What was mercantilism?

Mercantilism was the economic philosophy that dominated European thinking from roughly 1500 to 1800. At its core was the belief that the world's wealth was finite and that nations competed in a zero-sum struggle for economic dominance. A nation's power was measured by its stockpile of gold and silver (bullion), and the primary goal of economic policy was to maintain a favorable balance of trade — exporting more than you imported.

Mercantilist policies shaped the entire colonial system. Colonies existed to enrich the mother country by providing raw materials that would otherwise have to be purchased from rival nations, and by serving as captive markets for manufactured goods. Britain's Navigation Acts required that colonial trade be carried in British ships and that valuable commodities like tobacco and sugar be shipped only to Britain. Spain monopolized trade with its American colonies through the Casa de Contratación. France under Colbert built an elaborate system of state-directed industry and trade regulation.

The system had significant consequences. It drove European powers to establish colonial empires across the globe, seeking not just gold and silver but sugar, spices, timber, and other commodities. It fueled perpetual wars between European states competing for trade routes, colonies, and markets. It also created the conditions for colonial resentment — the American Revolution was partly a revolt against mercantilist restrictions that colonists viewed as exploitative.

Mercantilism was gradually displaced by Adam Smith's free-market economics, articulated in The Wealth of Nations (1776). Smith argued that wealth was not finite but could be created through productive labor, and that free trade benefited all parties. But mercantilist instincts — protect domestic industry, maintain favorable trade balances, view economic relations as competition — have never fully disappeared from economic policy debates.