Describe the system of Mercantilism.
Mercantilism is an economic system that dominated Europe from the 16th to the 18th centuries. It is based on the belief that a nation's wealth and power are determined by its accumulation of precious metals, particularly gold and silver.
Under mercantilism, nations aimed to maintain a positive balance of trade, meaning exporting more than they import. This was achieved through various policies and practices, such as imposing high tariffs on imported goods, providing subsidies to domestic industries, and establishing colonies to provide raw materials and serve as captive markets for finished products.
Mercantilist policies were centered around protectionism, with a strong focus on accumulating wealth and resources. Governments played a significant role in the economy, often implementing regulations and controls to ensure a favorable balance of trade. The goal was to increase national wealth and strengthen the state by accumulating precious metals, expanding overseas colonies, and promoting a positive trade balance.
This system was also characterized by competition among nations, with each trying to gain an advantage over others through trade and colonization. It led to conflicts such as wars and rivalries over resources, territories, and trade routes.
Mercantilism was eventually criticized and challenged by proponents of free trade and economic liberalism during the Enlightenment era. These critics argued that wealth should be measured not by the accumulation of precious metals but by the overall economic prosperity and well-being of a nation. Nonetheless, mercantilism remains an important historical phase in the development of economic systems.