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Adam Smith coined the term “mercantile system” to describe the system of political economy that desired to enhance the nation by promoting exports and restraining imports. This system was widespread in the Western European economic policies and thought from the 16th to the end of the 18th centuries. The purpose of these policies was, apparently, to achieve a desirable balance of trade, which would perhaps bring silver and gold into the country and to maintain domestic employment. Therefore, mercantilism is the economic nationalism aimed at establishing a powerful and wealthy state.
Mercantilism theory was put into effect in the English colonies by means of the Navigation Acts. Resistance to this thinking was enclosed in the principle of laissez-faire. Mercantilism was a well-liked economic philosophy in the 17th and 18th centuries. In this arrangement, the British colonies were moneymakers for the mother nation. It was a system of the economy that appeared in Europe in the 15th century and ended following the emergence of the absolute states between the16th and 17th centuries. It was not distinguished by the sightless loyalty to a particularly, accurately definite economic theorem. Instead, its supporters embraced, in various degrees, parts of a laid down universally held theoretical standpoints or inclinations, which were appropriate to the requirements of a specific situation and time.
The British placed constraints on the manner in which their colonies used their money in order that they could be in charge of their economies. Tey introduced restrictions on what goods the colonies could produce, whose ships they could utilize, and significantly, with whom they could trade. The British even imposed taxes referred to as duties on imported goods to dishearten this practice. This forced the colonists to purchase the British goods only, instead of other European nations.
Queen Elizabeth endorsed this thinking and passed laws like the Trade and Navigation Acts that were intended to safeguard and promote English shipping. The Navigation Acts stipulated that Colonial exports had to be transported in English ships, and all the Colonial imports had to primarily pass via the English ports. The commodities originating from the American colonies were passed through intense taxes during their shipping to England. Nevertheless, England implemented a policy of Salutary Neglect in the colonies that fundamentally permitted the colonists to infringe or defy the laws related to trade. Other Acts that were enacted include the Iron Act, the Hat Act, and Sugar Act. These Acts were meant to control the colonial trade.
Under mercantilism, colonies were crucial due to the fact that they produced raw materials meant for the mother country and goods that the nation would import such as sugar, grain, and tobacco. The colonies also offered the mother nation a passage for exports, thereby increasing jobs and industrial growth locally. Nevertheless, none of this would have happened if the colonies had traded with other nations, instead of their mother, which is in this case Britain. Therefore, Britain decided to impose rules that would force its colonists to trade only with England. It regulated colonial trade in order to capitalize on profits under the mercantilist system in the year 1660. The King forbade direct exportation too competitive markets. For instance, tobacco that originated from Jamestown had to be shipped to England first, whereby it could be taxed before being transported or sold elsewhere.
A basic difference of view emerged between the British government and the Americans on the related problems of taxing the colonists, including their representation in Parliament. On the one hand, the Americans supported actual representation implying that to be taxed by Parliament, the Americans truly should have real legislators seated and voting in London. On the other hand, the British promoted the idea of virtual representation that was reliant upon the standpoint that a member of parliament virtually represented every individual in the kingdom and there was no point for a particular representative from Massachusetts or Virginia, for instance. The Americans and the British differed over the meaning of representation. By virtual representation, England emphasized that colonial concerns were represented by every member of Parliament while the American colonists supported actual representation, which was geographically founded, as with the colonial assemblies.
The mercantilist period is long gone. Modern economists acknowledge Adam Smith’s idea that free trade leads to international specialization of labor, and typically, to better economic welfare for all states. Nevertheless, mercantilist policies still exist to some extent. Certainly, the flow of protectionist reaction that started with the crisis of oil in the middle of the year 1970, and progressed due to the worldwide recession at the beginning of the year 1980 has made some economists brand the modern pro-export, anti-import mindset as “neomercantilism.”