Mercantilism is a policy that has been on for centuries. Most western and third world countries have developed means through which they can implement it into their economy. Though mercantilism has many rules, that serve as guidelines and maps to its implementation, its effect on the economy of the practicing countries are usually positive, rather than negative.
Alright, which is the most accurate list of mercantilism rules?
Mercantilism is a policy that focuses on helping a mothering nation collect more silver and gold, and also allocate it to its subject. It also adopts rules that control trade and improve trade in the country. You might be wondering what the most accurate list of mercantilism rules is. However, due to the benefits and positive effects of the mercantilism rules on the economy, picking out the most accurate list is very rigid. One could consider retaining silver and gold to be among the most accurate mercantilism rules.
Let’s discuss further on this topic!
The Policy Of Mercantilism Rules
Controlling the economy of a country could be a very complex endeavor. You might say with the constant fluctuation of economical prices that it runs haphazardly. However, economic policies are the driving forces behind the scene of a country’s economy. It helps to regulate and manage the affairs of a country’s economy.
Mercantilism rules is a type of economic policy that emphasized importing less and exporting more. The aim is to stabilize and improve the country’s economy by bringing in more silver and gold into the country through exportation. The policy also focuses on developing more raw materials that will sell for money and other valuables.
The first introduction of mercantilism was in the Sixteenth Century by Adam Smith. Adam Smith was an economist; he spent all his life studying and practicing economics, developing new theories to advance the economy better.
He envisioned a state free from economic crisis and problems, well stable and rich in both raw materials and gold. His vision gave birth to Mercantilism rules. He concluded that infusing the rules into the economy as a guild will cause more positive effects and enhance the economy of that state.
Since the inception of mercantilism rules, it has gained more ground and acceptance in the economy of diverse countries around the world. Some of the rules include:
- The country is to retain more silver and gold than they spend.
- The country is to create and develop more raw materials to export for monetary value
- There is room for exportation.
- Importation has lesser value and does not receive much emphasis.
The Cons Of Implementing The Mercantilism Rules
The mercantilism rules were predominant during the Sixteenth Century up till the Eighteenth Century. The reason for its extinction was because of democracy and modern civilization. During the sixteenth century, states were mostly colonies and ruled by a mother nation.
The mercantilism rules make it easy for the mother nation to accumulate wealth and distribute it to its subject states. There were controversies and arguments due to the belief that the mother nation might exercise bias in allocating and distributing the wealth and resources to the other countries and states.
Since the economic policy is in support of a mothering nation being in charge of almost all the wealth of its subject, it promotes leadership and, at the same time, fosters inequality.
The mother nation becomes the ultimate and overall guide of all the wealth, and she is also in charge of allocating it to other states, making her the leader and superior to other nations.
Meanwhile, her subjects have lesser value and receive treatment in that measure. There are limits to the powers of her subjects in making decisions and suggestions. In terms of economic growth and advancement, they have little or no say. They can only take and obey orders from the mother nation. They have no right to complain about the wealth of resources allocated to them.
Though there were challenges with this system, the benefits overshadowed every claim to stop the mercantilism rules. The benefits were enormous that there was the implementation of some of the rules to enhance modern economic growth.
Pros Of The Mercantilism Rules
It helps nations to focus on developing their raw materials to the highest level. Many nations cover their lack of productivity with foreign goods. They cover their weakness with goods exported from other countries. Thus, it makes the economy weak and also creates room for waste. That way, they do not develop raw materials, and they end up being waste products.
However, mercantilism rules focus on developing raw materials and selling them for monetary values. It creates room for the active development of raw materials that, in turn, leads to economic growth.
It promotes trading. The primary aim of mercantilism is to create wealth. Raw materials are in high demand because one can buy and refine them into finished products. They sell finished products in higher value than the raw materials, in most cases. It means that trading can flow with unhindered restrictions caused by scarcity.
It creates more job opportunities. It is because the country is solely dependent on creating more raw materials than importing. Thus, job opportunities will be on the rise. Many factories and companies will be in urgent need of workers. Other factories will also need workers. Therefore, it will reduce the unemployment rate drastically.
It creates unity among nations. Since mercantilism promotes trade between countries, states, etc., it encourages integration as trade takes place in a friendly atmosphere.
Mercantilism Rules And Its Effect On The Modern Economy
Mercantilism rules are diverse. Each one has its importance and impact on the economy. There are beliefs that each rule complements another, and that there is an interconnection between the rules. However, each rule is unique and has a vital effect on the economy. We would be discussing some of the rules below. They are as follows.
Retain More Silver And Gold
The rule of retaining silver and gold focuses on the financial capability of the economy. It creates room for an unexpected need for money. In a situation where there is an economic downturn, maybe due to a pandemic or natural disaster, the country can spend from its reserve without having to experience a significant economic meltdown.
It is a policy that one could consider to be a proactive venture. It shows proper and adequate planning. The financial shortage also reduces and encourages stability. An economy that spends more than it saves will experience bankruptcy or a lack of monetary values.
Retaining silver, gold, and other valuables also improve the economy of a particular country or state. Research has shown that prices appreciate more than it depreciates. Having a $100 million worth of gold can appreciate to $200 million in less than a year’s time.
Create And Develop Raw Materials
The policy also encourages the development of raw materials. Creating raw materials is a stressful task, as seen by many countries based on their level of dependency on importation. It shows that a country that focuses more on developing raw materials will experience maximum economic growth.
Many countries that are too busy to engage in the task of creating raw materials will experience an economic meltdown. It is so because their incomes and values will be funding the raw materials needed by its citizens.
Economic Research has shown that the countries with the worst economy consume more than they produce. They spend the incomes gotten from their products on acquiring raw materials from other countries needed for the survival of their citizens.
Adopting the mercantilism rule of creating more raw materials for exportation will boost a country’s economy and monetary value exponentially. Most countries in the world that are famous for having the best economy and economic growth, such as China, the USA, and the likes, are fanatics of this particular mercantilism rule.
Export More Resources And Goods, Import Fewer Resources And Goods
The third rule on the list that we might consider as the most accurate mercantilism rules is this particular rule. The rule tilts the economy to a different phase. It creates room for the second rule of creating more raw materials to find expression.
If a country creates more raw materials and still end up importing more than they export, it will harm the economy. Thus, the third rule is the platform that gives focus and value to the created raw materials. It channels the attention of leaders from dependency on importation to dependence on exportation.
Exporting more goods is one of the best things that can happen to an economy. Research has shown it. Adam Smith also said it through his constant revolutionary rules and observations.
Speculations have it that China, known widely for its constant economic growth, once shut down its borders to importation. Reports said that during that period, China was dependent on the produce of its citizens. Though it hurt China’s economy during the earlier period of implementation, the turn out changed as time proceeded.
The vast produce from China’s citizens made her independent of importation. It also boosted her economic growth as they consistently sold products to other countries. Now, China is among the leading economic giant in the world. All thanks to this economic policy.
Although Adam Smith created mercantilism rules in the Sixteenth Century, its effect on modern economic growth is remarkable. Trying to predict which is the most accurate list of mercantilism rules can be an effort in futility because each list has a positive effect on the economy.