that these colonies existed to benefit the "mother country." Colonies were often forced to:

• Provide raw materials (like timber, cotton, or minerals) only to the mother country.
• Buy finished goods only from the mother country.
• Not trade with other countries.

This system ensured that the mother country always had a supply of cheap raw materials and a market for its manufactured goods. The triangular trade in the North Atlantic, for example, was a trade pattern that developed partly because of mercantilist ideas.

The End of Mercantilism

Mercantilism was the main economic idea in Europe for about 200 years. However, it started to face challenges in the late 1700s. Many thinkers began to argue that it was not the best way to create wealth.

One of the most famous critics was Adam Smith, a Scottish economist. In his important book, The Wealth of Nations, published in 1776, he argued against many mercantilist ideas. Smith believed that countries would become richer through free trade and competition, not by strict government control and trying to hoard gold. His ideas helped lead to the rise of capitalism, which focused more on free markets and less on government control.

Images for kids

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  Seaport at sunset, a French seaport painted by Claude Lorrain in 1639, at the height of mercantilism

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  Merchants in Venice

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  French finance minister and mercantilist Jean-Baptiste Colbert served for over 20 years.

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  The Anglo-Dutch Wars were fought between the English and the Dutch for control over the seas and trade routes.

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  Mercantilism helped create trade patterns such as the triangular trade in the North Atlantic, in which raw materials were imported to the metropolis and then processed and redistributed to other colonies.

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  Much of Adam Smith's The Wealth of Nations is an attack on mercantilism.

See also

In Spanish: Mercantilismo para niños