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Mercantilism and its relationship to colonial acquisition The growth of productive forces has caused decomposition of feudal system and origin of capitalism. An economic basis of occurrence of bourgeois relations was fine commodity manufacture. A huge role in this historical process the violent moments have played, which were named as initial accumulation. They have been connected, with exploitation of peasantry and accumulation of money resources mainly outside Europe. Origin of capitalism was accompanied by occurrence of two new classes: the bourgeoisie's and the proletariat and formation of the centralized state.
A new bourgeois ideology emerges. It was called humanism. The representatives of this ideology combated against feudalism. Economic ideology of bourgeoisie was the mercantilism. It directly expressed interests of trading bourgeoisie of an era of primitive accumulation of capital. The mercantilism was the first school of bourgeois political economy.
It represented attempt of a theoretical substantiation of system of economic policy that was asserted by merchants. The mercantilism is characterized by two basic features: - The riches are identified with money, and that state is considered richer which has more money; - Accumulation of monetary riches is achieved with the help of royal authority which carries out corresponding economic policy. The first step of development of mercantilism is known under the name of early mercantilism. Its main representatives were Stafford, Medline, Desantis, etc. The early mercantilism emerged before great geographical openings and become obsolete approximately in the middle of XVI century. The central point of products of early mercantilism is the system of monetary balance, that asserted the policy directed on increase of monetary riches in only legislative way.
With a view of deduction of money in the country export of them abroad was forbidden, places for trade of the foreign goods were created. To involve money from abroad, the government was engaged in damage of the coin resulting downturn of a rate of exchange. Mercantilists wrongly considered that as a result of depreciation of money foreigners can get more goods for the same amount of a national coin and consequently they will be interested in the exchange of money on native. The late mercantilism that was named as more advanced mercantilist system emerged after great geographical openings and achieved its blossoming in the middle of XVII century. Its major representatives were Men, Serra, Monkretien, and etc. In connection with the development of the domestic industry the role of foreign trade had risen.
During this period intermediary trade got special value and fiscal policy was replaced by encouragement of the national industry and trade. The central point of late mercantilism was the system of trading balance. It was considered, that the state becomes richer, if the difference between the sum of cost of taken out and imported goods increases (active trading balance) though thus the amount of material benefits decreases. This difference aspired to provide with two ways. The first way was the export of countrys products.
Thus the export of only finished goods was allowed as from their sale more money was gained, than from the export of raw material. Import of luxury goods was forbidden. The second way and it was the main way with the help of intermediary trade. In connection with this the export of money abroad was demanded. Thus a principle to buy more cheaply in one country and to sell more expensively in another was put forward. The late mercantilism has been characterized as manufactory or commercial system.
For realization of active trading balance late mercantilists asserted the protectionism that provided taxation with high duties foreign goods and by that created favorable conditions for development of national manufacture and trade. The mercantilism differs with its undeveloped methodology. Instead of the analysis of the phenomena mercantilists limit themselves with their description and demand intervention of the state in the economic life of the country. Mercantilists considered political economy as a science about trading balance and its primary goal they saw in finding out, how to increase amount of sellers of all goods, and how to reduce amount of buyers. (Hirshleifer, J) The early mercantilists identified riches with gold and silver, but they did not understand, that gold is not money by nature.
As riches the late mercantilists understood surplus of the products which had remained after satisfaction of needs of the country but which should necessarily turn to money on a foreign market. (Glete, J. ) The big merit of the late mercantilists was the recognition of the money as goods, but many economists could not overcome the main difficulty. They couldnt find out how and why the goods become money. The mercantilists considered profit as increase of amount of money. They taught that the profit inside the country can be only relative. Also they consider it as the main source of a nonequivalent exchange in foreign trade. The economic policy of mercantilism (protectionism) promoted initial accumulation, reducing transition from feudalism to capitalism.
At the same time progressiveness of mercantilism reflected its antagonistic character already at the first step of development of a bourgeois society. The bourgeoisie mercantilists have demanded the restriction of consumption of broad masses of the population in interests of accumulation. Mercantilists proved benefit of increase of the prices in a home market to increase export, and the protectionism was also marked by expropriation of independent workers, by the bloody legislation against expropriated and by robbery of colonies. The policy of mercantilism encouraged the capture of colonies and also used them as sources of raw material. Nowadays many countries in any measure adhere to a policy of mercantilism, in other words they adhere to the basic method of accumulation of gold reserves through introduction s of huge duties on import of the goods and services. But at the same time there are countries (for example the USA) which have refused from this policy and live due to corporations which receive a lot of money due export of their production.
I. e. they live on one of Adam Smith's principle which sounds so: " For any provident head of the family there is an immutable rule: never try to produce things at home that will cost for him more expensively than to buy... If other country can deliver us the goods more cheaply, than manufacture of them inside the country will cost, it is better to buy them." (Becker, G. S) Bibliography: Alchian, Armen A. "Uncertainty, Evolution, and Economic Theory, " Journal of Political Economy LVIII (Feb-Dec 1950) Becker, G. S.
The Economic Approach to Human Behavior. Chicago: University of Chicago Press, 1976 Ekelund R. B. , and. Tollison R. D, Mercantilists as a Rent-Seeking Society (1982); Glete, Jan, Business History; April 1993.
Hynes, W. G. The Economics of Empire: Britain, Africa and the New Imperialism, 1870 - 95. August, 1979. Hirshleifer, J. The Expanding Domain of Economics, The American Economic Review 75 (December 1985)
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Research essay sample on Political Economy Foreign Goods
