A journey from mercantytist ideas to neo merchantilist ideas

Abstract

The mercantilist system is the dominant economic system that ruled in the Western world between the 15th and 18th centuries. With explorations, states have met with gold silver deposits and new products in other states. Money (i.e. gold) is wealth. National power is important. Foreign trade is more important than domestic trade. The state should intervene in the economy to organize foreign trade. The most important of these policies is that the state intervenes in the economy in order to increase the national wealth, encouraging exports and decreasing imports, allowing gold and silver to enter the country. The belief that the source of richness lies in gold and silver used as money has developed in this period. Population growth was encouraged as the population growth was thought to increase the economic power and the wages were kept at a minimum by the state. It is possible to say that the mercantilist thought who came up with the goal of "national wealth" is based on three basic factors: first; national and powerful state principle. Second; precious metals and a passion for winning. Third; necessity of foreign trade. On the other hand, one of the requirements of the national and strong state principle was to have a strong army and navy, and to be superior to other states with a powerful trade fleet. Developed countries implemented mercantilist politics in the first phase of their development. Britain and the United States were among the countries that implemented the most aggressive protection and subsidies in the past. In the 18th and 19th centuries, Britain was the first country to achieve excellence in the art of infant industry protection. Britain then kicked up the staircase to the summit, recommending free trade to Germany and the US, which are less developed, because it needs markets to sell their goods.The United States, which takes Britain as an example, has continued the process of "kicking the ladder" by proposing free trade to underdeveloped countries about 100 years after having a peak with protectionism and subsidies. The "laissez faire" (liberal) policy, which is strongly recommended to the countries that are at the beginning of their development, does not suit to the Western world, especially to the United States. In the study, the mercantilist methodology in the neoclassical system, which is the current dominant theory of economics, will be addressed. The mercantilist system will be described as continuing with neo mercantilist policies, and examples of neo-mercantilist applications will be given. We will also try to reach some conclusions by taking the arguments that western economies are turning back to these old "wealth and national power" policies from time to time, especially when economic conjuncture has made a dip.