Mercantilism

Name

Institution Affiliation

Mercantilism

Mercantilism also referred as commercialism is an approach by a nation to grow its wealth by trading with other countries. The central concept of enhancing mercantilism is through encouraging more exports than imports. Besides, according to LaHaya (2008), this economic system was mostly practiced in Western Europe borrowed from sixteenth and late eighteenth centuries. The main aim of this policy was to establish an equitable economic situation between the trading partners. In pursuit of this objective, the country had to retain its domestic employment and at the same time try to balance the trade.

Mercantilism’s primary economic rationale was to bring together different nations and states. However, during its period, mercantilism experienced the highest military conflicts among nations and states. The governments retaliated to this by commanding enough quantities to support the military in territorial protection and expansion. With the introduction of mercantilism, this was no longer the main focus of capital distribution and expenditure. The latter induced the government to use policies to protect their business interests which included: subsidizing and offering incentives to local industries, providing permits to successful producers and developing monopolies in their local and colonial markets.

Due to the high profits gained from shipments of gold to Portugal and Spain, oceans become more strategic to European as an economic factor. In response, the government built marines that could facilitate the trade and military functions. However, through the Navigation Act of 1651, the England did not allow the use of European Marines in the transportation of goods imported. They maintained that only their commercial ships or ships registered from the country where the goods originate could use the coastal route.

Importation of silver and gold was commonly believed to be the core advantage of practicing the foreign trade. Nations were frequently at war trying to get valuable silver and gold that were considered to be as desirable as the benefits of trade. However, Adam Smith brought to light the fact that a nation’s wealth cannot be measured by the number of treasures it has. Besides, he went on to outline major doctrines in the mercantilism policy. First, he cleared that a profitable business should benefit both parties, he encouraged improvement...