Mercantilism, Liberalism, and Neo-Mercantilism

a. Mercantilism:
• It is based on the European thoughts in 16th to 17th centuries with the focuses on nation’s
welfare while believing on the notion of national interests are inevitably in conflict which
means that one nation could only increase its trade through expense of the others.
Mercantilism argues that possessing gold as a form of wealth is an important measure for
nations’ national policy. Mercantilists treat gold as precious as an article of faith. Its trade
policy includes; encourage exports, discourage imports, promote exports with income in
the form of gold.
• Ex: English Navigation Act 1651gives the right of home countries to trade with their
colonies but prohibit the goods import of non- European countries unless transported in
ships with English flags.
b. Liberalism:
• Based on the principle of personal liberty, private property, and limited government
interferences. In economy it depicts the elimination of restriction on the choice of
occupations or transfers of land and trade. Liberalists believe in cooperation thereby exists
trade agreements.
• Ex: Anglo - French trade agreement (1860) on French protective duties were to be lessen
to a maximum of 25% within five years, with free entry of all French products except
wines into Britain which then was followed by other European traders.
c. Neo- Mercantilism:
• discourage import, value national power than individual consumption of their citizens,
allows government interventions on the marketplace
• Ex: During the great depression (1930s), the number of unemployment increased to an
unprecedented levels resulting to the attempt of countries on balance of payment by
raising their customs duties and introducing a range of import quotas or even import
prohibitions, accompanied by exchange controls.
* Mercantilists ideas of trade are seen as shallow, and their are too much of trade restriction
prevent states to conduct international trade. It also weaken countries in the long run and only
enrich few segments. Besides, because of the excessive use of golds during 16th and 17th
century, it becomes irrelevant to the world then.