Essay Mercantilism

Essay Mercantilism-50
If one country had more gold than another, it was necessarily better off.

If one country had more gold than another, it was necessarily better off.

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The best way of ensuring a country’s prosperity was to make few imports and many exports, thereby generating a net inflow of foreign exchange and maximising the country’s gold stocks. Accumulating gold was thought to be necessary for a strong, powerful state.

Countries such as Britain implemented policies which were designed to protect its traders and maximise income.

But Mr Grampp argues that, on the whole, we should stop confusing mercantilism and bullionism.

Few mercantilists were slaves to the balance of payments.

In 1598 Barthélemy de Laffemas, a French thinker, denounced those who opposed the use of expensive silks.

He argued that purchasers of luxury goods created a livelihood for the poor, whereas the miser who saved his money “caused them to die in distress”.Nicholas Barbon—who pioneered the fire insurance industry after the Great Fire of London in 1666—wanted money to be invested, not hoarded.As William Petty—arguably the first “proper” economist—argued, investment would help to improve labour productivity and increase employment.One often reads in mercantilist tomes that foreign trade would be more beneficial than would domestic trade.And some of the early mercantilists, like John Hales, were enchanted by the idea of an overflowing treasure chest.At the heart of mercantilism is the view that maximising net exports is the best route to national prosperity.Boiled to its essence mercantilism is “bullionism”: the idea that the only true measure of a country’s wealth and success was the amount of gold that it had.Mercantilism is thought to have begun its intellectual eclipse with the publication of Adam Smith’s "Wealth of Nations" in 1776.A simple interpretation of the economic history suggests that Smith’s ruthless advocacy for free markets was squarely opposed to regulation-heavy mercantilist doctrine.Keynes, in a short note to his “General Theory”, approvingly quotes mercantilists, noting that an ample supply of precious metals could be key in maintaining control over domestic interest rates, and therefore to ensuring adequate resource utilisation.In some sense the Keynesian theory of underconsumption—that is, inadequate consumer demand—as a cause of recessions was presaged by mercantilist contributions.

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