MERCANTILISM is the economic doctrine that says government control of foreign tradeisof paramount importance for ensuring the prosperity and security of a state. In particular, it demands a positive balance of trade. In thought and practice it dominated Western Europe from the 16th to the late-18th century. Mercantilism was a cause of frequent European wars in that time. It also was a motive for colonial expansion. Mercantilist theory varied in sophistication from one writer to another and evolved over time. Favors for powerful interests were often defended with mercantilist reasoning.
Mercantilist policies have included: High tariffs, especially on manufactured goods; Monopolizing markets with staple ports; Exclusive trade with colonies; Forbidding trade to be carried in foreign ships; Export subsidies; Banning all export of gold and silver; Promoting manufacturing with research or direct subsidies; Limiting wages; Maximizing the use of domestic resources; Restricting domestic consumption with non-tariff barriers to trade
PEOPLE RELATED: Jean-Baptiste Colbert's work in seventeenth century France exemplified classical mercantilism. In the English-speaking world its ideas were criticized by Adam Smith with the publication of The Wealth of Nations in 1776; and later David Ricardo with his explanation of comparative advantage, but policy changes did not follow in either's lifetime, even in Britain. Mercantilism reached its low-water mark in the last half of the nineteenth century as the British Empire embraced free-trade and used its power as thefinancial center of the world to promote the same.
INFLUENCE: Mercantilism was the dominant school of thought in Europe throughout the late Renaissance and early modern period (from the 15th-18th century). Mercantilism encouraged the many intra-European wars of the period and arguably fueled European expansion and imperialism — both in Europe and throughout the rest of the world — until the 19th century or early 20th century.
INFLUENCE: Arguments have been made[by whom?] for the historical promotion of mercantilism in Europe since recorded history, with authors noting the trade policies of Athens and its Delian League specifically mention[clarification needed] control of value of trade in bullion as necessary for the promotion of the Greek polis. Additionally, the noted competition of medieval monarchs for control of the market town trade and of the spice trade, as well as the copious documentation of Venice, Genoa, and Pisa regarding control of the Mediterranean trade of bullion clearly points to an early understanding of mercantilistic principles. However, as a codified school, mercantilism's real birth is marked by the Empiricism of the Renaissance, which first began to quantify large-scale trade accurately.
COUNTRIES WHO USES MERCATILISM: Spain Portugal Europe France Great Britain
Wars and Imperialism Mercantilism was economic warfare and was well suited to an era of military warfare. Since the level of world trade was viewed as fixed, it followed that the only way to increase a nation's trade was to take it from another. A number of wars, most notably the Anglo-Dutch Warsand the Franco-Dutch Wars, can be linked directly to mercantilist theories. Most wars had other causes but they reinforced mercantilism by clearly defining the enemy, and justified damage to the enemy's economy. Mercantilism fueled the imperialism of this era, as many nations expended significant effort to build new colonies that would be sources of gold (as in Mexico) or sugar (as in the West Indies), as well as becoming exclusive markets. European power spread around the globe, often under the aegis of companies with government-guaranteed monopolies in a certain defined geographical regions, such as the Dutch East India Company or the British Hudson's Bay Company (operating in present-day Canada).
BARTER is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.
Corporate barter focuses on larger transactions, which is different from a traditional, retail oriented barter exchange. Corporate barter exchanges typically use media and advertising as leverage for their larger transactions. It entails the use of a currency unit called a "trade-credit"
INTERNET BARTERING Swapping is the increasingly prevalent informal bartering system in which participants in Internet communities trade items of comparable value on a trust basis using the Internet. The most notable disadvantage to electronic barter is inherent in Internet commerce, that of trust.
Limitations of a barter economy Absence of common measure of value Indivisibility of certain goods Lack of standards for deferred payments Difficulty in storing wealth