ECS3705
Assignment 1
Unique No:
Due 25 September 2025
, ECS3705
Assessment 1
Semester 2, 2025
Question 1
Mercantilist views on wealth creation, stimulation of wealth, and the role of
government
Wealth Creation
According to mercantilist thought, the prosperity of a nation was not measured by the
standard of living of its citizens, but rather by the stockpile of precious metals—
particularly gold and silver—held in its treasury. National wealth was therefore equated
with the ability to accumulate bullion. To achieve this, countries pursued policies that
encouraged exports and discouraged imports, thereby ensuring trade surpluses that
would bring precious metals into the country. Manufactured goods were prioritised over
the export of raw materials, since finished products generated greater profits in
international markets and enhanced national competitiveness. This approach was also
tied to political power, as larger bullion reserves meant greater capacity to fund armies
and exert global influence.
Stimulation of Wealth
Mercantilists believed that wealth could be expanded through state-led support of
domestic industries. To this end, governments offered subsidies to producers,
encouraged citizens to purchase local goods, and imposed import tariffs to protect
national industries from foreign competition. Colonies were viewed as essential
extensions of the home economy, supplying inexpensive raw materials and serving as
guaranteed markets for manufactured exports. Strong navies and merchant fleets were
built to safeguard trade routes and secure commercial dominance. Furthermore,
mercantilists encouraged low interest rates so that merchants could access credit
easily, invest in enterprises, and expand trade.
Assignment 1
Unique No:
Due 25 September 2025
, ECS3705
Assessment 1
Semester 2, 2025
Question 1
Mercantilist views on wealth creation, stimulation of wealth, and the role of
government
Wealth Creation
According to mercantilist thought, the prosperity of a nation was not measured by the
standard of living of its citizens, but rather by the stockpile of precious metals—
particularly gold and silver—held in its treasury. National wealth was therefore equated
with the ability to accumulate bullion. To achieve this, countries pursued policies that
encouraged exports and discouraged imports, thereby ensuring trade surpluses that
would bring precious metals into the country. Manufactured goods were prioritised over
the export of raw materials, since finished products generated greater profits in
international markets and enhanced national competitiveness. This approach was also
tied to political power, as larger bullion reserves meant greater capacity to fund armies
and exert global influence.
Stimulation of Wealth
Mercantilists believed that wealth could be expanded through state-led support of
domestic industries. To this end, governments offered subsidies to producers,
encouraged citizens to purchase local goods, and imposed import tariffs to protect
national industries from foreign competition. Colonies were viewed as essential
extensions of the home economy, supplying inexpensive raw materials and serving as
guaranteed markets for manufactured exports. Strong navies and merchant fleets were
built to safeguard trade routes and secure commercial dominance. Furthermore,
mercantilists encouraged low interest rates so that merchants could access credit
easily, invest in enterprises, and expand trade.
