Very simply: mercantilism is the body of economic practices and policies that evolved in Europe between the 13th and 17th centuries, when it began to coalesce into a coherent theory—but not a theory in the modern sense. Although these exchanges were privately financed, the government needed to intercede to protect the British economic interests at home and abroad. Others found problems on more theoretical grounds —that is, they directly or indirectly admitted to the argument later known as the specie-flow argument. Most characteristic were their ideas about trade and gold. For them the country is reach only if she accumulates precious metals such as Gold and Silver.
Smith admitted the mercantile system worked, yet criticized its principles. To accomplish that goal, a favorable balance of trade was desired. Half of the copperware, ironware, glassware, earthenware, silk goods, printed cotton, and flannel that England exported went to British America. These setbacks forced Colbert to undo many of his initial reforms from 1661 that had doubled the king's revenues, forged a powerful navy, and set France on a course for apparent dominance in Europe. And in a counter-intuitive way, mercantile policies often protect domestic markets—they make them better. Europe's new idea, that th … e country who imports more than exports gold or other types of metals is more powerful. Some argued that the principle was impractical as a policy goal, as it was impossible to account for a trade surplus in quantitative terms.
Prior to mercantilism, most of Western Europe practiced feudal economies. Additionally, the country that can efficiently and cost-effectively produce a product is not given the opportunity. The underlying principles of mercantilism included 1 the belief that the amount of wealth in the world was relatively static; 2 the belief that a country's wealth could best be judged by the amount of precious metals or bullion it possessed; 3 the need to encourage exports over imports as a means for obtaining a favorable balance of foreign trade that would yield such metals; 4 the value of a large population as a key to self-sufficiency and state power; and 5 the belief that the crown or state should exercise a dominant role in assisting and directing the national and international economies to these ends. The critical spirit toward existing Old Regime structures embodied in the intellectual revolution of the found its antimercantilist champions in the Physiocrats. Furs and raw tobacco were the first commodities in demand. Mercantilism is associated with policies which restrict imports, increase stocks of gold and protects domestic industries.
British were in trade surplus due to such practices and forced the colonies to experience trade deficits. The British mercantile system did after all allow for colonial monopoly over certain markets such as tobacco, and not only encouraged, but with its 1660 regulation was instrumental in, the development of colonial shipbuilding. Most goods and services in the marketplace of Nation will be produced by private citizens. Classical Political Economy and Colonies. Further revisions of the Act made British ports the hub for all trade within the empire.
The bellicism inherent in such beliefs would in part culminate in the Dutch War of 1672, a war Colbert supported. The development of colonies became very attractive during this era. By the nineteenth century, however, mercantilism was considered discredited as an economic theory. The means to achieve that objective are often questionable. Smith was not opposed to regulation per se, but rather instances where individuals and governments could abuse their position of power for personal gain. When dealing with power, when one country gains, another loses. The nation-state began in 1658 with the Treaty of Westphalia.
Foreign imports were more expensive because all imports had to be shipped by British ships from Great Britain regardless of product origin. How Did The Mercantile System Work In Practice? As an economy grows through population and technology, it can produce more for all of its participants. It is by definition impossible for both parties in a trade agreement to be net exporters. As a school of thought mercantilism is highly associated with specie gold and silver currency. Mercantilism, considered as a set of beliefs, did not cause the colonists to rebel. More than two centuries after Smith's landmark work, economics's foundational debate continues to resonate. The lack of representation available to colonists led many to become hostile.
Mercantilism dominated economic thought in Europe from the 16th through the 18th centuries. In reference to Colonial America, mercantilism was the idea that the colonies existed in order to benefit Great Britain. In England mercantilist policies were effective in creating a skilled industrial population and a large shipping industry. Empire doesn't want Nation to erect the same kind of tariffs and obstacles that it erected because it wants trade to flow only one way. At the core of mercantilism was the belief that foreign trade could be made to serve the interests of the government and vice versa.
Like I said, mercantilism has 2 goals: 1 make the nation as rich as possible and 2 make the nation as powerful as possible. His work has appeared in publications including the Daily Caller, the American Thinker, and the Foundation for Economic Education. Mercantilism does not allow for mutual benefit which negatively affects the global market. English intervention in the economy in order to serve national interests produced financial and strategic advantages to the colonies. Mercantilism has lead to many wars. Foreign trade, not domestic trade, was viewed as the preferred method for obtaining bullion, while manufacturing, which provided the goods for such trade, was favored over agriculture. It ended the 30 Years War between the Holy Roman Empire and various German groups.
Thus, a net inflow of money could be a means to procure wealth, but wealth itself was always the result of production and consumption. Revolutionary Americans resented the economic restrictions, finding them exploitative. Many members of Parliament owned stock in the company. These are rivalries between firms, buyers power, suppliers power, barriers to entry and threats of substitutes. Thus colonies were prevented from manufacturing. In an attempt to further the economic interests of England, the colonists had formulated policies that have ruined several local economies, health and fortunes of the colonized.
According to the tenets of mercantilism, colonies existed primarily to furnish the mother country with commodities gold, silver, raw materials and markets that could not be obtained at home or were too expensive to obtain from competitors. An expensive war with France left the British Empire eager for revenue and interested in raising taxes. Spengler , as have others inspired by radical development economics for example, Cosimo Perrotta. Four years after its publication, the Philosophical and Political History was banned by the church, and in 1781 it was burned by the French public executioner, after which Raynal fled the country. In France, a group of political economists called Physiocrats contended that all wealth derived from agriculture and argued for the virtues of laissez-faire, or. Principles of Mercantilism Mercantilism has several basic principles that were true no matter where it was practiced.