Question

Contrast and compare Adam Smith’s and the mercantilists’ views on the nature and causes of the wealth of nations

(Essay with about 325 words in MLA style for bibliography containing at least 3-4 sources of information)

Answer 1

Adam Smith was a famous economist who largely is held responsible for modern day trade and economics which has spread over the years. His theory of the Wealth of the nation’s largely changed how the society viewed market economics and the key differences with the Mercantilists views is as described.

Mercantilists argued, that wealth was finite and that countries should hoard gold and impose tariff restrictions on imports. This they said would lead to a situation in which a country would be able to export while keeping imports at a minimum or to even 0.

This however in turn lead to retrospective tariffs from other countries as well and the entire international trade came to a standstill.

Adam Smith on the other hand described that Wealth of Nations must be driven towards self-interest and that government role in economic activities should be extremely limited. He said that import and export form the back bone of economic development and growth is only possible when self-interest is fulfilled. If demand for goods is met and the markets are left unregulated, that is when capital is generated and wealth of a country begins to expand.

He highlighted the importance of competitive advantage in which a country should produce those goods which it has an advantage in producing. He gave an example of Scottish wine and said that even though Scotland may be able to produce wine yet, France may be able to do so at a much lesser cost.

He highlighted that allowing for free trade and minimum government control, creating wealth for the nations was possible as compared to the mercantilist view that it was finite and must be restrained.

Please feel free to ask your doubts in the comments section.