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Mercantilism

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This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

Developments in Europe

Mercantilism Introduction
The process of mercantilism can be said to

be the direct outcome of the shift seen at the

end of the 17th century, from the

Mediterranean to the Atlantic as one causal

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factor while another, would be the rise of

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trading routes, communities, and the

organization of guilds in Europe.

Jo It was Adam Smith in the 17th century who

coined the term ‘mercantilism’ to him,

mercantilism was the economic form of

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nationalism, where power was associated

with economic development and well-being.

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He however critiqued the mercantile theory

that was prevalent at three distinct levels,

firstly, it was exploitative and did not benefit

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the two nations equally.

Secondly, specialization did not

disadvantage but rather improved the market

economic structure and thirdly, the collusion

of the government and mercantile classes

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

was detrimental to the general public as it absolutism and the economic prerequisite

drove up prices and curbed competition for industrialization as a process. However,

from external forces. it can also be seen in the light of Eli

Heckscher as a step toward economic

The idea of mercantilism in this phase could

also be identified with the second phase of unification of the nation-state as an identity.

colonial expansion and the development of a Agreeing with this, Clough attempted to

i
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method to protect the state, from the influx secure economic unity in terms of state

of foreign bullion. To Jacob Viner, the power and control.

power of the state was directly proportionate

to the control of economic resources by the

state.

To the extent that Richard S Dunn observed

Jo Causes and ideological Base
Jacob Viner essentially categorizes the
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causes of the rise of mercantilism as follows.
that mercantilists were always patriots.

However, according to Braudel, classical Firstly, Wealth is essential for political and
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mercantilism was based on the old paradigm economic power.

of colonialist ambition of exploitation for This can be seen in the rise of the absolutist
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national interests. states that later moved towards mercantilism

Dobb describes the system as a for example, in France under Sun King

state-regulated form of exploitation through Louis XIV, his political power was

trade, a part of ‘primitive accumulation’ legitimized using the opulence and grandeur

While Jan D Vries, mentions that of the palace of Versailles.

Mercantilism allowed the development of

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

Mercantilism led to the economic

Secondly, political power is essential for the

retention of economic power and authority. unification of Europe, in terms of taxation

Since all taxation was collected by the extracted from the state and the church.

crown in the name of the King or religion, Secondly, it led to an increase in control

the continuation of the dynastic rule was over national economic rights.

important to control economic resources. It was also a quest for power and authority

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to gain wealth from colonies Heckscher
Thirdly, Wealth and power are the ends of

national policy, in light of the theory that modifies the paradigm of viewing

colonialism, he sees it as merely an

there is a limited amount of wealth in the

world and that it cannot be generated or

increased in any form.

Jo economic policy that strengthened the

absolutist state.

In the region of Spain JH Elliot points out

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Lastly, the separation of wealth and power

are harmonious till they work in isolation, that mercantilism was the source of 11% of

playing merely an instrumental role with the wealth of the crown, while to Michelet
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each other. Further, they attempted to cloth there were two important components of

the colonial policy in the garb of national Spanish mercantilism, the first was the
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strengthening of the metropolis. 'discovery of man' and secondly, the

discovery of the self, in search of others.

The tendencies of Mercantilism shifted

Europe towards the development of They were aided by armchair scholars such

economic ideas and policies. Its impacts, as Sepulveda, who discussed the men from

therefore, varied from region to region. these newly discovered regions to be part of

the mentality and mechanism of servitude.

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

However, they lacked in competition with

According to Sanjay Subramanian, this trade
the Portuguese in the opinion of Las Casas, was an essential element of understanding
as the Spanish gave away territorial India between the 15th to 18th centuries.
autonomy along with the fact that they did They also influenced the trade and
not control the trade route to India, similar commerce in the region of Brazil. However,
to England or Portugal. there are primarily four elements that

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In the region of Portugal however, the influence the process of colonization in the

objectives of colonialism were distinct from regions of England and France. However, it

those of Spain. There were primarily three was an outcome of organized state policy

elements of Portuguese colonist policy they

emphasize

announcements
papal decrees andJo that provided an additional market for goods

produced in proto-industrial

However, it was an outcome of Colbert’s

England.
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policy of state control and action in the
They subdued native ships of other

European nations. Secondly, they studied region of France that led to the systematic
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closely guarded sea routes. Lastly, by development of Europe. A system based on

limiting their own activities to the Eastern monopolized companies is termed the East
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spice trade. India Companies.

In the Dutch colonial policy, the main Case Study 1: France

activity was trade in the region of the Indian Colonial France was based on the systematic

Ocean, which was ruled by the merchant economic policy proposed by Colbert. In his

communities from Surat. policy, he focussed on market expansion and

an increase in the volume of trade in terms

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

of exports. This is an outcome of a favorable wealth was the basis of socio-political

balance of trade. French cities and ports control.

were regulated in terms of monopolies and

Secondly, Laffemas was a proponent of
the creation of East India companies that mercantile policies in France he proposed
competed and regulated trade in the western that in the production of even basic items
and expanding eastern hemisphere. With the such as linen manufacturing there lay an

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consistent expansion of commercial element of industrial profit that could be
capitalism and state rivalries between achieved only by adopting the mercantilism
England, France, and the Dutch, a number of policy of availing cheap raw materials and
trade wars and treaties brokered for peace

Jo
and altered the balance of power often in the

hands of the English or the Dutch.

expensive finished products of superior

quality, especially in native industries such

as Glassmaking and linen weaving.

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In France, however, there were three Lastly, it was Colbertism, proposed by
powerful voices that voiced an opinion in Colbert, a minister under Cardinal Richelieu
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favor of mercantilism as a policy and its that provided a final shape to the mercantile
organization. Firstly, Montchretien who policy of France.
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expressed his views in the opening part of

In the process of Colbertism, there was a
the 17th century based his theory on the
focus on increasing the capacity of maritime
wealth of the nation and primarily on that
networking and the development of a strong
controlled by the bourgeois. To him in the
legal system of recourse in financial and
Treatise of political economy, monetary
trade matters, it imposed the system of

alternative dispute mechanisms such as

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

negotiations and later in the Napoleonic

Case Study 2: England
codes, Colbertism led to the development of
English colonial policy was formalized by
a trading tribunal, that was controlled by
the Tudors and Stuarts In England, they
individual guilts that were under the state.
were seen as the primary proponents of the
Though Colbertism aided the development East India Company and its rise in the
of civil ordinances, criminal and maritime

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world. This was done through a series of

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ordinances in a relatively short span of time, carefully crafted legislations and regulations
it largely failed the test of mandatory that ensured the primacy of British interest
industrialization as France did not move on

that path till the later part of the 18th

century, which led to significant

disadvantage as compared to England, that

Jo in international trade and commerce.

The earliest of these acts was the navigation

acts passed between 1651 and 1673, which

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provided that only British ships captained by
moved on the road to industrialization
British citizens could bring goods (imports)
coupled with colonial expansion.
to England and that all goods being
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transported (imported or exported) across

Europe would need to be shipped through

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England.

They further impose a form of a

sophisticated system of taxation that broke

down the rate of taxation based on the type

of product, in other words, the nature of the

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

product as either a luxury product or a daily

use product that was taxed at a lower rate as
it was produced in England and was
exported to colonies while luxury goods
such as Ginger and Molasses were regulated
by acts such as the Hats act of 1731 and the
The first historian to express his views on
colonialism was Eli Heckscher who saw it
as a system that was implemented in stages.
Initially weakening the older paradigms of
regional power by usurping their symbols of
authority.

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Molasses Act 1733. According to historians,
For example in the context of the Americas,
the excessive rate of taxation and the
the colonialists from England marginalized
exploitative nature of English mercantilism

led to the American civil war led to the

continental blockade and the weakening of

the colonial empire.

Jo the native tribes and usurped their land,

imposing the concepts such as private

property in other regions like India and

Africa, British colonists systematically

na
The nature of English mercantilism has been broke down native power structures and
a concept of debate since the 20th century as adopted fancy titles such as Nabobs a
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a large number of historians recognize the corrupted pronunciation of Nawab as a

denaturing of native economies and the symbol of imperial authority.
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dependence on the metropolis as a challenge

His theory may be accepted as an economic
in the post-colonial reconstruction of former
phenomenon, however, it would be incorrect
colonies.
to assume that mercantile colonialism was

purely an economic motive devoid of

political ambition and bearing.

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

British East India to conduct economic

Another set of historians also critiqued the

process of colonization, Coleman uses the plunder in the garb of ‘trade’ as

definition of colonization proposed by TH representtives of the state. Through

Marshall, Heaton, and AV Judges as a monopolies held by certain guilds and

system based on a handful of coherent companies, there was a significant reduction

principles. in competition.

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sh
However, to Maurice Dobb, the process of However, international competition still

colonization is less uniform and unified than remained, in this period the trade and

military rivalry between England and France

it initially appears, however, he treats it as

an important economic milestone in history.

Andrews attacked the understanding of

Jo reached a second high after the period of the

crusades. This rivalry was strengthened by

the seventy years war, that contributed to the

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Adam Smith with the understanding that
expansion of colonialism into the west
mercantilism was an outcome of a harsh
indes.
relaity that was realised and needed to be
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mitigated in a short period of time. The casuse of these wars can be found in the

objectives of colonisation of England and

While to Childe, it was an economic form of
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France. England increased their vision to

wafare employed by the Tudor state to
control sites of trade in order to maintain a
support their power base.
monopoly in the colony.
In England, the case for mercantilism was
Whereas, the French merely saw the colony
supported by the Tudors who organised the
as a centre for trade and commerce.
Charter acts that gave monopolies to the
This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

the regions of America, West Indies.

However, in the second phase of colonial

expansion, French colonists attempted to Secondly, forced labour, more common in

pursue a polic of racialism and imposed the the regions controlled by England, these

Code noir or black code on the colonies in were prisoners who were forced to conduct

1685, to control the nature of slave trade in tasks such as work on plantation lay roads

Africa. and railway lines, while the more serious

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criminals were sent to colonise new lands of
While, the English East India company
convict colonies.
focussed on the trade relations developing
The third category were the indentured
between India and England and attempted

through the Pitt’s India Act to expand

monopolies on the sub-continent. Trade was

conducted in similar products across Asia

Jo labour or bonded labourer class, that was

forced to work on teir own land and meet

the exploitative rate of production as well as

na
and Africa, therefore, the fields of tea, revenue settlements.

sugarcane and cotton became the She however, points out that in the 20th
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battlefields. century another category of slaves

developed, that was the migratory

This gave an impetus to slave trade in
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colonial empires. Barbara Sallow throws indentured labour, that was forced labour

light on an important aspect of slave trade in sent from one colony to another to assist in

the colonial empire, she distinguishes it into the process of commercialisation of

three categories: Slavery in the Arican sense agriculture, this has led to the development

of the word where, native tribals were of diasporas outside the native country of

evicted from land, branded used as slaves in people with similar roots and traditions.
This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

as the Jagat Seths and Omichands were

Colonisation can be seen to be the backbone

of industrialisation and an added impetus to slowly ousted in favour of British and

the Industrial revolution according to some French colonial factors that regulated the

historians as the demand imcreased along rate of export duty and the volume of export

with the volume of trade. from Indian shores.

This led in South Asia to a situation of rapid

i
However, this picking up in commercial

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pace was only seen in a few sectors such as de-industrialisation and the replacement of

Sugar and Sugarcane products, cotton finished goods with commercial agrarian

produce. If there was an impact on the

textiles and weaving. However, the process

of colonisation as suggested by Sushil

Choudhury based on the volume of trade

opened up the European market to luxury

Jo colonies, there too was an impact on the

metropolises in Europe.

The triangular trade in goods and slaves

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goods from the east, especially from the provided for a high profit margin

region of Madras (cotton textiles) and economically however, the concentration of

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Murshidabadi silk. this wealth was in the hands of the slave

traders rather than the governments.

The competition to fulfil cotton demand in
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the period of lull caused by the continental The claim of Early historians regarding the

blockade led to the Carnatic Wars rise of industrialisation was refuted as it did

(Anglo-French) in the mid 18th century. not take into consideration the rise in

Further KN Chaudhury suggests that this led triangular slave trade.

to the development of an export based

market economy. The Indian agencies such

This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

of Nantes there was a consistent uptake in

In Europe, the wealh of the new World,

added a dimension of exploration to the Old the commercial activities, slave trade was

World and thus, created a gap between the investment heavy therefore, he argued that it

Old and the New World, one that was varied between 50 and 100 percent.

influenced by exploitation. The profits can be estimated that 7,000

vessel manned by about 80,000 seamen.

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The expansion of trade led to the complexity

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of the joint stock companies, tht brought the Therefore, slave trade’s actual investment

common man’s investment into colonial cannot be accurately estimated. In Boulle’s

view, slave traders formed an oligarchic

expansion in this phase.

89.8% of international slave trade was

undertaken from the African coastline.

Jo form, while Wilson and Pilard suggest an

increase to 200% in volume of slave trade.

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Especially, while the total foreign trade in

France was 35.2 million according to To Eric Williams, therefore the industrial

Arnould. revolution is not an outcome of mercantilism

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but was fuelled by slave trade.

Pierre H Boulle asserts that in this trade,

there were two two primary sources of Imanuel Wallerstein, slavery was the third
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income one that could be sold to generate stage of capitalism in europe that preceded

more income in the way of finished goods the mechanisation of the industrial

and the other in the form of human capital or revolution.

captive slaves that could be bought and sold.

Gaston martin points out that in the region

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This Article is a moral and intellectual assertion of the Author, no part of it may be
reproduced or transmitted without her prior permission

In conclusion, it can be said that

mercantilism is like a double edged sword, if

it gave development to the west it was a

story of under development in the colonies,

that shaped the journey of these nations in

the later 19th and 20th centuries.

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References

● Slavery,Race and ideology in the

United States of America- Barbara
Jwanne Fields
● World System Theory- Immanuel
Wallerstein
● Spain and its World- JH Elliot
● Tudor and Stuart England- Roger
Jo
na
Lockyer
● Capitalism and slavery in the
eceeding Long Run-Barbara L Salow
● Slavery and the rise of the Atlantic
ar

System Barbara L Salow

● Revisions in Mercantilism- DC
Coleman
● Mercantilism Eli Heckscher
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● Cambridge Economic History of

Europe
● Cambridge Economic History of
India