mercantilism was a series of practices applied to the economy of European nations in the 19th century. XV to XVIII.
He argued that a rich nation is one that maintains its favorable trade balance and accumulates precious metals.
Its main characteristics are the favorable trade balance, colonialism, state interventionism, metalism, monopoly and the creation of manufactures.
Let's look at each of them.
Favourable trade balance
A country should export more products than it imports, in other words, it should sell more than it buys, as this is the only way to guarantee that its trade balance is positive.
Protectionism
To prevent imported products from entering the country, the government basically used two strategies. The first was to charge customs fees that made imported products too expensive and therefore not profitable to sell them in the country.
The second was to prohibit the sale of raw materials obtained in the colony to the competitor.
In this way, the trade balance would always be favorable, with more exports than imports.
Colonialism
Mercantilism understands that commerce is responsible for generating a country's wealth. So, you have to conquer territories to turn them into colonies.
The colony, however, would be subject to a series of rules:it could only sell its products to the metropolis and could not have industries to transform them.
For its part, the colony would only buy manufactured goods from its metropolis. This relationship is also called the Colonial Pact.
The most important nations in Europe at that time – Portugal, Spain, England, France and the Netherlands – had colonies for this purpose.
State Intervention
It would be up to the State to plan the economy by creating manufactures to transform the raw material brought from the colony.
The Companies of Commerce were the instrument that the State used to organize and to administer all the colonial commerce. In addition, licenses were granted for the slave trade, as it was a very profitable trade.
Metalism
The accumulation of precious metals – gold and silver – was seen as a sign of prosperity for a nation. So it was necessary to get colonies where there was said metal to guarantee the value of the coin.
Spain was the country that most practiced this policy, as its colonies in America were rich in deposits of gold and silver.
Economic Monopoly
A monopoly, in economics, is the exclusivity of a government or an individual over a given economic activity. An example:Portugal had a monopoly on the sale of Brazilian sugar in Europe. Even if other countries wanted to buy it directly from Brazil, they couldn't do it.
This monopoly extended to manufactures, such as porcelain, crystal, metal (jewelry) and other industrial activities carried out in Europe.
Manufacture creation
The creation of state-controlled manufactures was essential for the functioning of mercantilism.
The clearest example is France. Based on the ideas of Colbert, King Louis XIV's finance minister, several luxury goods factories were built that supplied the French and European markets.
Likewise, Colbert determined that strategic sectors, such as naval production, should be controlled by the State, from the acquisition of raw materials to the manufacture of the product.
These economic practices were called “Colbertism”.
We have more text on this subject :
- Mercantilism
- Metalism
- Protectionism
- Trade Balance
- Colonial Pact