MERCANTILISM

How far did European mercantilism help in enriching maritime trade?

Analyze the concept of mercantilism as the impetus behind maritime trade.

Evaluate mercantilism as the concept which acted as the driving force of maritime trade.

Write a short note on Mercantilism.

 

Mercantilism was an economic system followed by England, France and other major trading nations form the 1500s to the 1700s. Under this system, a nation’s government strictly regulate economic affairs to enrich its treasury, specially by ensuring that exports exceeded imports.

Mercantilism was based on two beliefs:

Mercantilists judged a nation’s wealth by its stock of gold and silver rather than by standards of living or other measurements.

The mercantilists believed the world had a limited supply of wealth and so one country could grow rich only at the expense of another.

According to mercantilists, a nation that did not have gold or silver mines had to rely on foreign trade to become rich. They called for an excess of exports over imports, a situation they termed a favorable balance of trade.

To maintain a favorable balance of trade, mercantilist governments imposed high taxes and other restrictions on imports. Governments also encouraged the growth of domestic industries. Many nations established colonies overseas which served as markets for exports and source of raw materials. They also encouraged population growth because a large population provided supply of labor and a market for industrial products. Some nations prohibited the sale of gold and other precious metals to foreigners.

During the late 1700s the mercantilist system of many countries was gradually replaced by a policy of ‘Laisez Faire’. Under Laisez Faire the government played a limited role in economic affairs.

Mercantilism comprises of five central tenets (principles) which are interrelated:

Unification of the territory of the state into an economic unit.

The use of resources of the economy in the interest of the state.

The pursuit of power for the state.

The necessity for the protection of the state.

The accumulation of treasure through a favorable balance of trade and harmony in society.

The most important of all these is the emphasis of the state on defensive measures related to economy of the state. An aspect of this emphasis was the attempt to expel the foreign merchants. The necessary condition for such action was the internal power of the state. Therefore, protection of the activities of the state were given prominence.

English Mercantilism – a stress on production and trade

England and France put more emphasis on the production of agricultural and industrial goods. In the sixteenth century importance was given to production as the basis of national wealth. In the reign of Elizabeth encouragement was given to the manufacture of ammunitions so that England would be more powerful. Foreign workers were encouraged in the metallurgical trades to come to England to teach their arts to local workers. Forest was preserved along the seacoast to guarantee a supply of timber for shipbuilding. It was also insisted that Protestants in England should eat fish on Friday so that the fishing industry, the training ground for sailors would not be impaired.

In the seventeenth century, the whigs, who were representatives of business interest were becoming more powerful in politics so English economic rules became more positive in the direction of developing both output and trade. A protective tariff was introduced to preserve an English market for English producers.

The English placed great importance on the expansion of commerce for which they founded overseas trading companies, for e.g., the East India Company, and they enacted the famous Navigation Acts – 1651, 1660, 1663 and 1673. The acts provided that: No goods produced in Asia, Africa, America or Europe could be brought into England except in English ships, captained by an Englishman and imposed heavy custom duties on goods brought in foreign vessels.

Throughout the eighteenth century, England continued to protect its industry with high custom duties, to preserve its colonial markets for its own industrial goods and direct colonial trade to the shores to have a good supply of raw material for the Entre Port Trade. Such measures contributed to England’s economic growth and to the technological changes which constituted the Industrial Revolution.

French Mercantilism

France had no routes to the far East to carry on trade. Therefore, it decided to follow the policy of a favorable balance of trade a royal ordinance of 1540 forbade the export of bullion (gold). The government also made laws to suppress import of luxury items and give more stress on producing goods and services.

In the sixteenth century, the French government offered subsidies, tax exemptions, grants of monopolies, loans to develop such industries as glass making, sugar refining, wool, silk and linen textile manufacturing.

The French mercantilism reached its climax during the Ministry of Jean Colbart. He introduced various measures, built roads, and canals to improve transport system, founded the French East India Company with a hope to control Indian trade form the Dutch and English. He tried to secure colonies.

In the eighteenth century, France continued the policy of Colbartism i.e., its own brand of mercantilism. It maintained high protective tariffs, encouraged exports and tried to bring new industrial techniques. But several economic theories raised their voices which came to be known as Neo-Mercantilism which believed that ‘since money was the life blood of business activity there should be a large supply of it’ so that there would be a greater exchange of goods and a division of labor. But it did not succeed.

The Mercantilism of Portugal and Spain

The states like Portugal being small states achieved territorial unification and supported the efforts of its Princes to explore unknown lands of the South Atlantic. With the discovery of a water route to India, the Portuguese acquired a very lucrative trade. The Royal house instituted many regulations and collected much wealth by exporting goods of higher value.

During the most prosperous days of its commerce with the East, Portugal established, certain principles of mercantilist doctrine i.e.

The colonies were to be exploited for the benefit of the mother country.

All trade was to be regulated to have an excess of exports over imports.

National wealth was to be measure by the amount o bullion in order to get benefited by its colonies.

Spain also was anxious to be benefitted from her colonies. It issued licenses to visit the new world. Care was taken to bring gold and silver to Spain and it succeeded in acquiring large supplies of bullion. But gold and silver did little to stimulate the productivity of the country. The prices of the commodities went up and thus mercantilism practiced by the Spaniards did not lead to great economic development nor towards material wellbeing.

Mercantilism in Netherland

The economic growth of Netherland was fundamentally based on trade. The Dutch shippers went directly to the East, where they go good profits and could build up a colonial empire.

Netherland was a very small country with little industrial activity. It levied almost no custom duties on imports because international trade was in its interest. The Dutch statesman recognized that mere hoarding of bullion to acquire goods which could be sold at a profit and hence permitted free trade in precious metals. Thus, Bullionism was minimized in Dutch mercantilism in the interest of aiding commerce.

They established the Dutch East India Company gave trade monopoly to it in in order to exploit the colonial empire. From the middle of the sixteenth century, the Dutch had to face the onslaught of the English, French and Portuguese and in the far east their trade fell off.