Mercantilism

Historical Background

Steven G. Medema and Warren J. Samuels note that, during the 13th century, a shift from tally sticks to account books took place and provided the ground for the use of credit instruments and the resulting steady rise of a merchant class. Two [Page 1149]centuries later, the colonization of the Americas caused a large inflow of gold and silver into Europe. These precious metals, at the time referred to as bullion, spurred international trade, which led to the increased importance and social status of merchants in European societies. The striving mercantile class collaborated with the political establishment to reap the economic benefits of proliferating international commerce.

Mercantilism as a System of Discourse

Economic historians are divided on whether mercantilism represents a coherent theory or school of thought. The major mercantilist writers never identified themselves under a common label. Instead, the concept only appeared in print in 1763, introduced by Marquis de Mirabeau, and was commonly used by both the Physiocrats and Adam Smith to present their classical political economy as an antidote to prior contributions, thus establishing a dichotomy that was far less pronounced in reality. Most modern interpreters follow Coleman and do not consider mercantilism as a finished system or coherent doctrine but rather as an amalgam of interrelated pamphlets, tracts, and practical rules regarding the creation of (national) wealth, the best method to increase it, and the role of the state in economic and trade affairs.

Mercantilist authors, who were predominantly of English origin, such as Mun, Misselden, William Petty (1623–1687), and Dudley North (16411691), engaged in a discourse concerning topics like trade, production, the effects of tariffs, interest rates, and other monetary issues and were more interested in the solution of practical economic problems than the creation of economic ideas. Thus, most mercantilist writers were foremost practically oriented (in other words policy oriented) rather than concerned with the intellectual creation of economic concepts and theories for their own sake. However, these writers shared four main commonalities. First, they were the first group of economic theorists to perceive the aggregation of wealth as worthwhile, either for its own good or as means to increase the power position of a state. For most mercantilists, wealth was an essential foundation of a country's power and the acquisition of either of them (or preferably both) had to be the ultimate ends of any national policy. Second, they shared a common set of vocabulary on the basis of which they discussed their hypotheses and arguments. Third, the mercantilists were largely united in their recognition of the importance of the supply-and-demand principle, which they applied to the formation of prices, while, fourth, they regarded the economic sphere as an independent and interlinked system (which was situated even outside the state) that was regulated by its own, empirically observable laws rather than by any moral order. Thus, Lars Magnusson makes the case that mercantilism is most appropriately regarded as an economic discourse rather than a system of thought.

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