Assignment:
Many contributions have been made to the sources of wealth of nations. In this category the most prominent contributors are the thoughts of mercantilists and Adam smith.
Going first with the mercantilist believes; mercantilism was a word coined by Marquis de mirabeau in 1763 where the phrase merx meant commodity and mercari meant to run to trade. Mercantilist were distinguished men of though who existed in Ancient Europe, in their view for trade they believed that trade was fixed and finite and for such every economy should strive to attain power to control trade. They believed that wealth of any economy could only be measured in terms of stock of silver and trade the country held in their custody, this form of weighting wealth using stock of silver and gold came to be referred as bulliosm.
Mercantilists believed that to attain higher levels of economic mighty an economy needed to be keen to the following
A country needed to strive in a bid to protect and promote domestic manufacturers though subsides and monopolies in order to have surplus production this would see the economy become self reliant on the basic commodities and have excess of the dame for importation.
A country should work hard to acquire colonies as a source of cheap raw material which is a key input factor for growth if its industries and since its being acquired at a cheap cost then this would see the country enjoying a wide margin of benefits.
A country should use a colony as a source of cheap labour and an expansive market for their surplus production in their home countries, this will enhance continued production at low cost while the outputs are being absorbed in full amounts elsewhere thus little chance of losses would arise.
A country should continue to be involved in a continuous navigation of new colonies which would sources of cheap labour and a market for their outputs this is in a bid to ensure their economy grows continuously.
A country should war with competing countries in a bid to win a expansive areas of domination in terms of market opportunities and as sources of cheap labour and raw materials
Mercantilists also advocated for government to enhance the spirit of high exports and little imports and that imports should be restricted by use of tariffs and other related taxes.
Going by Adam smith’s view, Adam smith was Scottish philosopher and is regarded as the father of economics in his 1776 publication on the wealth of nations he outlined three major factors of development for any country which included:
Enlightened self interest, where he reasoned that individuals needed to work hard and aim to move themselves in the path of progress and think in a long-term basis in a bid for well good of their businesses and the good of the consumers where such good could be enforced by government via the legal laws. He gave a famous example of the butcher whereby he said a butcher should strive to provide good meet to his/her consumers not because of any other key reason but because of his interest which is the gained profit and in a bid to keep such customers he must continue offering good quality meat and charged at a reasonable price that the consumers are willing and are able to pay and is able to realise some profit.
He also argued on the need to have a solid currency and a free market economy where by solid metallic currency should be introduced because this would restrict the government of any country from engaging in unreasonable expenditure which would cause excessive supply and thus devaluating its own currency, on the need for introduction of free market economy he argued that the country would be required to keep its taxes and tariffs low and this would make life good for everyone and allow growth of industries both locally and across borders.
He also argued on the need for limited government whereby a government should play its role in the provision of universal education provision of infrastructure as well as enforcement of legal rights and protecting the whole country, he saw these as ingredients of development which would make a country wealthy. He particularly asserted that universal education would counteract the negative impacts associated with the division of labour.
Adam smith points infrastructural development, universal education and enforcement of legal rights as key recipes for growth of any economy of which the mercantilist fails to provide. Adam smith argues that taxes and tariffs would enhance fair completion of all economies while the mercantilist reason that war should be the best tool to stop a competititor but peace is obvious the key to economy growth as no economic activity would be carried out.
Adam smith reasons on the need to have an economy good for all whereby the providers of the commodities should provide quality commodities at affordable prices which the consumers are willing to pay and contribute a profit whereas the mercantilist depict a form of economic status whereby each should strive for his own good, such as use of war against a competititor and use of colonies as source of cheap labour which is obviously slavery, cheap raw materials and an expansive market for their outputs, in simple terms they advocated for wealthy generation in un decent and unlikeable means.
In this comparison it clearly shown that different ways of development could be achieved but going by the modern economics the countries have more or less leaned on the side of Adam smith’s concepts since the mercantilist’s concept are weak in content and approach.
Restrictive trade aims at protecting local industries and dumping in any economy but in the ancient times the mercantilist, Phillip Wilhelm von Hornick and Adam smith this had a different aim but relative to that stated above.
According to Phillip in his famous publication Austria over All is she only will he argued that for a country to achieve higher status of development and be regarded as wealthy he outlined nine principles of a state economy which include those of restrictive trade which stated that,
Gold and silver in a country should not be leave the country in any means; these were the measures of wealth for the country and wealth was not supposed to leave the country any way.
Imports should be obtained in exchange of other domestic products other than gold and silver this was to ensure that the economy doesn’t fall short of the two which were the measures of wealth for any economy, more and more ought to be retained for the economy to prosper.
Any commodity in a country that cannot be used in its natural existence should be processed by the country itself in a bid to add value to it before importing it to other countries other than importing it its raw form which would fetch little gain to it.
This Phillips thought never provided a solution in what ways the country could process the natural resources which existed in lands if it lacked the capacity to do so.
Furthermore not all traders could have agreed to exchange their products with other products other than gold and silver and for such Phillip doesn’t offer an alternative of obtaining such imports.
Another school of thought of mercantilists argued that tarrifs were the only tool that would restrict trade since it would make imports expensive and thus no person would prefer having them and for such domestic consumption would enhance and thus making an economy self dependent.
Adam smith argued that restrictive trade was not good for the good of all people and all the countries as a whole he advocated for free trade whereby tariffs and taxes should be kept low to facilitate completion among countries as well as ensure that economies specialised in areas they had a comparative advantage and that the countries could source commodities of high quality from cheap sources.
Finally smith recommended that any trade should strive to have a competitive ability and enhance regulated freedom for all using legal laws aiming at economic prosperity for all while Phillip argued that a country should strive for self sufficiency and natural power which are the basic policies of development.
References.
Adam, s. 1869. An Inquiry into The Nature And Causes Of The Wealth Of Nations. London: oxford university press.
Philipp, v. H. 1924. Austria Over All If She Only Will. In: History of Economic Thought Chapters. Ontario: Arthur Eli (Ed.)
