The term ‘mercantilism’ was first of all used by Adam Smith in his treaties The Wealth of Nations, while criticism the prevailing commercial system of Europe, under which the European states imposed artificial restraints on both internal and external trade. At the outset it may be pointed out that it would be wrong to describe mercantilism as a system because there never existed any group of writers who scientifically developed the doctrines of mercantilism.
On the other hand, it is merely a collection of economic maxims of strict practical utility. It may be futher noted that mercantilism is also known by other means like Colbertism, commercial system, and restrictive system, although by and large writers have preferred the use of term mercantilism.
Mercantilism prevailed in a number of European countries like France, England, Italy, Spain, Scotland, Russia etc. and assumed different characters according to the circumstances and variations of the local conditions in these countries. However, the basic principles of mercantilism were identical in all these countries.
The mercantilists held that commerce was a species of warfare in which the advantage of one country could only be obtained at the expense of another. They conceive the commercial regulations in narrow nationalist terms and favoured state intervention for the promotion of national interests. Though the mercantilists attached great importance to the economic considerations, they never allowed these interests to out-weigh the political interests of the state.
The economic regulations were pleaded merely with a view to promote the political interests. Before we examine the basic principles of mercantilism, it shall be desirable to have an idea about its age and the causes which led to its development.