Mercantilism, a term coined by Adam Smith, played a very important role in the evolution of Commercial Capitalism.
Maurice Dobb refers to it as ‘a system of state regulated exploitation through trade essentially the economic policy of an age of primitive accumulation.’
In short, mercantilism can be said to be a state controlled economic policy which aimed at regulating the trade and commerce of the nation, as well as its factories and manufactures with the primary purpose of ultimately to concentrate and wield political power by building fleets, equipping army etc.
Although mercantilism varied from country to country, it had certain common characteristic features like bullionism, paternalism, imperialism, economic nationalism etc. Bullionism, which meant that the prosperity of a nation was determined by the quantity of precious metals within its borders, became an essential element of mercantilism ever since precious metals had started flowing in from America to the old world.
Generally speaking, the period between 16th and 18th centuries is designated as the period of mercantilism, as great economic growth, an increase in the use of money, a sharp rise in the volume of distance trade, acquisition of more and more colonies etc. reached its zenith during this period.
Mercantilism is closely interlinked with Commercial Capitalism as growth of the latter attracted the attention of the state and although the activities of the merchants were sometimes obstructed and hampered by the policy of mercantilism and therefore the merchants were forced to oppose mercantilist policies on those occasions.
On the whole the merchants were positively benefited by the state policies like creating markets by acquiring colonies and thereby expanding exports by building fleets, by providing protection against foreign goods by raising the tariff, by maintaining banks, by giving subsidies etc.
Jean Baptiste Colbert, the French chief minister under Louis XIV, for example, gave a tremendous boost to commercial capitalism by adopting a vigorous mercantile policy like prohibition of export of money, levying high tariff on foreign manufactures, and giving bounties to encourage French shipping.
He also fostered imperialism hoping to increase a favorable balance of trade. On the other hand, as Christopher Hill argues, the mercantilism of the Tudor monarchs in England was positively proguild and restrictive towards the putting-out system, because with a weak army and bureaucracy it was easier for them to tax the urban guilds more effectively than the merchant-capitalists of the putting-out system located mostly far away in the countryside.
A series of Acts, starting with the 1533 Statute, passed by the Tudors in an effort to restrict them demonstrates the fact.
The Weavers’ Act forbidding the clothiers to own more than one loom and two weavers and the Enclosure Commission set up in 1548 to look into the enclosures slowed down the growth of the putting out system in England. The situation improved with coming of the Stuarts and Commercial Capitalism under the putting-out system flourished.