Mercantilism: the economic side of colonialism.

Mercantilism: an economic theory that dominated in the modernized parts of Europe from the 16th to the 18th century. This theory is mostly associated with colonialism and the exploitation of the colonies’ natural resources.
Mercantilism is considered as the first trade system between nations.

Mercantilism is centered around the idea that a country’s wealth is determined by its accumulation of precious metals (gold and silver) and the economic growth is associated with the increase of the money in circulation in the economy.
So the European countries had to focus on maximizing their exports and minimizing their imports. To do so, they developed industries oriented by governments for the production of goods to be exported. But before this, their main strategy was to rely on the colonies, which had a huge contribution in the European countries increasing wealth. The colonizers used to take the raw materials from their colonies, use their industrial capabilities to turn them into manufactured goods and then sell these goods to the colonies which form new markets with new opportunities and less competition. To facilitate this process, European countries prohibited inter-colonies trade.
Mercantilism also valued the importance of a large population as a form of wealth that leads to self-sufficiency and power: a larger population means more  labor supply, larger markets and stronger armies.
Back then, the wealth was viewed as zero-sum: if a country earns, the other one loses an equal amount, this is because the richness of a nation was determined by precious metals, which are scarce (limited) resources, so if one country has more of the world’s gold (or silver) then the other countrie has less of it. And this explains the extreme competition between European countries to conquer more lands.
After 3 centuries of dominance, mercantilism had to come to an end by the 19th century especially with Adam Smith and the publication of his book “Wealth Of Nations” that encouraged the world to shift into a free trade system based on Smith’s laissez-faire economics.

This economic system that made one part of the world grow relying on other part exploitatively, it was obvious that an end had to be placed for it, because it was inconsistent with human principles and values. Maybe we can (or we should) cooperate in order to grow and develop, but it is unreasonable for us to exploit each other in this hideous way.

E-money exchange rates

1 thought on “Mercantilism: the economic side of colonialism.

  1. […] the 17th century, thanks to the industrial revolution and the European expansion overseas, most European countries were witnessing an increase in agricultural production, technological […]

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