Mercantilism Definition for Kids


Mercantilism is an economic theory that developed circa 16th century and was a widespread practice through the 18th century. Most scholars and historians agree with that timeline and also argue that mercantilism doesn’t exist today, that the theory is not relevant and indeed a mistake. Some scholars argue that there are traces of mercantilism in the present day economies of the world.

What is Mercantilism?

Mercantilism is an idea that a nation or kingdom must attain economic superiority and whatever practical and enforceable policies that may be warranted to usher in the same must be developed and implemented. In simpler words, mercantilism calls for a robust domestic economy, more exports than imports, having a balance of trade, sustained agriculture, sufficient population for armies and to have large enough markets and eventually to fill the coffers of the state exchequer to become a richer nation.

The endgame is quite simple. Mercantilism aims for prosperity. The means to achieve that objective are often questionable.

Mercantilism: Illustrated!

Mercantilism advocates setting up trade relations with neighboring countries. One way of expanding this trade network is by colonizing new lands and thus developing new markets. In order to become the preferred trader or to be the only trader in a given market, a nation may forbid its colonies or regions to trade with other regions or kingdoms, there would be monopolization in specific categories or industries, the nation may ban export of essentials or precious items and may even ban import of stuffs that the country doesn’t need and essentially the whole trading industry including domestic produces would be extensively monitored and controlled by the state.

Mercantilism has many benefits as well. Beyond the obvious goal of making the country richer and more prosperous, mercantilism puts enormous focus on production or manufacturing, agriculture, technology, logistics and financial empowerment. States or kingdoms can subsidize industries, agriculture, exports and can also control wages, manufacturing standards and trade policies to favor the growth of the economy. Mercantilism can also lead to maximum use of land, natural resources, available manpower or labor.

Tenets of Mercantilism

As is the case with any theory, economic or in any other discipline, there are some stringent tenets that define it. Mercantilism is a stringent theory. It doesn’t leave much room for speculation or ambiguity. Here are some of the many tenets of mercantilism.

It demands that all usable soil in a country, in other words land, should be used for productive purposes. It could be agriculture, manufacturing or mining. This may be acceptable in theory but it is near impossible in reality. You cannot explore every terrain. There are some regions in almost every country of the world where you can neither grow something nor can you use the land to build something. In theory, it makes sense because the modernized and industrializing European nations at the time, namely France and England, were relatively smaller in size and did not have enough diversity of terrains. It was deemed reasonable and desirable to make use of as much land as possible.

Mercantilism dictates that a country must focus on exporting finished goods and using as much raw materials as possible that are sourced from within the country. There was vehement opposition to importing finished goods or manufactured products. Raw materials are always cheaper than finished products. Even if a country did import a bit of raw materials needed for a particular product, one was always expected to avert importing finished goods.

Mercantilism requires a large population and particularly those who are of working age. This in a way propagated that people should give birth to more children. In those days, circa sixteenth to eighteenth century, machines were not as developed as today. Massive labor forces were quintessential to industrial growth and operations. Larger populations meant larger workforces and also provided more soldiers for armies.

Precious metals cannot be exported according to mercantilism. Anything that is precious or has value must be retained in the country. Only the disposable or what can earn more economically than its value in the country was to be traded.

Dangers of Mercantilism

Mercantilism allows economics to trump all other aspects. Social, cultural, political, humanitarian and ecological aspects are shunned. The focus is solely on the economic progress of a nation, regardless of fallouts. Mercantilism has lead to many wars. It has lead to conflicts within nation states.

Colonization, especially the spree launched by the British, was heavily influenced by mercantilism. In an attempt to further the economic interests of England, the colonists had formulated policies that have ruined several local economies, health and fortunes of the colonized. From hoarding of essentials or basic goods to crippling free trade, mercantilism had wreaked havocs in many parts of the world. It is unsurprising that the theory finds very few takers today.