Mercantilism refers to the form of economic organization that dominated regions of Western Europe from approximately 1500 to mid to late 1700s. However, this system was most developed in the UK. Adam Smith as the first great economist (however, not the first economic thinker) had as a main objective showing that this economic theory is not such as good idea. The French as well as some English economies of the time were typical mercantile economies. Both of these economies were characterized by monarchies in which a queen or a king represented the central government. As practiced by these monarchs, mercantilism involved detailed and widespread regulation of economy. Frequently, this regulation took the form of creating monopoly right for favored individuals. Mercantile economics came to be characterized by the existence of our monopolies in such diverse areas such as mining, brewing as well as trading. Therefore, these economies were considered to be very bad since they squashed the right of individuals to act independently in the markets.

It is an economic system much older than Capitalism. The creation and protection of these monopoly rights had only one purpose – to raise revenue for the needs of the sovereign. The monarchies sold monopoly rights in order to raise revenue. Therefore, the purpose was not only to make the colonists obedient to United Kingdom, but to give United Kingdom most of the profit from trade with the colonies.

The real question is: Why did sovereigns use monopoly and not taxes for revenue? Generally, tax collection was a relatively inefficient means to raise revenue for the central state due to the costs of controlling as well as monitoring tax evasions were high.

One of the important aspects of national strength as well as power was wealth. And the granting of monopoly rights as a means to raise revenue didn't have the same deficiencies like taxation. There were basically no problems of evasion. Those who wanted the monopoly right would simply come to the queen or king and make an offer for the right. Therefore, mercantilism has a prominent place in the economics history due to its effectiveness in raising revenue for the central state. On the other hand, this denial of liberalism was a 'good' thing for both America as well as United Kingdom, in theory.