MERCANTILISM. Mercantilism was an economic "system" that developed in Europe during the period of the new monarchies (c. 1500) and culminated with the rise of the absolutist states (c. 1600 – 1700). Mercantilism was not characterized by the blind adherence to a single, precisely defined economic theorem. Rather, its adherents embraced, in various degrees, parts of a set of commonly held theoretical beliefs or tendencies that were best suited to the needs of a particular time and state. The underlying principles of mercantilism included (1) the belief that the amount of wealth in the world was relatively static; (2) the belief that a country's wealth could best be judged by the amount of precious metals or bullion it possessed; (3) the need to encourage exports over imports as a means for obtaining a favorable balance of foreign trade that would yield such metals; (4) the value of a large population as a key to self-sufficiency and state power; and (5) the belief that the crown or state should exercise a dominant role in assisting and directing the national and international economies to these ends. As such, mercantilism developed logically from the changes inherent in the decline of feudalism, the rise of strong national states, and the development of a world market economy. The shift from payments in kind, characteristic of the feudal period, to a money economy was one key development in this process. By the late fifteenth century, as regional, national, and international trade continued to blossom, European currencies expanded as well; circulation was more common, widespread, and vital. The early mercantilists recognized the seminal fact of this period. Money was wealth sui generis; it gave its holder the power to obtain other commodities and services. Precious metals, especially gold, were in universal demand as the surest means to obtain other goods and services. At the same time the rise of more powerful European states with burgeoning bureaucracies, frequent dynastic wars that required larger and more expensive armies, and more lavish court expenditures exacerbated this fundamental need for money in the form of precious metals. Foreign trade, not domestic trade, was viewed as the preferred method for obtaining bullion, while manufacturing, which provided the goods for such trade, was favored over agriculture. Finally, the discovery of the New World by Columbus in 1492 and the discovery of the sea route to India by Vasco da Gama in 1497 – 1499 also provided fertile ground for obtaining such wealth while creating an ever greater need for wealth to conquer and protect these colonies and their imperial trade. All of these factors ensured that the rising late medieval and early modern states embraced mercantilism as an economic theory that allowed them to adapt to and seek to exploit these shifting structures. Since mercantilism at base postulated increased royal control over both the internal and external economic policies of the state, it found easy acceptance among the "new" monarchies of the late fifteenth century and the sixteenth century. In Portugal, Manuel I (ruled 1495 – 1521) and his successors embraced its tenets regarding bullion and colonies to help exploit their burgeoning Asian empire. In Spain both Charles I (ruled 1516 – 1556) and Philip II (ruled 1556 – 1598), given the boon of New World precious metals, also found comfort in bullionism as well as the tenets calling for the exploitation of colonies for the benefit of the mother country. In England, Henry VIII (ruled 1509 – 1547) and Elizabeth I (ruled 1558 – 1603) adhered to some mercantilist principles in an effort that was, at least in part, designed to combat the threat of universal Habsburg Monarchy and Iberian dominance in the developing world market economy.
During the seventeenth century, adherents of absolutism also found much to embrace in mercantilism. During the age of Stuart absolutism James I (ruled 1603 – 1625) and Charles I (ruled 1625 – 1649) found it logical to accept the premise that the monarch should not only control the political and social hierarchy but should enjoy control over the economy as well. Oliver Cromwell (1599 – 1658), after destroying Stuart pretensions in the Civil War, embraced both mercantilist warfare and the Navigation Acts in his commercial struggle with the Dutch. It was in France, however, that mercantilism found perhaps its greatest supporter in Jean-Baptiste Colbert (1619 – 1683). Colbert's career was as much a product of the sociopolitical dynamics of the absolutist state as the result of the unrivaled bureaucratic energies he displayed in the service of his early patrons and eventually the crown. His family rose through the social hierarchy based on the time-honored expedients of wealth and venality of office. Utilizing family connections, Colbert entered the service of Michel Le Tellier in 1643, soon after the latter became secretary of state in charge of military affairs. This promising foundation was solidified during Colbert's "apprenticeship" under Jules Cardinal Mazarin, a mutually advantageous relationship that began in 1651 and lasted until Mazarin's death in 1661. By the end of this decade of opportunity, Colbert had become baron de Seignelay, secretary of the orders of the queen, intendant general of the affairs of Mazarin, counselor of the king in all of his councils — not to mention a very wealthy man. Just as importantly, he had begun to create an apparatus for the implementation of his later policies by further enriching his family and arranging influential positions for a bevy of his brothers and cousins. In this rapid ascent through the labyrinth of French political life, Colbert honed the ideas and theories that shaped his policies after 1661, the year Louis XIV (ruled 1643 – 1715) began his personal reign and Nicolas Fouquet was imprisoned, thus ensuring Colbert's ascent to ministerial preeminence. The basic theoretical tenets of mercantilism predated Louis XIV's reign, in some cases by half a dozen generations. Colbert was exposed to such ideas in the Paris of his youth, when the economic traditions of the first Bourbon king of France, Henry IV (ruled 1589 – 1610), and the theories of his able controleur g é n é ral du commerce (comptroller general of finance), Barth é lemy de Laffemas, were still relatively strong. Armand-Jean Du Plessis, Cardinal Richelieu (1585 – 1642) was still alive at that time, and Issac de Laffemas, the cardinal's creature, was in the midst of perpetuating his father's intellectual legacy. Although Colbert never referred to the writings of Antoine de Montchrestien (c. 1575 – 1621) and Jean Bodin (1530 – 1596), he was probably familiar with their works. Mercantilism reached its apogee under Colbert not because he was a theorist but rather because he was a man of action who judged its tenets to be the only natural and logical way to achieve his most cherished goal: a powerful and wealthy France united under a glorious monarch. The primary obstacle to France's economic greatness was the overweening economic power of the Dutch. If the mercantile power of the burghers of Amsterdam could be broken in both Europe and the lucrative Asian trade, France could prosper. Colbert's anti-Dutch strategy evolved logically from his beliefs on political economy. Foremost among his particular tenets on mercantilism was the conviction that the volume of world trade was essentially static and that, to increase its share, France would have to win part of that controlled by its rivals. In one of his most quoted m é moires (Lettres VI: 260 – 270) Colbert wrote, "The commerce of all Europe is carried on by ships of every size to the number of 20,000, and it is perfectly clear that this number cannot be increased." Commerce caused "perpetual combat in peace and war among the nations of Europe, as to who shall win most of it." His exaggerated estimate on the maritime strength of the major European trading nations competing in this "war" was fifteen thousand to sixteen thousand Dutch ships, three thousand to four thousand English ships, and five hundred to six hundred French ships. Just as importantly neither the French nor the English could "improve their commerce save by increasing this number, save from the 20,000 . . . and consequently by making inroads on the 15,000 to 16,000 of the Dutch." (Lettres VI: 260 – 270). The bellicism inherent in such beliefs would in part culminate in the Dutch War of 1672, a war Colbert supported. Unfortunately, despite his most careful calculations regarding this struggle in both Europe and the Indian Ocean, Louis XIV's armies and fleets suffered increasing difficulties in the war from 1672 to 1679. These setbacks forced Colbert to undo many of his initial reforms from 1661 that had doubled the king's revenues, forged a powerful navy, and set France on a course for apparent dominance in Europe. By the time of his death in 1683, the kingdom was instead on the road to bankruptcy and revolt, and Louis XIV's penchant for continued warfare in the decades down to 1715 only exacerbated this decline.
During the eighteenth century the limits of mercantilism became increasingly obvious, and intellectual and political critics of its basic tenets gradually emerged. First, Louis XIV's spectacular failures in the kingdom viewed as the apogee of both absolutism and mercantilism certainly revealed the limitations of allowing the state to direct the economy for its own frequently selfish, if not self-destructive, purposes. At the same time, in parts of England, Holland, and northwestern France the initial adherence to mercantilist principles created the very conditions that fostered antimercantilist sentiments. These developments would ultimately cause the destruction of merchant capitalism. In short, merchant capitalism reached a level within the mercantilist system where state intervention and direction of the economy was threatening and even preventing further expansion. The critical spirit toward existing Old Regime structures embodied in the intellectual revolution of the Enlightenment found its antimercantilist champions in the Physiocrats. In part adapting "natural law" doctrines to the economy, this influential group of economic theorists, including Fran ç ois Quesnay (1694 – 1774), Jean-Claude-Marie-Vincent de Gournay (1712 – 1759), and Pierre-Samuel du Pont de Nemours (1739 – 1817), instead argued for laissez-faire. This theory argued that the economy functioned best when its own "natural laws" were allowed to function without government intervention. Complementing the work of the French é conomistes, the Scottish philosopher David Hume (1711 – 1776) sought to identify the natural advantages that various nations enjoyed in the flow of commerce and provided a new theory on international trade. In his Political Discourses (1752) and Essays and Treatises on Several Subjects (1753), Hume also sought to refute some of the principal tenets of mercantilism, including confounding money with wealth and the blind acceptance of bullionism. Yet by far the most important work criticizing mercantilist thought was Adam Smith's (1723 – 1790) An Inquiry into the Nature and Causes of the Wealth of Nations (1776), the first systematic economic analysis of the world market economy created during the preceding age of mercantilism. Smith's strong advocacy of free trade and his belief that world wealth was not static, as Colbert and others had held, did much to undermine mercantilism. At the same time his theories and those of other Physiocrats also encouraged colonies like British North America to reject the traditional dependence on their mother countries as defined by the mercantilist model while furnishing intellectual fuel for the industrial revolution then taking place in Great Britain. In France, however, only the French Revolution and Napol é on I (1769 – 1821) would facilitate the destruction of the economic remnants of both the late medieval and mercantilist periods. See also Absolutism ; Colbert, Jean-Baptiste ; Hume, David ; Liberalism, Economic ; Physiocrats and Physiocracy ; Smith, Adam .
Colbert, Jean Baptiste. Lettres, instructions, et m é moires. Edited by Pierre Cl é ment. 7 vols. Paris, 1861 – 1882. Cole, Charles Woosley. Colbert and a Century of French Mercantilism. 2 vols. New York, 1939. — — . French Mercantilist Doctrines before Colbert. New York, 1931. Heckscher, Eli F. Mercantilism. Translated by Mendel Shapiro. Rev. ed. 2 vols. London, 1955. Glenn J. Ames