Essays on Demonstration of the Understanding of How Mercantilism Worked Case Study

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The paper 'Demonstration of the Understanding of How Mercantilism Worked ' is a great example of a Macro and Microeconomics Case Study. As economists, it often good to remember the economic history that helps us to evade the occurrence of a fatal crisis. The economists just as well account for the milestones of the business as well as show how it has contributed to the development of the same. When thinking of this economic history, mercantilism is one of the theories that flashes on our minds. It is currently being considered as a historical artifact and no update economists would associate themselves with mercantilism.

Back in the 18th century, European thought was intensively dominated by mercantilism (Ehrenberg, 1999). Behind the curtain of mercantilism is the motive of augmenting the net exports while regulating the imports to their minimal. This was adapted with the notions of increasing the nation’ s prosperity. This was mainly influenced by the fact that if a country had more gold than the other, then the latter was considered better off. To increase the prosperity of a country, was to engage in fewer imports and increased exports (Pencak, 2011).

This resulted in increasing the net flow of the foreign exchange as the country’ s gold stock remained constant. Most countries adopted this in order to remain powerful and strong. For instance, Britain protected its traders with the aim of augmenting the state’ s income. There were also other examples such as the Navigation act the restricted the ability to trade between England versus other colonies. This essay will focus on how mercantilism worked, the essential pillars, its strength as well as its weaknesses. Three Main Pillars of Mercantilism Government intervention Mercantilism is argued on the basis of national economic policies that are meant to help accumulate monetary reserves by ensuring a positive trade balance that mostly relied on the finished goods.

These policies however led to the expansion of colonization as well as colonial wars (Roberts, 1998). There were several policies that were applied by the state’ s government in favor of mercantilism which included; Limiting wages, Prohibition of gold and silver exportation even if it’ s for a fee, Market's monopolization, Export subsidies, maximum use of domestic resources, Establishment of overseas colonies, Criminalising any trade in the foreign ships, Promoting domestic manufacturing industries with research subsidies, and greatly regulating the domestic consumptions that are non-tariff barriers to the trade.

These policies made the mercantilism to be modeled as a simple form of bullionism but many writers have emphasized on it as money circulation and hoarding rejection (Barkin, 2003). The colonial Economy Mercantilism is a historical period that is associated with capitalism (Minchinton, 1969). Currently it is used to describe the colonial governments that imposed protective trading policies which were finally coupled with other regulations to either directly or indirectly subsidize production industries in an aim to augment state trading advantage.

The state fiats were used to control the price stabilization as well as making policies that restricted the trade roots. Japan is one of the examples that is classified to have even implemented the 20th-century  mercantilism which are characterised with the listed policies. However, this is banned by the free trade advocates who argue that the international, as well as the domestic market place, should be exposed to a minimum or no state interference (Roberts, 1998).

Stern & Wennerlind (2014) wrote that, for wealth to be achieved through mercantilism, the following elements were quite essential. (1) Policy and nationalism should go hand in hand, and all the policies should be biased towards nationalism. (2) The domestic countries should always think of foreign trade in terms of the effect it causes on the country’ s precious metal stock. (3) The country’ s that lack the precious metal should accumulate is by excess exports and minimum imports. This is in order for the domestic country to accumulate most of the precious metals to remain a superpower at the expense of the country's strength.

(4) The government of a certain country should impose trade regulations that favor excess exports and restrict rampant imports. This is in an effort to encourage the citizen to embrace the exports and minimize imports. (5) The political foreign policy as well as the economic foreign policy should be coordinated to ensure the achievement and effectiveness of Mercantilism (Stern & Wennerlind, 2014).


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