The Argument Of Mercantilism's Theory Of Feudalism
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At end of the seventeenth century Mercantilism is that ancient trade thought existing in the world. Commercial revolution argument trade was one of typical explanation of mercantilism trade thought. According to mercantilist, the concept of the commercial revelation means the way of transformation, that transform the market characteristic from local economic to national economic, from feudalism to capitalism and from small scale trade to large scale trade. The philosophers of mercantilism they strongly suggest that if a country will gain from the international trade by, will promote the export performance and limited import. This would have a positive gain for country gain thought trade. An accumulation precious metal (gold) was the main…show more content… This positive trade balance will increase the money supply which will reduce unemployment. However, in mercantilist trade theory view trade as zero sum game in which trade surplus of one country is offset by a trade deficit of another country (Sawyer and Sprinkle , 2003). The argument of mercantilism theories of international trade i.e.Commercial revolution commuted some basic fallacies. First, the philosopher of mercantilism they have believed that a nation gain of trade only measured by accumulation wealth, i. e gold. This would have not have effect on increase production and consumption. Second is, all classical and neo-classical economic school they believed that the gain of trade by efficiency and specialization. However, in case of mercantilism thought they did not rather, they were emphasizes a nation power will come by rise the volume of export and limited restriction import. Third, they have focused on the overall goal of system that means maximize wealth from sale export. This is the big failure theory trade since all nations cannot maximize export (Carbaugh,…show more content… As pointed out by Sodersten and Reed(1994), this is a theory of long-term general equilibrium in which two factors of production labour and capital are both mobile between sectors. Hereafter, further theory came which described the “new growth theory”. It originated from the mechanism through which exports affect economic growth. For instance, Grossman and Helpman (1990) proposed a two-country growth model with endogenous technological progress. In their model, exports help to promote technology and knowledge diffusion and thus in recent period, the extensive literature concerning the relationship between trade and growth is also the consequence of the many changes that have taken place in the fields of development economics and international trade policy. An example of these changes is the tremendous modification from inward oriented policies to export promotion strategy. By the early 1980s export-led orientation and export promotion had already secured a wide consensus among researchers and policy makers, to such an extent that they had become “conventional wisdom” among most economists in the developing world (Tyler, 1981; Balassa, 1985). This strategy is still advocated by some international organizations, the international bank community and multilateral lenders such as the World Bank and the International Monetary Fund (IMF), and among the mainstream policy makers.