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Lecture 3 and 4 - FirstAttachment

Mercantilism was an economic theory and practice prevalent in Europe between the 16th-18th centuries that viewed economic activity and trade as a zero-sum game between nations. States pursued policies aimed at accumulating wealth, especially gold and silver, in order to gain military and political power over other states. Mercantilist policies included maintaining trade surpluses, monopolizing trade with colonies, and restricting colonial industries.

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58 views

Lecture 3 and 4 - FirstAttachment

Mercantilism was an economic theory and practice prevalent in Europe between the 16th-18th centuries that viewed economic activity and trade as a zero-sum game between nations. States pursued policies aimed at accumulating wealth, especially gold and silver, in order to gain military and political power over other states. Mercantilist policies included maintaining trade surpluses, monopolizing trade with colonies, and restricting colonial industries.

Uploaded by

Maheen Ali
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Mercantilism

Introduction

 Mercantilism as a theory and practice first seen in Europe from 16 th to 18th century
 According to mercantilism economic activity is and should be subordinated to the primary
goal of string states

 Defining feature of mercantilism ---- Economics is the tool of politics

 International Economy as an arena of conflict between opposing national interests


 Economic competition between states is a zero sum game
Zero sum game

 Economic competition between states is a zero sum game

 One state gain is another state loss


 State should be more concerned about “relative economic gain”
 Because if one state accumulate an ample amount of wealth than this can be
used against the other state

 It can be noted that there is some similarities between States in an anarchic


realm
Benign Mercantilism

 Both of the approaches are concerned about state’s power in an anarchic system

 Therefore Economic rivalry between two states can be observed in two ways

1. Benign mercantilism ----- Defensive

2. Malevolent mercantilism ------ Aggressive

 In Benign mercantilism states look for national economic interest in terms of national
security

 In this situation states opt defensive policies towards the other state

 While such state never have negative effects on other state


Malevolent Mercantilism

 In this situation states try to exploit the international economy through expansionary
policies

Imperialism ---- European colonial power in Asia and Africa

 According to mercantilists economic strength result into military and political power

 The above situation oppose the idea of liberals

As Liberals posits economic prosperity ---- free trade & open exchange

Pursuit of power by means of military force & territorial expansion

 West Germany and Japan


Bullionism

 Mercantilism reject the liberal view – wealth and power are complementary

 Mercantilism --- Economy is a primary goal

 But the content of strong Economy changed with the passage of time

 During sixteenth century – supply of Precious metals were important as a powerful State

 This was known as acquisition of bullion and process of collecting the precious of gold
know as bullionism
Principles of mercantilism

 One of the interlocking principle of mercantilism:


If a nation did not possess mines or have access to them, precious metals should be
obtained by trade
 It was believed that trade balances must be “favorable,” meaning an excess of exports over
imports
 Colonial possessions should serve as markets for exports and as suppliers of raw materials
to the mother country
 Manufacturing was forbidden in colonies, and all commerce between colony and mother
country was held to be a monopoly of the mother country
Mercantilism

 Mercantilism has been advocated by some eminent politicians and economists

Alexander Hamilton – he was one of the founding father of United States

 Friedrich List --- German Economist

 In 1840s he developed the theory of “Productive Power”

 According to this theory being a powerful state, it is more important to have the ability to
produce than the result of producing

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