Mercantilism

MERCANTILISM

• An economic doctrine or system of the commercial age preceding the Industrial Revolution in which government has control over foreign trade, government impose regulation concerning all the nations commercial interest, to increase the nations wealth, ensure the military security, and domestic employment of the country.

• It was used by European government power such as Britain, France, Spain and so on primarily from the 16th century through the late 18th century.

• Mercantilist believed that the national strength could be maximized by limiting imports that cost the nations money and maximized exports that made the nation money.

• They also believed that the economic success could be judged by the possession of gold, silver and other precious metals.

TWO WAYS TO INCREASE A NATIONS WEALTH

1. You want to obtain as much as gold and silver as possible. There primary motive was to get gold and silver to make their country more wealthy and powerful as well as themselves too.

2. You want to establish a favorable balance of trade in which it sold more goods than it bought.

MERCANTILISM WORKED

• Colonies existed for the benefit of the Mother Country

• Source of raw material. Cheap

• Shipped to Mother Country to be turned into finished goods.

• Finished goods shipped to colony = Expensive

• Profit goes to mother country

• Pass laws forbidding colonies from producing their own goods

MERCANTILISM = UNFAIR/ UNBALANCED TRADE

Profit goes to Mother Country at the expense of the colony.

MERCANTILIST POLICY

• Universal feature of mercantilist policy:

• Building a network of overseas colonies;

• Forbidding colonies to trade with other nations;

• Monopolizing markets with staple ports;

• Banning the export of gold and silver even for payments;

• Export subsidies;

• Promoting manufacturing with research and direct subsidies;

• Maximizing the use of domestic resources;

• Restricting domestic consumption with non-tariff...