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Difference between Capitalism and Mercantilism

Difference between Capitalism and Mercantilism

Capitalism and mercantilism are two economic systems that have been around for centuries. Although they share some similarities, there are significant differences between the two. This blog post will explore those differences and discuss the benefits and drawbacks of each system.

What is Capitalism?

Capitalism is an economic system based on private ownership of the means of production and the pursuit of profit. Capitalism encourages competition and the drive to innovate and produce better goods and services at lower prices. This benefits consumers by providing them with more choices and lower prices. Capitalism also has a dark side, however. It can lead to income inequality, as those who own capital reap the rewards while workers earn only a fraction of the profits. In addition, capitalism promotes consumerism, encouraging people to buy more than they need and leading to environmental damage. Nonetheless, capitalism remains the dominant economic system in the world today.

What is Mercantilism?

Mercantilism is an economic system that was prevalent in the sixteenth and seventeenth centuries. It is based on the premise that a nation’s wealth is measured by its supply of gold and silver. Mercantilist countries, therefore, sought to increase their holdings of these precious metals through trade surpluses and colonial expansion. Mercantilism was characterized by heavy regulation of trade and industry, and by state intervention in the economy. The goal was to maximize exports and minimize imports, in order to achieve a favorable balance of trade. Mercantilism had a profound impact on the development of capitalism, and it continues to influence economic policy in many countries today.

Difference between Capitalism and Mercantilism

Capitalism and Mercantilism are two different economic systems that have been prevalent throughout history. Capitalism is an economic system in which private individuals or businesses own the means of production and profit by selling goods or services in a free market. In contrast, mercantilism is an economic system in which the government owns the means of production and tries to increase its wealth by regulating trade and accumulating gold and silver.

Both systems have their advantages and disadvantages, but Capitalism is generally considered to be more efficient and prosperous. Capitalism encourages innovation and competition, while Mercantilism stagnates economic growth. Additionally, Capitalism rewards hard work and risk-taking, whereas Mercantilism often leads to corruption and cronyism.


The differences between capitalism and mercantilism are vast, with different goals for each system. Capitalism is built on the idea of private ownership and trade for profit, while mercantilism focuses on government regulation of economic activity to increase state power. Understanding these distinctions is important when looking at the history of economics and how it has shaped our current society.

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