Mercantile capitalism and colonialism were intimately connected, especially in the context of British policy in the 18th century. Here's how they were interrelated:

1. Mercantile Capitalism Policy: Mercantile capitalism was a economic policy pursued by the British government in the 18th century. Under this policy, the government sought to regulate both the domestic economy at home and the economic activities in its colonies abroad. The goal was to enhance national power through economic control.
2. Regulation of Trade: Mercantile capitalism involved implementing trade barriers and granting trade monopolies to British companies, particularly in the colonies. This ensured that the colonies were economically dependent on Britain and contributed to a favorable balance of payments for the British.
3. Trade Monopolies: British companies were given exclusive rights to trade with the colonies. This meant that they had a monopoly on the trade in those regions, excluding other foreign companies from participating in this economic activity.
4. Colonization as a Result: When native rulers and chiefs resisted these policies, colonial powers often resorted to direct colonization of these regions. This was a means to secure and further solidify their economic dominance.
5. Transition to Laissez Faire: In the 19th century, a shift occurred with the influence of thinkers like Adam Smith. The policy of Laissez Faire, which advocated for less government intervention in the economy, gained prominence. However, this was primarily applied to domestic economies, and colonial territories continued to be subject to special economic privileges granted to imperial powers.
6. Special Economic Rights in Colonies: Imperial powers, including Britain, retained special economic rights in their colonies. Companies from other countries did not enjoy equal economic privileges in these regions. Economic projects and contracts were often reserved for companies belonging to the imperial power.
7. Decline of Laissez Faire: By the end of the 19th century, the practice of Laissez Faire began to decline. This was in part due to the negative consequences associated with it, such as worker exploitation and the lack of government intervention during crises like famines.
8. Role of State Intervention: The realization emerged that unbridled Laissez Faire could lead to violations of basic human rights. As a result, it became apparent that the state needed to intervene to safeguard the well-being of its citizens.

In summary, colonialism was closely tied to the economic policies of mercantile capitalism, as it provided a means for imperial powers to exert economic control over their colonies. While the transition to Laissez Faire introduced new economic ideologies, it did not significantly alter the economic dynamics between colonial powers and their colonies.