Mercantilism: International Trade and Favorable Balance
Wayllon Lu
10/20/13
European History AP 2. Discuss economic policies and institutions that characterized mercantilism systems 1600-1800.
During the Age of Exploration, mercantilism was the main economic philosophy. Mercantilism is a collection of governmental policies for the regulation of economic activities, mainly commercial activities, by and for the state. There are multiple ideas that characterize mercantilism. Mercantilism is characterized by the country applying policies and institutions such as the Navigational Acts, towards having a favorable balance of trade, extending borders, and having all of the economic goals set towards enriching the mother country.
Having a favorable balance of trade was essential to mercantilism. A favorable balance of trade meant that there were more goods leaving the country to be sold (exports) than there were goods coming into the country to be bought (imports). This allows the country to be making more money than it’s losing. This means that the country will be making a profit instead of losing money or being at a standstill economically speaking. Jean Baptiste Colbert of France applied this idea to France by making France self-sufficient, so that France would not have to buy anything outside of itself meaning no imports. He did this by setting up a system of state inspection and regulation on domestic goods. He made domestic industries meet very high standards on their products because then the French could buy high quality goods locally instead of buying the same goods internationally. Also, a key component for France’s favorable balance of trade included Colbert applying high tariffs to imports. This would encourage the French to buy less goods from other countries. This gave citizens a higher incentive to stop buying imports and to buy domestically made goods. Now French goods were of high quality and they were much cheaper than imported goods. These two ideas (self-sufficiency & tariffs)
10/20/13
European History AP 2. Discuss economic policies and institutions that characterized mercantilism systems 1600-1800.
During the Age of Exploration, mercantilism was the main economic philosophy. Mercantilism is a collection of governmental policies for the regulation of economic activities, mainly commercial activities, by and for the state. There are multiple ideas that characterize mercantilism. Mercantilism is characterized by the country applying policies and institutions such as the Navigational Acts, towards having a favorable balance of trade, extending borders, and having all of the economic goals set towards enriching the mother country.
Having a favorable balance of trade was essential to mercantilism. A favorable balance of trade meant that there were more goods leaving the country to be sold (exports) than there were goods coming into the country to be bought (imports). This allows the country to be making more money than it’s losing. This means that the country will be making a profit instead of losing money or being at a standstill economically speaking. Jean Baptiste Colbert of France applied this idea to France by making France self-sufficient, so that France would not have to buy anything outside of itself meaning no imports. He did this by setting up a system of state inspection and regulation on domestic goods. He made domestic industries meet very high standards on their products because then the French could buy high quality goods locally instead of buying the same goods internationally. Also, a key component for France’s favorable balance of trade included Colbert applying high tariffs to imports. This would encourage the French to buy less goods from other countries. This gave citizens a higher incentive to stop buying imports and to buy domestically made goods. Now French goods were of high quality and they were much cheaper than imported goods. These two ideas (self-sufficiency & tariffs)