5.2: Mercantilism Flashcards
What was the fundamental belief of mercantilism regarding national wealth, and how did it propose to achieve it through international trade?
Mercantilism asserted that gold and silver were essential to national wealth and commerce.
To accumulate wealth, countries were advised to maintain a trade surplus by exporting more than they imported.
This surplus would lead to an inflow of gold and silver, increasing the country’s wealth, prestige, and power.
What were the policies advocated by mercantilism to achieve a trade surplus, and what was the flaw pointed out by David Hume?
Mercantilism advocated limiting imports through tariffs and quotas while subsidizing exports.
David Hume highlighted the flaw in mercantilism, pointing out that a trade surplus would increase a country’s money supply, causing inflation.
In contrast, the country with the trade deficit would experience deflation, leading to a shift in trade balances over time.
How did Adam Smith and David Ricardo challenge the mercantilist view, and what concept did they introduce regarding international trade?
Adam Smith and David Ricardo demonstrated that trade is a positive-sum game, where all countries can benefit.
They countered the zero-sum perspective of mercantilism, emphasizing the mutual advantages of international trade.
What is neo-mercantilism, and how is it reflected in the trade policies of some countries, as mentioned in the text?
Neo-mercantilism equates political power with economic power and views a trade surplus as a measure of economic strength.
Some nations, including China, have been accused of pursuing neo-mercantilist policies by deliberately keeping their currency values low to boost exports and accumulate trade surpluses.
U.S. President Donald Trump’s statements also reflect a neo-mercantilist belief, equating political and economic power with a trade surplus.
