Capitalism vs. Mercantilism: What's the Difference?
Edited by Aimie Carlson || By Harlon Moss || Published on December 7, 2023
Capitalism is an economic system based on private ownership and free markets, whereas mercantilism focuses on trade, export dominance, and government intervention.
Key Differences
Capitalism relies on private ownership and individual initiative for economic growth. Mercantilism, conversely, emphasizes a nation's wealth accumulation through trade, exports, and government control over economic activities.
In capitalism, market forces determine prices and production based on supply and demand. While, in mercantilism, the state plays a significant role in controlling economic activities to maximize exports and minimize imports.
Capitalism encourages competition and innovation, leading to diverse products and services. However, mercantilism focuses on building national power and wealth, often at the expense of other nations, through trade surpluses.
Under capitalism, success is measured by profitability and market share. Whereas, mercantilism measures success by the accumulation of precious metals and a favorable balance of trade.
Capitalism fosters economic freedom and consumer choice. Mercantilism involves government policies that restrict trade to benefit the home country, often leading to monopolies.
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Comparison Chart
Basis of System
Private ownership and free markets.
Trade dominance and government intervention.
Market Forces
Prices determined by supply and demand.
Government controls on trade and production.
Role of Competition
Encourages competition and innovation.
Focuses on national wealth, often reducing competition.
Measure of Success
Profitability and market share.
Accumulation of precious metals and trade surpluses.
Consumer Impact
Offers consumer choice and diverse products.
Limited consumer choice due to trade restrictions.
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Capitalism and Mercantilism Definitions
Capitalism
An economic system based on private property and free enterprise.
The rise of tech startups is a hallmark of capitalism.
Mercantilism
A system favoring export over import to accumulate wealth.
Under mercantilism, countries imposed high tariffs to protect domestic industries.
Capitalism
A system where businesses operate for profit in a competitive market.
Capitalism drives companies to innovate for market success.
Mercantilism
An economic strategy focused on strengthening national power.
Mercantilism often involved colonial expansion to secure resources and markets.
Capitalism
A market-driven economy with minimal government intervention.
Capitalism thrives on the principles of supply and demand.
Mercantilism
An economic theory emphasizing national wealth through trade control.
Mercantilism was prominent in European economies during the 16th to 18th centuries.
Capitalism
An economic model emphasizing individual wealth accumulation.
In capitalism, personal financial success is highly valued.
Mercantilism
An economic practice where the state regulates trade for national benefit.
Mercantilism led to the establishment of several colonial trade monopolies.
Capitalism
A system promoting private investment and consumer choice.
The variety of products available is a result of capitalism.
Mercantilism
A policy aimed at accumulating precious metals by achieving trade surpluses.
Mercantilism's success was measured by the stockpile of gold and silver.
Capitalism
An economic system in which the means of production and distribution are privately or corporately owned and development occurs through the accumulation and reinvestment of profits gained in a free market.
Mercantilism
The theory and system of political economy prevailing in Europe after the decline of feudalism, based on national policies of accumulating bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade.
Capitalism
(politics) A socio-economic system based on private ownership of resources or capital.
Mercantilism
The practice, methods, or spirit of merchants; commercialism.
Capitalism
(economics) An economic system based on private ownership of the means of production and their operation for profit.
Mercantilism
The theory that a nation must always have a positive balance of trade, in the manner that a merchant would operate a shop. Typically this model presupposes protectionism.
Capitalism
A socio-economic system based on private property rights, including the private ownership of resources or capital, with economic decisions made largely through the operation of a market unregulated by the state.
Mercantilism
(economics) The theory that holds that the prosperity of a nation depends upon its supply of capital, and that the global volume of trade is unchangeable.
Capitalism
An economic system based on the abstraction of resources into the form of privately owned capital, with economic decisions made largely through the operation of a market unregulated by the state.
Mercantilism
An economic system (Europe in 18th C) to increase a nation's wealth by government regulation of all of the nation's commercial interests
Capitalism
An economic system based on predominantly private (individual or corporate) investment in and ownership of the means of production, distribution, and exchange of goods and wealth; contrasted with socialism or especially communism, in which the state has the predominant role in the economy.
Mercantilism
Transactions (sales and purchases) having the objective of supplying commodities (goods and services)
Capitalism
An economic system based on private ownership of capital
FAQs
Did mercantilism support free trade?
No, it involved heavy government control over trade.
Can capitalism exist with government regulation?
Yes, but typically with minimal government intervention in markets.
Does capitalism encourage monopolies?
Ideally, it promotes competition, though monopolies can form.
Can a capitalist economy have social welfare programs?
Yes, but the extent varies depending on government policies.
How did mercantilism affect global trade?
It led to competitive trade practices and the accumulation of wealth through exports.
What is the main goal of capitalism?
To generate profit through private ownership and free markets.
What was a key element of mercantilism?
The accumulation of precious metals like gold and silver.
Did mercantilism favor domestic or foreign industries?
It favored domestic industries through protectionist policies.
Is consumer choice a feature of capitalism?
Yes, capitalism promotes consumer choice through market competition.
Is innovation a characteristic of capitalism?
Yes, competition in capitalism encourages innovation.
Was mercantilism beneficial for all classes in a society?
It often benefited the merchant class and rulers more than others.
Was mercantilism focused on local or global markets?
It focused on expanding global markets under state control.
How does capitalism address economic crises?
It depends on market mechanisms and sometimes government intervention.
Did mercantilism promote global economic integration?
It often led to economic competition and conflicts between nations.
Are small businesses part of capitalist economies?
Yes, they are a vital part of capitalism.
How did mercantilism impact colonies?
It often exploited colonies for resources and markets.
Were mercantilist policies sustainable?
No, they often led to trade imbalances and conflicts.
Did mercantilism contribute to the rise of capitalism?
Yes, the decline of mercantilism paved the way for capitalist economies.
How does capitalism impact income distribution?
It can lead to income disparities based on market success.
How does capitalism affect prices?
Prices in capitalism are typically determined by market demand and supply.
About Author
Written by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
Edited by
Aimie CarlsonAimie Carlson, holding a master's degree in English literature, is a fervent English language enthusiast. She lends her writing talents to Difference Wiki, a prominent website that specializes in comparisons, offering readers insightful analyses that both captivate and inform.
