Question

The mercantilism philosophy, prevalent in the 16^th to 18^th centuries, was supplanted by free trade in the western world. Describe the mercantilism philosophy and contrast with that of free trade. Specifically, evaluate each system in terms of national wealth, balance of trade, trade restrictions and use of military power.   Make an argument as to why Global Free Trade is now, for the most part, the prevailing viewpoint in the world

Answer 1

Mercantilism philosophy : is to increase the national wealth by imposing government regulations on foreign trade. This philosophy supports trade restrictions on foreign trade to improve their foreign trade and maintain balance of trade.

Free trade : it means trade between countries without any restrictions.

Evaluation of these terms:

• National wealth: mercantilists wanted to increase their national wealth by increasing their exports and limiting their imports and importing new and modern techniques.

Under free trade government wants to increase their national wealth by increasing their foreign trade with different countries.

• balance of trade: mercantilism maintain their balance of trade by encouraging exports and imposing tariffs on imports

                             Under free trade balance of trade is earned by increasing their exports .

• trade restrictions: different types of trade restrictions are applied on import and exports of goods and services for trade restrictions under mercantilism.

There is no restrictions on export and import of good and servoes under free trade.   

• use of military power. Mercantilists used military powers to protect their trade practices.

Under free trade there is less use of military power.      

The global free trade has become as important part of every economy. Free trade leads to increase in flow of currency among people, it provides new techniques, goods and services to countries at low cost