Mercantilist economic theory and policy, interconnected with wider political issues.

Essay by nailhead_sledUniversity, Bachelor'sA-, July 2003

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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...