Globalization And International Trade Theory

1203 Words Mar 23rd, 2015 5 Pages
International trade plays a big role in every person’s life. The credit should go to every economist who has contributed to the development of international trade theory. Trade is the consequence of the human “propensity to truck, barter, and exchange one thing for another” (Smith, 1776). Different people have different propensities for trading, so do different economic periods have different economic conditions, which require different international trade theories. This could be the material cause for the development of international trade theory.
Mercantilism was the dominant school of thought in Europe from the sixteenth century to the eighteenth century. “It refers to the central policy prescription that the state should act like a merchant, augmenting the wealth of the nation by maximizing the surplus from trade with other nations” (Sandelin, 2014). It measured a country’s wealth by the amount of rare metals it owns. The country with more precious metals is better off than others. It aimed at making many exports and few imports to get positive trading balance. Mercantilism was dominant in France and England. Governments’ power were growing and they had big demand for lands at that time. This theory could be closely related to the wars during that period. “At the same time the rise of more powerful European states with burgeoning bureaucracies, frequent dynastic wars that required larger and more expensive armies, and more lavish court expenditures exacerbated this…
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