Mercantilism

“Whereas the earliest mercantilist nations were European, China has more recently become the epitome of mercantilism, exporting over two trillion US dollars worth of goods per year.”

Based on the sentence above, what is the most likely definition of mercantilism?

Check your answer!

Choice A - An economic philosophy that places emphasis on imports
Choice B - An economic philosophy that values exports over imports
Choice C - An economic philosophy based largely on isolationism
Choice D - An economic philosophy that emphasizes heavy taxation

Definition:

Mercantilism (noun) – an economic philosophy that emphasizes trade with other countries—with an excess of exports over imports—in order to generate national wealth

Mercantile (adjective) – of, or relating to, international commerce and trade

Mercantilist (adjective) – of a person or entity, abiding by mercantilism

GRE pro tips:

If you’re not familiar with mercantilism, you probably at least recognize the word merchant, which is a person who trades (buys and sells), particularly with other countries. (Both words come from the Latin mercāns, or “buyer.”) Therefore, you can safely assume that mercantilism has something to do with buying and selling.

In fact, mercantilism is an economic philosophy that values trading with other nations—particulary, the value of selling to other countries (over buying), in order to build up national wealth. It became popular during The Age of Exploration (from the 15th to the early 18th century), when European explorers traversed the globe in search of the “New World.” Mercantilism was largely driven by the desire to find new customers or buyers (of a nation’s goods and services), but also new trading partners and raw materials.

You may be tempted to assume that this approach to trade is characteristic of capitalist economies. However, mercantilism can apply to any form of government that seeks to maximize its own wealth through exporting its goods and services to other nations. So, according to this philosophy, even a socialist country can practice mercantilism to optimize its own wealth.

Example sentences:

“The conquistador Ponce de Leon’s quest for the Fountain of Youth was fueled by mercantilism—the Spanish crown sought new trading partners as well as additional sources of raw materials.”

“Today, China’s mercantile approach to commerce has contributed vastly to the nation’s great wealth.”