Principles of foreign trade of mercantilists, World economy...

Principles of foreign trade of mercantilists

On this post, the basic principles of foreign trade rested, according to which the state was supposed to:

• provide a monopoly on foreign trade;

• grant rights (or refuse) to foreign trade to certain companies and in certain regions of the world (for example, Hudson's Bay Company, East India Company, etc.);

• use tools such as the provision of export subsidies, customs duties on imports, etc .;

• Provide a positive trade balance, because only in this case, governments have the opportunity to maintain a steady flow of gold and silver into the country;

• implement strict (state) regulation of foreign trade by introducing tariffs, quotas and other instruments of administrative influence (to ensure a positive trade balance);

• prohibit the import of raw materials (if there is one in the country) and, conversely, provide duty-free exports (if there is no corresponding raw material in the country) - this approach should have accumulated gold reserves and simultaneously keep export prices for finished products at a low level .

With the development of capitalism, many provisions of mercantilists simply interfered with the development of the national economy and the establishment of foreign economic relations, primarily because of excessive mercantileism " (an excessively high level) of state intervention in the economy, in the activities of private industrial and trading companies. Many representatives of the new generation of entrepreneurs advocated freedom of trade ( freetrade ) and, more broadly, for the principles laissez-faire , rejecting state intervention in the economy and foreign trade.


The French economist, Professor Jean-Louis Muchelly formulated the main issues of international trade as follows.

1. Why does a particular country participate in international trade?

2. What are the forms of this participation?

3. Is specialization effective from the point of view of the foreign trade balance and the receipt of income from trade?

4. What is the most effective international specialization and what macroeconomic and trade policy should be pursued in order to deepen, improve or change the international specialization?

5. How does the integration process affect the specialization within the European Union?

These questions reflect the essence and substance of international trade. At the same time, the current practice of international trade raises new questions, new problems, including those related to the reverse effect of international trade on the overall state of the national economy.

The World Economy and International Trade of the Second Half of the 18th-19th Century

Strengthening the commercial and industrial bourgeoisie, the rapid development of foreign trade relations, which embraced all the continents and created a world market, required a theoretical and methodological justification. This role was brilliantly performed by outstanding economists of that era, among the first of which is the name of Adam Smith, an English economist scientist. What was the United Kingdom then?

In the XVIII - first half of the XIX centuries. the European powers and the United States owned 80.8% of the territory of Africa, 27.5% - America, 51.5% - Asia, 56.7% - Oceania, 100% - Australia. The territory of the British colonies was 22.5 million square meters. km (75 times more than the metropolitan territory), and the population - 252 million people. (6 times more than in the metropolis). The share of colonies accounted for 30% of UK exports. In 1850, out of the total world trade turnover of 14.5 billion marks, Britain (with colonies) accounted for 5.24 billion, for France, Germany, and the United States - for a total of 4.9 billion marks. In 1870, Britain's share was 14 billion marks out of 37.5 billion (the total share of these three countries barely reached 12 billion marks). Britain at that time was, undoubtedly, the largest, in fact, a world-wide colonial power, over its empire "the sun never set in" (Asia, Africa, Latin America, island territories in the World Ocean).

The most important element of the world commercial and industrial hegemony of the UK was the rapid development of the loan. The dominant position in world industry and trade was secured by Great Britain's accumulations, which created the conditions for the development of credit. In the middle of the XIX century. London has become a global financial center, where many foreign government loans were located. English capitalism played the role of a world manufacturer, merchant, carrier of goods and a world banker. The country in the middle of the XIX century. produced about half of the world's industrial output, industrial revolutions followed one after another, while in other countries they lagged behind. The industrial and commercial hegemony of Great Britain was promoted by the economic policy of the British monarchy: in Great Britain, high customs duties on foreign goods dominated. When English industry did not become afraid of foreign competition, the bourgeoisie proclaimed unrestricted freedom of trade - the so-called free trade (free trade). One of the main free trade acts was the abolition of the Bread Acts in 1846.

The great English (Scottish) economist Adam Smith created the general economic theory of the "classic" capitalism, in which the most important place is devoted to the study of international trade.

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)