Defining and Defending Mercantilism

THOMAS MUN, England’s Treasure by Foreign Trade (1664)

The overseas trade and colonization policies adopted by early modern European countries were shaped, to a considerable degree, by the economic theory known as mercantilism. Mercantilists saw global wealth as finite and measured its movement from one nation to another exclusively in reference to the balance of trade. Since new wealth could not be created, one nation’s gain was always another nation’s loss. Thus, in the mercantilist view, the goal of government economic policy should be to maximize exports while minimizing imports. This goal had implications that went far beyond trade policy itself. Mercantilist governments attempted to stimulate economic activities at home that would produce goods with ready foreign markets. At the same time, they sought to acquire colonies abroad which would eliminate the need to purchase raw materials from foreign competitors. In the excerpt below, Thomas Mun (1571–1641), an influential English merchant and economic theorist, laid out the basic premise of mercantilism. As you read it, think about the kinds of policies that might follow from Mun’s assumptions.

Although a Kingdom may be enriched by gifts received, or by purchase taken from some other Nations, yet these are things uncertain and of small consideration when they happen. The ordinary means therefore to encrease our wealth and treasure is by Foreign Trade, wherein we must ever observe this rule; to sell more to strangers yearly than we consume of theirs in value. For suppose that when this Kingdom is plentifully served with the Cloth, Lead, Tinn, Iron, Fish and other native commodities, we do yearly export the overplus to foreign Countries to the value of twenty two hundred thousand pounds; by which means we are enabled beyond the Seas to buy and bring in foreign wares for our use and Consumptions, to the value of twenty hundred thousand pounds; By this order duly kept in our trading, we may rest assured that the Kingdom shall be enriched yearly two hundred thousand pounds, which must be brought to us in so much Treasure; because that part of our stock which is not returned to us in wares must necessarily be brought home in treasure.

For in this case it cometh to pass in the stock of a Kingdom, as in the estate of a private man; who is supposed to have one thousand pounds yearly revenue and two thousand pounds of ready money in his Chest. If such a man through excess shall spend one thousand five hundred pounds per annum, all his ready money will be gone in four years; and in the like time his said money will be doubled if he take a Frugal course to spend but five hundred pounds per annum; which rule never faileth likewise in the Commonwealth, but in some cases (of no great moment) which I will hereafter declare, when I shall shew by whom and in what manner this balance of the Kingdoms account ought to be drawn up yearly, or so often as it shall please the State to discover how much we gain or lose by trade with foreign Nations. But first I will say something concerning those ways and means which will encrease our exportations and diminish our importations of wares; which being done, I will then set down some other arguments both affirmative and negative to strengthen that which is here declared, and thereby to shew that all the other means which are commonly supposed to enrich the Kingdom with Treasure are altogether insufficient and mere fallacies.

From Thomas Mun, England’s Treasure by Foreign Trade (Cambridge, U.K.: Economic History Society, 1664), pp. 5-6.