Mercantilism and Its Influences on European

Colonization
There were three main components to the motivations of European
Colonialism across the globe throughout the centuries which were greed,
power and influence. The greed represents colonialists belief in a
mercantilist economic system where a nations wealth originates from the
constant gain of goods from other powers to benefit ones own nation. The
more goods gained from other nations, the more wealthy ones nation was.
The second component was power; global domination was the goal for many
European powers and to become the global dominator first before anyone
else could take the advantage was of the utmost importance. The last
component for the push of colonialism was the push for influence, mainly the
catholic churches influence in order to bring more people under the
cornucopia of salvation that the catholic people flourished in. These three
components influenced European colonialism throughout the world, but as
the old saying goes Follow the money which is what I believe was the main
motivator for global colonialism.
Mercantilism had its peak during the earlier periods of colonialism,
which was mainly between 1500-1800. This first wave of colonization
mainly colonized to gain from these colonial efforts economically rather than
during the imperialistic colonization that would occur later. Much of the
mercantilist era colonialism can be seen by Spains, Portugals and
Denmarks efforts of colonialism as the main examples for mercantilist
colonization. After this period of mercantilist colonialism came a different
wave of colonialism called imperialistic colonialism (Strayer 802). The
imperialistic colonialism was mainly influenced by a strong sense of
nationalism and had the goal of inhibiting the diplomatic influence and power
of other nations by colonizing particular regions before other nations could
do so. The main difference between imperialistic colonization and
mercantilist colonization was that the main goal of mercantilist colonization
was to gain an economical advantage over other nations whereas
imperialistic colonization sought to gain a strategical or political advantage
as the main goal of colonization and the economic advantage was just a
bonus from colonizing. However, just because imperialistic colonization
overcame mercantilist colonization does not mean it hasnt had any lasting
influences on the world that we know today.
In order to understand the influences of mercantilism one must first
understand the origins and meanings of what mercantilism represents.
Mercantilism was first founded by Thomas Mun. it served the purpose of

presenting a scientific defence for state regulation and protectionism.

(Mercantilism xi 1). Mercantilisms main philosophies were founded on
political philosophies rather than a scientific understanding of how economic
systems work. Mercantilism was not necessarily an economic system such as
capitalism or socialism, rather it was more of a combination of political and
economic philosophy in order to justify actions from the state that might
have seemed unethical. As quoted by Eli F. Heckscher, mercantilism held
that the state was both the subject and the object of mercantilist economic
policy. (Mercantilism 21 2). Mercantilism can also be defined in another
set of terms as It [mercantilism] wanted to make use of them [economic
forces] not directly in the interests of the subject, but to strengthen the state
authority itself; it concentrated on the power of the state (Mercantilism 24
2). The main goal of mercantilist policy was to better the well-being of the
state, rather than the betterment of the society, the world or the individual.
It held that the state (the governing body that held mercantilist beliefs) was
of the utmost importance above all else. However, mercantilism played a
key role in the unification of European feudal societies during the middleages by justifying the interference of European states within European
economies as a necessity rather than a choice, it forced the people of Europe
to unify themselves underneath many of the European states that we know
today.
As was previously stated the main examples of mercantilist
colonization in practice was the colonization done by Spain, Portugal, and
Denmark in between 1500-1700 (Strayer 670). The main goal for all three of
these nations was to access the trade networks of Asia in order to get around
the Islamic middlemen that was between them and the Asian markets.
Leading the way in this effort were the Portuguese, where they painstakingly
mapped out the sea route around the horn of Africa, along the coast lines of
India and finally to Asia. However, at the same time as the Portuguese were
mapping out the western sea route towards Asia, the Spanish took a huge
risk by sailing east instead of west in order to find a route to Asia that way
instead of trying to beat Portugal from going around Africa to Asia. What
Spain found instead was an entirely different continent where they
conquered both the Aztecs and Incan peoples that gave them a largely
urbanized, concentrated, and wealthy population of people. With this
newfound colony of people, they established a system of encomienda which
took advantage of the native peoples by allowing settlers a certain amount
of natives which they would require the natives to give the settler (in return
for protection and instruction of the Christian faith) gold, labor or produce
from agriculture.
The leading group of people within this mercantilist colonization
movement around the world were the Portuguese (Strayer 673). They were
the first to sail around the horn of Africa and reach the Asian trade market

without having to go through any of the Arabian middlemen. What the

Portuguese quickly realized though was that the people within these Asian
trade markets had no demand for any of the European goods that the
Portuguese people had brought with them. What Portugal did in order to
counteract this was they established a trading post empire where they
aimed to control all the commerce and trade within the Indian Ocean. This is
textbook mercantilist colonialism as the Portuguese are trying to advance
their economic power forcefully by destroying ships that did not adhere to
their controlling tax policies within the Indian Ocean. By ignoring the
suffrage of the peoples within the Indian Ocean and focusing on
undermining the economies of those people for the gain of Portugals
economy instead. Unfortunately for Portugal, they just didnt have enough
people to efficiently control the commerce like they wanted to and when the
English and Dutch companies showed up, they took control from the
Portuguese with ease.
Probably the greatest example of mercantilist colonization done by the
Spanish was the Spanish colonization of the city called Potosi which was
located in the country that we call Bolivia today (Strayer 680). This city was
the epicenter of silver mining for the Spanish Empire and was a perfect
example of mercantilist colonization. The Spanish took advantage of the
native peoples and worked many of them to death within the mines.
Mercantilism can clearly be seen here as the major influence because the
teachings of mercantilism justify actions that are unethical, such as forcing
people to work to death. As long as Spain benefitted from this venture, by
the laws of mercantilist economic policy the sacrifice that these peoples
make are justified as it furthers the economic power of Spain. Mercantilism
puts the state above any individual group so the actions of Spain here in
order to gain more economic power are seen as perfectly viable actions as it
takes advantage of a group of people in order to grow the economic power of
Spain itself.
Another group of people that the Spanish took advantage of were the
people of the Philippines (Strayer 675). The Spanish colonized the
Philippines for four main reasons, they were close to the Asian trade markets,
had no centralized government, were militarily weak and they could produce
spices. With this new colonization they were the first to challenge the
Portuguese within the Asian markets who held a monopoly on the spice trade
between Asia and Europe. Much of the colonization of the Philippines was
done peacefully, however we can still see the mercantilist influences within
the colonization of the Philippines. This is the same old story as any other
mercantilist colonization where the colonizers forced the native population to
work for the gain of the Spanish empire at the expense of the natives
themselves.

The glorious network that Spain had set up around the world can be
simply explained by the desire for silver during this era (Strayer 680). China
had recently set up its tax system so that it only accepted silver currency for
taxes from its people. Since this increased the demand for silver, it opened
more trade with Chinese merchants and the rest of the world which was at
the time powered by the need to gain more silver so that they could pay
their taxes. One can see the great benefits of Spains global network from
Potosi in South America with the bountiful silver mines, and the Philippines
which they could use to leap-frog from South America to China fairly quickly
and easily.
Many of the societies that conducted a mercantilist colonization can be
explained within a simple formula that set up the process for these
mercantilist colonization efforts. The first step in figuring out if a civilization
can be colonized with a mercantilist goal is to explore whether the population
could have been taken advantage of or not. Once again the belief of a
mercantilist economic system states that the nation is the ultimate source of
economic prosperity and if the state could have taken advantage of a weaker
nation in order to grow the economic prosperity of the motherland, then it
would have been in the best interest of the state to do so. The second step
in determining whether a mercantilist colony should have been set up in a
certain area is if it was economically beneficial for the nation to set up a
colony there. For example if you set up a colony in a desert the people
would most likely be weaker than other nations simply due to a lack of
resources, but the colony in the desert would not bring any economic
benefits to the mercantilist nation because of the same reason that makes
those people weak also makes them not profitable to colonize which is
because the area has a lack of resources.
The development of mercantilist colonies can also be categorized into
two separate categories such as a harvesting colony and a more integrated
one based on the mortality rates of the colonies within these areas (Olsson
13). An integrated colony is a colony that is seen as a part of the nation
rather than just a colony that is taken advantage of by the more powerful
nation. A harvest colony would be seen as a colony that is not a part of the
nation that it is being colonized by and is only being colonized for the benefit
of the colonizing nation. Examples of harvest colonies would be colonies that
were set up in tropical African, Indian, Asian, and South American terrains
where the mortality rates for colonists from England or Spain was much
higher than it was in Australia, New Zealand or the United States which can
be seen as more integrated colonies. The key link between these two types
of mercantilist colonization techniques though was the mortality rates of the
colonizers. This cannot be better stated than by Ola Olsson who states,
Where the disease environment was favorable to Western colonists, they
created durable settlements and installed strong institutions of private

property (for instance in United States and Australia), whereas where settler
mortality was high they developed extractive institutions designed to create
the greatest flow of rents with the least possible physical presence of
colonists. (Olsson 13).
During the seventeenth century the European continent was going
through a period of contraction also known among historians as a Phase B
part of history. Historically, periods of when there are economic booms and
highs are collectively known as Phase A secular trends and economic
depressions, recessions or downs are known as trends of Phase B
(Wallerstein 3). It is generalized among many historians that there was a
period of growth during the sixteenth century and a period of contraction
during the seventeenth century, but how this change occurred is still
debated. Much of this is still debated and there are three main theories of
what and when caused these different phases to separate from each other
1800, with an emphasis on industrialism as the crucial change; 1650 with
an emphasis either on the moment when the first capitalist states (Britain
and the Netherlands) emerge or on the emergence of the presumably key
modern ideas of Descartes, Leibnitz, Spinoza, Newton, and Locke; and 1500
with an emphasis on the creation of the capitalist world-system, as distinct
from other forms of economies. (Wallerstein 7). However it is also argued
that in perspective, the period of 1500-1650 was a period of economic
increases and the Phase B period was more of a plateau rather than a
period of decline as many would suggest rather than a time of crisis and was
more of a period of stagnation than anything else (Wallerstein 18).
The mercantilist period, markedly between the years 1600-1750
mainly emphasizes two points, one is of economic nationalism and the other
is of the circulation of the commodities. The strategy of a mercantilist
perspective on economic systems can be seen as a function of productive
efficiency and that the middle-run objective of all mercantilist state policies
was the increase of overall efficiency in the sphere of production.
(Wallerstein 38). This sense of mercantilism can definitively start with the
United Provinces (a location also known as Holland) which for a short period
became the commercial hegemony of the world. Hegemony is when a state
has achieved such efficient superiority that every other nations attempt at
any type of production is thwarted by the immense efficiency of the state
that is in control of the hegemony. A hegemony has only ever been achieved
by Holland, England and the United States and every period of hegemony
only lasted for brief periods of time (Wallerstein 39). The three parts to
achieving hegemony are productive, commercial, and financial superiority
over every other known state on the planet. This is what the Dutch had, they
had a hegemony over the world and were capable of using it to their
advantage, such as in the case of the East Indies (Wallerstein 39). The
Dutch established a trading company, with the acronym of VOC (which

stands for Vereenigde Oost-Indische Compagnie) to become the leaders

within the world spice trade and to get around the Spanish controlled trade
(Wallerstein 47). It was proposed that there were two things necessary in
order to begin the process of incorporating or starting the peripheralization
of the East-Indies into the capitalist-world. The first step would be to
establish political control in order to constrain relatively strong Asian
potentates and reorganize the system of production (Wallerstein 47). The
second step would be to export a white settler class, both to help with
supervising the cash crop production and to provide a secure initial market
for European exports other than bullion. (Wallerstein 48). Much of the
Dutch exploitation of the East-Indies can be explained in these specific terms
of what made most sense to capitalist entrepreneurs in the short-run
(Wallerstein 48). For the Dutch could not have perceived the difficulties in
maintaining control over the trade from such a faraway distance, nor could
they have known the difficulties in maintaining a monopoly within the spice
trade for the VOC. Just like every other mercantilist nation, they were
blinded by their short-sightedness in seeking monetary gain.
Something that ought to be noted about mercantilist colonization is the
fact that many of these colonial efforts were driven strictly for the monetary
gain of the state, but much of the action of the colonizers with mercantilist
goals were being superseded by the goals of individuals. Whereas the state
would send colonizers to benefit the state and the nations economic
superiority but the colonizers as individuals were driven purely by selfish
goals of becoming wealthy most of the time. I think that with this conflict of
interests between the states control and the individuals probably created
some of the immoral actions that we see today as immoral during the era of
mercantilist colonization. For example if a state truly wanted to monetarily
gain from a colony, it would set one up that they could have permanent
domain over, one that could be incorporated into their own country, for if
they didnt that would imply they would eventually leave the colony. Due to
the individualist goal of achieving power and wealth from these colonial
extensions conducted by these empires we can see the short-term benefit of
abusing labor and the taking advantage of indigenous or native peoples.
However taking this from the long-term perspective of a nation looking to
gain monetarily, it makes utterly no sense as to why the state would permit
these actions. By abusing the natives and indigenous peoples the state is
alienating potentially generations of possible citizens in its empire and
creating a culture of distrust for interactions between those people and the
colonial empire. By stating that these actions benefitted the state would be
a lie, because in perspective it may benefit for a very short period of time,
but in the long term it is just infeasible to maintain. Which brings me to
conclude that the mercantilist reasoning for colonizing these areas was less
about state power and wealth and more about the selfish interest of

individuals to justify their immoral and wrong actions to gain power and
wealth in the world. By being able to justify the actions of abuse and neglect
as things that were for the greater good of the state they could justify the
means of their actions in order to get to the end of a wealthy and powerful
existence for themselves as individuals, whether that benefitted society was
not even considered within these interpretations of economic interpretations.
The Mercantilist period is known as a period of transition as well as a
time of abuse and neglect for people around the globe. It was a time of ups
and downs and changing economic currents for the world as new discoveries
and connections were made between different peoples of the globe.
Although much of the world suffered from mercantilist colonization, the
Europeans benefitted greatly from the mercantilist ideologies as it
consolidated and brought their broken continent together again under
centralized nations searching for one thing and one thing only; wealth.
Although the short-sightedness of our predecessors may have caused a
generational rift between different peoples, we as humans can learn from
these mistakes and hopefully create more long lasting prosperities rather
than short term ones that lead to the abuse and neglect of other individuals.
Mercantilism was an era of neglect driven by the cause of a greater good,
hopefully future generations can learn from this neglect and steer
themselves away from making the same mistakes before its too late for
themselves and their society.

Sources:
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Colonial Origins of Comparative Development: An Empirical Investigation.
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Magnusson, Lars. Introduction. Mercantilism. By Eli F. Heckscher. New York:
Routledge, 1994. Xi-25. Web.
Olsson, Ola. On the Institutional Legacy of Mercantilist and Imperialist
Colonialism Working Papers in Economics. 207 (2007). n. pag. Web. 22 Oct.
2015.
Wallerstein, Immanuel Maurice. Mercantilism And The Consolidation Of The
European World-Economy, 1600-1750. Berkeley: University of California
Press, 2011. eBook Academic Collection (EBSCOhost). Web. 27 Oct. 2015.
Strayer, Robert W. Ways of the World; Second Edition; A Brief Global History
with Sources. New York: Bedford/St. Martins. Print.