Mercantilism versus Laissez-Faire

622 Words3 Pages
Describe and compare the policies of mercantilism and laissez-faire. Mercantilism versus Laissez-Faire Mercantilism was a method of controlling profit in which the industry and trade were a means of strengthening the state rather than the individual. Laissez-faire was a (phrase coined by LeGendre), in economics, is a free market. "Free" in the sense that the government cannot intervene using taxes, or regulating minimum wage. In the beginning stages the European economic theory, mercantilism, was always in conflict with laissez-faire policy. Jean Baptiste Colbert used the bureaucracy to establish a new economic doctrine, mercantilism. Mercantilism was established during the 16th century and continuing on to the 18th century. The policy of mercantilism being that the government must intervene to increase national wealth by any means necessary. The government controlled the market economies and it was during this period in which much of the modern capitalist system was started. Early mercantilists embraced bullionism which is the belief that quantities of gold and silver were the measure of a nation’s wealth. Within Europe, mercantilism fueled the many wars of that time period as the Europeans powers fought over the "available markets" (being the different firms and products to be evaluated and priced). Belief in the system did not begin to fade away until the late 18th century as Adam Smith and other economists won in favour. Adam Smith challenged the primary mercantilist doctrines as that the amount of the world's wealth remained the same and that a state could only increase its wealth at the expense of another state. Laissez-faire comes from the phrase meaning "let alone" and is a doctrine that advocates that governments should not in any way intervene with business. Historically laissez-faire was a reaction against mercantilism. Navigation laws,
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