Econ 303
The Mercantilist
School
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The Mercantilist School 重商主義學派
• The economic doctrine 學說 known as mercantilism重商主
義 appeared between the Middle Ages and the Classical
School. Mercantilism can be dated roughly from 1500 to
1776.
• In this chapter, we will discuss the major tenets教條of the
Mercantilism with ideas of some mercantilists重商主義者.
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Historical background
• Feudalism封建制度 (9th century to the end of 18th century) is a type of
social and political system in which landholders (King, Nobles 貴族,
vassals: 諸侯; Knights 騎士) provide land or fief 封地 (which represents
wealth) and protection to tenants or peasants 佃戶 in exchange for
their loyalty and service.
• The self-sufficiency of the feudal community slowly gave way to the new
system of merchant capitalism商業資本主義. Cities, which had been
growing gradually during the Middle Ages 中世紀, became increasingly
important. Trade flourished繁榮both within each country and between
countries, and the use of money expanded.
• The discovery of gold, as a medium of exchange. facilitated促進 the
growing volume of commerce.
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金字塔
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Historical background
• Production was small scale but was increasing.
• National states were rising, and the most powerful of them were
acquiring colonies殖民地, and spheres範圍,領域,階層of influence.
Economic rivalries競爭between nations were intensified.
• Then, a body of doctrine evolved that superseded 取 代 feudal
concepts, promoted nationalism國家主義, gave new dignity尊嚴and
importance to the merchant and justified a policy of economic and
military expansion.
• This body of economic doctrine became the mercantilist school or
mercantilism.
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Major Tenets 教條 of the Mercantilist School
• 1. Gold and silver
• 2. Nationalism
• 3. Protectionism
• 4. Colonization
• 5. Opposition to internal tolls, taxes, and other restrictions
• 6. Strong central government
• 7. Large, hard-working population
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Major Tenets 教條 of the Mercantilist School
• 1. Gold and silver are the most desirable form of wealth財富.
Mercantilist重商主義者 tended to equate the wealth of a nation
with the amount of gold and silver bullion金塊; 銀塊 it possessed.
• A few early mercantilists 重商主義者 even believed that these
precious貴重的 metals were the only type of wealth worth pursuing.
All of them valued bullion as the way to achieve power 權力 and
riches財富.
• Countries could obtain hard money 硬幣,金屬貨幣 from trade
surplus (values of exports – value of imports > 0 ). Even when at war,
nations would export goods to the enemy as long as the products
from enemy were paid for gold.
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Major Tenets
• Basic concepts of Trade surplus and Trade deficit
− Countries export/sell goods to foreigners and receive hard money
such as gold and silver.
− Countries import/buy goods from foreigners and pay hard money
such as gold and silver.
− Trade surplus (value of exports > value of imports) leads to net
inflows of hard money such as gold and silver.
− Trade deficit (value of exports < value of imports) leads to net
outflows of hard money such as gold and silver.
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Major Tenets
• 2. Nationalism 國家主義. All countries could not simultaneously
export more than they imported. Therefore, one’s own country
should promote exports, increase trade surplus, and accumulate
wealth at the expense of its neighbours.
• Only a powerful nation could capture and hold colonies殖民地,
dominate控制trade routes航線, win wars against rivals競爭對手,
and compete successfully in international trade. Hence, one
country could increase its raw materials and production resources
only at the expense of another.
• Mercantilist nationalism naturally led to militarism 軍 國 主義 .
Strong navies 艦 隊 and merchant fleets 船 隊 were an absolute
requirement.
•
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Major Tenets
• 3. Protectionism. This emphasized exports and a reluctance 不情願 to
import in order to increase trade surplus .
• Policies to restrict imports: Restrictions on imports of manufactured goods
and raw materials that could be produced domestically helped to reduce
imports
• Policies to promote exports of goods: export restriction on raw materials and
duty-free 免關稅的 importation of raw materials that could not be produced
domestically helped to increase the domestic supply of raw materials,
reduce prices of raw materials and then the domestic production costs of
goods. Hence, it helps promote exports of goods. .
• The interests利益 of the merchants商人took precedence優先 over those of
the domestic consumers. Merchants received inflows of gold in return for
their exports, while the restrictions on imports reduced the availability of
goods for consumption at home. Consequently, gold and silver accumulated,
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supposedly enhancing the country’s wealth and power.
Major Tenets
• Examples:
• Prohibitions禁令 against the outward movement of raw materials
helped increase the local supply of raw materials, lower the prices of
raw materials and production costs. Then, it helped keep the prices of
finished exports low. For instance, a law passed in 1565-1566 during
Queen Elizabeth’s reign (1558-1603) 統治時期forbade禁止the export
of live sheep which provides raw wool for production of clothing.
• The penalties for violating this law were the confiscation 充公 of
property, one year in prison, and the cutting off of the left hand. The
death penalty was prescribed規定for a second offense犯法.
• The export of raw wool was prohibited禁止, and the same penalties
were applied in a law enacted實施 during the reign of Charles II (16601685).
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Major Tenets
• 4. Colonization 殖民化 and monopolization 壟斷 of colonial trade.
Merchant capitalists資本家 favored colonization and wanted to
keep the colonies eternally 永 久 地 dependent upon and
subservient恭順的to the mother country (e.g. UK).
• The English Navigation Acts 航海法案 of 1651-1660 are examples:
• Goods imported into Great Britain and the colonies had to move in
English or colonial ships or in ships of the country where the goods
originated in order to earn shipping service fee (export of services).
• Certain colonial products had to be sold only to England. Supply is
higher with lower prices. It lowers the values of imports to England
and then reduces gold outflows from England
• Other colonial products had to land in England before being
shipped to foreign countries to earn distribution fee and dock 碼頭
parking fee (export of services).
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Major Tenets
• Foreign imports into the colonies were restricted or
prohibited. Colonial manufacturing was curbed 限制 or in
some cases outlawed宣布…為非法, so that dependent從屬的
territories領土would remain suppliers or exporters of lowcost raw materials to England and importers of English
manufactured goods.
• So, it helped decrease the costs of English production and
increase exports.
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• On colonization:
• acquire and exploit colonies
• could provide markets for manufactured goods and
sources of raw material.
• Spain: Southern North America, Central & South
America
• England: Caribbean Islands and coastal North
America
• France: Northern North America & parts of the MidWest of North America
• Netherlands: New York region
• Portugal: Brazil
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Major Tenets
• 5. Opposition 反 對 to internal tolls 通 行 費 , taxes, and other
restrictions on the movement of goods. Mercantilists recognized
that tolls and taxes could throttle 壓 制 business enterprises,
increase production costs, and drive up the price of a country’s
exports.
• It is important to point out that mercantilists did not favor free
internal trade in the sense of allowing people to engage in any
trade that they wished. On the contrary, mercantilists preferred
monopoly grants 補助金 and exclusive獨家的trading privileges特權
whenever they could acquire them.
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Major Tenets
• 6. Strong central government. A strong central government was
needed to promote mercantilist goals. The government granted
monopoly privileges特權to companies (e.g. East India company)
engaged in foreign trade. It restricted free entry into business at
home to limit competition.
• Agriculture, mining, and industry were promoted with subsidies
from the government and protected from imports via tariffs 關稅.
• Furthermore, the government closely regulated the methods of
production and the quality of goods so that a country would not gain
a bad reputation for its products in foreign markets, thereby
hampering exports. The government was required to prohibit以法令
禁止poor workmanship工藝 and shoddy劣質的 materials. The result
was a bewildering令人困惑的 maze 紛繁複雜 of regulations governing
the production of goods. A strong national government was
therefore required to ensure uniform national regulation.
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Major Tenets
• Central governments were also necessary to achieve the goals discussed
previously: nationalism, protectionism, colonialism, and internal trade
unhampered不受阻礙 by tolls and excessive taxes.
• 7. Importance of a large, hard-working population. Not only would a
sizable相當大的, industrious勤勞的population provide an abundance
of soldiers and sailors ready to fight for the glory榮譽and the wealth of
the nation, but also it would keep labor supply high and wages
therefore low. The advantage is that these low wages would (1) enable
lower costs of production and then lower prices on exports, thereby
increasing the inflow of gold, and (2) reduce idleness懶散 閒散 躺平
and promote greater participation in the labor force.
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Major Tenets
• Idleness and begging 乞討by able-bodied people were dealt with
mercilessly 殘忍地, and thievery偷竊was severely嚴厲地punished.
• During the reign of Henry VIII in Great Britain (1509-1547), 7,200
thieves were hanged吊死. A law passed during Queen Elizabet’s reign
in 1572 decreed頒布 that unlicensed beggars of fourteen years or
older were to be flogged 鞭 打 and branded 給 … 打 上 烙 印 unless
someone was willing to employ them; for a second offense they were
to be executed處死 unless someone would take them into service;
for a third offence they were to be considered as felons重罪犯 and
executed without mercy寬恕,憐憫.
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Major Tenets
• Some mercantilists contended that low wages were necessary to
reduce idleness and promote participation in the labour force.
They believed that increase in the wage rate, thus enabling
workers to earn more income per hour, would allow them to
reduce their hours of work. Some workers, including children,
might even exit the labour force if their parents could earn more
income per hour.
• It implies a downward sloping labour supply curve.
• Increase in wages can increase labour force? Labour supply curve
can be upward sloping?
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Comments
• The mercantilists believed that there was a basic conflict
between private interests and the public welfare. Therefore,
they considered it necessary for government to channel 引導…
投入 private self-interest into public benefits.
• Classical economists, on the other hand, find a basic harmony 和
諧 in the system and see public good as coming naturally from
individual self-interest. Even the later mercantilists who
advocated laissez-faire 自由放任 policies lacked sufficient insight
into the operation of the market to make an adequate argument
to support them.
• Still, the writings of the later mercantilists were used by Adam
Smith to develop his ideas of the Classical School古典學派.
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Comments
• The Mercantilist policies were designed to benefit the government
and the commercial class, rather than the entire population
• The Mercantilist assumption that colonies existed for the mother
lands 殖民地的宗主國 was not a sound economic proposition.
• Colonial expansion and wars in European countries were the
results of the Mercantilist thoughts.
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Comments
• None of the mercantilists was able to present an integrated view of
the operation of a market economy, in which prices are formed and
scarce resources are allocated.
• This failure of the mercantilists to reach the understanding of
market mechanism and price theory eventually achieved by Adam
Smith and subsequent classical economists may be attributable to
one important difference between mercantilist and classical theory.
•.
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