The rise of the modern nation-state, with bullion hungry treasuries would no
longer be able to rely on a medieval style feudal economy to ensure its existence. The
new form of centralized government would come to recognize the growing strength of
merchant capital, and a commercial revolution of sorts would be born.
No longer would Aristotle's ethical philosophies of 'natural exchange' and 'just
price' be the dominate attitudes toward the economy. This new form of economic
thought (Mercantilism) would focus on economics as statecraft and the promotion of
national wealth and power.
This new economic theory required the nation to accept that the economy would
now, out of necessity be 'disembedded' from the society. Clearly the Mercantilist
approach had a definite profit and expansionist basis; in contrast, the insular embedded
approach would be more consistent with a stable, non expansionary somewhat introverted
society or set of policies.
This short essay will examine the ways in which Mercantilist economic theory and
policy were interconnected with wider political issues.
Mercantilist foreign and economic policies shared one common goal, growth
through territorial expansion. From the early voyages of Columbus and Vasco de Gama, to John Cabot and England's subsequent claim to the new world, Mercantilist theory would dictate that through the colonization of new territory, the nation would receive valuable new resources, in addition this would open new trading lanes with captive markets. The end result would be an increase in wealth for the empire. A primary example of this was the Spanish conquest of the Aztec and Inca, which drew enormous wealth into Spain from the influx of Latin American silver and gold.
Mercantilist economic policy would also dictate that through an understanding of The Balance Of Trade Doctrine, states aiming to build a strong and wealthy nation would require a close...