What is mercantilism? This concept can often be heard from people or on TV. It is worth noting that this word should not be confused with commercialism. So what is hiding under this term?
In this article we will tell you what mercantilism is and what it can be.
What does mercantilism mean?
Mercantilism (lat. mercanti - to trade) - a system of doctrines that proved the need for active government intervention in economic activity, mainly in the form of protectionism - the establishment of high import duties, the issuance of subsidies to national producers, etc.
In simple terms, mercantilism is the first separate theoretical doctrine that tried to comprehend economic processes separately from religion and philosophy.
This teaching arose at a time when subsistence farming was replaced by commodity-money relations. Under mercantilism, they tend to sell more products abroad than to buy, which leads to an increase in funds within the state.
It follows from this that the supporters of mercantilism adhere to the following rule: to export more than to import, as well as to invest in domestic projects, which over time leads to a high development of the economy.
Following these principles, the government must maintain a monetary balance by promoting such bills that would help increase finance in the country. In such circumstances, the state obliges foreign traders to spend all profits on the purchase of local products, prohibits the export of precious metals and other valuables abroad.
The followers of the trade balance theory found the key principles of mercantilism in increasing the competitiveness of domestic goods. This led to the emergence of the so-called thesis - "the usefulness of poverty."
Low salaries lead to a decrease in the cost of goods, which makes them attractive in the world market. Consequently, low wages are beneficial to the state, since the poverty of the people leads to an increase in money in the country.
