Mercantilism

What It Covers

Mercantilism dominated European economic thinking from the sixteenth to eighteenth centuries, prioritizing exports over imports and state intervention. Adam Smith's 1776 Wealth of Nations critiqued and discredited this zero-sum trade philosophy.

Key Questions Answered

• •Zero-sum trade philosophy: Mercantilists viewed trade as competitive warfare where one nation's gain required another's loss, leading countries to restrict imports and maximize exports even at the cost of domestic welfare, fundamentally misunderstanding gains from cooperation.
• •East India Company influence: Trading company directors like Thomas Mun and Josiah Child wrote mercantilist treatises defending their monopolies by arguing company profits equaled national interest, successfully aligning private merchant interests with crown policy for two centuries.
• •Navigation Acts protectionism: England mandated all colonial trade occur on British ships, growing the merchant fleet substantially while restricting competition. This pure protectionism combined trade policy with military enforcement to dominate Atlantic commerce and challenge Spanish silver dominance.
• •Fallacy of composition trap: Mercantilism persisted because household economics seemed to scale to nations—if saving more than spending benefits families, surely nations should export more than import. This intuitive but flawed reasoning made mercantilist policies politically popular despite economic inefficiency.