Mercantilism was an economic policy that dominated European economic thinking and practice from the 16th to the late 18th century. It aimed to increase national wealth and power by imposing strict controls over colonies and trade. Key aspects included encouraging exports and discouraging imports, maintaining a positive balance of trade, and accumulating gold and silver. The ideas of mercantilism were influential in Europe during this period and laid the foundations for modern capitalism and ideas of economic nationalism.

1. MERCANTILISM
 The idea that colonies
and trade should be
strictly controlled to
benefit the economy of
the home (European)
nations.
 A nation was only truly
wealthy if it had more
stored gold and silver
than its rivals.

2. Period
 Approximately from the 1600-1800
 The Term “Mercantilism” was invented by
Maquis de Mirabeau (a physiocrat)
 It is a system closely associated with the rise
of nations and the concept of Nationalism
 It was a system common in:
• France
• Spain
• England
• Holland

3. Von Hornick’s Blueprint - 9 points by Phillip
Wilhelm von Hornick (1864)
 1 Every inch of a country’s soil should
be utilized for agriculture, mining, or
manufacturing
 2 All raw materials found in a country
should be used for domestic
manufacturing, since finished goods
have a higher value than raw materials

4. Von Hornick’s blueprint
 3 A large, working population should
be encouraged
 4 All exports of gold and silver should
be prohibited and all domestic money
be kept in circulation
 5 All imports of foreign goods should
be discouraged as much as possible

5. Von Hornick’s blueprint
 6 If certain imports were very important
they should be obtained in exchange for
other domestic goods instead of gold
and silver
 7 As much as possible, imports should
be confined to raw materials that can be
finished at home

6. Von Hornick’s blueprint
 8 Opportunities should be constantly
pursued for selling a country’s surplus
goods to foreigners for gold and silver
 9 No importation should be allowed if
such goods are sufficiently and suitably
supplied at home

7. BALANCE OF TRADE
The measure of goods (not
services) one country buys
and sells with other
countries

8. Bullionism
Belief that economic
health of a nation is
measured by the
amount of precious
metals (gold and
silver) it posses

9. Colonies
Are important because:
• provide raw materials
• provide workers
• are forbidden from
purchasing
manufactured goods
unless they come from
the “mother” country

10. The Seas
Need to be
protected since
they are the route
to commerce
between the
colonies and
home countries

11. Labor and “The Utility of
Poverty”
 Basic Premise:
• suffering is helpful
• Given the opportunity, the poor
would be lazy and unproductive
 Bernard Mandeville argued
that poor children should not
be allowed to go to school
since that would make them
less useful for the jobs that are
given to them

12. Population
 Discourage Young
people from entering
the clergy
 Gave TAX breaks to
families with over 10
children

13. Physiocrats
 Group of individuals who called themselves
economists. They introduced the name
“Economist” as a profession.
 However, as the profession of “economics”
evolved they were recognized as a school of
thought and they were renamed the
Physiocrats.
 They believed Natural Laws governed the
economy.

14. Physiocrats
 Among the great contributions of the
Physiocrats was that they introduced
the importance of building theories
based on models where analysis was
done by isolating one or more variables
in the economy.
 Their economy was based on
agriculture.

15. Physiocratic Policy
 They believed capital accumulation
was essential for economic growth.
 They also wanted the government to be
strong.
 Consequently, they looked at those
things which could do both and focused
on
• Taxation
• Trade

16. Physiocratic Policy
 At the time a large burden of the tax was on
farmers
 They argued that for capital accumulation to
occur it should be the people who benefitted
from capital accumulation who should pay the
tax not the producers of it.
 They called for large tax increases on
landowners and lowering tax on farmers.

17. Physiocratic Policy
 They were not against Landowners, they
argued that the increase in economic growth
would increase Landowners wealth beyond
the burden of the tax.
 They saw the trade restrictions of the
Mercantilists as imposing a large burden on
the economic growth so they argued for free
trade.

18. Impact of the Physiocrats
 The Physiocrats influenced Adam Smith and
other economists.
 It could be argued that the Physiocrats
established early ideas that led to Capitalism.