1. Foreign Trade

In the first place the mercantilists laid great empha­sis on a favourable balance of trade. They held that the strength and richness of a country depends on two things-the possession of gold and silver mines and favourable balance of trade.

As all the countries did not possess mines of gold and silver, they could built up rich stocks of these metals by exporting maximum of their manufactured articles and import­ing minimum of commodities from other countries.

Highlighting the im­portance of foreign trade Thomas Mun wrote: “The ordinary means….to increase our wealth and treasure is by Forign Trade….This ought to be encouraged, for upon it hangs the great revenue of the king, the honour of the kingdom, the noble profession of the merchant, the school of our arts, the supply of our poor, the improvement of our lands, the nursery of our mariners, the walls of the kingdom, the means of our treasures, the sinews of our wars and the terror of our enemies.”


For the maintenance of a favourable balance of trade the mercantilists favoured commercial regulation. They insisted on discouraging the im­ports through imposition of heavy duties and prohibitions on foreign goods.

On the other hand, the exports should be encouraged through bounties and other artificial stimulation of domestic agriculture and indus­try. For the promotion of the country’s trade a number of Navigation laws were passed to ensure that the country’s trade remained in the hands of the native shippers.

The mercantilism not only laid emphasis on the regulation of foreign trade but also emphasized the principle of monopoly. In most of the European countries the right to engage in foreign trade was vested only in a small privileged section of the society.

For example, the British govern­ment allowed its subjects to trade freely only with a small area (viz. France, Spain and Portugal) while the rest of the world was divided for trading purposes amongst numerous joint stock companies. Each com­pany was allotted a definite trading sphere.


Thus the East India Company enjoyed monopoly of trade with Asia, Africa Company with Africa and Levant Company with the Mediterranean. Similarly, the European powers also vested the right of trade in various joint stock companies. East India Companies were formed in France, Holland, Sweden and Denmark for carrying on trade with the East.

The mercantilists applied the principle of monopoly with regard to their colonies also. It was asserted that colonies had no right to regulate their economic independently and must try to meet the needs of the mother country through supply of raw materials for her manufacturers.

The other foreigners were excluded from the colonial trade. They were not permitted to carry on trade with the colonies except in some less important articles. Industries were permitted to develop in the colonies only if they did not compete with the mother country. Obviously this policy led to complete neglect of the interests of the colonial people.

2. Importance of Money.


Mercantilism attached great importance of money. It considered the wealth as the source of all powers and laid great emphasis on the importance of gold, silver etc. It also considered money as a significant factor for the commercial advancement. Further as the trade in those days was mostly carried on the basis of barter of goods, the people naturally preferred to keep gold and silver rather than the commodities.

The importance of money also increased because the state needed more taxes for the management of its affairs and it naturally preferred those taxes in money rather than in kind. The enormous amounts required for the conduct of commercial wars with other nations for the retention of colonies also greatly contributed to the importance of money.

Money was also considered essential for abundance of trade. It was commonly held that “where money was scarce, trade was sluggish, where it was abundant, trade boomed.” In short, mercantilism emphasized the importance of money on account of numerous reasons.

3. Interest.


The concept of interest formed an important part of mer­cantilism even though there was no unanimity among the various mercan­tilists regarding its use and importance. For example, Mun justified charg­ing of interest on the money because it could be profitably employed in trade and enabled the borrower to make hugh profits.

However, by and large the mercantilists favoured low rates of interests. They believed that the high rates of interests made the money scarce. Some of the mercan­tilist writers who favoured low rates of interests included Thomas Manley, John Locke, Nicholas Barbon etc.

This stand of mercantilist was quite natural in view of the fact that it was an age of great scarcity of liquid funds, underdeveloped banking facilities and growing antagonism between the mercahnt-manufacturers and the goldsmiths and big merchant finan­ciers.

4. Factors of Production.


The mercantilists considered the land and the labour as the sole factors of production. Petty asserted, “Labour is the father and active principle of wealth, as lands are the mother.” Similarly, Josiah Child held that land and trade went hand in hand.

Most of the mercantilists laid emphasis on the need of increasing production with a view to attain self-sufficiency in foodstuffs as well as encouragement of exports. Emphasis was laid on the cultivation of waste lands to increase . reduction of agriculture.

5. Large Populations.

Mercantilism emphasized the need of possessing large population for increasing production and participation in the war. Highlighting the importance of large popuation Davenant said, “The people are the real strength of the community; dense population made inventions. It also developed industries which brought riches to the na­tion. In view of the importance of the population Samuel Fortrey pleade for freedom of immigration and granting of equal rights to the immi­grants.


He argued the immigrants would bring riches with them and improve the condition of trade and industry in the country. Large popula­tion also made available cheap labour which helped a country to increase its domestic population and successfully compete with the foreign coun­tries. In view of this the state encouraged matrimony and parenthood.

6. Commercial Regulations.

Mercantilists accepted the need of com­mercial regulation for the smooth working of the economy and promotion of social welfare. Almost all the European countries framed regulations with a view to restrict the imports of foreign goods and encourage exports.

Generally the import of raw materials was preferred over import of finished product because it helped the industrial development of the coun­try. Most of the states imposed artificial restraints on internal and exter­nal trade keeping in view the national interests. As the mercantilists believed that a country could obtain an advantage at the expenses of another country only, the commercial regulations were framed keeping in view selfish national interests.

This explains why often the mercantilists did not permit the economic considerations to outweigh the political con­siderations and agreed to subserve the economic life to the political end.