The growth of Mercantilism was the result of combination of factors cultural, religious, political and economic-and it shall be desirable to examine these causes in some details.
In the beginning of the sixteenth century Europe witnessed great religious and intellectual awakening due to Reformation and Protestantism.
These two movements associated with the names of Erasmus and Martin Luther respectively which gave a great fillip to the ideas of individualism and personal freedom and went a long way in developing the concepts of property and contract rights which in turn led to the growth of commerce and free exchange.
Before the emergence of these movements, the Pope enjoyed a predominant position in religion and could also interfere in the worldly matters. With the rise of Protestantism the monetary aspect of life was emphasized and a bid was made to confine the authority of the Pope to the religious matters alone and prevent his interference in the economic and political matters.
Even the international position of the church was challenged by setting up national churches. For example, in England Henry VIII seized the church property and established the Church of England and himself became its spiritual head.
Renaissance played even more significant role and highlighted the element of humanism. It challenged the medieval theologian concept that happiness in heaven should be preferred over worldly happiness, and asserted that happiness on this earth was to be preferred over the promised pleasures of the other world.
In other words, it emphasized the materialistic basics of the human happiness. Once the principles of humanism and individualism were accepted, a large number of writers, artists, philosophers emphasized the economic basis of the society in their works and shook the foundations of the edifice of Church Theology.
In the economic sphere the decline of feudalism greatly contributed to the growth of mercantilism. The feudal system was characterized by economic self-sufficiency, agricultural production and absence of exchange economy. The agriculturists were required to work free of charge on the fields of the lords for a stipulated period.
They were also required to work as soldiers for the lords in times of war. As there were no organized industries and even commercial crops were not in much demand, these agriculturists worked for local self-sufficiency in food grains. In the absence of organized markets the manufacture was undertaken chiefly to meet the local requirements.
This resulted in the growth of an independent domestic economy based on local self-sufficiency. Above all, there was no effective state organization. In the cities and towns the guilds and municipalities tried to regulate the trade between different localities.
However, with the expansion of commerce divergent individual trading interests came to the fore. Almost all of them looked for a strong central authority to protect them against their rivals. In the absence of a national government this was not possible and the relationship was decidedly a weak link.
The growth of commerce and development of domestic economy gave rise to the problem of labour and distribution. But probably the most important factor which stimulated the development of mercantilism was the emergence of the exchange economy.
This led to development of international trade, which in turn encouraged large scale production. For a fuller utilization of the available economic resources it was felt that the economic life should be regulated. The urge for new marks led to the discovery of new islands and countries and the development of colonialism.
In short, we can say that mercantilism was stimulated by factors like decline of feudalism, lack of state organization, rise of free labour classes, competition and development of exchange economy.
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