Final answer:
Mercantilism promotes a strong state through protectionist policies and a positive balance of trade, while commercial liberalism, influenced by Adam Smith's capitalism, advocates for free-market competition with minimal government intervention, allowing for economic freedom and prosperity for all.
Step-by-step explanation:
The core difference between mercantilism and commercial liberalism (also known as capitalism) is their approach towards government intervention in the economy. Mercantilism, which flourished from the 16th to the 18th century, is based on the idea that national power is derived from building a wealthy and powerful state through a positive balance of trade. To do so, mercantilist policies employ high tariffs, monopolies, and subsidies to protect domestic industries and promote exports over imports. In contrast, commercial liberalism, heavily influenced by the work of Adam Smith, suggests that economic prosperity comes from free-market competition without significant government intervention. Smith's laissez-faire principles suggest that an 'invisible hand' should naturally regulate the market, with minimal government interference.
Governments that embraced mercantilism exploited colonies for raw materials and markets for exports, often harming local economies and populations. In contrast, commercial liberalism supports the idea that economic freedom can lead to general prosperity, where not just a nation's elite but all individuals have the opportunity to succeed and benefit from the market. This perspective also challenged the mercantilist belief that the world's wealth was finite, instead suggesting that wealth could grow and all nations could prosper simultaneously. Therefore, the transition from mercantilism to capitalism signified a shift towards individual economic freedom and away from mercantilist protectionist policies.