What does the term "mercantilism" primarily refer to?

The term "mercantilism" primarily refers to an economic theory and practice that dominated in Europe during the 16th to 18th centuries. It posits that a nation's strength is directly related to its wealth, especially in terms of gold and silver, which are seen as the primary indicators of a nation's economic power.

Under this system, governments encouraged exports while imposing restrictions on imports. The idea was that a country would accumulate wealth by exporting more than it imported, thus creating a favorable balance of trade. This led to policies that promoted domestic industries and the accumulation of resources within a nation, while limiting foreign competition.

The distinction of mercantilism is crucial, as it contrasts sharply with ideas of free trade, where the unrestricted flow of goods and services is promoted for mutual benefit. It also differs from other economic concepts that may support less governmental intervention in trade. Thus, the correct understanding of mercantilism highlights its foundational belief in boosting national power through controlled trade practices that favor exports over imports.