AP Syllabus focus: ‘Western European states began abandoning mercantilism and adopting free trade, influenced by Adam Smith’s laissez-faire ideas and free markets.’
Industrial-era economic change was also a change in ideas. Between the mid-1700s and 1800s, many European policymakers and merchants questioned state-directed trade controls and increasingly argued that markets and trade should be freer.
Mercantilism and Why It Was Challenged
Mercantilism as an older policy model
Mercantilism: A state-centered economic approach that sought national power by controlling trade (especially through tariffs and monopolies) to accumulate wealth, often measured in gold and silver.
Mercantilist practices commonly included:
Protective tariffs to shelter domestic producers
Chartered monopolies and exclusive trading rights
Navigation laws and shipping rules to keep commerce in national hands
Colonial trade restrictions that limited where colonies could buy and sell
Pressures that made mercantilism seem less effective
Critiques grew as Atlantic commerce expanded and production changed:
Expanding commercial networks made rigid controls harder to enforce and more expensive to administer.
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FAQ
Physiocrats tended to argue that agriculture was the primary source of wealth, whereas Smith emphasised productivity across sectors and the gains from division of labour and exchange.
It was an Anglo-French agreement that reduced tariffs and helped encourage a wider pattern of tariff-reduction treaties in Europe through “most-favoured-nation” clauses.
No. States often kept tariffs for revenue, regulated labour and currency, and intervened during shortages or unrest, even while publicly endorsing laissez-faire language.
Where the state relied heavily on customs duties to fund government, policymakers were more cautious about rapid tariff cuts and often preferred selective reductions.
Common tools included revoking exclusive charters, liberalising licensing rules, allowing more firms into long-distance trade, and standardising commercial law to widen market access.
