The demand for gold and silver in Europe had risen sharply in the seventeenth century. People needed them for trade but, their supply was low. The economist decided to weigh gold and silver as a means to trade as there was no paper money. The magnitude of trade was high and the supply of gold and silver low. Thus countries were holding onto their gold and silver hence restricting international trade. Mercantilist saw the bullionist restrictions as an impediment to trade. The mercantilist wanted the government to allow import and export trade to continue. When a country is importing goods to another country, it uses its currency, and when exporting, the recipient country uses its money.
This way according to the economist, they would get more money from export while discouraging imports. They created trade monopolies with the intention of controlling the market price to their advantage. Merchants were also given government subsidies to compete in the foreign market much efficiently. Various hurdles were put by the England authorities to curb the importation of goods. The duties on some products were increased to discourage merchants from importing those goods. These restrictions benefited some individuals while others were adversely affected. The state took over critical industries by changing regulations. It now controlled the labor force, the wages people should be payed and where more efforts need to be put. The state now had a grasp of trade, domestic production, and commerce.
The author supports the decision of the State to embrace and find a favorable balance of trade. The balance of trade is intended to encourage exports while limiting imports from foreign countries. This way England would get more gold from the business than what is going out to other countries. Measure are put in place to hinder importation by charging exorbitantly. Monopolies are also started. Merchants are discouraged from competing with traders from the same country. Subsidies are started to shield the merchants from losses arising from competing with foreign traders.
The argument I found unconvincing is that monopolies help a Nation. A monopoly economic policy will only shield young, and growing industries from foreign competition in the short-run. In the long-run, it will lead to the production of inferior products by the company. Competition leads to innovation and innovation translates to more excellent quality of goods. The consumers after realizing the product they are consuming are inferior. They will all shift to the competitors product leading to the reduction in sales. The decline in sales will lead to the company not getting enough revenue to cater for its productions. They will be forced to lay off some workers, and if it persists, they will shut down the company down. This scenario will lead to massive job loss and affect the economy of a country. If all the States decide to give subsidies to its companies, this is not economically viable in the long-run. For how long will the government give grants? Taxation has to be increased for the government to afford giving out subsidies. Thus, overburdening the ordinary citizen.
Stark, Werner. The History of Economics. Hoboken: Taylor and Francis, 2013. Print.
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