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History Of Mercantilism

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Historical Background

In the economics term, an infant industry is a new industry which in the early stage the industry found difficulty or incapable to compete with established foreign competition. Therefore, the infant industry needs protection either in the form of tariff or subsidies in their early stage of development until the industry can attain similar economics of scale with competitors abroad. Mercantilism or commercialism is an economic system, dominant in modernized parts of Europe during 16th century to 18th century which the country attempts to accumulate wealth through international trade and the country’s export must greater than its import in order to say that the country is wealth. Besides that, mercantilist is an ideology …show more content…

Furthermore, this is not only ensures their own industrial production capacity and fosters new industries but also provides abundance of employment opportunities for their people. Mercantilists think that the principle means of market protection are tariff system and the monopolized management system of international trade, for instance, regarding quota, administrative management, tariff and exchange rate as the main reason to develop and protect their own manufacturing. Mercantilism stressed the necessity to protect their own market by using the state power to protect their domestic industries, and develop the world market. Its essence is the “national industrialism” which recognized in the early economic thinking to protect the national industry. In addition, there are people believe that the policy orientation of mercantilism is, in fact, the economic nationalism or the country’s economic policy of nationalism. In any case, mercantilist is the origin of industrial protection theory or is the mercantilism is actually the source of the idea of trade …show more content…

About the industry selection of the protection, Liszt says that even though the countries are in the agro-industrial stage of development, they have no necessity to protect all industries, or even all of the infant industries, instead only to protect the infant industries which have two conditions. The first condition is that some industries which cannot participate in the competition because of their lack of technology, low productivity, and the higher cost compared with the foreign market, namely, the infant industries which just begin to develop but subject to strong competition abroad. The other type is the infant industries which have the promise to develop. That is to say through the protection these industries can become some comparative advantage industries. In other meaning, Liszt advocates for the protection of the infant industries which have good future, and this protection is limited. He believes that protective measures can be taken only for the purpose to promote and protect domestic industrial

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