Mba Student

Mercantilism is the view held that a country’s wealth is measured by its holding of treasure, which usually meant gold. Exports increase a country’s treasure, as payment for the exports are received from countries abroad while imports attract payments to be made to other countries decreasing a country’s treasure. Therefore exports were “good” but imports were “bad.” A country that exported more than it imported (i.e., had a favorable balance of trade) got richer, while a country that imported more than it exported (i.e., and unfavorable balance of trade) got poorer.
Mercantilism can be referred to as economic nationalism for the purpose of building a wealthy and powerful state. Adam Smith coined the term “mercantile system” to describe the system of political economy that sought to enrich the country by restraining imports and encouraging exports. This system dominated Western European economic thought and policies from the sixteenth to the late eighteenth centuries. The goal of these policies was, supposedly, to achieve a “favorable” balance of trade that would bring gold and silver into the country and also to maintain domestic employment.

In trade policy the government assisted local industry by imposing tariffs, quotas, and prohibitions on imports of goods that competed with local manufacturers. Governments also prohibited the export of tools and capital equipment and the emigration of skilled labor that would allow foreign countries, and even the colonies of the home country, to compete in the production of manufactured goods. At the same time, diplomats encouraged foreign manufacturers to move to the diplomats’ own countries.
During the mercantilist era it was often suggested, if not actually believed, that the principal benefit of foreign trade was the importation of gold and silver. According to this view the benefits to one nation were matched by costs to the other nations that exported gold and silver, and there were no net gains from trade....