Mercantilism

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Mercantilism is a policy for a nation based on a positive trade surplus, meaning that an increase in wealth is based on exporting more goods to other nations and territories than importing from them.

Background

Relying almost exclusively upon interventionist and centralized government, a mercantilist system depends heavily upon giving subsidies to politically favored businesses, often under the guise of infrastructure development combined also with a central bank with monopoly power. Additionally protectionism is favored and the nationalization of industries is welcomed, generally if it promotes export and trade.[1]

Structure

An excess of exports over imports increased the balance of trade and the acquisition of gold by the nation. For the benefit of the mother country, acquiring and using colonies to supply raw materials and provide foreign markets was a key aspect of mercantilism. But in the end, no colony would be allowed to get richer than the mother country.[2] Due to the restrictions placed on markets, something that was a benefit to Britain was always allowed to be for sale, but if something was only of benefit to the colonists, this would not have been allowed. Such an economic system undermines any Self-government.[2]

Mercantilism once was the economic and trade policy of several European countries, such as Britain and France, and their colonial empires. Britain's government-controlled East India Company played a central role during the Boston Tea Party crisis. The India company routinely held exclusive monopoly powers granted to them by the crown.

America

As mercantilism was the British policy at the time of the American Revolution, the United States initially rejected mercantilism. Though many of the Federalists, especially Alexander Hamilton, were huge proponents of mercantilism, disagreeing only with who was in charge,[3] by and large the Founding Fathers found the work of Adam Smith with free capitalist markets and economic individualism to be much the superior.[4]

References