Mercantilism

Mercantilism is a national economic policy that is designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries, a period of proto-industrialization, before falling into decline, although some commentators argue that it is still practiced in the economies of industrializing countries, in the form of economic interventionism.Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth centuries, was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. Thus, mercantilism held exports should be encouraged by the government and imports discouraged. Mercantilism is a national economic policy that is designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries, a period of proto-industrialization, before falling into decline, although some commentators argue that it is still practiced in the economies of industrializing countries, in the form of economic interventionism. It promotes government regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers. Mercantilism includes a national economic policy aimed at accumulating monetary reserves through a positive balance of trade, especially of finished goods. Historically, such policies frequently led to war and also motivated colonial expansion. Mercantilist theory varies in sophistication from one writer to another and has evolved over time. High tariffs, especially on manufactured goods, were an almost universal feature of mercantilist policy. These policies aim to reduce a possible current account deficit or reach a current account surplus. With the efforts of supranational organizations such as the World Trade Organization to reduce tariffs globally, non-tariff barriers to trade have assumed a greater importance in neomercantilism. Mercantilism became the dominant school of economic thought in Europe throughout the late Renaissance and the early-modern period (from the 15th to the 18th centuries). Evidence of mercantilistic practices appeared in early-modern Venice, Genoa, and Pisa regarding control of the Mediterranean trade in bullion. However, the empiricism of the Renaissance, which first began to quantify large-scale trade accurately, marked mercantilism's birth as a codified school of economic theories. The Italian economist and mercantilist Antonio Serra is considered to have written one of the first treatises on political economy with his 1613 work, A Short Treatise on the Wealth and Poverty of Nations. Mercantilism in its simplest form is bullionism, yet mercantilist writers emphasize the circulation of money and reject hoarding. Their emphasis on monetary metals accords with current ideas regarding the money supply, such as the stimulative effect of a growing money-supply. Fiat money and floating exchange rates have since rendered specie concerns irrelevant. In time, industrial policy supplanted the heavy emphasis on money, accompanied by a shift in focus from the capacity to carry on wars to promoting general prosperity. Mature neomercantilist theory recommends selective high tariffs for 'infant' industries or the promotion of the mutual growth of countries through national industrial specialization. England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). An early statement on national balance of trade appeared in Discourse of the Common Weal of this Realm of England, 1549: 'We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them.' The period featured various but often disjointed efforts by the court of Queen Elizabeth (reigned 1558-1603) to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping. A systematic and coherent explanation of balance of trade emerged in Thomas Mun's argument England's Treasure by Forraign Trade or the Balance of our Forraign Trade is The Rule of Our Treasure - written in the 1620s and published in 1664. Elizabeth's efforts organized national resources sufficiently in the defense of England against the far larger and more powerful Spanish Empire, and in turn, paved the foundation for establishing a global empire in the 19th century. Authors noted most for establishing the English mercantilist system include Gerard de Malynes (fl. 1585–1641) and Thomas Mun (1571-1641), who first articulated the Elizabethan system (England's Treasure by Forraign Trade or the Balance of Forraign Trade is the Rule of Our Treasure), which Josiah Child (c. 1630/31 – 1699) then developed further. Numerous French authors helped cement French policy around mercantilism in the 17th century. Jean-Baptiste Colbert (Intendant général, 1661-1665; Contrôleur général des finances, 1661–1683) best articulated this French mercantilism. French economic policy liberalized greatly under Napoleon (in power from 1799 to 1814/1815) Many nations applied the theory, notably France, which was the most important state economically in Europe at the time. King Louis XIV (reigned 1643-1715) followed the guidance of Jean Baptiste Colbert, his Controller-General of Finances from 1665 to 1683. It was determined that the state should rule in the economic realm as it did in the diplomatic, and that the interests of the state as identified by the king were superior to those of merchants and of everyone else. Mercantilist economic policies aimed to build up the state, especially in an age of incessant warfare, and theorists charged the state with looking for ways to strengthen the economy and to weaken foreign adversaries.