1) Bullionism
Ø Export surpluses
Mercantilism encouraged nations to export more than they imported to accumulate precious metals. Although this approach aims to increase a nation's wealth, it can create a trade imbalance and deprive the nation of needed goods.
Ø Inflation and deflation
If too much money chases too few commodities, the emphasis on hoarding bullion can lead to inflation. On the other hand, an outflow of bullion could lead to deflation that could harm the entire economy
2) Colonial expansion
Ø Exploitation of resources
Merchant colonialism often led to the exploitation of the colonies' resources. This could lead to social and economic disparities within the colonies and contribute to long-term tensions.
Ø Conflicts and wars
Competition for colonial territories among European powers resulted in frequent conflicts and wars, such as the Seven Years' War, as nations sought to secure valuable foreign possessions.
3) Protectionist policies
Ø Prevention of innovation
High tariffs and trade restrictions limited competition and innovation within domestic industries. This hindered technological progress and economic growth.
Ø revenge
When one nation enacts protectionist policies, trading partners often respond with trade barriers of their own, resulting in a cycle of economic protectionism.
4) Trade surpluses
Ø Lack of essential goods
The pursuit of perpetual trade surpluses meant that nations often neglected to import essential goods, leading to shortages of critical resources.
Ø Economic stability
A focus on self-sufficiency can limit economic flexibility and prevent the specialization and division of labor essential to sustainable economic growth.
5) Government intervention
Ø Bureaucracy and corruption
Extensive government intervention can hinder economic progress and lead to bureaucratic inefficiencies and corruption.
Ø A distorted market
Government patronage of particular industries , known as economic mercantilism, can distort markets and discourage competition.
1) the zero-sum View
Ø Opportunities missed
Mercantilism's zero-sum view of trade failed to recognize the potential mutual benefits of international commerce and missed opportunities for nations to improve their prosperity through cooperation.
2) Emphasis on State Power
Ø Totalitarian regimes
Mercantilism favored strong centralized states that controlled economic and colonial affairs. This emphasis on centralized power can lead to authoritarian regimes and undermine individual freedom.
Ø Inefficiency
Centralized decision-making does not always lead to optimal economic choices, as it can lead to bureaucratic inefficiencies and decisions based on political rather than economic considerations.
Written by Manoj
Reference
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