The Rise Of A Mercantilist Economic System History Essay

The Rise Of A Mercantilist frugal System History EssayThe rise of a mercantilist economic body in atomic number 63 forged a unified relationship between g everyplacenment and its people by superseding feudalism and developing a merchant caste that bridged the gap between the peasant and ruling classes. Britain, France and Spain, in particular, reaped the rewards of mercantile system by forming a berthful array of nation states. Although mercantilism stands in stark occupation with the principles of a free-market economy, it was nonetheless the driving force behind European imperialism from the 15th by dint of the 18th centuries. The emergence of a merchant class developed a link between determination and wealth. Mercantilism in Europe helped to centralize power, replacing the feudal arrangement of yesteryear. As critics like Adam metalworker would visor out, mercantilism was not without its drawbacks. The only two countries that corralled enough wealth to be considered heg emonic, the United States and Britain, did so in the nineteenth century, well after the fall of mercantilism. Smith opined that economies should be self-regulating, and that mercantilism, through its rigid establishmental constraints, prevented economies from truly flourishing. Despite an abundance of critics, the mercantilist economic system undoubtedly had a tremendous impact on Europe and the rest of the globe. Mercantilism was the foundation from which capitalism was born.European mercantilism first emerged in the latter part of the Renaissance in about 1595 and didnt fade past until the late 1800s. Queen Elizabeth I, desperate to quell the powerful Spanish Empire, severalizeed her Admiralty to reform foreign trade. Her reforms proved highly effective as England would go on to become the most powerful imperial empire in world history. England exploited the mercantilist economic system of importing precious metals and raw materials in permute for manufactured goods. The fren ch would later mimic Englands economic system. Mercantilist countries used the rule of law to attain a controlling balance of trade through their colonies. virile tariffs were obligate on imports and colonies were restrained in their ability to manufacture goods. Instead they were forced to purchase products from their mother countries. For example, gold and silver were extracted from the colonies and shipped to European merchants, greatly enriching Europe. The power of the state depended on the amount of gold and silver in its coffers, because this international currency made it possible to build ships and pay for armies. (A Concise History of Economic Thought,Vaggi Groenwerth, 2003). Beginning in the 16th century, control over land, and trade routes became the most important part of compendium wealth for the most powerful countries.The growth of the mercantile system of Europe was largely spurred by the general discontent people had with the Roman Catholic Church. Mercantili sm was, to a large extent, spawned by the Reformation. The lifestyle regulations imposed on Catholics allowed for very little self-actualization a source of great embitterment for the masses who were fed up with the feudal system. Mercantilism brought upon the rise of the merchant class, a channel of wealth that brought with it a sense of hope for much of Europe. The spread of alternatives to hard-line Catholicism like the Anglican Church coincided with the growth of mercantilism.In the 1600s England began to notice the Spanish becoming a rising power, due inlarge part to their influence in colonial America. England knew that whoever maintainedthe strongest blend of colonial influence and soldiers strength would control the all-important trade routes and foreign territories. England, in an effort to squelch risingcountries, began to streng thus their control over colonies, demanding that all trade gothrough them. The growing sense of competition between world-powers fueled the spr eadof mercantilism. The major players in this face-off were England, France, Holland andSpain. England reigned supreme as the victorious imperial power thank to dominantmilitary wins over Portugal and Spain in the sixteenth century, then Holland in theseventeenth and France in the eighteenth century.One of the major objectives of mercantilist countries was to create a bondbetween the powerful aristocracies and the rising merchant classes. The purpose of thisalliance was to damage the economies of competing nations. Mercantilist theorysuggested that government should enact a wealth-collecting agenda by defend againstforeign imports. Prior to the rise of mercantilism, the military was only formed duringspecific times of conflict. During the era of mercantilism, however, armies and naviesbecame full-time enterprises as conflict had become a focal point of life. Gold and silver werethe means by which goods and services could be obtained, and funding a strong militarywas an essential p art of the equation. The merchants were willing to finance theirgovernments in exchange for protection against foreign competition. Large centralgovernment and mercantilism go hand-in hand the merchants needed the government andvice-versa. Mercantilist theorists believe that the net total of planetary wealth was alreadyestablished, and that countries vied for a greater stake in the pie by exchangingmanufactured goods for precious metals. The concept of, buy low, sell high wasparamount towards collecting national wealth. The acquisition of non-coined gold andsilver, or bullion, was considered the benchmark for economic growth. The growingwealth of European countries, namely England, France and Spain, had a trickle-downeffect on their economies. Merchants would become wealthier through mercantilism, and,to a lesser extent, the lives of the labor forces improved thanks to better job security.The transfer of bullion funneled from the colonies of the Americas proved to be a major boon f or European mercantilism. Mercantilist writers believed all trade to be a zero sum blue, for every transaction there is a winner and a loser, mercantilists sought to handicap the game in tell apart to promote economic success nation-wide. Mercantilism was a Machiavellian, Puritanically dark world view that promoted a general feeling of thick nationalism and ill-will toward competing countries and the colonies they governed. Governments would go as far as to damage entire monetary systems and limit civilian wages in order to reduce imports, and pine other countries economies. When mercantilist countries did import goods, it was preferred that they deal in raw materials that could be processed and sent abroad in order to acquire more capital. import low cost, raw materials to be completed and converted into higher cost, manufactured goods and bartered for precious metals was a lucrative process for merchants. Extractive industries, like agriculture, gave way to manufacturing or t ouch on material businesses. Precious metals had the strongest purchasing power for commanding goods and services. During the sixteenth century, the flows of precious metals from the American Colonies of Spain produced high inflation in Europe, but for the mercantilists gold and silver were the core and the definition of both private and national wealth.(Vaggi Groenwegen, A Concise History of Economic Thought, 2003) As competition in the New World intensified, England began to tighten the screws on her colonies. Mercantilists were acutely aware of the linkage between politics and economics they believed that power and wealth were closely related, and that both were legitimate goals of national polity. (Theodore Cohn, Global Political Economy, 2005) Although some(prenominal) countries became rich because of the wealth transferred from the New World, not every country capitalized as much as it could have.Between 1647 and 1715, the French attempted to mimic the British, but thanks toextreme inefficiency, they fell short. Jean Babtiste Colbert was one of the most well-known proponents of mercantilism. Colbert served as finance minister of France, underKing Louis XIV in the seventeenth century. The French used the British mercantilisteconomic system of as a model for their political economy. Colbert inherited a perilousFrench economy on the coast of bankruptcy and enabled King Louis to embark on aseries of aggressive military campaigns. The term colbertisme was coined by Colbert todescribe the method of protecting infant industries. During his 18 years as minister offinance, Colbert issued a total of 150 edicts designed to regulate the guild industry.Colberts successful use of mercantilism was essential in support the reign of LouisXIV. The Sun Kings reign featured a powerful military force, but the French economy,particularly its agriculture, was over-taxed and stagnant.Thomas Mun was one of the leading mercantilist authors during this time. Hismost powerfu l works were a pair of pamphlets A Discourse of Trade and, later,Englands Treasure by Foreign Trade. Mun was the director of the East India Company,a monopolistic British have founded in 1600 that supplied a wide array of goods,ranging from cotton to opium. According to Mun, monetary movements and theexchange rate depend on the condition of the trade balance the inflows of preciousmetals reflect the existence of a positive balance of trade and vice versa. (Vaggi Groenwegen, A Concise History of Economic Thought, 2003) Government-imposedmonopolies were inherently corrupted the use of raw market dealings were aninevitable byproduct of price ceilings and quotas.As noted above, colonial powers competed vehemently for control over the North American territories they ruled over. Englands avarice would cause tensions to boil over, eventually spurring the American Revolution. The initial Navigation Act of 1651, a bill enacted by the Oliver Cromwell-led Parliament, was designed to gain co ntrol over foreign exchanges between the English colonies and other countries. Under the bill, all trade flowing in and out of England or her colonies had to be shipped using British ships. The Dutch, who had been well-heeled thanks to their free-trade market, were crushed and sent to economic ruin thanks to Cromwells protectionist policies. Not only did the Navigations Acts seize control of transnational commerce, it also disabled competing countries from profiting from freight and tape transport services. The mercantilists discovered that it was the whole current account balance that mattered, not scarcely the exchange of commodities. (Vaggi Groenwegen, A Concise History of Economic Thought, 2003) British colonial mercantilism was oppressive by nature American colonies were banned from the global economy and were treated as little more than pawns.The prosperity of mercantilist economies was contingent on the back up of a strongcentralized government that regulated foreign and domestic trade. Mercantilist economiesbecame immensely wealthy by coercing a positive trade surplus. It was thought that acountry could be strengthened by regulating commercialism by discouraging imports,and maintaining a positive flow of exports. Governments began placing tariffs, quotasand even prohibitions on imports in order to protect domestic business. New businesseswould be encouraged with generous tax breaks. As for the trade part of the balance ofpayments, the government must favour the sale of raw materials abroad because they willbe purchased with precious metals, hence adding to the stock of national wealth (Vaggi Groenwegen, A Concise History of Economic Thought, 2003) Improved tools andtechnologically advanced products were not allowed to be exported to foreign markets inorder to maintain superiority over competing states. The same was true of talentedworkers, who were prohibited from emigrating to other countries, just as foreigndiplomats hypocritically recruited ot her businessmen to come to their home countries.One of the sharpest critics of European mercantilism was economic expert CharlesDavenant, who believed England would become more prosperous if governmentdiscontinued their policy of intervening in foreign trade. In 1690, Davenant published AnEssay on the East-India Trade, which outlined his belied that a liberal foreign tradepolicy would increase Englands exports thanks to a larger market. According toDavenant, this increase in the stock of money leads to lower interest rates and to higherprices of land. The increase in the value of landed estates brings about a rise of rent andof tax revenue. As a result of a freer trade every section of the creation is better off, butthe starting point of the whole story is still the successful export trade of England.(Vaggi Groenwegen, A Concise History of Economic Thought, 2003) Davenantstheories, subversive for the time, caused vast condemnation in Europe, who believedthe risks of an expanded m arket outweighed the rewards. Ultimately, no alternate systemcapable of challenging the nationalistic balance of trade theories of mercantilismemerged, and mercantilism continued.Mercantilism began to fade in the 18th century, ending not with a bang, but witha whimper. Adam Smith, a Scottish Oxford graduate, was a revolutionary economist inthe mid to late 1700s who was responsible for coining the term mercantilism. One ofSmiths major points of contention with mercantilism, as was outlined in The Theory ofMoral Sentiments, was his distaste for morganatic governmental control of theeconomy. Smith, who despised mercantilism invented the metaphor, invisible handwhich stood for a natural, self-regulation that functioned because of the essential tenets ofa free-market economy self-interest, competition, economic characteristics he believedwere possible without governmental intervention. In 1776, Smith wrote in Wealth ofNations It is not from the benevolence of the butcher, the brewer or the baker, that weexpect our dinner, but from their regard to their own self interest. We address ourselves,not to their kind-heartedness but to their self-love, and never talk to them of our own necessitiesbut of their advantages. His writings were the basis of laissez-faire capitalism, inwhich industry is free from the shackles of government. Smith believed in the naturalorder of the economy, whereby, rather than have the government fix prices and regulatetrade, the economy should be a self-sufficient machine that dictates the price ofcommodities. When the price of any commodity is incomplete more nor less than what issufficient to pay the rent of the land, the wages of the labour, and the profits of the stockemployed in raising, preparing, and bringing it to market, according to their natural rate,the commodity is then sold for what may be called its natural price. (Adam Smith,Wealth of Nations, 1776) The brilliance of Smith was not in his ability to producerevolutionary econom ic theories of his own his magnificence was embodied in his ability toassemble existing concepts into a system.The fundamental problem with mercantilism is its refusal to account for the valueof all economic activity. Maintaining a positive balance of trade is not the only indicatorof economic health. To the contrary, as has been proven in the United States meteoricgrowth despite a banish balance of trade since the 1970s, a positive balance of trademeans very little, and often leads to inflation. Mercantilism, though largely debasedtoday, played an essential role in the rise of the middle class. Without the spread ofmercantilism in Europe, its impossible to project how the world might look today. Itspossible that, without mercantilism, we would still be sustenance in a feudal, caste-like systemcomprised of only governmental elitists and a the peasant class, with very little inbetween. 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