Theory of mercantilism

Mercantilism is associated with policies which restrict imports, increase stocks of gold and protects domestic industries.

Theory of mercantilism

Mercantilism replaced the older, feudal economic system in Western Europe, leading to one of the first occurrences of political oversight and control over an economy.

At the time, England, the center Theory of mercantilism the British Empire, was small and contained relatively few natural resources.

The Sugar Act of introduced high customs for sugar and molasses imported from outside of England and the British colonies. Great Britain was not alone in this line of thinking.

The Underlying Principles of Mercantilism Mercantilism is based on the idea that strong nation-states had the opportunity to create a world economy by using a state's military power to ensure local markets and supply sources were protected.

What is 'Mercantilism'

Advocates of mercantilism believed the prosperity of a nation was reliant on its supply of capital, and global volume of trade was static.

The result was a system of economics that required a positive balance of trade, with surplus exports. One notion behind mercantilism is the economic health of a nation could be assessed by the amount of precious metal, gold or silver it owned.

The system advocated for each nation to strive to be economically self-sufficient, which meant the nation would have to increase domestic production and build new homes and industries.

Advocates of mercantilism also saw that agriculture was important and should be promoted so a nation could reduce the need to import foods.

What was the theory of mercantilism

They suggested a strong nation-state needed colonies and a merchant fleet, both of which could provide additional markets for goods and raw materials. Mercantilists also believed a large population was integral to the domestic labor force of a nation.

Controlled production and trade: The expansion of the slave trade: This fostered the development of the slave trade in many colonies, including America. The colonies provided rum, cotton and other products heavily demanded by imperialists in Africa.

In turn, slaves were returned to America or the West Indies and traded for sugar and molasses. Mismanagement of printed currency resulted in periods of inflation. Additionally, Great Britain was in a near-constant state of war.

Taxation was needed to prop up the army and navy. Through the use of force or mass immigration or both, imperialistic nations establish control over potentially less-developed regions and force inhabitants to follow the dominant country's laws. One of the most powerful examples of the relationship between mercantilism and imperialism is Britain's establishment of the American colonies.

BREAKING DOWN 'Mercantilism'

It was argued that the state should franchise out the leading merchants in promising industries to create exclusive monopolies and cartels.

These monopolistic corporations were to be controlled by the government and act as an arm of government interests. Citizens could invest money in mercantilist corporations in exchange for ownership and limited liability in their royal charters.

They were granted "shares" of the company profit—the first traded corporate stocks.Mercantilism was the theory of trade espoused by the major European powers from roughly to It advocated that a nation should export more than it imported and accumulate bullion (especially gold) to make up the difference.

Nov 24,  · Mercantilism was the economic philosophy underlying early European colonial policy. The object of mercantilism was to increase the wealth of the Mother Country (England) in gold and silver. Mercantilism Mercantilism was the theory of trade espoused by the major European powers from roughly to It advocated that a nation should export more than it imported and accumulate bullion (especially gold) to make up the difference.

Mercantilism was the primary economic system of trade from the 16th to 18th century with theorists believing that the amount of wealth in the world was static. Mercantilism, economic theory and practice common in Europe from the 16th to the 18th century that promoted governmental regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers.

Mercantilism is economic nationalism for the purpose of building a wealthy and powerful state. Adam Smith coined the term “mercantile system” to describe the system of political economy that sought to enrich the country by restraining imports and encouraging exports.

Theory of mercantilism
mercantilism | Definition & Examples |