Mercantilism IPE

Mercantilism – Salim H.
Ali
 Mercantilism was an economic theory and practice which first emerged

in Europe alongside with the emergence of nation-states from the 16th
century until the 18th century, and mainly called for the governmental
regulation of economies and foreign trade in order for countries to
develop and protect their national economies and gain national power
and wealth at the cost of other countries around the world.
 According to mercantilists, a country could develop and protect its

economy by and limiting/reducing the imports to the country and
increase its exports to other countries around the world in order to
protect its local industries, which will benefit the country a lot and harm
other countries at the same time.
฀ What are imports? – they are the goods and services that gets into a
country from other countries.
฀ What are exports? – they are the goods and services that goes out
from a country to other countries.
 Today, mercantilism exists as neomercantilism, economic nationalism,

and protectionism.
 How can mercantilism be implemented?
 According to mercantilism, in order to increase the number of exports

of a country and reduce its imports, countries must impose tariffs
(import taxes) and provide export subsidies to the producers, especially
those who export a lot to other countries, within the economy.
฀ What is export subsidy? – it is the governmental support to the
producers within the economy in order to encourage them to export
more to different countries around the world. Export subsidies could
be in different forms, for example, low taxes on exports, providing
soft loans (low/zero-interest loans) to producers, setting minimum
prices on goods for exports, etc.
฀ Extra information – tariffs and export subsidies are considered

protectionist measures that undermine free trade.
 The Great Depression & Mercantilism:
 During the 1930’s, when the Great Depression took place, mercantilism
began to be practiced by many countries around the world, especially
developed countries, due to the economic recessions and crises they
faced at that time.
 So, countries adopted protectionism to reduce its imports and increase

its exports in order to prevent their local industries from failing
(‘Beggar-thy-neighbor’ policies).
 What does the ‘beggar-thy-neighbor policies’ refers to? – it refers to

the protection of the national economy by reducing imports to the
country and increasing exports to other countries, which is related to
the mercantilist policies.
 Countries succeeded in achieving that through encouraging the

consumption of local-produced goods and services, rather than the
imported ones, and also through using several protectionist
measures/polices, for example, imposing more import tariffs, setting
import quotas, devaluating national currency, import bans, etc.
2
 Import-Substituting Industrialization (ISI):
 Following the independence of many countries in Asia, Africa and Latin

America, the Import-Substituting Industrialization was implemented by
such countries in order to protect their new local industries (infant
industries) from the cheap and better-quality imports from other
countries around the world.
 What is Import-Substituting Industrialization (ISI)? – it is the protection

of the new local industries from the cheap foreign imports from other
countries, especially developed countries, in order to allow such
industries to grow and be efficient over time, through for example,
imposing more tariffs, setting import quotas, import bans, etc.
 What is the disadvantage of the ISI? – the ISI could turn the new local
industries into monopolies over time within the country that
implements it, which is definitely not good for consumers.
 The emergence of free trade & the decline of protectionism:
 After the end of the Second World War, a new economic order was
established in the world, mainly to promote capitalism and free trade
and reduce protectionism as much as possible through establishing the
World Trade Organization (WTO), the International Monetary Fund
(IMF), and the World Bank (WB), in order to promote the liberal
economic policies around the world, for example, privatization, tax
cuts, reduce tariffs rates, etc.
3
 The rise/emergence of Neo-mercantilism:
 In the recent decades, although free trade exist and mercantilism

disappeared, some countries, especially Asian countries with fast-
growing economies (ex. Japan, Singapore, South Korea, etc.), started
moving towards implementing policies which are related to
mercantilism (ex. imposing more tariffs, capital controls, providing
export subsidies, etc.) in order to protect their local industries, leading
to the emergence of neomercantilism.
 Recent events that are linked to Neo-mercantilism:
1) Tensions between the United States and China due to economic

nationalism and protectionism in both countries.
2) Britain’s withdrawal from the European Union (EU) (Brexit).
3) The opposition by developed countries to the emigration of workers

from developing countries to their countries.
4) The Covid-19 Pandemic and how it made countries seek what’s best
for them only.

Mercantilism IPE

Uploaded by

Copyright:

Available Formats

Mercantilism IPE

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Mercantilism IPE

Uploaded by

Copyright:

Available Formats

Mercantilism – Salim H.

 Mercantilism was an economic theory and practice which first emerged

 According to mercantilists, a country could develop and protect its

 Today, mercantilism exists as neomercantilism, economic nationalism,

 How can mercantilism be implemented?

 According to mercantilism, in order to increase the number of exports

฀ Extra information – tariffs and export subsidies are considered

 The Great Depression & Mercantilism:

 So, countries adopted protectionism to reduce its imports and increase

 What does the ‘beggar-thy-neighbor policies’ refers to? – it refers to

 Countries succeeded in achieving that through encouraging the

 Following the independence of many countries in Asia, Africa and Latin

 What is Import-Substituting Industrialization (ISI)? – it is the protection

 The emergence of free trade & the decline of protectionism:

 In the recent decades, although free trade exist and mercantilism

 Recent events that are linked to Neo-mercantilism:

1) Tensions between the United States and China due to economic

2) Britain’s withdrawal from the European Union (EU) (Brexit).

3) The opposition by developed countries to the emigration of workers

You might also like