With money they could build armies and by such a process rule the world. This seemed perfectly sound to them, and was accepted with "same unquestioning faith with which the early Christians believed in Miracles."" .
In practice, mercantilism worked as follows: You try to export more to your neighbor than he can export to you. Therefore, he will spend more of his gold than you do of yours. Hence you gain and he loses. This became known as the "favorable balance of trade- . This creed led to a state program that (a) was eager for any voyage which might be able to find more gold (physical or otherwise), (b) encouraged trade exports over trade imports, (c) encourage industry which can create exportable products, (d) encourage a large industrial population above an agricultural one in order to fulfill (c), and (d) allow the state to interfere as it pleases in order to increase the wealth of the nation. One common tactic used to ensure the favorable balance of trade' was to exercise their right to interfere with trade affairs by imposing high tariffs on imported goods. This way, even when, for example, the Italians and French produced higher quality silk at cheaper prices than those of England, it was still more profitable for the consumers of England to buy silk domestically.
Charles V, Queen Elizabeth, Louis XVI and many other leaders adopted Mercantalism. At the time it seemed like a viable - if not the only - way for a country to become rich. However, as is explained in the next section, it was far from a perfect system. .
Inherent Problems with the Mercantile System.
Many problems existed with the mercantile system. The most outstanding of them was the fact that it was directed towards harming other nations rather than improving the home nation. The basic premises of mercantilism were aimed at outpassing other nations, rather than improving the home economy. Obviously, this encourages war and deliberate harm to other nations.