Reviewed by Anjaneyulu | Updated on Jul 26, 2021



In order to build a wealthy and powerful society, mercantilism is economic nationalism. Adam Smith coined the term "mercantile system" to describe the political economy structure that was trying to enhance the country by limiting imports and promoting exports. From the sixteenth to the eighteenth century, this system dominated Western European economic thought and policies.

The goal of these policies was to maintain a "favourable" trade balance that would bring gold and silver into the country and also maintain domestic jobs.

Understanding Mercantilism

Mercantilism is a national economic policy aimed at increasing a nation's exports and reducing imports. Such policies aim at reducing a future current account deficit or attaining a current account surplus.

Mercantilism includes a national economic policy which aims to accumulate monetary reserves through a positive trade balance, especially of finished goods. Historically, these strategies also led to war, as well as encouraging imperial expansion. The theory of mercantilism differs in complexity from author to author and has evolved over time.

Mercantilism was prevalent in the modernised parts of Europe from the 16th to the 18th centuries. This system belongs to the time of proto-industrialisation until decreasing. However, some observers claim that it is still practised in the economies of developed countries in the form of economic interventionism. It encourages government regulation of a nation's economy for purposes of economic intervention.

High tariffs were an almost universal feature of the mercantilist policy, particularly for manufactured goods. With the efforts of multinational organisations, such as the World Trade Organization, to reduce tariffs globally, non-tariff barriers to trade have assumed greater importance in neomercantilism.

Significance Today

Mercantilism laid the foundation for nationalism and protectionism as it is today. Nations believed they had lost power because of globalisation and free trade interdependence. Across capitalist countries, the Great Recession exacerbated a trend towards mercantilism.

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