Mercantilism and Its Critics

FOUNDATIONS OF THE ATLANTIC WORLD HIST 1301 | History Mercantilism and Its Critics Despite the fervent reliance of European government ministers and merchants on mercantilist ideology to establish colonial empires, mercantilism was not without its detractors. Scottish philosopher David Hume proposed in the eighteenth century that prices would grow and eventually become so exorbitant that no one would buy products as more gold was used in the economics of the nation. Moreover, Hume contended that if a nation's possession of gold and silver decreased its value due to abundance, then that nation's wealth would also decrease. This contradicted the mercantilist notion that a nation should accumulate precious metals in order to become wealthy. Another Scot who opposed mercantilism was Adam Smith, the eighteenth-century economist and philosopher. Smith maintained that a country's economic success did not entail a country's economic downfall. Instead, trading could be advantageous to all parties involved. By providing raw resources to another country, which could then turn those commodities into completed items to be sold at profitable rates, one country may develop. Smith was likewise against economic control by the government. According to him, the market's power—that is, the aspirations of customers and sellers—combined with the rivalry of product manufacturers to create a robust economy. A high level of demand would cause an item's price to increase. Prices would decrease if there was little demand or poor quality. Smith felt that although the government should support business, for example by constructing roads and funding the military, it shouldn't give companies monopolies or provide them with subsidies. Consumers would only suffer as a result of the artificially high pricing. Without support from the government, businesses would either have to learn how to run more profitably by lowering prices, or they would fail. Smith also said that it was illogical for a country to generate all of its needs. England should use the money it made from selling the commodities it was best at producing to purchase the Spanish product if Spain could produce it more cheaply or more effectively than England could. Spain might create wine more affordably than England, but England could produce textiles more effectively. Smith clarified that it was therefore more economical for Spain to purchase wine from England and for England to purchase fabric from Spain than for each nation to manufacture the necessary amounts of wine and cloth on its own. European countries fought each other in trade wars as they attempted to employ tariffs to keep others out of their markets because mercantilist ideology believed that any economic gain for one country was inevitably a loss for others. Trade wars were sometimes accompanied by actual battles. Throughout the course of the seventeenth and eighteenth centuries, England and the Netherlands engaged in four wars, partly in an effort to seize control of transatlantic trade. England battled France as well to get access to India's markets. Mercantilism had an impact on relations between classes as well as between nations. For example, by suggesting that wages should be kept low, it elevated the interests of manufacturers and merchants over those of workers and customers. As a result, employers would hold onto more money, and consumers would be deterred from purchasing luxuries that could be exported for a profit. Moreover, mercantilists supported high taxes as a way to benefit governments. Governments in colonies frequently restricted the economic growth of their colonies and severely punished anyone who attempted to dodge trade restrictions due to the perceived necessity to collect raw materials from colonies to serve the interests of the home nation. In an attempt to take as much riches from the American colonies as possible, the urge to exploit them also resulted in the mistreatment of Indigenous inhabitants and the enslavement of Africans.