The economic policy of the state influences both external and internal spheres of its activity. One of its main types is the politics of mercantilism.
Prerequisites
Since the 15th century, European states have become more active in terms of international relations, international economic ties have developed, the first large organizations appear, like the East India Trading Company. All this prompted the economists of that era to create a system of rules and doctrines, expressed in the politics of mercantilism, the main idea of which was the active participation of the state in the economic activities of the country and its inhabitants in order to accumulate money, gold and silver.
The concept of mercantilism is closely related to the concept of protectionism, a political doctrine according to which economic ties with other countries are limited, capital outflow and consumption of foreign goods are prohibited.
Principles of the politics of mercantilism
In such European countries as England, France, Germany and Austria, in the XV-XVI centuries. the policy of mercantilism was reduced to the accumulation of funds in the country by any means. These purposes were served by restrictions on the import of foreign goods, bans on the export of gold and silver from the country, a ban on the purchase of foreign products at the expense of income received from the sale of goods abroad, etc. Over time, these installations were modified and changed, and from the end of the 16th century to the middle of the 19th century, the policy of mercantilism gradually moved away from strict restrictions on the export of valuable metals.
Late mercantilism
By the end of the 19th century, mercantilism had already been accepted as the main economic doctrine by all the strongest European powers. Artificial interference of the authorities in economic life led not only to positive economic consequences (an increase in the trade balance, GDP growth, improvement in the welfare of the population), but also to the development of technological support for production, an increase in the birth rate, a decrease in social tension and an improvement in the quality of life of the population. According to economic historians such as Immanuel Wahlerstein and Charles Wilson, the technological revolution in England in the 19th would not have occurred without the practical application of the principles of mercantilism.
The pursuit of a mercantilist policy will be difficult if the country lacks natural resources. This means the lack of developed production, in connection with which the accumulation of capital becomes problematic.
Criticism of mercantilism
Assessing the economic well-being of a country only from the point of view of the availability of funds in it is not entirely correct. Adam Smith, one of the greatest economists of that era, wrote that large gold and monetary reserves of a country do not have the proper impact on economic development without a developed supply and demand in the market for goods and services, as well as without a developed fixed capital. In other words, it is not the very presence of money and precious metals in the state treasury that is important, but their competent use for the benefit of the development of the market, production, demand and consumption.
