Case Study

lnternational E s, i 5th Edition 47

Chapier J \\'irr ELr t rir''h

benefits fcr clomestic 0ducei' ir'lterests (in irotli

was the PirilosoPhY tha,t.n.11::

L-uropean thinking allout internationa! trade rn

in-"i*-tt, ,*ntoii*' br:{r:re Ariam 5mith p'ub-

il-.,i i'; wedlth of tlatit:ns irr 1776' lrlcrcantilists ,l**l it.it-tnational irade a5 a sour(e of major o-"-litt tc a naliorr' Merctrants enqacef.

in

i*o-, especially tho:* selilrrg exports' were Onod* f,*na* tire n:lme nercantilism'

But m*r-

I"ntiriu,t also maintairrec that government regu-

lation af trade !'v'*s ne(eisary tcl provide the

i.rn-tt t;;ti"-ii r:enefirs' Trade nierchants wculd

s*lve 'rheir cwil intere$ts aniJ r]ot ihe natiorral

intere!r. in ihe abse nc* of goverirnrent guidance'

"'"i".*"rr..i b*lief oi rnertantilisnr was .that

nationat u,'eli-being, or wealth was based on

;-;;;;,;' nalJing' ii soid and silver (specie or

n.liii-t'i' eiverr this 'iiew ot netionai wealth' ;;o;,;; *;t- vie'r"-erj as goorJ anc imqorllj.*lt*o' tui i"*"0 nraterials rtot produced at homej^were

,i*r, n. b;d' li a tountrv seils.(exFlortsl,,ntoi* to

{nrpinrr l)ir'/crs than llir-' foreigners seli tc the ' u' L Y r

; inr$orts)' then lhe for eigtt-c0untry {li-re counirY'l uir-[ro.'to pay fr:r the exeess at their

purchases

iro ,n'pping'goid anll cilver to the cauntry' The

o'.',r''i-r-tf"ii ancJ siiver increases ihe country's

,"n;eil-being, atccrdirir; lo the m€rcarrtilist belief'

;;;;";t; ai* undesir;rhle betause they recluce the

country's ability to 'ti{umLliate these precir:us

rrletal-c' 1;llpolts were also feareci because they

,.r,inn"'.l", it- :rvailart:ie to the r:ountry in time o{

;r;1. i,, l*ciciitlon, golc errd silver accruing to tlt{"-

,,ntio,.rui ru!erl cor't!cl be especiall;' vair'rahle in

;;ip;;t; to maintain a large rr:iiitary for the coun-

try. Baseel on mereantillsi tninfing' governments

(1) irrrpcseri arr alr*! af taxes and pi"ohibitions

;;;;";; ta lirnil irnports anri {2) subsidi;zed ar'd

t,nccur.r qeci expoi'l5

Because cf iis peculiar emphasis or': gold

unJ ruu*r' n:ercantiiisri viewecJ trade as a zero'

sr-.irTl aeiiviiy*one cOuntry's gains come at r'he

expeilse of -some other crfuniri*s' since a surpius

in irrlerrr*tional trade fr:r one ccuntry inu-qt Lre a

,l*ticii for so;r:e other(s)' The focus iln t)rorrlcting

*"p-tqt"C limitinq imnorts aiso provided rnajcr

ex.Porting and imPort-

.Adanr 5rnith *rr nainted out that t n'1ore exports and priorities u Siside dorn'i

that ref ute merranlii

National wetl-h'ein co!1sume Proeluits leisure and a ciea

the future' lmPor"t

incr:me tr: kluY P are not desirable

positive -sum

ln addition' even ancl silver can be

tion exPands the

ompeti nq I nfl Lr51-ries)' econ0misrs a{ter him mercdntiiist5' PLtsi' {oi

r imParts turns social , l'}ere are th* key Points t thinkinil:

is bare'J cn the abitity ta

and otlier "qoods" such as

e!'rv-ilofirnent) now arrd in

arc Parl of tne exPantlirrg

nalianal ProdLrctlon and

dire ct: TheY Provide tht uttt to {onsume' !;xPorts fheir own; i"{ttheI; exports

f-c,lefeating if ihi: acqut:t" rnestit. t"nr:rre! SuPPlY 31ql

.rv. it ricw riaq a tirarp {or tts

:jmercaniilists believe ihat-

se they ci'eate jci:s in the

bad berauEe iheY take jshs

qive thern to foreigners' i''le o"

e to dePict trade as a zero' ri0 riliogttttit-rll tllal tl d(lr' '".rl ntr ies (including nrurtua\ g'tttts

o:p*rity ris*s iirrou13hor'lt tl':e

ininr.ing, though misguided'

ions cf lnternational trade in

r')atioilal LonSurnP that a rlaticrl see ks, nt:t

an evil ta i:e suP

lhe imPortafi(e exports is onlV

are useful becau theY PaY f rrt imPurts'

* Trade f reeiY trar teri be tween coLrtitr ie: gett-

eraliY leads to gat s for ali countries*trade is a

ty.

goal o i acquir ing gr:ld

argument f irst exP

before Smith diri ht

leads t0 clome:tic in lation of Prorluct Prices*-an ded bY David llume even

Although the P wriiing. nositic.ns of the mercantilists

irave been rafuteci' rd countrie: nr: lorrger focus

r:n piiing '-lP gold ci silver, tnercantiiist thirrkinq

is ver',; milch alive t

orr etnPloYment' exports are good

cot,ntry. lrfiPorts ar

front tlre ccuntry ail

rnercantilists contt

surn artivi iY. "1'here

bring gajns to all in emPl0yneni as

world). Metcantiiis still Pervades disc

c()untries all over t world