THE BMZ ACADEMY
THE BMZ ACADEMY
053 8213
BMZ ACADEMY 061 262 1185/068 053 8213Page 1 of 10
, THE BMZ ACADEMY
Question 1
Distinguishing Between Mercantilist and Adam Smith’s Views on Wealth
Determination
Mercantilist Conception of Wealth
The mercantilist school of thought, which prevailed in Europe between the sixteenth
and eighteenth centuries, conceptualised wealth primarily as the accumulation of
precious metals, particularly gold and silver bullion. Central to this perspective was the
doctrine of bullionism, which equated a nation’s wealth with the quantity of specie it
possessed within its borders (UNISA, 2025). Mercantilists argued that the most
effective means of increasing this wealth was by maintaining a favourable balance of
trade, whereby exports exceeded imports, thus ensuring a continuous inflow of gold
and silver. This export-led strategy was underpinned by what has been termed the
“fear of goods,” reflecting a deliberate policy of restricting imports to prevent the
outflow of precious metals (Heckscher, 1935). Furthermore, mercantilists viewed
international trade as a zero-sum game, meaning that one nation’s economic gain
necessarily resulted in another’s loss, thereby justifying aggressive trade policies and
colonial expansion (Blaug, 1997). In addition, wealth in monetary form was favoured
because it provided rulers with the flexibility to finance military campaigns,
administrative functions, and imperial ambitions, thereby linking economic wealth
directly to national power (Viner, 1948). The mercantilist system also emphasised
strong state intervention through tariffs, subsidies, and monopolies to regulate
economic activity in the national interest. Finally, mercantilists advocated for a large,
industrious, and low-wage population, as this would reduce production costs, enhance
export competitiveness, and sustain the inflow of bullion, thereby reinforcing their
narrow and state-centric conception of wealth determination.
Adam Smith’s Conception of Wealth
In contrast to the mercantilist view, Adam Smith fundamentally redefined wealth in his
seminal work, An Inquiry into the Nature and Causes of the Wealth of Nations, by
arguing that wealth consists not of money but of the total annual production of goods
and services that satisfy the needs and wants of society (Smith, 1776). Smith rejected
BMZ ACADEMY 061 262 1185/068 053 8213Page 2 of 10
THE BMZ ACADEMY
053 8213
BMZ ACADEMY 061 262 1185/068 053 8213Page 1 of 10
, THE BMZ ACADEMY
Question 1
Distinguishing Between Mercantilist and Adam Smith’s Views on Wealth
Determination
Mercantilist Conception of Wealth
The mercantilist school of thought, which prevailed in Europe between the sixteenth
and eighteenth centuries, conceptualised wealth primarily as the accumulation of
precious metals, particularly gold and silver bullion. Central to this perspective was the
doctrine of bullionism, which equated a nation’s wealth with the quantity of specie it
possessed within its borders (UNISA, 2025). Mercantilists argued that the most
effective means of increasing this wealth was by maintaining a favourable balance of
trade, whereby exports exceeded imports, thus ensuring a continuous inflow of gold
and silver. This export-led strategy was underpinned by what has been termed the
“fear of goods,” reflecting a deliberate policy of restricting imports to prevent the
outflow of precious metals (Heckscher, 1935). Furthermore, mercantilists viewed
international trade as a zero-sum game, meaning that one nation’s economic gain
necessarily resulted in another’s loss, thereby justifying aggressive trade policies and
colonial expansion (Blaug, 1997). In addition, wealth in monetary form was favoured
because it provided rulers with the flexibility to finance military campaigns,
administrative functions, and imperial ambitions, thereby linking economic wealth
directly to national power (Viner, 1948). The mercantilist system also emphasised
strong state intervention through tariffs, subsidies, and monopolies to regulate
economic activity in the national interest. Finally, mercantilists advocated for a large,
industrious, and low-wage population, as this would reduce production costs, enhance
export competitiveness, and sustain the inflow of bullion, thereby reinforcing their
narrow and state-centric conception of wealth determination.
Adam Smith’s Conception of Wealth
In contrast to the mercantilist view, Adam Smith fundamentally redefined wealth in his
seminal work, An Inquiry into the Nature and Causes of the Wealth of Nations, by
arguing that wealth consists not of money but of the total annual production of goods
and services that satisfy the needs and wants of society (Smith, 1776). Smith rejected
BMZ ACADEMY 061 262 1185/068 053 8213Page 2 of 10
