Mercantilism is the belief in commercialism. As a theory of economics, it says that by trading with others, wealth can be generated. This stimulates profits at the individual level, which then benefits the region and nation around that individual. Is this a system that should be protected and encouraged? Here is a look at the key pros and cons of mercantilism.
The Pros of Mercantilism
1. It promotes the independent spirit.
Under the theory of mercantilism, people can truly earn what they’re worth. There is no glass ceiling. A good idea can transport anyone to great wealth. Even a lot of hard work can allow anyone to earn a living. This allows the independent spirit to do what they want and make money doing it.
2. It creates economic stability.
Because everyone in a system of mercantilism is working toward earning a profit, there are natural checks and balances in place that help keep the system flowing. People need to eat, so they buy food. Food needs to be grown, so grocers and restaurants buy it from farmers. It is a self-supporting cycle.
3. It provides an opportunity to eliminate poverty.
If everyone is participating within a system of mercantilism, then each person has the opportunity to eliminate poverty and live in relative comfort.
The Cons of Mercantilism
1. Not every idea is a profitable idea.
People can lose a lot of money in mercantilism if they have an idea that doesn’t fit within the economic cycle that exists. Instead of being included, they become excluded, and this can quickly lead to poverty.
2. It is exclusionary.
Mercantilism must be exclusionary in order for it to be successful. This limits international trade or allows it through the practice of high tariffs. This means regional economies may thrive, but a national or international economy is going to end up suffering because needed resources are within a local mercantilism cycle.
3. It encourages the hoarding of resources.
Because people are encouraged to “pull themselves up by their bootstraps,” there is less of an incentive for those who have wealth to provide for those who have none. Resources are hoarded because people feel like they worked hard to receive them.
The pros and cons of mercantilism show that the system can ultimately be highly beneficial for a lucky few, but there will also be many who will struggle to succeed when it is place. If resources can be shared when needed, then this economic system could provide numerous exciting opportunities to help everyone.
Crystal Lombardo is a contributing editor for Vision Launch. Crystal is a seasoned writer and researcher with over 10 years of experience. She has been an editor of three popular blogs that each have had over 500,000 monthly readers.