Mercantilism Theory - Essay Example

Mercantilism theory argues that nations should embrace more exports than import value and accumulate the net earnings in gold. Its application favored exporting finished products over intermediate and extractive goods. The mercantilism theory emerged as a reaction to resolve economic challenges earlier experienced as states became too weak to guide economies (Ekelund & Hebert, 2013). It arose from the multiplicity of tariffs levied by each town and principality on cargo traversing its borders.

The mercantilism theory thrived under the belief of wealth being finite and that a nation accumulated wealth at the expense of others. Countries would satisfy their desire for wealth accumulation and power through increased exports and collection of precious metals. Formulation of mercantilism replaced feudal economic system applied in Western Europe (Magnusson, 2012). England small size had few natural resources compelling the introduction of fiscal policies to grow its wealth. It enacted the Sugar Act alongside the Navigation Act to limit the access of foreign products, therefore forcing other colonists to purchase its goods. It created a favorable balance of trade leading to increased national wealth (Boyer, Clark, Hawley, Kett, & Rieser, 2010).

The introduction of Sugar Act in 1764 imposed high customs for imported sugar and molasses from suppliers beyond the British colonies. The implementation of Navigations Act of 1651, made it difficult for foreign vessels to conduct their trade along the English coast. Such exports would go through the British control before its redistribution in Europe (Magnusson, 2012). Such thoughts drew the interest of Spain. France and Portugal, thus making their colonies very attractive.

Mercantilism formulation coincided with the colonies development becoming more attractive. The colonial masters would source raw materials from colonies and use them to manufacture finished products sold to the colonies. Agriculture became a critical source of self-sufficiency to reduce dependency on imported foods. Its adoption of mercantilist theory in England translated to the assembly of skilled labor force with the creation of superior navy (Boyer, Clark, Hawley, Kett, & Rieser, 2010). It led to the establishment of merchant marine on the belief that accomplishes a strong nation-state required the supply of market goods and inputs.

The establishment of Mercantilism resulted in enormous trade restrictions targeting to control production and trade participation. Secondly, it stimulated the slave trade expansion with a triangulated trade involving the British Empire, foreign markets, and colonies. The colonies became a destination of slave trade while supplying rum, and cotton products. Slaves drawn from Africa were transported to America and West Indies in exchange for molasses and sugar (Ekelund & Hebert, 2013). The colonies paid for products through gold and silver bullion to the British government, leaving them with insufficient supply to circulate within their markets. The British imposed taxation as the policy to fund their army and navy always in near-constant of war.

The desire to accumulate more state wealth from trade and colonies saw the British establish control over the labor system. They devised the indentured servitude that involved a temporary contract that bound the employee to undertake work for a defined period. Its use during the colonial period of British North America targeted working-class immigrants. It differed from slavery from its temporary nature, particularly where the individuals were heavily indebted workers. They faced restrictions to change employers. Slave labor occurred through the use of physical coercion on individuals captured and drawn from Africa and other colonies (Magnusson, 2012). Their infinite engagement period differed with the free labor where workers would choose their employers and employees to another.

References

Boyer, P. S., Clark, C. E., Hawley, S., Kett, J. F., & Rieser, A. (2010). The Enduring Vision: A History of the American People, Volume 1: To 1877 . Boston : Cengage Learning.

Ekelund, R. B., & Hebert, R. F. (2013). A History of Economic Theory and Method: Sixth Edition (6 ed.). Long Grove: Waveland Press.

Magnusson, L. (2012). Mercantilist Economics. Dordrecht: Springer.