The Term, Mercantile System, By Adam Smith Essay

The Term, Mercantile System, By Adam Smith Essay

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The term “mercantile system”, coined by Adam Smith, refers to a system of political economy that seeks to enrich a country by decreasing imports and increasing exports. From the 16th to 18th centuries this was the prevailing way of thinking, however in the 19th and early 20th centuries a more laissez-faire approach was taken that served to benefit merchants and producers.
During the mercantilist period conflict was at an all times high between nation-states. This was due to the military’s importance shifting from being a temporary force to spending most of its time deterring attacks on trade from other countries and aid territorial expansion. As a result of these mercantilist policies, many members of the mercantile class paid taxes and levies in exchange for the government enacting policies that inevitably protected their business interests. These policies were not limited to one area, and affected both domestic and foreign affairs. For example, some domestic policies subsidized new industries, gave tax breaks to guilds, and established monopolies over certain markets. Governments would increase tariffs on imported good and prohibit tools and even the emigration of labor to foreign countries.
With the growth of colonies in the new world and the new role of the military, control of the oceans were vital to a countries power. Many countries decided to increase port duties to incoming ships into domestic ports. England passed the Navigation Act of 1651, which prohibited foreign vessels from coastal trade with England and all goods going to England must be carried on an English ship or a ship from the country the goods originated from. Many of these Acts and policies passed by larger European nations were primarily focused on the...


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...s that a current account deficit is bad. This means that a country is borrowing from the rest of the world to finance imports in excess of export revenue. Even though this increases foreign debt, it is worth it in the long run if the spending is used to increase production that will give a larger return than what is spent. The United States took part heavily in this practice by borrowing from English investors to build railroads.
Even today there are still people who prefer a more mercantilist form of governing trade rather than a more free trade. As it has been shown throughout history, even those who have once tried to reduce imports and increase exports, these countries eventually found the most growth when they allowed for free trade. This not only benefits countries domestically, but foreign trade partners benefit resulting in an increase in the global economy.

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