ECS3705
Assignment 1
Unique No:
Due 25 September 2025
, History of Economic Thought
Question 1: Mercantilist Views
1.1 Wealth Creation
Mercantilism, which dominated European economic thinking from the sixteenth to the
eighteenth centuries, defined national wealth in terms of the accumulation of precious
metals, particularly gold and silver. A country was considered prosperous if its treasury
held abundant bullion reserves. Unlike modern economic views, which regard wealth as
stemming from productive capacity, knowledge, or services, mercantilists equated
wealth with tangible stores of value.
The pathway to creating this wealth lay in ensuring a favourable balance of trade.
Countries sought to export more goods than they imported, thereby bringing in
additional bullion as payment. Colonies played an essential role in this system. They
supplied raw materials such as cotton, sugar, and spices to the mother country while
serving as captive markets for manufactured exports. This closed-loop system was
designed to enrich the metropole and expand its financial reserves.
Mercantilism’s fixation on bullion accumulation shaped government policies in Europe.
Nations established strict trade regulations, colonial monopolies, and protectionist
barriers. This mindset tied national strength directly to the possession of gold and silver,
thereby encouraging expansionist and colonial ventures.
1.2 Stimulation of Wealth
Mercantilists argued that wealth could be stimulated through active government
intervention in economic life. They favoured measures that would secure trade
surpluses and strengthen domestic industries. These included:
High tariffs and import bans to shield local producers from foreign competition.
Export subsidies to make domestic goods more competitive abroad.
Assignment 1
Unique No:
Due 25 September 2025
, History of Economic Thought
Question 1: Mercantilist Views
1.1 Wealth Creation
Mercantilism, which dominated European economic thinking from the sixteenth to the
eighteenth centuries, defined national wealth in terms of the accumulation of precious
metals, particularly gold and silver. A country was considered prosperous if its treasury
held abundant bullion reserves. Unlike modern economic views, which regard wealth as
stemming from productive capacity, knowledge, or services, mercantilists equated
wealth with tangible stores of value.
The pathway to creating this wealth lay in ensuring a favourable balance of trade.
Countries sought to export more goods than they imported, thereby bringing in
additional bullion as payment. Colonies played an essential role in this system. They
supplied raw materials such as cotton, sugar, and spices to the mother country while
serving as captive markets for manufactured exports. This closed-loop system was
designed to enrich the metropole and expand its financial reserves.
Mercantilism’s fixation on bullion accumulation shaped government policies in Europe.
Nations established strict trade regulations, colonial monopolies, and protectionist
barriers. This mindset tied national strength directly to the possession of gold and silver,
thereby encouraging expansionist and colonial ventures.
1.2 Stimulation of Wealth
Mercantilists argued that wealth could be stimulated through active government
intervention in economic life. They favoured measures that would secure trade
surpluses and strengthen domestic industries. These included:
High tariffs and import bans to shield local producers from foreign competition.
Export subsidies to make domestic goods more competitive abroad.
