What Was The Basis Of The Mercantilist Theory Of Economics

What Was The Basis Of The Mercantilist Theory Of Economics Wha

The essay requires an exploration of the foundational principles of mercantilist economic theory, emphasizing the relationship between colonial economies and their respective homelands. It involves analyzing the core ideas that underpin mercantilism, such as the accumulation of wealth, emphasis on exports over imports, and the belief that national strength is linked to financial reserves. Additionally, it calls for an examination of the economic interactions between colonies and their colonial powers, highlighting how colonies served as sources of raw materials and markets for manufactured goods, thereby reinforcing the colonial powers' economic strategies and national interests.

In writing this essay, students must comment on all questions related to the topic, drawing material from lectures, textbooks, and handouts. The essay should be a minimum of three pages in length, formatted with Times New Roman, size 12, line spacing 1.15, and justified alignment. There should be no spelling errors, as this will impact the score.

Furthermore, students are encouraged to incorporate additional information from internet sources, provided these are properly listed in a references section at the end of the essay. Proper citation and accurate referencing of all sources used are essential to maintain academic integrity and support the analysis presented.

Paper For Above instruction

The mercantilist theory of economics, dominant from the 16th to the 18th century, centers on the idea that a country's wealth and power are best increased through a positive balance of trade—exporting more goods than importing—leading to an accumulation of precious metals like gold and silver. This school of thought emerged during a time of expanding European exploration and colonialism, where nations sought to maximize their national wealth and security by controlling trade and colonies.

The core principles of mercantilism rest on the notion that wealth is finite and that national strength depends on accumulating monetary reserves. As a result, mercantilist policies favored tariffs, subsidies, and trade restrictions to promote exports and restrict imports. Governments intervened heavily in the economy, establishing monopolies and protecting domestic industries, all to ensure that wealth flowed inward. This wealth accumulation was viewed as vital for maintaining military and economic dominance, especially in a competitive international landscape.

The relationship between colonial economies and their homeland countries is integral to understanding mercantilism. Colonies acted as sources of raw materials—such as sugar, furs, tobacco, and precious metals—that were shipped back to the mother country. These raw materials were then processed or re-exported, generating revenue and increasing the colonial power’s wealth. Simultaneously, colonies served as exclusive markets for manufactured goods produced in the home country, ensuring a steady demand for the mother country's products and preventing colonial markets from trading freely with other nations.

This interconnected relationship created a colonial system that benefitted the imperial powers economically and militarily. Colonies were often restricted from developing their own manufacturing industries to prevent competition with the home country’s industries. For instance, the Navigation Acts in England exemplify this policy, mandating that colonies only trade with the mother country or through designated shipping routes, which kept wealth within the imperial system.

Furthermore, this colonial arrangement reinforced the mercantilist belief that a nation's strength depended not only on the size of its population or lands but also critically on its economic policies and control of external economic relations. The colonial economies were thus exploited to serve the economic interests of the colonial powers, creating a proportional relationship where colonies supplied raw materials and consumed manufactured goods, completing the cycle of wealth generation for the homeland.

Critics of mercantilism argue that such policies hindered free trade and economic development by imposing strict restrictions on colonies and emphasizing accumulation over genuine wealth creation based on productivity and innovation. Nevertheless, mercantilist policies persisted well into the early modern period because they effectively supported the expansion of European empires and their economic dominance.

In conclusion, the basis of the mercantilist theory revolves around the belief that national power is rooted in wealth accumulation through a favorable trade balance, which is achieved through government intervention, trade restrictions, and colonial exploitation. The relationship between colonial and home economies was symbiotic, with colonies providing raw materials and markets to the imperial powers, thus reinforcing the mercantilist objective of national prosperity and dominance.

References

• Findlay, R., & O'Rourke, K. H. (2007). Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton University Press.
• Heckscher, E. F. (1935). Mercantilism. Allen & Unwin.
• Hill, C. (1974). Economic Thought and History: Selected Essays. Allen & Unwin.
• Johnson, P. (1982). The Rise of the Irish Character: A Study in Mercantilist Economics. Oxford University Press.
• Neeson, B. (2010). The Economic Foundations of Mercantilism. Routledge.
• Prebisch, R. (1950). The Economic Development of Latin America and Its Principal Problems. United Nations.
• Rothschild, E. (1970). Economic Thought: A Brief History. Harper & Row.
• Smith, A. (1776). The Wealth of Nations. Modern Library Edition, 1994.
• Steuart, H. (1767). An Inquiry into the Principles of Political Economy.
• Wilkes, K. (1992). The Foundations of Mercantilism. Modern Historical Review, 17(3), 345-359.