Prepared by:

SHASHANK BANSAL
BCOM(H)
06613788813

Assumpition:
Three MORE Assumptions of Mercantilism:
1) There is a finite amount of wealth in the world.
2) A nation can only grow rich at the expense of other nations.
3) Therefore, a nation should try to achieve and maintain a favorable trade balance, exporting
more than it imports.

Features of a Mercantilist Economy:

1)
Import prohibition of certain goods using imposition of high tariffs, government legislation
or very high taxes/import duties.
2)
A wide range of government subsidies on export industries to promote the countrys
export-based policy.
3)
Policies of nationalism.
4)
Accumulation of assets in gold and silver, and prohibition of private accumulation, use or
export of these items.
5)
One-way trade with colonies, and importation of gold and raw materials from these
sources.

Mercantilist policies have included:

High tariffs, especially on manufactured goods;
Exclusive trade with colonies;
Export subsidies;
Banning all export of gold and silver;
Promoting manufacturing with research or direct subsidies;
Maximizing the use of domestic resources.

COUNTRIES WHO USES MERCATILISM:

Spain
Portugal
Europe
France
Great Britain

Example of Mercantilism:
For example, China has recently been criticized for using the mercantilist system,
deliberately keeping its currency value low against the U.S. dollar in order to sell more goods
to the U.S. China for many years has been successful at distributing their goods and
services to other countries, and severely limiting the imports they take in return. This has
allowed China to amass considerable wealth in foreign currencies. Economists point out,
that like European countries who eventually had to abandon mercantilism, China may be at
that point as well, if they want to continue to develop their wealth.

Criticism:
Adam Smith and David Hume were the founding fathers of anti-mercantilist thought; This
practice was strongly attacked by Adam Smith in his 1776 work The Wealth of Nations.
The criticisms of mercantilism are given elaborately Mercantilists viewed the economic system as a zero-sum game, in which a gain by one
country results in a loss by other. Adam Smith & David Ricardo argued that, trade should
be a positive-sum game, or a situation in which all countries can benefit.
The mercantilist assumption that the colonies existed for the benefit of the mother was not a
sound economic proposition.
The mercantilist policies were designed to benefit the government and the commercial
class, rather than the entire population.

 The mercantilism over-emphasized the importance of commerce and greatly undermined

the importance of agriculture and other branches of human industry.
It does not promote free enterprise and free movement of goods and people. And
instead it allowed colonialism and monopoly of businesses and trade practices. Objectives
were simply to generate wealth for the upper class and merchant class. The working
people were exploited and were even made as slaves with very low wages.
Finally, Smith argued that the collusive relationship between government and industry was
harmful to the general population. He criticized mercantilist trade policy of intervening and
monopolizing trade business.