Was a political movement and an economic theory

Dominated in the modernized parts of europe from 16th to the 18th

century.

Adam Smith was the first person to organize formally most of the
contributions of mercantilists in his book The Wealth of Nations

A nation’s power was directly related to its wealth

Each of country’s soil should be utilized for agriculture,
mining or manufacturing

The trade balances must be favourable.

The economic health or wealth can be measured by the

amount of precious metal , gold, and silver

All imports of foreign goods be discouraged as much as

possible

High tarrifs especially on manufactured good, and low

on imported raw material.
 A large population is important
to provide a domestic labor force
and to people colonies.

Colonies should provide markets

for manufactured goods
and sources of raw material.

Forbidding colonies to trade with other nations

The crown or state should be heavily

involved in regulating
the economy (Rempel 1998).
 EXAMPLE OF MERCHANTILISM

The Stamp Act:

The Stamp Act of 1765
imposed a direct tax on
In seventeenth-century
British colonies and also
The Navigation Acts: France, the state
required that colonies’
Britain’s navigation acts in promoted a controlled
printed materials, such as
1650 were laws created economy with strict
legal document, magazine
to restrict how foreign regulations about the
and etc, be printed on
ship were used for trade. economy and labour
paper carrying an
markets.
embossed revenue stamp,
which was produce in
London.
 MODERN MERCHANTILISM

1. Undervaluation of currency. e.g. government buying foreign currency assets

to keep the exchange rate undervalued and make exports more competitive.

2. Government subsidy of industry for unfair advantage. Again China has

been accused of offering state supported subsidies for industry, leading to
oversupply of industries such as steel – meaning other countries struggle to
compete.

3. A surge of protectionist sentiment, e.g. US tariffs on Chinese imports,

and US policies to ‘Buy American.’