Mercantilism.

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Presentation transcript:

Mercantilism

Mercantilism is the economic doctrine that advocates for government control of foreign trade. Mercantilists believed that government control was critical for ensuring the prosperity and military security of the state. In particular, it demands a positive balance of trade. Popular from the 16th – 18th centuries.

Assumptions of the theory Wealth is finite Wealth is extractable only from land Positive balance of trade is “good” for a country. Trade must be a monopoly Assumes that the accumulation of specie (Gold an Silver) will not produce inflation Assumes a permanent shortage of labor in the Americas

Early Mercantile theorists Jean Baptiste Colbert

Why Mercantilism declined as a reliable economic doctrine Adam Smith: The Wealth of Nations (1776) Investment and wealth: Wealth as being infinite 19th century idea of free trade and comparative advantage

Salutary Neglect 1650-1763 Mercantile polices not enforced in North America