MERCANTILISM

Feudalism had laid some of the foundations necessary for the development of
Mercantilism, our next economic model. A precursor to Capitalism, Mercantilism
is basically trade for profit, but where the government institutes controls to assure
the prosperity and security of the state. Mercantilism began principally as trade
between towns, but it was non-competitive trade since the towns trading with each
other had different goods or services to offer. Then over time, as demand
increased within the respective towns for the same goods and services, the products
and services became homogenized between those towns, thus trade had to spread.
First, county to county, then province to province, and eventually between nations.
What happens when nations become competitive with each other for trade? Often,
it stokes feelings of nationalism and sparks wars.

Among the measures governments took to protect the State, and promote
prosperity within, were: High tariffs to discourage imports; banning gold and
silver exports; limiting wages to keep profits high; forbidding trade with foreign
ships and colonies; and subsidizing home production of manufactured goods. The
State also took the place of local guilds as regulators of the economy. Before the
State usurped that function, there had been a collection of merchants from different
towns, such as the Hanseatic League in Germany, which pooled resources and
instituted regulations for conducting and protecting business. And finally, a vitally
important governmental measure instituted to protect and promote the State, was
the granting of monopolies to merchants that engaged in oceanic voyages-- leading
to colonization.