Mercantilism and the Struggle for Bullion

From the sixteenth to the eighteenth century, European states largely followed mercantilism, the belief that national power depended on accumulating gold and silver through trade surpluses. Governments encouraged exports, restricted imports, granted monopolies to trading companies and used colonies as sources of raw materials and captive markets. England's Navigation Acts required many colonial goods to travel on English ships, while France's finance minister Jean-Baptiste Colbert built state-supported industries and high tariffs.

Mercantilism linked trade closely to war, since one nation's surplus was seen as another's loss. In 1752 David Hume argued that a trade surplus would bring in gold, raise prices and make exports less competitive, so hoarding was self-defeating; Smith later attacked the system directly. Some historians stress that mercantilist policies did help build manufacturing and naval power, and modern debates about trade surpluses and national champions sometimes echo the old doctrine.