Mercantilism in International Political Economy

Mercantilism is the Economy Political system that is emphasized in collecting gold and precious metals with the aim for wealth because they seen that the size wealth of a country is determined by the how much amount of gold or precious metals that they would store or collect. in order to increase the gold or precious metal of the state they do a lot of export policies than do the import policy, and they only accept the payment with gold. This system is developed from 16^th Century to 18^th Century in Europe. Starting from ocean exploration, foreign relations between European countries (Portugal, Spain, England, France and the Netherlands) and became widespread via trade in the Atlantic Ocean.

Mercantilism is also one of three main approach from International Political Economy (the other two are economic liberalism, and marxism). Mercantilism view the economy as an arena of international conflict because there are conflict interests than as an arena for profitable cooperation. In other words, mercantilism see the international economy as a Zero-Sum Game game arena where state benefits are considered as a detriment to other countries. Because they do a lot of export policy, they really need the country where they can do export. Because of this the practice of colonialism is often done by the state, especially European countries to invade developing countries with the aim of obtain their resources and also make developing countries as markets.

As we know the true objective of mercantilism is not just to collect the gold or precious metal to pursuit the wealth, It also to protect the domestical industry inside the state. In 1776 Adam Smith published a book with the title The Wealth of Nations. this book is considered as the foundation of modern economic theory. In this book Adam Smith critized mercantilism system that if the state can do the free trade it will be benefit for both state. Because every country will produce their absolute advantages that cannot be produced by other country. Adam Smith also believe that the “Invisible Hand” will be able to regulate the working of the market completely. As the result of the book publication, it marked as the end of mercantilism era. And gradually many country in Europe began to practice free trade.

Although the practice of mercantilism began unused but the fact protectionist policies remains needed especially in the modern era. since the first trade was first introduced by Adam Smith more than two centuries ago. It was only after The Great Depression in the 1930s, the world began to realize that the market could also experience failures (Market Failure). Then appears John Maynard Keynes and his theory to enhance the economic shortcomings of the free market, that market is basically not always able to regulate themselves. The market also requires the state to regulate and organize them. Without regulation, the market will tend to wild, and it is very risky for the economy of a country. That's why, in a economy free market also the role of the state began to be recognized and necessary to regulate market.

For the conlusion I think the usage of Mercantilsm perspective is still relevant in the Modern World especially the role of state or government in the use of protectionism policy. because with the protectionism policy, the state can protect the domestical industry and also can reduce dependence on other countries to reach the national stability. However, even the role of state is recognized, the state should not intervene too much on the economy sector because the government excessive intervention can also lead to the failure of the economy (Government Failure). 

By Alvin Ernesto/1701350380 

Reference : David, N.Balaam. and Bradford, Dillman. (2011) Wealth and Power : The Mercantilist Perspective. in in Introduction to International Political Economy, Fifth Edition. (Pearson,Harlow)