Mercantilism is a type of economic system based on international trade. Merchants export goods to other nations and import goods to their own nation in hope of making a profit. Because many businesses in a modern capitalist economy do the exact same thing, mercantilism can be interpreted as an early form of capitalism.
The most obvious similarity between mercantilism and capitalism is the profit motive. According to "Encyclopedia of Modern Political Thought" by Gregory Claeys, mercantilism began in the 1500s and continued until the beginning of the Industrial Revolution. Merchants in seafaring countries such as Britain, Spain and Holland sent ships all over the world to sell their goods, returning later with imported goods for the domestic market. Claeys defines capitalism as an economic system in which people invest money to earn a profit. The merchants who controlled international trade in the mercantilist era invested their money in trading voyages with the goal of profiting, so they could be considered early capitalists.
According to "Economy and Society" by R. R. Suresh, people in pre-capitalist societies produce goods for their use value. For instance, a shoemaker might trade a pair of shoes for a bag of flour. In a capitalist economy, people produce goods for their exchange value. In a capitalist system a shoe store would generally sell shoes for cash, which has no inherent value but can be exchanged for other goods and services. During the mercantile era, merchants typically sold goods for gold and silver bullion which could then be used to buy other goods. According to Suresh, this practice was similar to capitalism because merchants treated gold and silver as a medium of exchange, much as merchants use cash today.
Under the mercantile system, powerful companies such as the British East India Company, the Hudson's Bay Company and the Royal African Company dominated international trade and world politics. Wars in the mercantile era were often fought over the rivalries between merchant interests. In the modern capitalist economy, large corporations do business in many different countries at once and their political influence transcends national borders. Like the large corporations of the mercantile era, modern multinational corporations are often in a position to influence the laws and policies of the nations where they do business.
Under the mercantile system, international diplomacy was used as a tool for opening markets to trade. Governments of that era routinely imposed large tariffs on imports from other nations. For example, French merchants hoping to trade with England in the 1600s had to pay tariffs as high as 50 percent. Diplomats sought to find ways around these barriers to trade. For instance, the Methuen Treaty of 1703 gave Portuguese merchants the right to export wine to England so that English merchants could export textiles to Portugal. Modern capitalism also depends on international diplomacy. For instance, the North American Free Trade Agreement of 1994 eliminated trade barriers between the United States, Canada and Mexico.
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