MERCANTALISM AND NEO-MERCANTALISM
Neo-mercantilism refers to those policies that are adopted by governments to control the economic environment in the a given country through measures that encourage exports, limit the imports, get hold of the capital movement mechanism coupled with a complete centralization of the currency in the tight grip of the central government. The primary objective of the Neo-mercantilist policies is to raise the level of foreign reserves that a country may hold allowing the monetary and fiscal policy to function unrestrained. States like Japan, Singapore, Taiwan, China and South Korea have often been referred to as the Neo-mercantilist. The main difference that exists between Neo-mercantilism and its prodigy, Mercantilism,is that it tends to lay a lot of emphasis on economic development as opposed to the latter. However, it is sometimes difficult to make a complete distinction between the Neo-mercantilism and the mercantilism policies since most of the policies adopted in former are merely echoing those of the latter with only slight modifications. The paper demonstrates a specialist’s understanding of the key neo-mercantilism policies that a country ought to adopt if it was to classify its self as neo-mercantilist coupled with a discussion of the a liberal critique mercantilism.
Specialist understanding of the principals of Neo-Mercantilism
Before delving into a complete discussion regarding Neo-mercantilism and the policies thereof that need to be adopted under such a system, it is imperative to present a short description of mercantilism since it forms the back born of all the policies that are adopted under the practice of Neo-mercantilism. Mercantilism refers to a policy of economic nationalism adopted purposely for construction of a wealthy and powerful state. It was first coined by a famous economist, Adam Smith, referring to it as a mercantile system. Adam Smith defined it as political economies that seek to enrich their domiciles by restraining the imports at the expense of the exports (Kelly, 2014). The mercantile system emphasized the outgrowth and the liaison between those governments of the national states as well as their mercantile classes. In that system, it was customary for mercantile classes to pay taxes and other levies in exchange for the government policies that would protect the business interests of these mercantile states against any form of foreign competition (LaHaye, 2008). Some of the policies that would be adopted domestically involved the provision of capital to the new industries by the domestic states, exempting them from the guild rules and any form of taxation, establishing monopolies,pensions and grant titles to those producers that were considered to be successful. In the trade policies, the governments would assist the local industries in imposing trade tariffs, trade quotas and any prohibitions of the imports that would directly compete with the manufacturing that are home-based.
Furthermore, the governments under the mercantilist system would prohibit any export of capital, tools or emigration of skilled workers that would allow the foreign manufacturers to compete directly with the domestic producers. Consequently, the major difference between Neo-mercantilism and mercantilism is that the former lays …