Mercantilism

Mercantilism, an economic theory promoting government regulation of a nation's economy, was designed to increase state power and wealth at the expense of rival nations. German historians first used the word mercantilism in the 1800s, but many of its goals date back to the early Renaissance.

Between the 1500s and the 1700s, many European states wanted to expand business at home, increase foreign trade, and export more goods than they imported. For this reason, they established new colonies around the world. They also developed, supported, and protected their own industries.

The Renaissance marked the first stage in the gradual use of mercantilist policies. Three factors influenced the growth of mercantilism: economic problems, increased trade competition, and military ambition. Officials in major cities established policies that would bring in cheap food supplies and raw materials. They also set up regional market monopolies* to favor their own merchants and craftsworkers.

Countries often used mercantilism to control and to protect their industries. England, for example, wanted to protect the sale of woolens, its main industry. As a result, in the 1400s, England barred all foreign wool and silk from entering the country. During the late 1500s, England used money and market restrictions to attract foreign artisans* to start new businesses.

In France, King Louis XI offered financial aid to his country's mining efforts and production of cheap woolen goods for export. He also supported silk manufacturing in France by stopping luxury imports from foreign countries. In the 1500s, the Holy Roman Emperor* Charles V tried to aid Spain's production of goods by forbidding the export of raw materials.

Because many political leaders in the Renaissance also wanted to safeguard their gold and silver reserves, they stockpiled precious metals. Some even tried to stop the export of any gold or silver.

The effects of mercantilism in the Renaissance were limited. Few governments had the money to finance new industries, and those industries that depended on government funding often failed. Still, many of these attempts pointed toward future efforts by governments to increase national wealth and power.

(See alsoEconomy and Trade; Taxation and Public Finance. )

see color plate 2, vol. 2

* monopoly

exclusive right to engage in a particular type of business

* artisan

skilled worker or craftsperson

* Holy Roman Emperor

ruler of the Holy Roman Empire, a political body in central Europe composed of several states that existed until 1806