Mercantilism (characteristics, advantages and disadvantages)

The mercantilism had as a fundamental basis the wealth and advancement of a nation, due to a strong intervention of the State in the economy, since, that depended on an accumulated capital and the unalterable global market that came from precious metals in search of monetary increase, to achieve positive trade and the accumulation of capital governed by protectionist policies that would favor exports and reduce import.

It was a system with economic ideals that stood out in Europe during the 16th century, it maintained that the wealth and importance of a State depended totally on its commercial activities. This economic theory prevailed, when Europe ended the trade it had had during the Middle Ages and began to obtain important commercial gains through its activities.

Purpose of Mercantilism

It established as the main essence, that the knowledge of the trade and its firm establishment in the internal market, should be the first objective of a modern nation to be strong and successful. Is mercantilist theory, was spread by thinkers such as Jean Baptiste Colbert, Adam smith and Jean Bodin, stated that the new states could be able to increase their finances through commercial activities.

This emergence sought to stimulate trade and establish power in domestic markets, which implied that a active direct participation of the State to be able to control centrally and induce various instances that will lead to the success of the same.

The mercantilism was an economic and political doctrine that administered the wealth of a nation, due to its abundant possession of gold or silver and for having a favorable trade, where exports predominated over import. The Government was in charge of implementing different policies to protect domestic productions from foreign competition.

This allowed the introduction of tariff payments on the import of products that came from abroad, facilitated subsidies to private companies, formed monopolies And despite the benefits in terms of exports, a ban on the export of precious metals was decreed, since gold and silver were the main objective of the trader, which was a boost for the exchange commercial.

Characteristics of Mercantilism

Between the main characteristics of mercantilism, they find each other:

Wealth and national interest

The collection of national wealth is the main objective and characteristic of Mercantilism. Gold and silver were considered the most significant reserves of all wealth, this gave the State greater power. Another important aspect in this type of economy was that the nation that had more land, the more wealth it had, therefore, they focused on working it.

Precious Metals Reservation

Some nations for not having precious metals, manifested their consumption through export trade, therefore, wages were extremely low in the domestic market, this in order to promote exports and thus be able to increase reserves in metals beautiful.

Trade balance profit

The economics of this system concentrated on a type of balance of trade which was held for a long time due to the rise in prices that resulted in obtaining large amounts of money.

The state

Its role within this system is totally essential and important, this is because it can maximize its power to transform it into a controlling and sovereign state. For this to happen, markets are used to organize the economy and private property.

Economic objectives

These are directly related to the interests of the accumulation of power, which can produce economic solidity and in turn give the State more power politically.

Import and export

Mercantilism favors exports more than imports, since it has the objective of obtaining the greatest amount of wealth possible for the nation, through commercial exchange.

Handling customs taxes

This was one of the most important characteristics that the State controlled, in order to establish customs duties for imports.

The population

For the commerce of this system, the increase in population was essential, because there were a greater number of workers to maintain this economic model and with minimum wages. Most of the time, the work was not rewarded monetarily, because at the beginning of the expansion of this system the employees were slaves and serfs.

Mercantile doctrine and the move to liberalism

This doctrine is based on important measures such as:

• Population growth, to increase the amount of work as an economic source.
• The unification of the domestic market.
• The monopoly formation.

This system with the passage of time, generated many failures that led to certain accusations to the State for intervening too much in the economy, this allowed the Liberal economy took place and it was there that trade was regularized for each individual, leaving the State totally limited in its role and intervention. economical.

Disadvantages of Mercantilism

Due to the measurements made by the system mercantilist, some disadvantages can be determined such as those mentioned below:

• Due to monopoly development, a high price of products was manifested, giving rise to smuggling and the execution of clandestine trade in order to avoid the payment of duties customs.
• The excess of exaggerated extraction of resources or precious metals that were carried out in colonized places, caused many of them to become extinct.
• The exploitation of the colonies, with the intention of extracting precious metals and different raw materials to process them in the industries, as well as the appearance of Dutch, French and English pirates who were looking for a way to attack the Spanish fleets in order to take away the merchandise and wealth that moved.
• This system disappeared in the nineteenth century, when the liberal and physiocratic theory appeared, which were fundamental to rebuild the economy of the seventeenth century and because of the Revolutionary Wars of France.

For a country to grow and increase its wealth, foreign trade must be promoted, this is a way to give way to excess of domestic domestic production, taking into account protectionist policies, export support and the different barriers to duty.