1. Mercantilism

2. Mercantilism is the economic doctrine that advocates for government control of foreign trade. Mercantilists believed that government control was critical for ensuring the prosperity and military security of the state. In particular, it demands a positive balance of trade. Popular from the 16th – 18th centuries.

3. Assumptions of the theory
Wealth is finite
Wealth is extractable only from land
Positive balance of trade is “good” for a country. Trade must be a monopoly
Assumes that the accumulation of specie
(Gold an Silver) will not produce inflation
Assumes a permanent shortage of labor in the Americas

4. Early Mercantile theorists
Jean Baptiste Colbert

5. Why Mercantilism declined as a reliable economic doctrine
Adam Smith: The Wealth of Nations (1776)
Investment and wealth: Wealth as being infinite
19th century idea of free trade and comparative advantage

7. Salutary Neglect
Mercantile polices not enforced in North America