The Mercantile policy was an economic theory used in the periods16th to 18th century and it stated that prosperity of a nation was dependant upon the supply of capital and the total volume of international trade. This theory implied that a country had to employ protectionist policy to prosper and this was thus done through the encouragement of exports and discouragement of imports. The tools employed to facilitate this included tariffs and subsidies; therefore commodities such as gold and silver were prohibited from being exported.
The Mercantile policy had both positive and negative impacts; both internally and externally. However, its internal impact was less compared to its external impact. Internally, it brought about changes in governance system with the government controlling all the resources. It also saw the introduction of a capitalist system of governance. The main positive impact of Mercantilism was the creation of riches for the British rulers and merchants. This was achieved through the exploitation of foreign lands such as India, Latin America and later on, Africa.
The exploitation was done through establishing trade relations with the targeted countries and soon after; overthrowing the native rulers and setting up a colony. The colonies were made to pay heavy taxes to their colonial masters thereby enriching the British masters. Apart from paying taxes, raw materials were extracted from these countries to serve as a source of cheap raw materials for the colonial masters’ homeland industries. To make matters worse, merchants were given exclusive rights to mines and plantations to further ensure the availability of cheap raw material such as gold, jewelry and silver.
In the long run, the British coffers were enriched at the expense of the colonies and as a result, the British gathered enough wealth that made them embrace the industrial revolution that was in progress (McCusker, British Mercantilist Policies and the American Colonies). Secondly, it paved way for the introduction of political economy as a scientific discipline. Many writers came up to write articles concerning Mercantilism with others criticizing it while other supporting it.
Many discussions came up as to the meaning of mercantile with others stating that it was a zero sum theory while others argued that it was a system that promoted corruption and laziness in the country. As a result, this period saw the coming up of renowned political economist such as David Ricardo and Adam Smith. Adam Smith on his part criticized the mercantile system and agitated for a Laissez-faire economy where forces of demand and supply determined the prices of commodities.
On the other hand, Ricardo called for the adoption of comparative advantage method in dealing with international trade. All these developments brought about changes in the functioning of the economy that led to the abolition of protectionist and adoption of free market economy. Considering the time in which mercantilism took place; that is, when most European countries were undergoing the transition from feudal governance to central governance, it paved way for international trade.
Prior to the centralization of government, the economy was divided into feudal estates which made trade quite difficult to carry. However, with the transition accompanied by technological changes in shipping and modernization of urban centers, trade became easier thus promoting international trade. Therefore, with the mercantilism system in place, focus was made on how to improve trade. Another positive impact was the introduction of modern accounting that incorporated book keeping. This led to accurate accountability of transactions made during international trade.
As a result, a clear picture of balance of trade could be seen and a country balance of payment position easily determined. This made trade much easier and further contributed to international trade (McCusker, British Mercantilist Policies and the American Colonies). However, mercantilism had negative effects especially on the colonies. First, in pursuit of mercantilism, the political freedoms of the colonies were deprived. Freedom of governance was taken away by the colonial masters making them answerable to colonial masters’ foreign rule.
This went hand in hand with the deprivation of their human rights. The colonies’ populace had to work for very long hours in farms plantations with an insignificant amount of wage. They were subjected to harsh treatment with very little time to rest and yet they were working on there own lands. Secondly, the economic freedoms of the colonies were also deprived. This was in the form of expatriation of economic resources from the colonial land to British land thus enriching the British at the expense of the Colonies.
Further still, mercantilism led to the erosion of cultural and religious practices of the colonies. With the introduction of Christianity during colonization, many indiginous religious believes of the colonies were eroded thus interfering with their religious freedom. In conclusion, it can be asserted that British mercantilism paved way for the modernization of trade especially international trade. Comparative method of international trade was incorporated that saw two countries endowed with different resources mutually benefiting from each other.
Above all, mercantilism initiated free market economy proposed by Adam smith that saw free functioning of the economy with little government interference. All these were essential in the growth of British colonial development. Works Cited McCusker, John J. “British Mercantilist Policies and the American Colonies. ” The Colonial Era. Eds. Stanley L. Engerman and Robert E. Gallman. Cambridge University Press, 1996. Cambridge Histories Online. Cambridge University Press. 22 February 2009