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Throughout the 16th and 18th centuries, mercantilism was the dominant economic theory and practice in Europe. It is a form of economic nationalism that places a strong emphasis on the creation of riches through commerce as well as the support of domestic production and exports.
Via a positive trade balance, mercantilism seeks to boost the country's prosperity. This was accomplished by increasing the value of exports while lowering the cost of imports, and by exporting more commodities than were imported. Mercantilist administrations adopted measures like export subsidies, import tariffs, and bans on international trade to attain this purpose.
The encouragement of the home industry is a crucial component of mercantilism. This was accomplished by giving domestic producers subsidies, tax breaks, and protectionist policies while limiting or forbidding the importation of foreign goods that compete with indigenous industry.
Mercantilism also placed a strong emphasis on building up gold and silver reserves, which were considered to be the foundation of a country's riches. In order to accomplish this, mercantilist administrations encouraged a favorable trade balance by restricting imports and promoting exports. To guarantee sources of raw materials and markets for home businesses, they also promoted the colonization of other lands.
The mercantilist system, however, had a number of shortcomings. Exports and domestic industry were prioritized, which resulted in protectionism and trade obstacles that hampered global trade and competitiveness. Money was scarce for expansion and investment as a result of the emphasis on acquiring gold and silver. Furthermore, the focus on governmental intervention and control in the economy constrained economic freedom and innovation.
Mercantilism is seen as a discredited and out-of-date economic philosophy in the present world. The promotion of the home industry and the significance of exports are two aspects of mercantilism that still have an impact on economic policy in some nations.
