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Day 23 – Q 2.What is mercantilism? Discuss. How did mercantilism give rise to colonialism in 19th century Europe? Explain.

2. What is mercantilism? Discuss. How did mercantilism give rise to colonialism in 19th century Europe? Explain. 

व्यापारीवाद क्या है? चर्चा करें। 19 वीं शताब्दी के यूरोप में व्यापारीवाद ने किस तरह से उपनिवेशवाद को जन्म दिया? विस्तार में बताएं।


The term ‘mercantilism’ was coined by Adam Smith in 1776. The concept of mercantilism has been called the ideology of the monopoly trading companies by the Marxists. Maurice Dobb describes it as system of state regulated exploitation through trade or the economic policy of an age of primitive accumulation. The term mercantilism usually applied to the policies and measures which the European states adopted between the 15th & 18th century to acquire wealth and power.



  • First popularized in Europe during the 1500s, mercantilism was based on the idea that a nation’s wealth and power were best served by increasing exports, in an effort to collect precious metals like gold and silver.
  • The mercantilists adopted policies of economic nationalism in many European states. These policies were not new; they had their roots in the scattered acts and beliefs of feudal and municipal authorities of the medieval period. With the expansion of trade and the declining revenues of the feudal states, with the emergence of centralized monarchies and more luxurious courts, the emerging states realized the value of trade that brought wealth and greater revenue for the state. It was believed that the wealth of the subjects was the wealth of the kings. This led to active government intervention in economic and political matters and became the central feature of all mercantilist ideas. However the mercantilist policies and practices could only be adopted in states that had strong governments and a reasonably well developed trade and commerce. It was aimed at strengthening the centralized state structure by weakening and regulating the semi-independent local authorities.

Mercantilism gives rise to colonialism in 19th century Europe

  • Under mercantilism, nations frequently engaged their military might to ensure local markets and supply sources were protected, to support the idea that a nation’s economic health heavily relied on its supply of capital. Mercantilists also believed that a nation’s economic health could be assessed by its levels of ownership of precious metals, like gold or silver, which tended to rise with increased new home construction, increased agricultural output, and a strong merchant fleet to provide additional markets with goods and raw materials.
  • Under mercantilism, the colonies were supposed to send to the mother country raw natural resources. Colonies were not supposed to manufacture any goods; the raw natural resources were supposed to be processed into manufactured goods only in the mother countries.
  • English methods of colonization: England introduced fiscal policies that discouraged colonists from buying foreign products, while creating incentives to only buy British goods. For example, the Sugar Act of 1764 raised duties on foreign refined sugar and molasses imported by the colonies, in an effort to give British sugar growers in the West Indies a monopoly on the colonial market. The British wanted a monopoly of trade with India so that there would be no other English or European merchants or trade companies to compete with. The Company wanted to sell its goods at high prices and buy Indian products at low rate to make maximum profits. After 1800, India began to absorb textiles from English mills. In 1813, the Charter ended the Company’s monopoly of Indian trade. It opened East Indian trade to private enterprise. With the termination of the Napoleonic Wars in 1814-15, enormous increase of import of British machine made cloths began to India. During 1800-1850, the colonial objective changed from seizing Indian commodities to seizing the Indian market. The changed objective no only made the East India Company’s monopoly over Indian internal commerce and overseas trade obsolete, but positively required free trade.
  • Spain’s methods of colonization: From the late 15th century to the early 19th, Spain controlled a huge overseas territory in the New World, the Asian archipelago of the Philippines, and territories in Europe, Africa and Oceania.  Spain attempted to expand the possibilities for trade within the empire, by allowing commerce between all ports in the empire, and took other measures to revive economic activity to the benefit of Spain. Spain had an economy shorn of manufactures, a crown deprived of revenue taxing colonists, tightening control, and fighting off foreigners.  In the process, Spain gained revenue. The Napoleonic invasion of the Iberian Peninsula precipitated the Spanish American wars of independence (1808–1826), resulting in the loss of its most valuable colonies. In its former colonies in the Americas, Spanish is the dominant language and Catholicism the main religion, enduring cultural legacies of the Spanish Empire.
  • France’s methods of colonization: 19th Century France controlled its colonies in Morocco, Algeria, Tunisia, Ivory Coast, Porto-Novo, French Guinea Mauritania etc.  French firms were authorised to ship to the colonies without further restrictions. The trade was thus “free” to all French subjects residing in a long list of ports, but protected from foreign competition. With the addition of a few naturalized foreigners, all French-born individuals were considered French subjects. This policy restricting colonial trade and shipping to French subjects is traditionally considered as laying the foundation of French 19th century colonial trade growth.


Mercantilism paves the way for fight between countries in 19th century Europe. Two world wars fought for capturing markets in colonies.  After the end of World War II economic nationalism remained the prevalent tendency of most countries of the world, and most colonies got Independence after end of the war.

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