Paradox of Mercantilism and its Policy Implication in Wage and Population(Global Economics)

Mercantilism, an economic philosophy inbred during 15^th to mid of 17^th century had focused on trade as a zero-sum game. Rather than focusing on the long-term globalized progress, it tried to manifest itself in enhancing smaller economic pie of its nation alone. Accumulation of the wealth in the form of precious metals through trade was the only way of depicting economic resilience, in layman’s view, nation tried to increase its export but strictly had regulated its import.

In a bid to come across the competition, nation’s regulated the industry. Firstly, the authorization of monopoly was centralized in government where it kept the wage rate as low as possible so that goods could be produced relatively cheaply that other countries leading to more export and inflow of specie. These were making the nation richer but working people with minimum wage rate were into the vicious circle of poverty. Their propensity to consume and save was decreasing exponentially. 

Similarly, in the policy level government had discouraged the outflow of the specie as they thought that it could destabilize the national economy by reducing the national vault.

On the one hand, due to low wage, the standards of living of poor were, even more, declining and ultimately limiting them to consume what they get within their nations. On the other hand, they were not able to get other required essentials from other nations at low prices as import was discouraged. These ultimately lead to unequal distribution of the wealth. I personally believe that most of the peoples in that time were under-employed; a state where employees are paid less in comparison to their skills and effort.

Hence, situation was created where the government became rich on the virtues of the pains of its peoples calling it as a paradox of mercantilism. But later economist like Hume’s purported that, trade surplus could not be maintained forever as higher inflow of specie leads to increased price of factor of products (wage), making export expensive and imports affordable

And still, in the present scenario, some dimensions of mercantilism as a protectionist move are being assumed by some nations. The move is principally to increase the export rather than to accumulate the precious metals like gold as it used to be in the 15^th century. Currently, countries practices various trade and tariff barriers in a bide to reduce the capital flight and increase the export. But it should be always taken care that rather it be 15^th century or 21st, international trade always better-offs the involved parties and the policies of government to undermine the importance of import directly impacts the poverty and consumption of its citizen.