Answer to Question #143428 in Economics for Neba

Question

What is mercantilism? Write
A) factors that shaping mercantilism
B) characteristics of mercantilism

Answer 1

A. The main factors shaping mercantilism:

1) economic factors: development of the exhanging economy, prevalence of industry over agriculture;

2) political factors: the emergence of strong nations like England, France, Spain, etc, decline of feudalism, growth of Kings power;

3) religious factors: challenging of the Pope authority by the Reformation;

4) cultural factors: change of values due to the Renaissance and education influence: worldly life became more important than heavenly, thus the value of money increased;

5) scientific factors: discovery of the compass opened new countries with more resources and trading potential.

B. The main characteristics of mercantilism:

1. Mercantilism firmly believed that gold was the basis of wealth and power. 

2.The aim of the Mercantilist theory of foreign trade was to get large amount of precious metals.

3. The mercantilists considered commerce and industry as the most important branches of the national economy. 

4. They encouraged large population for making the nation militarily strong and for increasing its productive capacity. 

5. The mercantilists wanted to utilize all the natural resources to the maximum extent so as to produce more, export more and import less.

6. They did not give much importance to the problems of wages and rent.

7. Mercantilists recognised three important factors of production, namely, land, labour and capital.