The mercantilism had appeared from the sixteenth to the eighteenth century and was based on the intervention of the State on the economy ; promoted the idea that the wealth and prosperity of a country would depend directly on accumulable capital and that the global market was unalterable. Capital translated into the accumulation of precious metals. In this article we we make you aware What is mercantilism in history?
What is mercantilism
It is an economic system where precious metals represent the fundamental wealth of the States. The economic ideas that mercantilism encompasses maintain that the prosperity of a nation will depend on the capital it possesses and that the total volume of world trade remains unchanged. Precious metals, which represent capital, are increased through a positive trade balance when interacting with other nations. In other words, that exports must be greater than imports.
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What objectives did mercantilism pursue
Mercantilism proposes that the government should seek to achieve the aforementioned objectives by employing a protectionist policy with respect to the economy. For this, it was necessary to favor exports and discourage imports , especially through the imposition of tariffs. Mercantilist ideas focused on three areas: State intervention in economic activity, the close relationship between political power and economic activities, and control of the currency.
During mercantilism it was observed: the regulation of the economy by the state, the internal market was unified, population growth, increased own production, tariffs were imposed on foreign products and the money supply was increased. All this was with the objective of multiplying tax revenues and thus forming the strongest possible state.
What is mercantilism based on?
The mercantilist economic system is based on three basic ideas:
- Accumulation of wealth for the economic development of the country, mainly that of precious metals. The greater the amount of wealth, the greater prosperity and political power the nation holds.
- It is the State that imposes the mechanisms to achieve the accumulation of wealth. Whether through restrictions, subsidies, controls, etc. State intervention is protectionist in nature and will encourage local production while protecting competition from foreign producers.
- The global trade is unchangeable . To achieve the accumulation of wealth by trade, it is necessary to regulate entry and exit, maintaining a positive balance.
What was the origin of mercantilism
The current of economic thought known as mercantilism manifested itself to a greater degree in France (16th century) . With the mandate of Jean Baptiste Colbert who was Minister of Finance of King Louis XIV. Throughout his tenure, Jean Baptiste offered protection to French industrial and agricultural companies through credits, subsidies and other types of facilities. At the same time, it imposed strict restrictions on imports.
It is not possible to speak of mercantilism as an economic school, since to do so, a series of characteristics that encompass this term must be present. One of these is that there is a teacher who creates a line of thought that is followed by those who make up the school and that there is also homogeneity of thought. Mercantilism does not meet these characteristics so that it can be called an economic school.
Disappearance of mercantilism
The mercantilism began to fade at the end of the eighteenth century due to the emergence of new economic theories. These theories were much more liberal and focused on benefiting from the advantages that trade offered.
Characteristics of mercantilism
The measures applied to achieve a mercantilist economic system can be summarized as follows:
- The export of capital, represented by precious metals, was prohibited .
- Control of the local currency is established .
- The imports are restricted and subject to tax.
- Regulation in the use of natural resources .
- Benefits, subsidies and facilities for local producers , especially in areas such as industry and agriculture.
- Promote the development of the working population .
- Offer cheap labor to make the country more competitive internationally.
- Offer of fiscal privileges in the case of exports and local production.
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Main mercantile aspects
Mercantilism was the origin of other economic theories, such as bullionism, colbertism and commercialism.
- Bullionism: Promotes the hoarding of wealth through precious metals. It was developed in the 15th and 16th centuries, reaching its maximum splendor in the 17th century. It came to be known as Spanish mercantilism because it was the system used by the Hispanic monarchy at the time of the Old Regime.
- Colbertismo: Raises the industrialization of the economy as a source of wealth. It is known as French mercantilism.
- Commercialism: In this case the source of wealth is foreign trade and it is not restricted but promoted. It is also called British mercantilism.
Importance of mercantilism
There is no doubt that during the time of mercantilism a great economic activity arose that offered a deep theoretical reflection for the subsequent economic ideas and schools. However, European mercantilism was always undemocratic and non -participatory capitalism . In this type of capitalism, only the nobles , friends of those who had the authority of the time, could have private property . They had the possibility of creating companies to whom the King himself granted this privilege.
For example, to start a company in Spain in the mercantile era, a royal letter was required. In England the letter of privilege was required. In order to create a company, a corporation or an authorized society, a patent from the crown or a privilege of the state was necessary. So the mercantilist economy was really a business with the State, who gave the authorization for an idea to be developed and it was necessary to share the business with it.
At present, mercantilism continues to be an economic policy of an interventionist nature , where the government regulates economic activity. It is based on government control of imports and exports to obtain a surplus of resources.