Why Is Mercantilism Important?

The value of mercantilism in Western Europe from the 16th through 18th centuries includes advancing a monetary system based on gold and silver currency and engaging in trade with nations further away. The rise of mercantilism in Europe marked a shift from an agricultural economy, to an economy based on trade and production of consumer goods. Nations engaging in mercantilism sought reduction of imports and instead promoted production of goods and services internally, stimulating national economies.

The mercantile system, according to the Library of Economics and Liberty, promotes the growth of national wealth through expanding exports. Increasing goods and services produced within national borders necessitates more jobs, which in turn stimulates employment in the local economy. In the 16th century, Western European nations justified a mercantile system based on several reasons. The rise of competitive nation states on the European continent and acquisition of new lands and territories necessitated aggressive economic actions.

Governments from the 16th through 18th centuries encouraged growth of industry and business primarily through financial incentives. Economic growth among Western European nations also led to a rise in power, necessitating strong militaries. Governments encouraged production of military supplies and weapons by reducing or eliminating taxes for companies producing those items. They also protected businesses from foreign competition, in turn strengthening their national economies.