The Rise of Mercantilism

FOUNDATIONS OF THE ATLANTIC WORLD HIST 1301 | History The Rise of Mercantilism Later historians named this economic philosophy "mercantilism," which served as the impetus for a great deal of European travel. This belief stated that a country's strength was based on how much gold and silver it had. Larger armies and ships that a country could support in its wars with opposing nations increased with prosperity. Building up national wealth, on the other hand, required preserving a positive trade balance—that is, a condition in which a nation sells more valuable commodities than it imports. The underlying tenet of mercantilism was that gold and silver had limited supply worldwide, meaning that a country's gain would necessarily result in a loss for another. A nation has to have more gold and silver than other countries in order to overtake them in power. In economic rivalry, mercantilism said there could only be one winner. A country would earn gold and silver from selling things overseas, but it would also have to pay other countries with gold and silver when importing commodities from other countries. Therefore, the necessity for a country to maximise its exports and minimise its imports lay at the core of mercantilism. In fact, it was ideal to manufacture everything domestically, including agricultural products, and import nothing. If a country was unable to meet all of its own demands, it should import raw materials, process them into completed goods, and then export those goods for a higher price than what it originally cost to make them. Any raw materials that a country owned need to be kept for use in its own production. Most European countries in the 16 and seventeenth centuries, particularly France and England, adopted mercantilist doctrine. This idea fueled exploration and colonial establishment almost as much as religious fervour and a hunger for knowledge. Mercantilists held that dominance in the economy required an empire of colonies. There was no need to buy resources from outside the colonies because the colonies could provide raw materials for domestic use. In turn, colonial people offered a ready market for domestically produced commodities. The European nations who founded colonies typically mandated that they trade primarily with their home nation in order to guarantee that the colonies increased their national riches. For instance, the colonies of England in North America were able to market goods that they manufactured solely in England. To optimise wealth, the majority of mercantilist philosophers held that economic regulation by the government was essential. In order to keep particular imports from competing with home industries, governments frequently banned them. For instance, in order to safeguard its own textile industry, France prohibited the importation of wool products in 1539. High tariffs, or levies, were also levied by governments on imports. They increased the cost of imported goods, which encouraged the growth of domestic industry. In order to achieve domestic self-sufficiency, governments may also award businesses monopolies over specific types of domestic production, develop and fund specific sectors, and finance internal improvements like new highways to assist domestic trade and manufacturing. In order to safeguard overseas colonies and international trade, they also kept sizable warships. Perhaps the best illustration of the mercantilist idea in action is seen in France. In France, the monarchy was absolute. throughout the 16 and seventeenth centuries, when feudalism began to fade and new nations emerged from mediaeval kingdoms, absolute monarchy began to emerge throughout Europe. These nascent nation-states were distinguished by codified laws and centralised bureaucracies. Instead of noble vassals leading their own private armies, they were protected by professional standing armies. A monarch, often a king, presided over the state and asserted his divine right to govern. While the pope was considered the monarch's superior under the mediaeval notion of monarchy, absolute monarchs saw no one as their inferior. They could rule as they pleased without consulting anybody else, asking for permission, or sharing authority with the nobility as had been the case with mediaeval kings. Absolute monarchs set their own laws, directed foreign policy, presided over the administration of justice (or chose others to do so), and set their own tax rates. Since they were the only source of authority in their domains, they frequently took actions to reduce the influence of their nobility in order to keep them from becoming a challenge to their reign. France possessed the strongest absolute monarchy, and its king Louis XIV, who ascended to the throne in 1643, was the model of a sovereign with divine authority. Unwilling to share authority with the higher-ranked members of the French aristocracy, who had been responsible for multiple revolts against the French monarchy in the decades before he ascended to the throne, Louis robbed them of any role in governing or running the state. He made them live in his magnificent palace at Versailles, where they were invited to put on displays of ostentatious living and compete with one another for the king's favour, which could mean being allowed to hold the king's shirt when he dressed in the morning. Instead of using their time and resources to plot revolts, they were encouraged to do this. Louis carefully examined every aspect of state affairs; he devoted hours to organising military movements, supervising the construction of roads and canals, and creating laws for France's colonies. "L'état, c'est moi"—"I am the state"—was a famous quote of his. Because of its absolute monarchy, France was able to control the economy, something that other nations with weaker leaders and less centralised governments were unable to do. Under the leadership of Jean-Baptiste Colbert, who was appointed Louis XIV's chief minister in 1661, France adopted mercantilism. Colbert aimed to reduce imports while promoting French manufacture and international commerce in his capacity as controller general of finances. He oversaw the government's hike in tariffs on products created abroad and the outright prohibition on the importation of specific items, including lace. Colbert gave private enterprises monopoly over the production of lace while establishing royal manufactures and glassworks. Colbert enforced stringent quality-control measures, believing that higher quality products might command greater prices abroad. He also penalised anybody who attempted to circumvent these rules. He also attempted, but was unable, to tax the French nobility in order to augment the government's coffers. Colbert reduced the country's need on foreign ships by establishing a merchant navy to transport French commodities overseas for commerce. He contributed to the preservation of riches inside the country by making sure that the French captains and owners of the ships received payment for carrying these products. Colbert had therefore also enhanced France's capacity to fight foreign nations militarily since the merchant marine might be called upon in times of war. England and the Netherlands were also impacted by mercantilist theory. The English Parliament took action to encourage English commerce and prevent the importation of foreign products, even though it did not have the same level of economic power that the French king had. In the second part of the seventeenth century, regulations were created mandating that all ships delivering commodities to England have English owners and a crew composed primarily of Englishmen, and tariffs were imposed on foreign imports. The resource-poor nation of the Netherlands used the mercantilist tactic of exporting high-quality commodities, particularly cloth, iron tools, and firearms, to offset the money it paid for foreign raw materials. Similar to France, England and the Netherlands gave private corporations—the British East India Company and the Dutch East India Company—monopolies on international commerce. The idea was to keep retailers from undercutting one another on the prices they charged for domestic items sold overseas and raising the prices they were prepared to pay for imported goods. Observing the success of Spain and Portugal, the Dutch, English, and French all set out to create colonies in the Americas in order to improve their access to raw materials and open up new markets for their goods. It appeared that maintaining a colonial empire was necessary to ensure national prosperity.