Mercantilism, origin, characteristics and mercantilist doctrine

Mercantilism, origin, characteristics and mercantilist doctrine

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The 18th century is a key century for the evolution of the capitalist system since in it the passage of commercial capitalism (that is, of capitalism in which the main source of high profits is commercial activity, complemented by the first stage of financial expansion) to Industrial Capitalism (originated in the Industrial Revolution, notorious from 1770) and which is accompanied by a new financial expansion since the second half of the 19th century.

This first stage of financial expansion, metal concentration, accumulation of means of payment, which will end up channeling its enormous purchasing power towards industrial investment, is the consequence of a long process that began in the communal revolution of the Middle Ages. Y consolidates in the commercial and financial transformation of the 16th century.

At the same time, the change also occurs at the level of economic policy, since the eighteenth century signifies the passage from the ruling and regulatory capitalism of the previous stage, to the so-called “concurrent” capitalism that is to say, of competition between the new manufacturing productive units in which the State will cease to fulfill a guiding function of the economy until it "intervenes" in it again from the 1880s.

To understand the degree of change produced in the 18th century, it is necessary to know the antecedents, in the commercial stage, which made it possible.

The end of the Middle Ages: the origins of capitalism

Undoubtedly a certain general security achieved in Europe during the thirteenth century, accompanied by considerable population growth and the resumption of more intense relations between East and West after the Crusades, provoked a revival of urban life, based on both the old "episcopal cities" and the "lay towns", as new cities that will be created in the process of commercial expansion, located in places individualized by the new market demands.

During the final centuries of the medieval world, which coincide with what has been called the stage of the "proto-capitalism”, Three facts deserve to be highlighted for their later projection:

The enrichment of merchants.

The new class that awakens and is formed under the protection of the great walls of old and new cities (The bourgeoisie) shows at this stage of its existence an accelerated enrichment process. This must be attributed to different causes, I only quote the facts to which the causes of this accumulation of wealth have been attributed:

- The renaissance of Mediterranean trade, between East and West, which although never disappeared, its volume lacked the dynamic effect that it would acquire from the 13th century (as Henri Pirenne points out)

- Werner Sombart attributes this enrichment to interest loans, to the profit originated in the perception of taxes and other benefits for the Monarchs and the Holy See and in the valorization of certain lands due to the expansion of the cities.

- Other authors have highlighted the enormous profits originated in the loans that the bourgeoisie made to the Monarchs and the cities themselves.

The rebuilding of royal power

In these years, the monarchs managed to rebuild the royal power around their people, confronting the feudal lords, rebuilding the power of the State and leaving their bases raised for the emergence, in the sixteenth century, the "Modern State

The social pact of the monarchs and the bourgeoisie

There is a clear alliance between the monarchs and the new social class of the burgos, in which both parties will seek mutual benefits. The Kings, on the one hand, must obtain new and important resources to finance the new state and the wars against the lords that its construction requires. For its part, the bourgeoisie obtained new and important sources of income, internal order, relative safety on the roads so that they could develop trade.

The expansion of capitalism in the 16th century

During the 16th century, the capitalist system shows an expansive force unknown until then, together with the “artistic revival"And to"religious revival” (Lutheran reform and Counter-reform). This century is already a era of capitalism, but registered within the commercial revolution, the main source of profits will not be in crafts but in international trade.

A series of facts and circumstances explain this expansion of capitalism during the 16th century:

- The discoveries of new routes and unknown territories until then (discovery of the Cape of Good Hope in Africa and discovery of America by Columbus)

- The general price hike of the 16th centuryIn other words, price inflation started in Spain and later spread to the rest of Europe, which made possible a significant increase in profits while constituting a decisive factor in the redistribution of wealth.

- The Renaissance spirit It helped to increase the volume of the business and the possibilities of profit. Indeed, the Renaissance discredits otherworldly concerns and exalts temporal tastes and pleasures.

The Mercantilist Doctrine

To understand the doctrine, we can summarize a general theoretical model with the fundamental principles of application of mercantilism in each country.

These principles are as follows:

Metalism: part of the thesis of the belief that gold and silver constitute wealth, and therefore, the richest country would be the one that managed to accumulate more precious metals. This is a thesis that arises in Europe after the discovery of America, at which time a huge amount of metals were obtained creating a new form of monetary economy and reducing barter.

Populationism: the increase in population of a country is another factor for its growth. The greatest example of this principle was Germany, a country that encouraged immigration while preventing emigration. However, in countries like England, colonization interfered.

Industrialism: the development of the industry was fundamental for the mercantilists, being an activity that the states had to support, both by supporting the Bugueses who created them, and creating them by themselves, or offering subsidies, trade protectionism, facilitating the technification of production or raise quality. France and England are the greatest exponents of this principle, being the main promoters of the Industrial Revolution.

Leadership: As a result of the above, the mercantilists understood that it was necessary to regulate the economy and therefore believed in state intervention (for example, with customs duties on imported products). It did not prevent private initiative, but rather sought to protect the nation and when the collective sense was protected, the industry would grow.

Favorable trade balance: the key was that the State should export a lot and import little, so that the trade balance was always favorable for the country.

National character of the doctrine: the concern of the mercantilists was "to enrich the nation to the Sovereign", and not individual interest, something that would be seen to falter at the end of the 18th century with the arrival of the liberalism.

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