ECS3705 Assignment 1
Semester 2 Memo
(COMPLETE ANSWERS) Due
25 September 2025
For assistance contact
Email:
, Mercantilist Views on Wealth Creation, Wealth Stimulation, and the Role of Government
Mercantilism, a dominant economic theory from the 16th to the 18th centuries, held a distinct
and, at times, rigid perspective on wealth creation. In the Mercantilist view, a nation's wealth was
measured by its accumulation of precious metals, primarily gold and silver. This was seen as a
finite, zero-sum game: for one nation to gain wealth, another must lose it. The primary goal was
to maximize exports and minimize imports to ensure a favorable balance of trade. This surplus
would result in an inflow of bullion, directly increasing the nation's wealth. Mercantilists
believed that domestic production, particularly of finished goods, was the engine of this process,
as it provided the products for export and reduced the need for foreign imports.
To stimulate this wealth-creation process, Mercantilist states employed a range of protectionist
and interventionist policies. The primary mechanism for wealth stimulation was the control of
international trade. This was achieved through the imposition of high tariffs on imported goods
to make them prohibitively expensive and the use of subsidies to support domestic industries,
making their exports more competitive. Furthermore, states actively sought to establish colonies,
which served a dual purpose: they provided a source of cheap raw materials for the home
country's industries and acted as a captive market for its finished goods. This system of trade
monopolies and state-sanctioned companies, such as the British East India Company, was central
to the Mercantilist strategy of stimulating a trade surplus and accumulating wealth.
The Mercantilist school of thought assigned a central and powerful role to the government in the
economy. Unlike later laissez-faire theories, Mercantilism viewed the state as the primary
orchestrator of economic activity. The government's role was to regulate all aspects of the
economy to achieve a positive balance of trade. This included setting wage and price controls,
granting monopolies to favored companies, controlling and directing colonial trade, and funding
a strong navy to protect trade routes. This active state intervention was not for the welfare of
individual citizens but for the power and enrichment of the state itself. The government was seen
as the crucial agent in ensuring national security and political dominance through economic
strength.
Semester 2 Memo
(COMPLETE ANSWERS) Due
25 September 2025
For assistance contact
Email:
, Mercantilist Views on Wealth Creation, Wealth Stimulation, and the Role of Government
Mercantilism, a dominant economic theory from the 16th to the 18th centuries, held a distinct
and, at times, rigid perspective on wealth creation. In the Mercantilist view, a nation's wealth was
measured by its accumulation of precious metals, primarily gold and silver. This was seen as a
finite, zero-sum game: for one nation to gain wealth, another must lose it. The primary goal was
to maximize exports and minimize imports to ensure a favorable balance of trade. This surplus
would result in an inflow of bullion, directly increasing the nation's wealth. Mercantilists
believed that domestic production, particularly of finished goods, was the engine of this process,
as it provided the products for export and reduced the need for foreign imports.
To stimulate this wealth-creation process, Mercantilist states employed a range of protectionist
and interventionist policies. The primary mechanism for wealth stimulation was the control of
international trade. This was achieved through the imposition of high tariffs on imported goods
to make them prohibitively expensive and the use of subsidies to support domestic industries,
making their exports more competitive. Furthermore, states actively sought to establish colonies,
which served a dual purpose: they provided a source of cheap raw materials for the home
country's industries and acted as a captive market for its finished goods. This system of trade
monopolies and state-sanctioned companies, such as the British East India Company, was central
to the Mercantilist strategy of stimulating a trade surplus and accumulating wealth.
The Mercantilist school of thought assigned a central and powerful role to the government in the
economy. Unlike later laissez-faire theories, Mercantilism viewed the state as the primary
orchestrator of economic activity. The government's role was to regulate all aspects of the
economy to achieve a positive balance of trade. This included setting wage and price controls,
granting monopolies to favored companies, controlling and directing colonial trade, and funding
a strong navy to protect trade routes. This active state intervention was not for the welfare of
individual citizens but for the power and enrichment of the state itself. The government was seen
as the crucial agent in ensuring national security and political dominance through economic
strength.
