Mercantilism: Economics and Mother Country

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  • Topic: Economics, The Wealth of Nations, Mercantilism
  • Pages : 2 (473 words )
  • Download(s) : 96
  • Published : February 12, 2007
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While reading my Unites States History textbook, I ran upon the word "Mercantilism". But what does mercantilism really mean? An example of mercantilism would be like this: A colony produces tobacco. The tobacco is then shipped back to the mother country and made into cigarettes. The mother country then SELLS the cigarettes back to the colony. Many countries in Europe, especially England and Spain, used this method to obtain gold and silver. But does mercantilism benefit the colony as much as it benefits the mother country? Mercantilism is unfair because the colony is paying for everything, the mother country gets rich, and it produces an oversupply of money and, with it, serious inflation.

Mercantilism developed at a time when the European economy was in transition. Isolated feudal estates were being replaced by centralized nation-states as the center of power. Changes in shipping and the growth of urban areas led to an increase in international trade. Mercantilism focused on how this trade could best help the colonies. But in fact, Mercantilists misunderstood the concept of mercantalism, arguing that an increase in the money supply meant that everyone gets richer, when actually only the parent country gets rich. Adam Smith, the "Father of Modern Economics", had something to say about mercantilism: "To prohibit a great people, however, for making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themsleves, is a manifest violation of the most sacred rights of mankind" (The American Pageant, 120).

The first people to reject mercantilism were the Physiocrats of France. Their theories also had several problems, and the replacement of mercantilism did not come until Adam Smith published The Wealth of Nations in 1776. This book outlines the base of what is today known as classical economics. Smith spends part of the book rebutting the arguments of the mercantilists,...
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