Mercantilism is a national economic policy that is designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries[1] before falling into decline, although some commentators argue[2] that it is still practiced in the economies of industrializing countries in the form of economic interventionism.[3][4][5][6][7]

It promotes government regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers. Mercantilism includes a national economic policy aimed at accumulating monetary reserves through a positive balance of trade, especially of finished goods. Historically, such policies frequently led to war and also motivated colonial expansion.[8]

Mercantilist theory varies in sophistication from one writer to another and has evolved over time. High tariffs, especially on manufactured goods, was an almost universal feature of mercantilist policy.[9] These policies aim to reduce a possible current account deficit or reach a current account surplus.

With the efforts of supranational organizations such as the World Trade Organization to reduce tariffs globally, non-tariff barriers to trade have assumed a greater importance in neomercantilism.

Canal, Giovanni Antonio (Canaletto) - Return of the Bucentoro to the Molo on Ascension Day, c. 1733-4. Royal Collection Buckingham Palace
Merchants in Venice
F0087 Louvre Gellee port au soleil couchant- INV4715 rwk
A French seaport painted by Claude Lorrain around 1639, at the height of mercantilism


Mercantilism became the dominant school of economic thought in Europe throughout the late Renaissance and the early-modern period (from the 15th to the 18th centuries). Evidence of mercantilistic practices appeared in early-modern Venice, Genoa, and Pisa regarding control of the Mediterranean trade in bullion. However, the empiricism of the Renaissance, which first began to quantify large-scale trade accurately, marked mercantilism's birth as a codified school of economic theories.[9]

Mercantilism in its simplest form is bullionism, yet mercantilist writers emphasize the circulation of money and reject hoarding. Their emphasis on monetary metals accords with current ideas regarding the money supply, such as the stimulative effect of a growing money-supply. Fiat money and floating exchange rates have since rendered specie concerns irrelevant. In time, industrial policy supplanted the heavy emphasis on money, accompanied by a shift in focus from the capacity to carry on wars to promoting general prosperity. Mature neomercantilist theory recommends selective high tariffs for "infant" industries or the promotion of the mutual growth of countries through national industrial specialization.

England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). An early statement on national balance of trade appeared in Discourse of the Common Weal of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them."[10] The period featured various but often disjointed efforts by the court of Queen Elizabeth (reigned 1558-1603) to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping. A systematic and coherent explanation of balance of trade emerged in Thomas Mun's argument England's Treasure by Forraign Trade or the Balance of our Forraign Trade is The Rule of Our Treasure - written in the 1620s and published in 1664.[11]

Elizabeth's efforts organized national resources sufficiently in the defense of England against the far larger and more powerful Spanish Empire, and in turn, paved the foundation for establishing a global empire in the 19th century. Authors noted most for establishing the English mercantilist system include Gerard de Malynes (fl. 1585–1641) and Thomas Mun (1571-1641), who first articulated the Elizabethan system (England's Treasure by Forraign Trade or the Balance of Forraign Trade is the Rule of Our Treasure), which Josiah Child (c. 1630/31 – 1699) then developed further. Numerous French authors helped cement French policy around mercantilism in the 17th century. Jean-Baptiste Colbert (Intendant général, 1661-1665; Contrôleur général des finances, 1661–1683) best articulated this French mercantilism. French economic policy liberalized greatly under Napoleon (in power from 1799 to 1814/1815)

Many nations applied the theory, notably France, which was the most important state economically in Europe at the time. King Louis XIV (reigned 1643-1715) followed the guidance of Jean Baptiste Colbert, his Controller-General of Finances from 1665 to 1683. It was determined that the state should rule in the economic realm as it did in the diplomatic, and that the interests of the state as identified by the king were superior to those of merchants and of everyone else. Mercantilist economic policies aimed to build up the state, especially in an age of incessant warfare, and theorists charged the state with looking for ways to strengthen the economy and to weaken foreign adversaries.[12]

In Europe, academic belief in mercantilism began to fade in the late-18th century, especially in Britain, in light of the arguments of Adam Smith (1723-1790) and of the classical economists.[13] The British Parliament's repeal of the Corn Laws under Robert Peel in 1846 symbolized the emergence of free trade as an alternative system.


Most of the European economists who wrote between 1500 and 1750 are today generally considered mercantilists; this term was initially used solely by critics, such as Mirabeau and Smith, but was quickly adopted by historians. Originally the standard English term was "mercantile system". The word "mercantilism" was introduced into English from German in the early 19th century.

The bulk of what is commonly called "mercantilist literature" appeared in the 1620s in Great Britain.[14] Smith saw the English merchant Thomas Mun (1571–1641) as a major creator of the mercantile system, especially in his posthumously published Treasure by Foreign Trade (1664), which Smith considered the archetype or manifesto of the movement.[15] Perhaps the last major mercantilist work was James Steuart's Principles of Political Economy, published in 1767.[14]

Mercantilist literature also extended beyond England. Italy and France produced noted writers of mercantilist themes, including Italy's Giovanni Botero (1544–1617) and Antonio Serra (1580–?) and, in France, Jean Bodin and Colbert. Themes also existed in writers from the German historical school from List, as well as followers of the American system and British free-trade imperialism, thus stretching the system into the 19th century. However, many British writers, including Mun and Misselden, were merchants, while many of the writers from other countries were public officials. Beyond mercantilism as a way of understanding the wealth and power of nations, Mun and Misselden are noted for their viewpoints on a wide range of economic matters.[16]

The Austrian lawyer and scholar Philipp Wilhelm von Hornick, one of the pioneers of Cameralism, detailed a nine-point program of what he deemed effective national economy in his Austria Over All, If She Only Will of 1684, which comprehensively sums up the tenets of mercantilism:[17]

  • That every little bit of a country's soil be utilized for agriculture, mining or manufacturing.
  • That all raw materials found in a country be used in domestic manufacture, since finished goods have a higher value than raw materials.
  • That a large, working population be encouraged.
  • That all exports of gold and silver be prohibited and all domestic money be kept in circulation.
  • That all imports of foreign goods be discouraged as much as possible.
  • That where certain imports are indispensable they be obtained at first hand, in exchange for other domestic goods instead of gold and silver.
  • That as much as possible, imports be confined to raw materials that can be finished [in the home country].
  • That opportunities be constantly sought for selling a country's surplus manufactures to foreigners, so far as necessary, for gold and silver.
  • That no importation be allowed if such goods are sufficiently and suitably supplied at home.

Other than Von Hornick, there were no mercantilist writers presenting an overarching scheme for the ideal economy, as Adam Smith would later do for classical economics. Rather, each mercantilist writer tended to focus on a single area of the economy.[18] Only later did non-mercantilist scholars integrate these "diverse" ideas into what they called mercantilism. Some scholars thus reject the idea of mercantilism completely, arguing that it gives "a false unity to disparate events". Smith saw the mercantile system as an enormous conspiracy by manufacturers and merchants against consumers, a view that has led some authors, especially Robert E. Ekelund and Robert D. Tollison, to call mercantilism "a rent-seeking society". To a certain extent, mercantilist doctrine itself made a general theory of economics impossible.[19] Mercantilists viewed the economic system as a zero-sum game, in which any gain by one party required a loss by another.[20] Thus, any system of policies that benefited one group would by definition harm the other, and there was no possibility of economics being used to maximize the commonwealth, or common good.[21] Mercantilists' writings were also generally created to rationalize particular practices rather than as investigations into the best policies.[22]

Mercantilist domestic policy was more fragmented than its trade policy. While Adam Smith portrayed mercantilism as supportive of strict controls over the economy, many mercantilists disagreed. The early modern era was one of letters patent and government-imposed monopolies; some mercantilists supported these, but others acknowledged the corruption and inefficiency of such systems. Many mercantilists also realized that the inevitable results of quotas and price ceilings were black markets. One notion that mercantilists widely agreed upon was the need for economic oppression of the working population; laborers and farmers were to live at the "margins of subsistence". The goal was to maximize production, with no concern for consumption. Extra money, free time, and education for the lower classes were seen to inevitably lead to vice and laziness, and would result in harm to the economy.[23]

The mercantilists saw a large population as a form of wealth that made possible the development of bigger markets and armies. Opposite to mercantilism was the doctrine of physiocracy, which predicted that mankind would outgrow its resources. The idea of mercantilism was to protect the markets as well as maintain agriculture and those who were dependent upon it.


Mercantilist ideas were the dominant economic ideology of all of Europe in the early modern period, and most states embraced it to a certain degree. Mercantilism was centred on England and France, and it was in these states that mercantilist policies were most often enacted.

The policies have included:

  • High tariffs, especially on manufactured goods.
  • Forbidding colonies to trade with other nations.
  • Monopolizing markets with staple ports.
  • Banning the export of gold and silver, even for payments.
  • Forbidding trade to be carried in foreign ships, as per, for example, the Navigation Acts.
  • Subsidies on exports.
  • Promoting manufacturing and industry through research or direct subsidies.
  • Limiting wages.
  • Maximizing the use of domestic resources.
  • Restricting domestic consumption through non-tariff barriers to trade.


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

Mercantilism arose in France in the early 16th century soon after the monarchy had become the dominant force in French politics. In 1539, an important decree banned the import of woolen goods from Spain and some parts of Flanders. The next year, a number of restrictions were imposed on the export of bullion.[24]

Over the rest of the 16th century, further protectionist measures were introduced. The height of French mercantilism is closely associated with Jean-Baptiste Colbert, finance minister for 22 years in the 17th century, to the extent that French mercantilism is sometimes called Colbertism. Under Colbert, the French government became deeply involved in the economy in order to increase exports. Protectionist policies were enacted that limited imports and favored exports. Industries were organized into guilds and monopolies, and production was regulated by the state through a series of more than one thousand directives outlining how different products should be produced.[25]

To encourage industry, foreign artisans and craftsmen were imported. Colbert also worked to decrease internal barriers to trade, reducing internal tariffs and building an extensive network of roads and canals. Colbert's policies were quite successful, and France's industrial output and the economy grew considerably during this period, as France became the dominant European power. He was less successful in turning France into a major trading power, and Britain and the Netherlands remained supreme in this field.[25]

New France

France imposed its mercantilist philosophy on its colonies in North America, especially New France. It sought to derive the maximum material benefit from the colony, for the homeland, with a minimum of imperial investment in the colony itself. The ideology was embodied in New France through the establishment under Royal Charter of a number of corporate trading monopolies including La Compagnie des Marchands, which operated from 1613 to 1621, and the Compagnie de Montmorency, from that date until 1627. It was in turn replaced by La Compagnie des Cent-Associés, created in 1627 by King Louis XIII, and the Communauté des habitants in 1643. These were the first corporations to operate in what is now Canada.

Great Britain

In England, mercantilism reached its peak during the Long Parliament government (1640–60). Mercantilist policies were also embraced throughout much of the Tudor and Stuart periods, with Robert Walpole being another major proponent. In Britain, government control over the domestic economy was far less extensive than on the Continent, limited by common law and the steadily increasing power of Parliament.[26] Government-controlled monopolies were common, especially before the English Civil War, but were often controversial.[27]

De slag bij Terheide - The Battle of Schevening - August 10 1653 (Willem van de Velde I, 1657)
The Anglo-Dutch Wars were fought between the English and the Dutch for control over the seas and trade routes.

With respect to its colonies, British mercantilism meant that the government and the merchants became partners with the goal of increasing political power and private wealth, to the exclusion of other empires. The government protected its merchants—and kept others out—through trade barriers, regulations, and subsidies to domestic industries in order to maximize exports from and minimize imports to the realm. The government had to fight smuggling, which became a favorite American technique in the 18th century to circumvent the restrictions on trading with the French, Spanish, or Dutch. The goal of mercantilism was to run trade surpluses so that gold and silver would pour into London. The government took its share through duties and taxes, with the remainder going to merchants in Britain. The government spent much of its revenue on a superb Royal Navy, which not only protected the British colonies but threatened the colonies of the other empires, and sometimes seized them. Thus the British Navy captured New Amsterdam (New York) in 1664. The colonies were captive markets for British industry, and the goal was to enrich the mother country.[28]

British mercantilist writers were themselves divided on whether domestic controls were necessary. British mercantilism thus mainly took the form of efforts to control trade. A wide array of regulations were put in place to encourage exports and discourage imports. Tariffs were placed on imports and bounties given for exports, and the export of some raw materials was banned completely. The Navigation Acts expelled foreign merchants from England's domestic trade. The nation aggressively sought colonies and once under British control, regulations were imposed that allowed the colony to only produce raw materials and to only trade with Britain. This led to friction with the inhabitants of these colonies, and mercantilist policies (such as forbidding trade with other empires and controls over smuggling) were a major irritant leading to the American Revolution.[29]

Mercantilism taught that trade was a zero-sum game, with one country's gain equivalent to a loss sustained by the trading partner. Overall, however, mercantilist policies had a positive impact on Britain helping turn it into the world's dominant trader and the global hegemon.[30] One domestic policy that had a lasting impact was the conversion of "wastelands" to agricultural use. Mercantilists believed that to maximize a nation's power, all land and resources had to be used to their highest and best use, and this era thus saw projects like the draining of The Fens.[31]

Other countries

Triangle trade2
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.

The other nations of Europe also embraced mercantilism to varying degrees. The Netherlands, which had become the financial centre of Europe by being its most efficient trader, had little interest in seeing trade restricted and adopted few mercantilist policies. Mercantilism became prominent in Central Europe and Scandinavia after the Thirty Years' War (1618–48), with Christina of Sweden, Jacob Kettler of Courland, and Christian IV of Denmark being notable proponents.

The Habsburg Holy Roman Emperors had long been interested in mercantilist policies, but the vast and decentralized nature of their empire made implementing such notions difficult. Some constituent states of the empire did embrace Mercantilism, most notably Prussia, which under Frederick the Great had perhaps the most rigidly controlled economy in Europe.

Spain benefited from mercantilism early on as it brought a large amount of precious metals such as gold and silver into their treasury by way of the new world. In the long run, Spain’s economy collapsed as it was unable to adjust to the inflation that came with the large influx of bullion. Heavy intervention from the crown put crippling laws for the protection Spanish goods and services. Mercantilist protectionist policy in Spain caused the long-run failure of the Castilian textile industry as the efficiency severely dropped off with each passing year due to the production being held at a specific level. Spain’s heavily protected industries led to famines as much of its agricultural land was required to be used for sheep instead of grain. Much of their grain was imported from the Baltic region of Europe which caused a shortage of food in the inner regions of Spain. Spain limiting the trade of their colonies is one of the causes that lead to the separation of the Dutch from the Spanish Empire. The culmination of all of these policies lead to Spain defaulting in 1557, 1575, and 1596. [32]

During the economic collapse of the 17th century, Spain had little coherent economic policy, but French mercantilist policies were imported by Philip V with some success. Russia under Peter I (Peter the Great) attempted to pursue mercantilism, but had little success because of Russia's lack of a large merchant class or an industrial base.

Wars and imperialism

Mercantilism was the economic version of warfare using economics as a tool for warfare by other means backed up by the state apparatus and was well suited to an era of military warfare.[33] Since the level of world trade was viewed as fixed, it followed that the only way to increase a nation's trade was to take it from another. A number of wars, most notably the Anglo-Dutch Wars and the Franco-Dutch Wars, can be linked directly to mercantilist theories. Most wars had other causes but they reinforced mercantilism by clearly defining the enemy, and justified damage to the enemy's economy.

Mercantilism fueled the imperialism of this era, as many nations expended significant effort to conquer new colonies that would be sources of gold (as in Mexico) or sugar (as in the West Indies), as well as becoming exclusive markets. European power spread around the globe, often under the aegis of companies with government-guaranteed monopolies in certain defined geographical regions, such as the Dutch East India Company or the British Hudson's Bay Company (operating in present-day Canada).

With the establishment of overseas colonies by European powers early in the 17th century, mercantile theory gained a new and wider significance, in which its aim and ideal became both national and imperialistic.[34]

Mercantilism as a weapon has continued to be used by nations through the 21st century by way of modern tariffs as it puts smaller economies in a position to conform to the larger economies goals or risk economic ruin due to an imbalance in trade. Trade wars are often dependent on such tariffs and restrictions hurting the opposing economy.


The term "mercantile system" was used by its foremost critic, Adam Smith,[35] but Mirabeau (1715–1789) had used "mercantilism" earlier.

Mercantilism functioned as the economic counterpart of the older version of political power: divine right of kings and absolute monarchy.[36]

Scholars debate over why mercantilism dominated economic ideology for 250 years.[37] One group, represented by Jacob Viner, sees mercantilism as simply a straightforward, common-sense system whose logical fallacies remained opaque to people at the time, as they simply lacked the required analytical tools.

The second school, supported by scholars such as Robert B. Ekelund, portrays mercantilism not as a mistake, but rather as the best possible system for those who developed it. This school argues that rent-seeking merchants and governments developed and enforced mercantilist policies. Merchants benefited greatly from the enforced monopolies, bans on foreign competition, and poverty of the workers. Governments benefited from the high tariffs and payments from the merchants. Whereas later economic ideas were often developed by academics and philosophers, almost all mercantilist writers were merchants or government officials.[38]

Monetarism offers a third explanation for mercantilism. European trade exported bullion to pay for goods from Asia, thus reducing the money supply and putting downward pressure on prices and economic activity. The evidence for this hypothesis is the lack of inflation in the British economy until the Revolutionary and Napoleonic Wars, when paper money came into vogue.

A fourth explanation lies in the increasing professionalisation and technification of the wars of the era, which turned the maintenance of adequate reserve funds (in the prospect of war) into a more and more expensive and eventually competitive business.

Mercantilism developed at a time of transition for the European economy. Isolated feudal estates were being replaced by centralized nation-states as the focus of power. Technological changes in shipping and the growth of urban centers led to a rapid increase in international trade.[39] Mercantilism focused on how this trade could best aid the states. Another important change was the introduction of double-entry bookkeeping and modern accounting. This accounting made extremely clear the inflow and outflow of trade, contributing to the close scrutiny given to the balance of trade.[40] Of course, the impact of the discovery of America cannot be ignored. New markets and new mines propelled foreign trade to previously inconceivable volumes, resulting in "the great upward movement in prices" and an increase in "the volume of merchant activity itself".[41]

Prior to mercantilism, the most important economic work done in Europe was by the medieval scholastic theorists. The goal of these thinkers was to find an economic system compatible with Christian doctrines of piety and justice. They focused mainly on microeconomics and on local exchanges between individuals. Mercantilism was closely aligned with the other theories and ideas that began to replace the medieval worldview. This period saw the adoption of the very Machiavellian realpolitik and the primacy of the raison d'état in international relations. The mercantilist idea of all trade as a zero-sum game, in which each side was trying to best the other in a ruthless competition, was integrated into the works of Thomas Hobbes. This dark view of human nature also fit well with the Puritan view of the world, and some of the most stridently mercantilist legislation, such as the Navigation Ordinance of 1651, was enacted by the government of Oliver Cromwell.[42]

Jean-Baptiste Colbert's work in 17th-century France came to exemplify classical mercantilism. In the English-speaking world, its ideas were criticized by Adam Smith with the publication of The Wealth of Nations in 1776 and later by David Ricardo with his explanation of comparative advantage. Mercantilism was rejected by Britain and France by the mid-19th century. The British Empire embraced free trade and used its power as the financial center of the world to promote the same. The Guyanese historian Walter Rodney describes mercantilism as the period of the worldwide development of European commerce, which began in the 15th century with the voyages of Portuguese and Spanish explorers to Africa, Asia, and the New World.


Adam Smith and David Hume were the founding fathers of anti-mercantilist thought. A number of scholars found important flaws with mercantilism long before Smith developed an ideology that could fully replace it. Critics like Hume, Dudley North and John Locke undermined much of mercantilism and it steadily lost favor during the 18th century.

In 1690, Locke argued that prices vary in proportion to the quantity of money. Locke's Second Treatise also points towards the heart of the anti-mercantilist critique: that the wealth of the world is not fixed, but is created by human labor (represented embryonically by Locke's labor theory of value). Mercantilists failed to understand the notions of absolute advantage and comparative advantage (although this idea was only fully fleshed out in 1817 by David Ricardo) and the benefits of trade.[43]

For instance, imagine that Portugal was a more efficient producer of wine than England, yet in England, cloth could be produced more efficiently than it could in Portugal. Thus if Portugal specialized in wine and England in cloth, both states would end up better off if they traded. This is an example of the reciprocal benefits of trade (whether due to comparative or absolute advantage). In modern economic theory, trade is not a zero-sum game of cutthroat competition, because both sides can benefit from it.

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

Hume famously noted the impossibility of the mercantilists' goal of a constant positive balance of trade. As bullion flowed into one country, the supply would increase, and the value of bullion in that state would steadily decline relative to other goods. Conversely, in the state exporting bullion, its value would slowly rise. Eventually, it would no longer be cost-effective to export goods from the high-price country to the low-price country, and the balance of trade would reverse. Mercantilists fundamentally misunderstood this, long arguing that an increase in the money supply simply meant that everyone gets richer.[44]

The importance placed on bullion was also a central target, even if many mercantilists had themselves begun to de-emphasize the importance of gold and silver. Adam Smith noted that at the core of the mercantile system was the "popular folly of confusing wealth with money", that bullion was just the same as any other commodity, and that there was no reason to give it special treatment.[14] More recently, scholars have discounted the accuracy of this critique. They believe Mun and Misselden were not making this mistake in the 1620s, and point to their followers Josiah Child and Charles Davenant, who in 1699 wrote, "Gold and Silver are indeed the Measures of Trade, but that the Spring and Original of it, in all nations is the Natural or Artificial Product of the Country; that is to say, what this Land or what this Labour and Industry Produces."[45] The critique that mercantilism was a form of rent seeking has also seen criticism, as scholars such Jacob Viner in the 1930s pointed out that merchant mercantilists such as Mun understood that they would not gain by higher prices for English wares abroad.[46]

The first school to completely reject mercantilism was the physiocrats, who developed their theories in France. Their theories also had several important problems, and the replacement of mercantilism did not come until Adam Smith published The Wealth of Nations in 1776. This book outlines the basics of what is today known as classical economics. Smith spent a considerable portion of the book rebutting the arguments of the mercantilists, though often these are simplified or exaggerated versions of mercantilist thought.[38]

Scholars are also divided over the cause of mercantilism's end. Those who believe the theory was simply an error hold that its replacement was inevitable as soon as Smith's more accurate ideas were unveiled. Those who feel that mercantilism amounted to rent-seeking hold that it ended only when major power shifts occurred. In Britain, mercantilism faded as the Parliament gained the monarch's power to grant monopolies. While the wealthy capitalists who controlled the House of Commons benefited from these monopolies, Parliament found it difficult to implement them because of the high cost of group decision making.[47]

Mercantilist regulations were steadily removed over the course of the 18th century in Britain, and during the 19th century, the British government fully embraced free trade and Smith's laissez-faire economics. On the continent, the process was somewhat different. In France, economic control remained in the hands of the royal family, and mercantilism continued until the French Revolution. In Germany, mercantilism remained an important ideology in the 19th and early 20th centuries, when the historical school of economics was paramount.[48]


Adam Smith rejected the mercantilist focus on production, arguing that consumption was paramount to production. He added that mercantilism was popular among merchants because it was what is now called rent seeking.[49] However, John Maynard Keynes argued that encouraging production was just as important as encouraging consumption, and he favored the "new mercantilism". Keynes also noted that in the early modern period the focus on the bullion supplies was reasonable. In an era before paper money, an increase in bullion was one of the few ways to increase the money supply. Keynes said mercantilist policies generally improved both domestic and foreign investment—domestic because the policies lowered the domestic rate of interest, and investment by foreigners by tending to create a favorable balance of trade.[50]

Keynes and other economists of the 20th century also realized that the balance of payments is an important concern. Keynes also supported government intervention in the economy as necessity, as did mercantilism.[51]

As of 2010, the word "mercantilism" remains a pejorative term, often used to attack various forms of protectionism.[52] The similarities between Keynesianism (and its successor ideas) and mercantilism have sometimes led critics to call them neo-mercantilism. Paul Samuelson, writing within a Keynesian framework, wrote of mercantilism, "With employment less than full and Net National Product suboptimal, all the debunked mercantilist arguments turn out to be valid."[53]

Some other systems that copy several mercantilist policies, such as Japan's economic system, are also sometimes called neo-mercantilist.[54] In an essay appearing in the 14 May 2007 issue of Newsweek, business columnist Robert J. Samuelson wrote that China was pursuing an essentially neo-mercantilist trade policy that threatened to undermine the post–World War II international economic structure.[2]

Murray Rothbard, representing the Austrian School of economics, describes it this way:

Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth centuries, was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. Thus, mercantilism held exports should be encouraged by the government and imports discouraged.[55]

In specific instances, protectionist mercantilist policies also had an important and positive impact on the state that enacted them. Adam Smith, for instance, praised the Navigation Acts, as they greatly expanded the British merchant fleet and played a central role in turning Britain into the world's naval and economic superpower from the 18th century onward.[56] Some economists thus feel that protecting infant industries, while causing short-term harm, can be beneficial in the long term.


Neomercantilism is a 20th-century economic policy that uses the ideas and methods of neoclassical economics. The new mercantilism has different goals and focuses on more rapid economic growth based on advanced technology. It promotes such policies as substitution state taxation, subsidies, expenditures, and general regulatory powers for tariffs and quotas, and protection through the formation of supranational trading blocs.[57]

See also


  1. ^ "Mercantilism," Laura LaHaye The Concise Encyclopedia of Economics (2008)
  2. ^ a b Samuelson 2007.
  3. ^ kanopiadmin (2017-02-15). "Mercantilism: A Lesson for Our Times? | Murray N. Rothbard". Mises Institute. Retrieved 2018-09-11.
  4. ^
  5. ^
  6. ^
  7. ^
  8. ^ Johnson et al. History of the domestic and foreign commerce of the United States p. 37.
  9. ^ a b John J. McCusker, Mercantilism and the Economic History of the Early Modern Atlantic World (Cambridge UP, 2001)
  10. ^ Now attributed to Sir Thomas Smith; quoted in Braudel (1979), p. 204.
  11. ^ David Onnekink; Gijs Rommelse (2011), Ideology and Foreign Policy in Early Modern Europe (1650–1750), Ashgate Publishing, Ltd., p. 257, ISBN 9781409419143
  12. ^ Jerome Blum et al. The European World: A history (1970) p 279.
  13. ^ Humphrey, Thomas M. "Insights From Doctrinal History. MERCANTILISTS. CLASSICALS" (PDF). Richmond Federal Reserve. Retrieved 14 June 2018. [...] the mercantilism of John Law and Sir James Steuart gave way to the classicism of David Hume and David Ricardo [...].
  14. ^ a b c Magnusson 2003, p. 46.
  15. ^ Magnusson 2003, p. 47.
  16. ^ Magnusson 2003, p. 50.
  17. ^ Ekelund & Hébert 1997, pp. 40–41.
  18. ^ Landreth & Colander 2002, p. 44.
  19. ^ Ekelund & Tollison 1981, p. 154.
  20. ^ Ekelund & Tollison 1981, p. 9.
  21. ^ Landreth & Colander 2002, p. 48.
  22. ^ Landes 1997, p. 31.
  23. ^ Ekelund & Hébert 1975, p. 46.
  24. ^ Kellenbenz 1976, p. 29.
  25. ^ a b Williams 1999, pp. 177–83.
  26. ^ Hansen 2001, p. 65.
  27. ^ Hill 1980, p. 32.
  28. ^ Nester 2000, p. 54.
  29. ^ Max Savelle, Seeds of Liberty: The Genesis of the American Mind (1948) pp. 204ff.
  30. ^ Jeffry A. Frieden et al. eds. (2002). International Political Economy: Perspectives on Global Power and Wealth. Routledge. pp. 128ff. ISBN 9781134595952.CS1 maint: Extra text: authors list (link)
  31. ^ Wilson 1963, p. 15.
  32. ^ Rothbard, Murray (2010). "Mercantilism in Spain". Mises Institute.
  33. ^ Spiegel 1991, pp. 93–118.
  34. ^ Emory Richard Johnson; et al. (1915). History of domestic and foreign commerce of the United States. Carnegie Institution of Washington. pp. 35–37.
  35. ^ Gauci, Perry (2011). Regulating the British Economy, 1660-1850. Farnham: Ashgate Pub. p. 83. ISBN 9780754697626.
  36. ^ editors, Encyclopædia Britannica (2014)
  37. ^ Ekelund & Hébert 1975, p. 61.
  38. ^ a b Niehans 1990, p. 19.
  39. ^ Landreth & Colander 2002, p. 43.
  40. ^ Wilson 1963, p. 10.
  41. ^ Galbraith 1987, pp. 33–34.
  42. ^ Landreth & Colander 2002, p. 53.
  43. ^ Spiegel 1991, ch. 8.
  44. ^ Ekelund & Hébert 1975, p. 43.
  45. ^ Referenced to Davenant, 1771 [1699], p. 171, in Magnusson 2003, p. 53.
  46. ^ Magnusson 2003, p. 54.
  47. ^ Ekelund & Tollison 1981.
  48. ^ Wilson 1963, p. 6.
  49. ^ Brezis 2003, vol. 2, p. 484.
  50. ^ Harris 1950, p. 321.
  51. ^ See Markwell 2006.
  52. ^ Wilson 1963, p. 3.
  53. ^ Samuelson 1964.
  54. ^ Walters & Blake 1976.
  55. ^ Rothbard 1997, p. 43.
  56. ^ Hansen 2001, p. 64.
  57. ^ Johnson 1974, pp. 1–17.

Further reading

  • Ames, Glenn J. (1996), Colbert, Mercantilism and the French Quest for the Asian Trade
  • Braudel, Fernand (1979), "The Wheels of Commerce", Civilization and Capitalism 15th–18th Century
  • Brezis, Elise S. (2003), "Mercantilism", The Oxford Encyclopedia of Economic History, Oxford University Press
  • editors (2014), "Mercantilism", Encyclopædia Britannica, Oxford University Press
  • Ekelund, Robert B.; Hébert, Robert F. (1975), A History of Economic Theory and Method, New York: McGraw–Hill, ISBN 978-0-07-019143-3
  • Ekelund, Robert B., Jr.; Hébert, Robert F. (1997), A History of Economic Theory and Method (4th ed.), Long Grove, Illinois: Waveland Press, ISBN 978-1-57766-381-2
  • Ekelund, Robert B.; Tollison, Robert D. (1981), Mercantilism as a Rent-Seeking Society: Economic Regulation in Historical Perspective, College Station, TX: Texas A&M University Press, ISBN 978-0-89096-120-9
  • Galbraith, John Kenneth (1987), Economics in Perspective: A Critical History, Boston: Houghton Mifflin, ISBN 978-0-395-35572-5
  • Grant, R. George (2009), Tackling the Poverty of Nations: Why So Many Are Poor and What We Can Do About It, Xlibris, ISBN 978-1-4363-3582-9
  • Hansen, E. Damsgaard (2001), European Economic History: From Mercantilism to Maastricht and Beyond (1st ed.), Copenhagen Business School Press, ISBN 978-87-630-0017-8
  • Harris, Seymour E. (1950), New Economics: Keynes' Influence on Theory And Public Policy
  • Heckscher, Eli F. (1935), Mercantilism, London: Allen & Unwin
  • Hill, Christopher (1980) [1961], The Century of Revolution, 1603–1714 (2nd ed.), ISBN 978-0-17-712002-2
  • Johnson, Harky G. (March 1974), "Mercantilism: Past, Present and Future", The Manchester School, 42: 1–17, doi:10.1111/j.1467-9957.1974.tb00098.x
  • Kellenbenz, Hermann (1976), The rise of the European economy: an economic history of continental Europe from the fifteenth to the eighteenth century, New York: Holmes & Meier Publishers
  • Keynes, John Maynard (1936), "Notes on Mercantilism, the Usury Laws, Stamped Money and the Theories of Under-Consumption", The General Theory of Employment, Interest, and Money, London: Palgrave Macmillan, archived from the original on |archive-url= requires |archive-date= (help)
  • Landes, David S. (1997), The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present, Cambridge: Cambridge University Press, ISBN 978-0-521-09418-4
  • Landreth, Harry; Colander, David C. (2002), History of Economic Thought (4th ed.), Boston: Houghton Mifflin, ISBN 978-0-618-13394-9
  • Letwin, William (2003) [1963], The Origins of Scientific Economics: English Economic Thought 1660–1776, London: Routledge, ISBN 978-0-415-31329-2
  • Magnusson, Lars G. (2003), "Mercantilism", in Samuels, Warren J.; Biddle, Jeff E.; Davis, Jon B. (eds.), A Companion to the History of Economic Thought, Malden, MA: Blackwell Publishing, ISBN 978-0-631-22573-7
  • Markwell, Donald (2006), John Maynard Keynes and International Relations: Economic Paths to War and Peace, Oxford & New York: Oxford University Press, ISBN 978-0-19-829236-4
  • Nester, R. (2000), The Great Frontier War: Britain, France, and the Imperial Struggle for North America, 1607–1755, Praeger, ISBN 978-0-275-96772-7
  • Niehans, Jürg (1990), A History of Economic Theory: Classic Contributions, 1720–1980, Baltimore, MD: Johns Hopkins University Press, ISBN 978-0-8018-3834-7
  • Omrund, David (2003), The rise of commercial empires: England and the Netherlands in the Age of Mercantilism, 1650–1770
  • Rothbard, Murray (1997), Mercantilism: A Lesson for Our Times?, Cheltenham, England: Edward Elgar
  • Samuelson, Paul (May 1964), "Theoretical notes on trade problems", The Review of Economics and Statistics, 46 (2): 145–154, doi:10.2307/1928178, JSTOR 1928178
  • Samuelson, Robert J. (17 May 2007), China's Wrong Turn on Trade, Newsweek, retrieved 2007-12-06
  • Smith, George H. (2008). "Mercantilism". In Hamowy, Ronald (ed.). The Encyclopedia of Libertarianism. Thousand Oaks, CA: SAGE; Cato Institute. pp. 326–28. doi:10.4135/9781412965811.n198. ISBN 978-1412965804. LCCN 2008009151. OCLC 750831024.
  • Spiegel, Henry William (1991), The growth of economic thought (3rd ed.), Duke University Press, ISBN 978-0-8223-0973-4
  • Vaggi, Gianni; Groenewegen, Peter (2003), A Concise History of Economic Thought: From Mercantilism to Monetarism, New York: Palgrave Macmillan, ISBN 978-0-333-99936-3
  • Walters, Robert S.; Blake, David H. (1976), The Politics of Global Economic Relations, Englewood Cliffs, NJ: Prentice-Hall, ISBN 978-0-13-684712-0
  • Williams, E. N. (1999), The Ancién Regime in Europe: government and society in the major states 1648–1789, London: Pimlico, ISBN 978-0-7126-5934-5
  • Wilson, Charles (1963) [1958], Mercantilism, London: Routledge and Kegan Paul

External links

Adams and Liberty

"Adams and Liberty" is considered the first significant campaign song in American political history, and served to support incumbent Federalist John Adams in the 1800 United States presidential election.

The lyrics are from Robert Treat Paine, Jr., to the tune of "To Anacreon in Heaven" (the same tune as the patriotic song and future national anthem "The Star-Spangled Banner".)

The country is poetically referred to as Columbia, and enduring national greatness depends on avoiding the evils of mercantilism, French alliances (see XYZ Affair), and political faction. Other songs were used in subsequent presidential campaigns.

Advanced capitalism

In political philosophy, particularly Frankfurt School critical theory, advanced capitalism is the situation that pertains in a society in which the capitalist model has been integrated and developed deeply and extensively and for a prolonged period. The expression advanced capitalism distinguishes such societies from the historical previous forms of capitalism, mercantilism and industrial capitalism, and partially overlaps with the concepts of a developed country; of the post-industrial age; of finance capitalism; of post-Fordism; of the spectacular society; of media culture; and of "developed", "modern", and "complex" capitalism.

Various writers identify Antonio Gramsci as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of civil society institutions to manipulate public ideology in the capitalists' favor.Jürgen Habermas has been a major contributor to the analysis of advanced-capitalistic societies. Habermas observed four general features that characterize advanced capitalism:

Concentration of industrial activity in a few large firms

Constant reliance on the state to stabilize the economic system

A formally democratic government that legitimizes the activities of the state and dissipates opposition to the system

The use of nominal wage increases to pacify the most restless segments of the work force


Autarky is the characteristic of self-sufficiency; the term usually applies to political states or to their economic systems. Autarky exists whenever an entity can survive or continue its activities without external assistance or international trade. If a self-sufficient economy also refuses all trade with the outside world then economists may term it a closed economy. The term "closed economy" is also used technically as an abstraction to allow consideration of a single economy without taking foreign trade into account – i.e. as the antonym of "open economy". Autarky in the political sense is not necessarily an economic phenomenon; for example, a military autarky would be a state that could defend itself without help from another country, or could manufacture all of its weapons without any imports from the outside world.

Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especially left-wing creeds like African socialism, mutualism, war communism, council communism, Swadeshi, syndicalism (especially anarcho-syndicalism) and leftist populism. It has also been used in temporary, limited ways by conservative, centrist and nationalist movements, such as in the American system, Juche, mercantilism, the Meiji Restoration, social corporatism, and traditionalist conservatism. Fascist and far-right movements occasionally claimed to strive for autarky in platforms or in propaganda, but in practice crushed existing movements towards self-sufficiency and established extensive capital connections in efforts to ready for expansionist war and genocide while allying with traditional business élites.Autarky may be a policy of a state or other entity when it seeks to be self-sufficient as a whole, but also can be limited to a narrow field such as possession of a key raw material. For example, many countries have a policy of autarky with respect to foodstuffs and water for national-security reasons. By contrast, autarky may be a result of economic isolation or external circumstances in which a state or other entity reverts to localized production when it lacks currency or excess production to trade with the outside world.

Centre-right politics

Centre-right politics or center-right politics (American English), also referred to as moderate-right politics, are politics that lean to the right of the left–right political spectrum, but are closer to the centre than other right-wing politics. From the 1780s to the 1880s, there was a shift in the Western world of social class structure and the economy, moving away from the nobility and mercantilism, as well as moving towards the bourgeoisie and capitalism. This general economic shift towards capitalism affected centre-right movements such as the British Conservative Party, that responded by becoming supportive of capitalism.The International Democrat Union is an alliance of centre-right to right-wing political parties, including the British Conservative Party, the Conservative Party of Canada, the Liberal Party of Australia, the New Zealand National Party and Christian democratic parties, which is committed to human rights as well as economic development.According to a 2019 study, center-right parties had approximately 27% of the vote share in 21 Western democracies in 2018. This was a decline from 37% in 1960.


Colbertism is an economic and political doctrine of the 17th century, created by Jean-Baptiste Colbert, the French minister of finance under Louis XIV. Colbertism is a variant of mercantilism that is sometimes seen as its synonym. It is more a collection of economical practices than a true current of economic thought.

Commercial Revolution

The Commercial Revolution consisted in the creation of a European economy based on trade, which began in the 11th century and lasted until it was succeeded by the Industrial Revolution in the mid-18th century. Beginning with the Crusades, Europeans rediscovered spices, silks, and other commodities rare in Europe. This development created a new desire for trade, and trade expanded in the second half of the Middle Ages. Newly forming European states, through voyages of discovery, were looking for alternative trade routes in the 15th and 16th centuries, which allowed the European powers to build vast, new international trade networks. Nations also sought new sources of wealth and practiced mercantilism and colonialism. The Commercial Revolution is marked by an increase in general commerce, and in the growth of financial services such as banking, insurance, and investing.

Crony capitalism

Crony capitalism is an economy in which businesses thrive not as a result of risk, but rather as a return on money amassed through a nexus between a business class and the political class. This is often achieved by using state power rather than competition in managing permits, government grants, tax breaks, or other forms of state intervention over resources where the state exercises monopolist control over public goods, for example, mining concessions for primary commodities or contracts for public works. Money is then made not merely by making a profit in the market, but through profiteering by rent seeking using this monopoly or oligopoly. Entrepreneurship and innovative practices which seek to reward risk are stifled since the value-added is little by crony businesses, as hardly anything of significant value is created by them, with transactions taking the form of trading. Crony capitalism spills over into the government, the politics, and the media, when this nexus distorts the economy and affects society to an extent it corrupts public-serving economic, political, and social ideals.

The term crony capitalism made a significant impact in the public as an explanation of the Asian financial crisis. It is also used to describe governmental decisions favoring cronies of governmental officials. In this context, the term is often used comparatively with corporate welfare, a technical term often used to assess government bailouts and favoritistic monetary policy as opposed to the economic theory described by crony capitalism. The extent of difference between these terms is whether a government action can be said to benefit the individuals rather than the industry.

Economic liberalism

Economic liberalism is an economic system organized on individual lines, which means the greatest possible number of economic decisions are made by individuals or households rather than by collective institutions or organizations. It includes a spectrum of different economic policies, such as freedom of movement, but its basis is on strong support for a market economy and private property in the means of production. Although economic liberals can also be supportive of government regulation to a certain degree, they tend to oppose government intervention in the free market when it inhibits free trade and open competition.

Economic liberalism is associated with free markets and private ownership of capital assets. Historically, economic liberalism arose in response to mercantilism and feudalism. Today, economic liberalism is also considered opposed to non-capitalist economic orders, such as socialism and planned economies. It also contrasts with protectionism because of its support for free trade and open markets.

An economy that is managed according to these precepts may be described as a liberal economy.

Economic nationalism

Economic nationalism, or economic patriotism, economic populism, refers to an ideology that favors state interventionism over other market mechanisms, with policies such as domestic control of the economy, labor, and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital. In many cases, economic nationalists oppose globalization or at least question the benefits of unrestricted free trade. Economic nationalism is disputed as the doctrine of mercantilism, and as such favors protectionism.

Foreign policy

A country's foreign policy, also called foreign relations or foreign affairs policy, consists of self-interest strategies chosen by the state to safeguard its national interests and to achieve goals within its international relations milieu. The approaches are strategically employed to interact with other countries. The study of such strategies is called foreign policy analysis. In recent times, due to the deepening level of globalization and transnational activities, the states will also have to interact with non-state actors. The aforementioned interaction is evaluated and monitored in attempts to maximize the benefits of multilateral international cooperation. Since the national interests are paramount, foreign policies are designed by the government through high-level decision-making processes. National interests accomplishment can occur as a result of peaceful cooperation with other nations, or through exploitation. Usually, creating foreign policy is the job of the head of government and the foreign minister (or equivalent). In some countries, the legislature also has considerable effects. Foreign policies of countries have varying rates of change and scopes of intent, which can be affected by factors that change the perceived national interests or even affect the stability of the country itself. The foreign policy of a country can have a profound and lasting impact on many other countries and on the course of international relations as a whole, such as the Monroe Doctrine conflicting with the mercantilism policies of 19th-century European countries and the goals of independence of newly formed Central American and South American countries.


Broadly, geoeconomics (sometimes geo-economics) is the study of the spatial, temporal, and political aspects of economies and resources. The formation of geoeconomics as a branch of geopolitics is often attributed to Edward Luttwak, an American economist and consultant, and Pascal Lorot, a French economist and political scientist. Azerbaijani economist Vusal Gasimli defines geo-economics as the study of the interrelations of economics, geography and politics in the "infinite cone" rising from the center of the earth to outer space (including the economic analysis of planetary resources).

Hamiltonian economic program

The Hamiltonian economic program was the set of measures that were proposed by American Founding Father and first Secretary of the Treasury Alexander Hamilton in four notable reports and implemented by Congress during George Washington's first administration. These reports outlined a coherent program of national mercantilism government-assisted economic development.

First Report on Public Credit – pertaining to the assumption of federal and state debts and finance of the United States government (1790)

Second Report on Public Credit – pertaining to the establishment of a National Bank (1790)

Report on Manufactures – pertaining to the policies to be followed to encourage manufacturing and industry within the United States (1791)

Report on a Plan for the Further Support of Public Credit - pertaining to how to deal with the system of public credit after Hamilton's resignation, including complete extinguishment of the public debt (1795)

History of capitalism

The history of capitalism has diverse and much debated roots, but fully-fledged capitalism is generally thought to have emerged in Northwestern Europe, especially in the Low Countries (mainly present-day Flanders and Netherlands) and Great Britain, in the sixteenth to seventeenth centuries. Over the following centuries, capital has accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth. Capitalism has gradually become the dominant economic system throughout the world. Much of the history of the past five hundred years is, therefore, concerned with the development of capitalism in its various forms.

Index of international trade topics

This is a list of international trade topics.

Absolute advantage

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

Asia-Pacific Economic Cooperation (APEC)


Balance of trade


Bilateral Investment Treaty (BIT)


Branch plant economy

Bretton Woods conference

Bretton Woods system

British timber trade

Cash crop

Central European Free Trade Agreement (CEFTA)

Comparative advantage

Cost, Insurance and Freight (CIF)

Council of Arab Economic Unity


Customs broking

Customs union

David Ricardo

Doha Development Round (Of World Trade Organization)

Dominican Republic – Central America Free Trade Agreement (DR-CAFTA)

Enabling clause

Enhanced Integrated Framework for Trade-Related Assistance for the Least Developed Countries

European Union (EU)

Export documentsATA Carnet

ATR.1 certificate

Certificate of origin

EUR.1 movement certificate

Form A

Form B

TIR CarnetEuropean Free Trade Association (EFTA)

Exchange rate

Factor price equalization

Fair trade

Foreign direct investment (FDI)

Foreign exchange option

Foreign Sales Corporations (FSCs)


Free Trade Area of the Americas (FTAA)

Free On Board (FOB)

Free trade

Free trade area

Free trade zone (FTZ)

General Agreement on Tariffs and Trade (GATT)

Generalized System of Preferences (GSP)

Genetically modified food controversies

Geographical pricing

Giant sucking sound (a colorful phrase by Ross Perot)

Global financial system (GFS)


Gold standard

Gravity model of trade

Gresham's law

Heckscher-Ohlin model (H-O model)

Horizontal integration


Import substitution industrialization (ISI)

International Chamber of Commerce (ICC)

International factor movements

International law

International Monetary Market (IMM)

International Monetary Fund (IMF)

International Trade Organization (ITO)


Internationalization and localization (G11n)

ISO 4217 (international standard for currency codes)

Leontief paradox

Linder hypothesis

List of tariffs and trade legislation



Merchant bank

Money market

Most favoured nation (MFN)


New Trade Theory (NTT)

North American Free Trade Agreement (NAFTA)

Offshore outsourcing


Organisation for Economic Co-operation and Development (OECD)

Organization of the Petroleum Exporting Countries (OPEC)


Purchasing power parity (PPP)

Rules of origin


South Asia Free Trade Agreement (SAFTA)

Special drawing rights (SDRs)

Special Economic Zone (SEZ)


Tax, tariff and trade

Terms of trade (TOT)

Tobin tax


Trade barrier

Trade bloc

Trade facilitation

Trade Facilitation and Development

Trade finance

Trade pact

Trade sanctions

Trade war

Transfer pricing

Transfer problem

United Nations Monetary and Financial Conference

Uruguay Round (Of General Agreement on Tariffs and Trade)

Wage insurance

World Intellectual Property Organization (WIPO)

World Intellectual Property Organization Copyright Treaty (WIPO Copyright Treaty)

World Trade Organization (WTO)

Merchant capitalism

Some economic historians use the term merchant capitalism to refer to the earliest phase in the development of capitalism as an economic and social system. However, others argue that mercantilism, which has flourished widely in the world without the emergence of systems like modern capitalism, is not actually capitalist as such.Merchant capitalism is distinguished from more fully developed capitalism by its focus on simply moving goods from a market where they are cheap to a market where they are expensive (rather than influencing the mode of the production of those goods), the lack of industrialization, and of commercial finance. Merchant houses were backed by relatively small private financiers acting as intermediaries between simple commodity producers and by exchanging debt with each other. Thus, merchant capitalism preceded the capitalist mode of production as a form of capital accumulation. A process of primitive accumulation of capital, upon which commercial finance operations could be based and making application of mass wage labor and industrialization possible, was the necessary precondition for the transformation of merchant capitalism into industrial capitalism.Early forms of merchant capitalism developed in the medieval Islamic world from the 9th century, and in medieval Europe from the 12th century. In Europe, merchant capitalism became a significant economic force in the 16th century. The mercantile era drew to a close around 1800, giving way to industrial capitalism. However, merchant capitalism remained entrenched in some parts of the West well into the 19th century, notably the Southern United States, where the plantation system constrained the development of industrial capitalism (limiting markets for consumer goods) whose political manifestations prevented Northern legislators from passing broad economic packages (e.g. monetary and banking reform, a transcontinental railroad, and incentives for settlement of the American west) to integrate the states' economies and spur the growth of industrial capitalism.


Neomercantilism is a policy regime that encourages exports, discourages imports, controls capital movement, and centralizes currency decisions in the hands of a central government. The objective of neo-mercantilist policies is to increase the level of foreign reserves held by the government, allowing more effective monetary policy and fiscal policy.

Roman commerce

The commerce of the Roman Empire was a major sector of the Roman economy during the early Republic and throughout most of the imperial period. Fashions and trends in historiography and in popular culture have tended to neglect the economic basis of the empire in favor of the lingua franca of Latin and the exploits of the Roman legions. The language and the legions were supported by trade while being at the same time part of its backbone. Romans were businessmen and the longevity of their empire was due to their commercial trade.

Whereas in theory members of the Roman Senate and their sons were restricted when engaging in trade, the members of the Equestrian order were involved in businesses, despite their upper class values that laid the emphasis on military pursuits and leisure activities. Plebeians and freedmen held shop or manned stalls at markets, while vast quantities of slaves did most of the hard work. The slaves were themselves also the subject of commercial transactions. Probably due to their high proportion in society (compared to that in Classical Greece), and the reality of runaways; as well as, the Servile Wars and minor uprisings, they gave a distinct flavor to Roman commerce.

The intricate, complex, and extensive accounting of Roman trade was conducted with counting boards and the Roman abacus. The abacus, using Roman numerals, was ideally suited to the counting of Roman currency and tallying of Roman measures.

Tobacco in the United States

Tobacco has a long history in the United States.

Tobacco distribution is measured in the United States using the term, "tobacco outlet density." An estimated 36.5 million people, or 15.1% of all adults (aged 18 years or older), in the United States smoked cigarettes in 2015. By state, in 2015, smoking prevalence ranged from between 9.1% and 12.8% in Utah to between 23.7% and 27.4% in West Virginia. By region, in 2015, smoking prevalence was highest in the Midwest (18.7%) and South (15.3%) and lowest in the West (12.4%). Men tend to smoke more than women. In 2015, 16.7% of men smoked compared to 13.6% of women. In 2009 46.6 million, or 20.6 percent of adults 18 and older were current smokers.Cigarette smoking is the leading cause of preventable death in the United States, accounting for approximately 443,000 deaths, or 1 of every 5 deaths, in the United States each year. Cigarette smoking alone has cost the United States $96 billion in direct medical expenses and $97 billion in lost productivity per year or an average of $4,260 per adult smoker.


In underconsumption theory in economics, recessions and stagnation arise due to inadequate consumer demand relative to the amount produced. It means that there is an overproduction and a demand crisis. The theory formed the basis for the development of Keynesian economics and the theory of aggregate demand after the 1930s.

Underconsumption theory narrowly refers to heterodox economists in Britain in the 19th century, particularly 1815 onwards, who advanced the theory of underconsumption and rejected classical economics in the form of Ricardian economics. These economists did not form a unified school, and their theories were rejected by mainstream economics of the time.

Underconsumption is an old concept in economics, going back to the 1598 French mercantilist text Les Trésors et richesses pour mettre l'Estat en Splendeur (The Treasures and riches to put the State in Splendor) by Barthélemy de Laffemas, if not earlier. The concept of underconsumption had been used repeatedly as part of the criticism of Say's Law until underconsumption theory was largely replaced by Keynesian economics which points to a more complete explanation of the failure of aggregate demand to attain potential output, i.e., the level of production corresponding to full employment.

One of the early underconsumption theories says that because workers are paid a wage less than they produce, they cannot buy back as much as they produce. Thus, there will always be inadequate demand for the product.

Early modern
20th- and 21st-century

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