Brief Characterization of “Mercantilism” (Coursework Sample)

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Brief Characterization of "Mercantilism”
Introduction
Mercantilism refers to an economic system used in the 16th to the 19th century in Europe. This economic system promoted the regulation of the economy by government whose sole mission was to grow its power and influence at the expense of other nations. The system worked similarly as absolute monarchies, which was the ruling forms of government then. Mercantilism involved implementing national economic policies, which were directed at collecting monetary reserves using positive balance of trade. Throughout history, such types of policies promoted colonialism and led to war. Mercantilism as a theory and practice often varied from one economist to the next as time went by. High tariffs charged on manufactured goods are the most common feature of is economic system other policies including prohibition of trading between colonies and other nations (Hoen et al, p.g 34). This paper seeks to discuss the characteristics of Mercantilism the historical context.
Brief Characterization of "Mercantilism”
Domestically, this economic system led to various government interventions on the economy as a way of controlling and increasing exports while collecting precious metals. It was in the mercantilism era that the modern day capitalist system was established. Mercantilism as an economic system faced many challenges among them from economists who emphasized the importance of the domestic trade also. Logically, the mercantile economic system developed because of the growth of strong nation states, world market economy, and the failure of feudalism. The system recommended the use of a country’s military power in protecting local markets and supply(Hoen et al, p.g 79).
The system placed the growth of a country on the supply of capital and presumes that the global volume of trade to be constant. In economic terms, there should always be a positive balance of payment meaning surplus exports. Some of the key principles of the mercantilism economic system advocated for the measurement of a country’s wealth by the amount of precious metals, silver and gold it possesses. The system also banned the use of precious metals being used as means of payment since it was a wealth measuring standard. Mercantilism also advocated for self-sufficiency of every nation through the increase of domestic production and funding home industries. This was to allow the home country manufacture various goods that were to be exported to create wealth for the country. Improving on agricultural production was also a key principle in order to reduce the amount of food import. As a way of discouraging importation of manufactured goods, high tariffs were placed while the importation of raw materials had low tariffs(Hoen et al, p.g 141). The economic system also encouraged merchants to have their own fleets in order to avoid seeking assistance from foreigners when transporting their raw materials and finished goods.
The expansion of colonies was used to as a source of raw materials and ready market for finished goods. The resources in the colonies that include labor were utilized in colonial masters industries providing cheap labor thereby reducing the cost of production. During the 15th and 18th Century, countries used huge amounts of revenue in paying local government expenses and maintaining large armies. With these high costs of operations, mercantilist nations were pleased that precious metals were in demand as a means of exchange with other goods and services. This created a tendency of identifying money with wealth that brought about a theory called bullionism. This theory thrived under some conditions that were mostly present under the mercantilism era. Some of the conditions included the fact that much emphasis was placed on agriculture as a way of reducing food imports and that the industry provided a strong base for taxation. One of the other key conditions for the theory to work was the availability of power in at the sea. This was not only necessary to provide transportation of finished goods s but also as a show of power, might, and controlling foreign markets. Lastly, the theory also advocated for the imposition of various internal taxes as a way of revenue collection(Hoen et al, p.g 204).
Under the Mercantilism system, every nation sought to export as much finished goods as possible importing only a few products accumulating bullion. Nations exercised their control over the economy through corporat...