Smith's Critique of Mercantilism
Smith's greatest polemical achievement was demolishing the mercantilist system that dominated European economic policy for two centuries.
What Was Mercantilism?
The mercantilist doctrine that Smith attacked held that national wealth consisted of the accumulation of gold and silver. Governments should therefore maximize exports, minimize imports, and maintain a favorable balance of trade. This led to an elaborate system of tariffs, bounties on exports, monopoly trading companies, and colonial restrictions designed to funnel precious metals into the home country.
Mercantilism was not merely an academic theory. It was the operating system of European statecraft. The Navigation Acts required all colonial trade to pass through British ports. The East India Company held monopoly rights over trade with half the world. Tariffs protected domestic manufacturers from foreign competition. Smith saw this entire edifice as a conspiracy of merchants and manufacturers against consumers and workers.
