Characteristics of Mercantilism Import prohibition of certain goods using imposition of high tariffs, government legislation or very high taxes/import

t duties. Tariffs to protect domestic businesses from foreign competition. Government must develop its agriculture sector. A wide range of government subsidies on export industries to promote the countrys export -based policy. Policies of nationalism. Accumulation of assets in gold and silver, and prohibition of private accumulation, use or export of these items. Government should control all the routes, e.g. sea and land (which links with foreign markets) One-way trade with colonies, and importation of gold and raw materials from these sources. Every nation should be trying for its economic self efficiency A negative effect of mercantilism was that it encouraged plenty of warfare, since the only way open to get wealth that could not be obtained by trade was to forcefully take it from another country. Conquered territories were made to pay hefty tributes in gold and had their natural resources plundered. Many analysts are also quick to point out that the colonization of territories like Africa and what constitutes Latin America and the West Indies can also be likened to a form of mercantilism. Thomas Mun (1571-1641) Book IV of Adam Smith's Wealth of Nations (1776) is largely a refutation of mercantilistic theory and policy; in it, Smith quotes Mun as a leading mercantilist. Mun (1571-1641) was a director of the East India Company, which had been criticized for two things that some writers found undesirable: (1) England imported more from India than it exported, and (2) England sent precious metals to India to pay for imports. Mun was a typical mercantilista proponent of governmental policies that benefited a particular business interest. Mun's first book, A Discourse of Trade from England Unto the East Indies, was published in 1621; it defended the East India Company against these charges in a partisan manner. His second book, England's Treasure by Forraign Trade, was produced in 1628 and was published posthumously in 1664 by his son. The book had several editions, and its popularity was evidently the reason Smith chose it for rebuttal. It is often said that Mun's 1664 book is the classic of

English mercantilistic literature. English policy was designed to keep the colonies a raw material-exporting economy that was dependent on England for manufactured goods. Mun asserted in the title of his book that England's treasure was gained by foreign trade. His thinking was typically mercantilistic in that he confused the wealth of a nation with its stock of precious metals and therefore argued for a favorable balance of trade and an inflow of gold and silver to settle the trade balance. He believed that government should regulate foreign trade to achieve a favorable balance, encourage importation of cheap raw materials, encourage exportation of manufactured goods, enact protective tariffs on imported manufactured goods, and take other measures to increase population and keep wages low and competitive. Mun presented these mercantilistic ideas but refuted some of the cruder mercantilistic notions that embodied criticisms of the East India Company. He pointed out that even though a favorable balance of trade with all nations was desirable and an outflow of precious metals to all nations was undesirable, the unfavorable balance of trade with and export of precious metals to India was beneficial to England in that such practices enlarged its trade balances with all nations and, thereby, its inflow of gold and silver. By the time the last edition of Mun's famous book was published in 1755, many of the more perceptive mercantilists were seeing the serious errors of the mercantilistic paradigm. These liberal mercantilists were beginning to articulate the intellectual foundation for Smith's Wealth of Nations.

Jean-Baptiste Colbert (1619-1683) The mercantilist ideas of Colbert were familiar: encouraging and keeping bullion in the country so that it can flow into the coffers of the state; prohibiting the export of bullion; cartellizing through compulsory high standards of quality; subsidizing of exports; and restriction on imports until France became selfsufficient. Colbert's ideas on taxation were those of almost every minister of finance everywhere, except they were more clearly and far more candidly expressed: 'The art of taxation', he said, 'consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing'. There is

no more dramatic encapsulation of the inherently conflicting interests of the people vs the state. From the point of view of the state and its rulers, the people are but a giant goose to be plucked as efficaciously as possible. In 17th century France, mercantilism was the dominant economic theory, and was largely instated thanks to the French finance minister Jean-Baptiste Colbert. The theory of mercantilism, and Colbert's reign as finance minister, helped shape France's path during its golden age. Mercantilism is the idea that a country should maintain a favorable balance of trade, meaning that it should export as much as possible and import as little as possible. It also involves the idea of cultivating colonies abroad, who can supply the mother country with raw materials for production and help purchase the finished goods. In France, Colbert instituted an economic system based on the ideas of mercantilism. He put tariffs on goods from foreign countries, a protectionist measure to help the production of domestic industries. At the same time, he promoted the development of New France (which roughly corresponds to today's Canada), and made it illegal for colonists of New France to purchase finished products from any country except for France. Along a similar vein, Colbert worked to promote other domestic industries, such as the production of glass in France to supplant the importation of Venetian glass. He also encouraged Flemish experts in the textile industry to immigrate to France, to help France develop its cloth-making industry. At the same time, Colbert prohibited French workmen from emigrating to other countries. In addition, Colbert founded the French merchant marine. All of these measures were based on the principles of mercantilism, that a country should work to increase its exports and decrease its imports. Colbert was a firm believer in the planned economy, and France's economy was very much planned by him in all areas. He established many regulations on the quality of various goods produced in France. These measures were widely unpopular, and were thought by many to be disadvantageous, since they prevented trade in lower-quality substitutes, many of which would have been desired by consumers. On a more positive note, Colbert equalized duties among provinces of France and improved the roads and canals across the country. This lowered internal trade barriers in France and helped improve trade among provinces. While Colbert did not develop the theory of mercantilism, and few historians would argue that he contributed much to it in terms of his own ideas, he was an ardent supporter of mercantilism and made it a reality in 17th century France.

However, Colbert's mercantilist rules have been widely criticized for being overly draconian.