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Western Civilization Mercantilism Was Practiced Term Paper

Western Civilization

Mercantilism was practiced by the major trading nations during the 16, 17th and 18th centuries (Mercantilism). These nations sought to increase exports so they could build wealth by collecting precious metals, especially gold. To accomplish this, mercantilists favored foreign trade over domestic trade and focused on manufacturing as a means to produce goods which could be exported rather than extractive industries such as agriculture. State actions were aimed at making sure a nation sold more goods than it bought. Specifically, states levied duties on imports, regulated production to secure high quality, low cost goods, signed treaties to obtain exclusive trading privileges and exploited the commerce of the colonies for their own benefit.

Mercantilists polices eventually led to an oversupply of money and serious inflation.

Adam Smith was against mercantilism. In his book, the Wealth of Nations, Smith rejected the idea that the wealth of a nation is measured by the size of its treasury (LaHaye). Smith also argued that free trade benefits both parties through specialization in production that allows for economies of scale. Thus, free trade would mean goods at less cost from abroad than at home. He believed that a collusive relationship between government and industry was harmful to the general population. Smith described the principle of the "invisible hand" in which every individual is being led by an invisible force toward his or her own self good and that interference from government is a hindrance to success (Springer).

While many believe that Smith laid the foundation of modern-day practice, most industrialized nations today are not representative of his laissez-faire leaning, rather they favor mercantilist-type practices. Government intervention is common, including minimum wages, corporate welfare, anti-trust regulation, nationalized industries, welfare programs, subsidy programs for businesses and agricultural products, regulation of market competition, and economic trade barriers in the form of protective tariffs, regulation favoring domestic industry, and many other types of policies (Laissez-faire, Wikipedia).

Bibliography

LaHaye L. Mercantilism. http://www.econlib.org/library/enc/Mercantilism.html

Laissez-faire. Wikipedia. http://en.wikipedia.org/wiki/Laissez-faire

Mercantilism. http://www.infoplease.com/ce6/bus/A0832738.html

Springer, W. Adam Smith: founder of modern economic theory. http://heritage.scotsman.com/timelines.cfm?cid=1&id=40812005

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