Chapter 1. The Mercantilists and Physiocrats

During the 16th and 17th centuries, European economies were still largely based on agriculture. Land was the exclusive ownership of landlords and agricultural production was carried out by serfs, or peasants. Industrial production was not significant and was carried out by independent artisans and craftsmen who still owned their tools and other means of production (Hunt and Lautzenheiser, 2011). Commerce was probably the most lucrative activity, which flourished even more with the growth of overseas trade. Colonial powers during this period (Italy, Spain, Portugal, Holland, France and the United Kingdom) rivaled each other by engaging in bloody conquests, pillage and slavery of the inhabitants of Africa, Asia and the Americas. Colonial trade was so profitable not only because it permitted the import of cheap raw materials and exotic goods, and the export of commodities made in Europe, but also because it brought back precious metals, namely gold and silver. Since these two metals have long been appreciated and sought by most people, they quickly became the only internationally acceptable means of cash settlements. Amassing large quantities of gold meant more purchasing power, and thus more wealth. This notion of wealth was particularly defended by a new social class that became rich because of commerce and finance: they were the rising wealthy merchants – the mercantilists.