Definition
Mercantilism was the dominant economic theory of European states from roughly the 16th to the 18th century. It held that the world's wealth was a fixed pie, measured in gold and silver, and that a nation grew rich only by capturing a larger share of it.
The practical goal was a favorable balance of trade: exporting more than a country imported, so that precious metals flowed in rather than out. Governments shaped trade, industry, and empire to serve this aim.
Why it matters
How it works
Under mercantilism, the state managed the economy as an instrument of national strength. It granted monopolies to favored companies, taxed foreign goods, and built fleets to protect trade. Colonies were forbidden to manufacture goods that competed with the home country or to trade freely with rival powers.
The logic followed from the fixed-pie assumption: if bullion was finite, then accumulating it required taking trade from competitors. This made commerce a form of warfare by other means and helped justify the scramble for colonies.