MERCANTILISM. – Mercantilism is the theory that subordinates all economic activity of a nation to the state, so that through active protection of the domestic and foreign market the state may acquire the economic means necessary for a policy of power. It represents the extreme expression of the voluntaristic conception of the economy, which had dominated throughout classical antiquity and the Middle Ages. But it is a completely new voluntarism, in which the economy is removed from the limits of moral and religious conscience, becoming a pure instrument for asserting the political power of the state.
I. Historical Notes
Its rise coincides with the formation of the great absolute monarchies, which tended to concentrate in their hands all internal life of the nation, to form national standing armies, and to pursue an expansionist international policy. It also coincides with the rise of the bourgeois class, to the detriment of a nobility essentially rooted in landed estates, and with the ever-greater discoveries of new lands.Mercantilism developed in a philosophical climate that strengthened and rationally justified II. This climate, characteristic of the second half of the sixteenth century and the entire seventeenth century, depended on many and varied factors: the autonomy of politics from morality; the theory of raison d’état; the theory of the immediate divine origin of the sovereign’s authority; the doctrine of essential and justified individual instincts, and thus harmful to the common good; and the Protestant glorification of professional activity. The philosopher who best justified mercantilism is certainly Hobbes.
When one speaks of mercantilism, one must not understand it as an organic and fixed system of doctrines, but rather as a general attitude. This general attitude is given by the following alleged economic principle, characteristic of mercantilism: money is the greatest means of enriching a nation, and therefore the quantity of money possessed is the cause of the state’s economic power. The surplus in the balance of trade thus becomes the fundamental interest of economic policy.
Through more or less simplistic observations and under the pressure of contingent necessities, this policy of an active trade balance oriented itself along several fundamental guidelines: 1) The strengthening of industrial production to the detriment of agricultural production. It was believed that the effect of state intervention on agriculture was almost nil, since natural factors dominate in it, over which human will can have little and slow influence. One will then understand how a state desirous of rapid and easy monetary enrichment abandoned any aspirations to agrarian policy, concentrating all its energies on industry, which, by continually increasing manufactured goods, allowed the conquest of international markets and thus the influx of money. 2) Protective tariffs designed to ensure that gold and silver would flow into the country and prevent their outflow.
Thus, there was an absolute prohibition on the export of precious metals and of raw materials useful to the industries of rival nations; the imposition of heavy duties on the import of finished products. 3) This was done in order to achieve the conquest of international markets, overcoming the competition of other nations in the sale of products and in the monopolization of raw materials. 4) Maritime policy: directed toward the maximum strengthening of the merchant fleet and the defense of the freedom of the seas with a strong military fleet. 5) Colonial policy: the conquest of colonies had an eminently economic purpose. From the new lands, precious metals and raw materials could be obtained, and they provided a secure market for the sale of finished products. 6) Demographic policy: a large population contributed to the military power of the nation and also to its economic enrichment.
Mercantilism had its origins in the second half of the sixteenth century, with the theory of chrysaedonism. The sudden imbalance in prices, due to the ever-increasing influx into Europe of precious metals from the newly discovered lands, led scholars to interpret the serious phenomenon and to the simplistic conclusion that the quantity of money was the surest guarantee of the country’s enrichment. Those who took part in the discussion included Malestroit, Bodin, Scaruffi, Davanzati, and in Spain and Portugal, which had felt the gravity of the phenomenon most keenly, where chrysaedonism developed: Lopes de Gómara, Ortiz, De Monchada, Olivarez, Gomez, De Castanares.
Mercantilism began to take on a definite physiognomy at the beginning of the seventeenth century, when the monetary defense of countries was attributed to state intervention with the theory of the balance of contracts regulating international trade, and then with the definitive theory of the balance of trade.
Among the principal mercantilist authors are Antonio Serra, Antoine de Montchrétien, and Thomas Mun. Following them in the seventeenth century were Turbolo, Bocchi, Montanari, Lunetti, Sully (who attempted agrarian protectionism in France), Child, Temple, Davenport, Hörnigk, Schröder, and others. In the seventeenth century, mercantilism found its most important application in England under Cromwell and in France under Colbert, from whom mercantilism also took the name Colbertism. In the eighteenth century, there were still mercantilist theorists, even if often with attitudes much softened by various reservations: Law, Melon, Dutot, Genovesi, and, in the end, even Galiani.
Criticisms of mercantilism began especially in England, where individualism, both philosophically and politically, soon overcame monarchical absolutism, and where the application of mathematics to the study of social phenomena increasingly led to the search for constant laws in politics and economics. Already in the second half of the seventeenth century, the economic observations of John Locke and the quantitative methods applied to the social world by William Petty, John Graunt, and Gregory King foreshadowed the English prematurist movement of the first half of the eighteenth century. Among all the domestic prematurists, the Englishman Richard Cantillon (1697–1734), whose posthumous work *Essai sur la nature du commerce en général* (1755) is of capital importance in the history of economic doctrines, stands out. In France and Italy, the criticisms of mercantilism had a rather contingent significance, although they served as preparation for the advent of physiocracy and are known as agrarian protectionism. The principal exponents are Boisguillebert (1646–1714), Vauban (1633–1707), Bandini (1677–1760), and Pascoli (1674–1744). Prematurists and agrarian protectionists are usually grouped under the single denomination of liberal mercantilists, although they express quite different attitudes of thought and practical implementations. Liberal mercantilism is the complex of those economic theories that, while subordinating the economy to politics and invoking state intervention for a sound economy, defend the existence of natural economic laws and the importance of private initiative. To liberal mercantilism may also be attributed those writers known as syncretists, who, despite affirming physiocratic and naturalistic liberal doctrines, sought to reconcile the postulates of these theories with those of mercantilism. Particular mention should be made for the eighteenth century: Beccaria, Verri, Filangieri, Carli, Ward, and Tucker. In our own day, mercantilism is judged less harshly than the liberal authors of the past century did. Indeed, contemporary neovoluntarism permits acceptance of a moderate active intervention by the state in economic life. Moreover, one cannot deny the importance of mercantilism in the development of modern history and in the evolution of economic doctrines itself.
II. Assessment
### 1. Philosophical Value
In relation to medieval voluntarism, mercantilism certainly represents a regression. For, detached from ethical principles, economics loses entirely its human significance and becomes an instrument of utilitarian competition that is detrimental to true civilization and human prosperity. Politics, likewise independent of ethical principles, regards economics merely as an empirical means for the realization of its power-oriented plans.
A positive aspect of mercantilism may be seen in its having emphasized the social value of economics, elevating it from an absolutely private sphere to that of the public good. Even so, the lack of a philosophical-ethical foundation meant that the growing importance assigned to economics led people to regard material prosperity as the chief end of both social and individual life.
### 2. Economic Value
It is necessary to distinguish the economic value of mercantilist doctrines from the practical results achieved by mercantilism. While mercantilist theories undeniably reveal the superficiality of their observations and the gratuitousness of many important conclusions, they nonetheless represent a great step toward the formation of modern economic science. The immediate practical results were: the establishment and independence of individual national economies; the development of mobile wealth and the economic functions of the state; the expansion of international trade; the birth of major industries; and the formation of an active and competent bourgeoisie. The remote and general effects, however, were very grave, for a state intervention so intelligible yet unsupported by adequate knowledge of economic laws—and indeed guided by partial or fallacious explanations—was bound to lead to the most disastrous economic imbalances.
### 3. Historical Value
It was voluntarism that greatly contributed to nourishing the struggle of the emerging state against residual particularism and to imposing on private initiatives aims that were distant yet useful to the community. It encouraged private initiative and largely succeeded in making it an instrument of a sustained policy of power. It transformed the economies of nations, created the modern physiognomy of French industry, laid the foundations of the Dutch colonial empire, built the maritime power of England, and marked the era of the birth of modern Russia and Prussia.
*A. Fanfani, Storia delle dottrine economiche: il volontarismo, 3rd ed., Milan 1943, pp. 244–245.*