Mercantilism Commercial

Mercantilism Commercial

Mercantilism The commercial legislation of the time reflected these ideas. Imports of goods considered unlikely to add to the productive powers' of a country were discouraged by duties, or prohibited. Exports were encouraged by bounties and by drawbacks of duty on imports that were re-exported. The export of raw materials considered essential to home manufacturers was prohibited. Commercial treaties with other countries confined trade to the channels thought most likely to yield export surpluses and thus the desired inflow of the precious metals. The trade of the colonies was confined to the mother country and restrictions placed on their production of competing manufacturers. The Navigation Acts encouraged the growth of shipping and thus earnings from the carrying trade.

By the second half of the eighteenth century mercantilist policies were being increasingly regarded as a hindrance to economic progress. Adam Smith's denunciation of the system in The Wealth of Nations (1776) was the turning point 'It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to. .' The classical economists rejected the mercantilist view that the purpose of an economic activity was to provide markets for surplus production and acquire metal to use as money. They held that the purpose of economic activity was to satisfy human wants and that the desirability of foreign trade should be judged by this criterion. Exports were desirable only in so far as they enabled wants to be satisfied by imports more fully than was possible from home production alone. Since stocks of monetary metal could not by themselves satisfy wants, there was no lasting benefit in a continuing export surplus financed by imports of precious metal. Indeed, attempts to maintain such a surplus would tend to defeat themselves because movements of the metals between countries would affect relative national price levels. Instead of creating wealth, mercantilist impediments to free trade thus reduced it by impairing the efficiency with which a country's resources were mobilized to satisfy wants.

Although these views were widely accepted, especially during the nineteenth century, the influence of mercantilist doctrines still lingered on among many statesmen and business men. The re-examination, by J. M. Keynes in The General Theory of Employment, Interest and Money(2013), of classical economic theory gave renewed (although qualified) support to the mercantilist view that an export surplus could increase domestic employment, output and income; but he agreed that, in practice, trade restrictions were an unreliable and treacherous means of achieving such expansion. In more recent years there has been little room for mercantilist ideas in the attempts to liberalize international trade and replace national by supra-national authorities or organizations such as the European Free Trade

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