Mercantilism Disclaimer: The views expressed are

Transcript:Mercantilism Disclaimer: The views expressed are:
Mercantilism Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System. Feudalism System of political organization prevailing in Europe from the 9th to about the 15th centuries Relation of lord to vassal Resulted from isolated areas of control Inability to create a centralized political or economic structure. Mercantilism Economic belief system that served an underlying motivation for military actions Level of gold viewed as fixed Protection of resources/standard of living Zero sum game Principles of Mercantilism: National Wealth The economic health or wealth of nation can be measured by the amount of precious metal, gold, or silver it holds. vs. Productivity and available resources Investments in Labor Infrastructure Capital goods Principles of Mercantilism: Trade A favorable balance of trade is required Purchase of products/resources from external sources allowed specie to leave the country Principles of Mercantilism: Self-sufficiency Economic self sufficiency is vital. It demands increasing domestic production, new domestic industry. Protection for infant industries. Jefferson vs. Hamilton North vs. South Business vs. consumer gains from trade Principles of Mercantilism: Agriculture Sufficient agricultural production to support the domestic population. Agricultural products can be imported but they will be traded for manufactured goods. Principles of Mercantilism: Tariffs & Subsidies High on imported manufactured goods. Republicans from Lincoln forward Subsidies in the form of land and money for infrastructure (railroads) Low on imported raw materials Principles of Mercantilism: Ships Merchant fleet is a necessity to facilitated the flow of goods in and out of a nation. Naval fleet assures protection of transport. Focus changes from the protection of resources through military might to protection/ support through regulation Principles of Mercantilism: Colonization Provides raw materials necessary to produce manufactured goods. Provides a constant market for manufactured goods. Continuing debate on the role of developing nations today Principles of Mercantilism: Population Provide a source of labor for domestic production Provide a source of labor for settlement of colonies Issue of immigration today Principles of Mercantilism: Government Appropriate for the government to be heavily involved in directing economic activity. change from a military presence to a policy presence which protects economic development Global Conditions Spain/Portugal 1500’s Portugal rules the high seas Exploration of South America/Mexico Cortes Pizarro Gold/Silver exported to Europe Elizabeth I – develop navy Sir Francis Drake 1580 – Dutch vs. Portugal (trade with Germany) Characteristics of