Which of the following is the main principle of mercantilism group of answer choices?

Handbook of Income Distribution

Martin Ravallion, in Handbook of Income Distribution, 2015

22.3 The Utility of Poverty

For much of the sixteenth through eighteenth centuries, when Western Europe was mired in poverty, the dominant economic theory of the time, mercantilism, saw poverty as a natural state of affairs and, indeed, instrumentally good, as a means of encouraging work effort. The mercantilist goal was to maximize a nation's export surplus—the balance of trade, which was equated with the future prosperity and power of the realm—and the means were cheap production inputs, that is, cheap raw materials (for which colonies proved useful) and cheap, and therefore poor, labor at home. Poverty was not just accepted; it was seen as an essential precondition for a country's economic development. Hunger would encourage work, and lack of it would do the opposite. The seemingly widely held economic premise was that the individual supply curve for unskilled work was negatively sloped—in modern economic terms, that the income effect on demand for leisure dominated the substitution effect. As the Reverend Townsend (1786) put it: “The poor know little of the motives which stimulate the higher ranks to action—pride, honor and ambition. In general, it is only hunger which can spur and goad them onto labor” (p. 23). And so: “… in proportion as you advance the wages of the poor, you diminish the quantity of their work” (p. 29).12

The idea of a negatively sloped labor supply curve is essentially what Furniss (1920, p. 117) later dubbed “the utility of poverty.” The basis for this idea appears to have been little more than casual anecdotes; Furniss (1920, Chapter 6) provides many examples from writings of the time, often with references to the attractions of the alehouse when workers got a wage increase. It was not the last time in the history of thought about poverty that casual incentive arguments resting on little or no good evidence would buttress strong policy positions.

A continuing future supply of cheap labor was also seen to be crucial. Large families were encouraged and good work habits were to be instilled from an early age. Like higher current wages, too much schooling would discourage both current and future work effort. Consistent with this model, few sustainable opportunities were expected to be available to any educated children from poor families. In de Mandeville's (1732, pp. 288–311) mind, the only realistic future prospect for the children of laboring (and hence poor) parents was to be laboring and poor. Poor parents had little realistic hope that their children would be anything but poor; their low aspirations simply reflected and rationalized their lack of opportunity. Small amounts of schooling would have served little purpose. In this view of economic development, there was little or no prospect of reducing wealth poverty—including escaping the poverty trap demonstrated in Figure 22.1. There was little or no perceived scope for upward mobility of working class children. They were born poor and stayed poor.

Modern progressive thinkers may be shocked by de Mandeville's views (and similar views still heard occasionally in modern times), but there may well be an element of cruel truth to them. His claim that a modest amount of extra schooling for working class children is wasted is consistent with the model in Figure 22.1. Suppose that the poor—the working class—are concentrated at the wealth poverty trap (point A in Figure 22.1). A small increase in their wealth, in the form of extra human capital only sufficient to get them to the threshold (say), will not bring any lasting benefit. In due course, the dynamics will push them back to point A. A large gain in schooling is needed.

And de Mandeville's pessimism about schooling would not surprise many poor children in the developing world today. Katherine Boo's (2012) vivid description of life in a Mumbai slum includes a discussion of the choices made by Sunil, a young scavenger who spends long hours collecting whatever he can find of any value in the trash deposits around Mumbai airport. Sunil is clearly very poor. He is also clearly capable of learning and is aware that with sufficient schooling he might escape his wretched life. But how can he finance sufficient schooling? At one point, he spends a few days in a private after-hours school run by a college student who lives in the slum, and after much rote learning he masters the “twinkle-star” song.13 Boo (2012, p. 68) writes:

He’d sat in on [the English class taught in the slum] for a few days, mastering the English twinkle-star song, before deciding that his time was better spent working for food.

By interpretation, the modest amount of schooling that Sunil could afford would be insufficient for him to escape poverty. He is better off addressing his current hunger.

22.3.1 Early Social Protection Policies

Recall that the poverty trap in Figure 22.1 has people stuck at zero wealth but they still earn enough to survive (as Sunil does through scavenging). Higher wages or prices for their outputs increase their welfare, and uninsured shocks to their health (say) have the opposite effect. There is space here for social protection policies providing state-contingent income support. Such policies can exist and be seen as reasonably effective without changing the fact that poor people are stuck in the wealth poverty trap.

It has long been argued that governments have a role in social protection from shocks that threaten extreme poverty. For example, around 300 BC, the famous Indian academic and advisor to royalty, Chanakya (also known as Kautilya), recommended that when famine looms a good king should “… institute the building of forts or water-works with the grant of food, or share [his] provisions [with the people], or entrust the country [to another king]” (quoted in Drèze, 1990a, p. 75). If one thinks of antipoverty policy primarily in terms of protection from adverse events, then the idea is very old indeed.

Even though mainstream economic thinking has for a long time encouraged a limited role for the state in social protection, more contentious has been the idea of promotion. In the premercantilist feudal and slave economies, the employer had a responsibility for insuring workers, even very poor workers, who may well have faced exploitation but were at least protected to some degree. (This was not necessarily altruistic in any sense; a slave owner had a purely selfish interest in keeping his property alive.) The new elites in the early development of capitalism were keen to see the state take over these roles, but consistently with their economic ideas. The status quo distribution of wealth was seen by its defenders as the outcome of natural processes, which included the competitive market mechanism, and it was not to be tampered with through policy. Persistent poverty was believed to be the natural order of things until modern times. By contrast, transient poverty was seen as a threat to the social order. There was at least an implicit recognition of the limitations of free markets in providing insurance against risk.

The sixteenth and seventeenth centuries saw the emergence of fledgling social policies in Europe in response to rising “pauperism.” There were increasing numbers of dislocated and unemployed workers and beggars on city streets. Although the cause was widely seen to be the moral weaknesses of poor people, deeper explanations could be found in changes in the organization of production (including in agriculture with the breakup of feudalism) combined with greater mobility (also with implications for family support of the aged). Although unemployment was not commonly identified as a cause of poverty, work was widely seen as the solution. Publicly financed workhouses were introduced around 1600. Welfare recipients were incarcerated and obliged to work for their upkeep. From the outset, the idea was that the workhouses would be “self-targeting,” in that only the poorest would be willing to be so confined, thus providing a cost-effective means of poverty relief (Thane, 2000, p. 115). But the policy was also grounded in the prevailing view that poverty was caused by bad behaviors, which could be controlled and (hopefully) corrected by the workhouses. The workhouses were seen as a cost-effective policy for moral reform.

There was a strong element of protection in the workhouse idea; anyone thrown into poverty by some shock could turn to the workhouse. Was it also a promotional policy? There is not much discussion in the literature about the promotional value to poor people of the work done beyond the perceived moral value of actually doing work. Advocates might well argue that this was promotion through behavioral change. But it was clearly not promotion by relieving the constraints facing poor people.

22.3.2 England's Poor Laws

A major policy response to poverty emerged in Elizabethan England in the form of the Poor Laws.14 This was a system of publicly provided insurance against income poverty due to specific sources, notably old age, widowhood, disability, illness, or unemployment. Essentially the central government instructed local parishes to deal with their poverty problem. As a system of protection, the Poor Laws were quite comprehensive and came to be reasonably generous in some places.15 Arguably the pinnacle of the Poor Laws was the Speenhamland System of 1795 introduced by the justices of Berkshire. This system aimed to ensure a guaranteed minimum income through a sliding scale of wage supplements indexed to the price of bread (Himmelfarb, 1984a; Montagu, 1971).

The antipoverty programs elsewhere in Europe around this time relied heavily on charitable giving and so faced free-rider problems; levels of church and private spending on transfers to poor people were low—well under 1% of national income in most countries (Lindert, 2013). In contrast, the disbursements under the Poor Laws in England and Wales were largely financed by local property taxation. There was evidently some displacement of private charity, though the latter continued to exist (Hindle, 2004; Lindert, 2013). But there can be little doubt that the Poor Laws entailed a net gain in social protection. By the late seventeenth century almost all parishes of England and Wales were covered, and, under the “Old Poor Laws” up to the nineteenth century, all persons were eligible for relief. (New Poor Laws came out of reforms in the 1830s, which I return to later.) The parishes had the responsibility for implementation, subject to monitoring by central authorities. Being based in the parishes was convenient but possibly never ideal as they provided limited scope for pooling risks, and there was undoubtedly considerable horizontal inequity (whereby equally poor people in different parishes fared very differently).16 Nor could these policies ever be expected to have much impact on the steady-state wealth distribution. However, it is clear that the Old Poor Laws did provide a degree of protection from risk, and it has been argued that they helped break the historical link between harvest failures and mortality (Kelly and Cormac, 2010; Smith, 2011).

The Poor Laws appear to have helped ensure a relatively docile and sustained working class, with little threat to the steady-state distribution of wealth. Solar (1995) argues that the Old Poor Laws were crucial to England's long-term social stability, including periods (such as the late eighteenth century) of concern about the possibility of the dramatic instability in France spilling across the English Channel. Broad political support was ensured by the fact that anyone could get relief if needed. For example, widowhood was a threat to many of those who would not normally expect to turn to the parish for relief.17 As novels of the time often pointed out, even the well-to-do upper middle class family could be vulnerable to poverty (a favorite theme of Charles Dickens).

Fleischacker's (2004, p. 51) discussion of England's Poor Laws argues that they were motivated by the “… virtue of charity rather than the virtue of justice,” and as such they did not constitute the beginnings of the modern role for public policy in assuring distributive justice. One can conjecture that the motivation for the Poor Laws was at least as much to do with maintaining social stability as charity or justice. However, whatever may have been the motives of policy makers, the Poor Laws constituted a legally enforceable state policy for limited relief from the specified events, financed by redistributive taxes. And parish residents (though not outsiders) had a legal recourse under the Poor Laws, which is why they could help ensure social stability over some 300 years (Solar, 1995). Against Fleischacker's interpretation, it seems that the Poor Laws came very close to being a premodern example of policies to help ensure distributive justice.

However, an aspect of the Poor Laws that should not be ignored is that they were clearly intended for protection rather than promotion. These laws were an early form of social insurance intended for a world in which the poor and the middle class faced many uninsured risks associated with uncertain employment, health crises, harvest failures, and simple bad luck (Hindle, 2004). Such risks may well have spilled over into production, with adverse long-term consequences. By assuring greater social stability, this, too, may have brought long-term gains. However, it is clear that any longer-term promotional advantages were attained via the enhanced protection that was attained under the Poor Laws. Protection was clearly seen as the main aim of the Poor Laws.

Instead of focusing on whether the motivation was charity or justice, the more important reason why the Elizabethan Poor Laws, or Chanakya's famine relief policy, did not constitute a comprehensive antipoverty policy is that these policies were unlikely to change the steady-state distribution of the levels of wealth. In terms of the model in Section 22.2, what these policies were doing was preventing the consumption levels of those either stuck in the wealth poverty trap or settled at some low steady-state level of wealth from falling too much. They provided a degree of protection but did little to help people permanently escape poverty. By the economic logic of the mercantilists, hunger was a good thing as it motivated poor people to work, with social protection playing a limited and well-defined role. After all, just like the slave owner, mercantilists believed that one must keep the workers alive.

By the late eighteenth century, a significant change in thinking was underway.

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The Emergence of the Engineering Sciences: An Historical Analysis

David F. Channell, in Philosophy of Technology and Engineering Sciences, 2009

3.3 The study of machines

During the 18th and 19th centuries, developments in the study of machines contributed to the emergence of the engineering sciences. With the new demands for manufacturing brought about by mercantilism and industrialization, scientists and engineers began to focus their attention on understanding and improving machines [Reynolds, 1983]. Throughout much of the 18th century the study of machines focused on the waterwheel. Building on Galileo's idea that machines should be analyzed in terms of their ability to apply the forces of nature in the most efficient way, the Frenchman Antoine Parent used the differential calculus to calculate the maximum efficiency of undershot waterwheels in 1704. A few years later Henri Pitot calculated the optimum number of blades an undershot waterwheel of a given size should have and presented his calculations in tabular form. By mid-century a debate arose whether the undershot or overshot waterwheel was the most efficient. Antoine de Parcieux, a member of the French Academy of Sciences, conducted a series of experimental tests using scale models and concluded that the overshot wheel was more efficient. At about the same time, John Smeaton in Britain began conducting an extensive series of experiments in which he systematically varied the type of wheel, the quantity of flowing water, the head of water, and the load on the wheel, and concluded that the overshot wheel was more efficient. His experiments would help establish a new “tradition of testability” [Constant, 1980, p. 20]. Smeaton's technique would later be called “parameter variation,” and would become an important methodology of the engineering sciences [Vincenti, 1990, pp. 146–151].

The experimental research on waterwheels encouraged new theoretical work. In France, Jean Charles Borda, a member of the Academy of Sciences, analyzed waterwheels in terms of vis viva (mv2 — which is related to the modern concept of kinetic energy) and concluded that the inefficiencies of the undershot wheel were the result of vis viva being lost to turbulence. In 1783 Lazare Carnot, in his Essai sur les machines en genéral extended Borda's analysis of waterwheels and developed a theory that was applicable to all machines [Gillispie, 1971]. By applying the idea of vis viva to machines Carnot concluded that all impacts and shocks needed to be avoided.

By the 19th century the combination of experimental and theoretical studies of machines led to new design principles. In 1824 Jean Victor Poncelet designed a new waterwheel based on the work of Borda and Carnot. In America during the middle of the 19th century James B. Francis began a series of extensive experiments on a water turbine designed by Benoit Fourneyron [Layton, 1979]. Combining both the experiments and theoretical work based on Newtonian mechanics, Francis developed a series of design principles for turbines. At about the same time, G.G. Coriolis in France and William Whewell and Henry Moseley in Britain employed the idea of work to analyze machines. By comparing the transmitted work to the wasted work, they analyzed machines in terms of efficiency which would become another fundamental concept of the engineering sciences.

Machines like waterwheels and turbines could be seen as devices that transmitted and modified force or work but machines could also be seen as devices that transmitted and modified motion. If one neglected the action of dynamic forces, a machine could be analyzed in terms of what became known as the theory of mechanisms [Ferguson, 1962; Hartenberg and Denavit, 1964], an idea that went back to Leonardo Da Vinci. By the beginning of the 18th century the Swedish natural philosopher Christopher Polhem created a Laboratorium mechanicum by collecting mechanisms from across Sweden. He put forward the idea that all machines could be created from a “mechanical alphabet” with the five ancient machines serving as vowels and other mechanisms serving as consonants. Throughout the 18th and 19th centuries several institutions, such as the Conservatoire des Arts et Métiers in Paris, the Royal Institution in London and the Franklin Institute in Philadelphia, established large collections of mechanisms in order to provide a basis for the understanding and improvement of machinery. At the end of the 18th century and the beginning of the 19th century Gaspard Monge at the École Polytechnique argued that machines could best be understood by analyzing the elements of a machine that converted one type of motion into another. In order to do so, Monge and his followers, Agustin de Betancourt, Pierre Hâchette and Phillipe Lanz, developed a system to classify mechanisms that was similar to Carl Linnaeus', binomial classification system for plants. This work was extended by André-Marie Ampère, who coined the term cmématique, later called kinematics.

By the middle of the 19th century Robert Willis at Cambridge began studying mechanisms in terms of the relationship of motions created by the mechanism, seeing that the action of a mechanism was independent of the given motion that was applied to the mechanism. By the second half of the century, Franz Reuleaux, at Charlottenberg, further extended the theory of mechanisms by moving away from the study of individual mechanisms and toward the analysis of mechanisms as part of an integrated system. Particularly important work was also done by James Clerk Maxwell in Britain in 1868 with his analysis of mechanical governors which led to one of the earliest theories of feedback control [Mayr, 1970].

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Economics

Leonardo Becchetti, ... Stefano Zamagni, in The Microeconomics of Wellbeing and Sustainability, 2020

1.14 Colonial expansion and mercantilism

In the historical period between the end of the 1500s and the beginning of the 1700s the first large modern states were formed. The consolidation of the great European powers (England, Spain, France, and the Netherlands) was accompanied by a series of economic interventions to support their commercial activities. All these contributions together were called “mercantilism.”

This phenomenon, which was comprised of more than one school of thought, represented a set of techniques and rules of conduct for merchants and ministers of the economy.

Mercantilism is a set of rules, practical directions, and economic policy suggestions addressed to sovereigns to increase a country's wealth. Mercantilism held that the wealth of a nation was measured by the quantity of gold and precious metals it possessed; that is why mercantilists supported the reasoning of colonial policy and protectionism. Traditional societies were transformed from transient associations between individuals for the purpose of single business deals into permanent organizations to carry out large-scale, risky commercial activities. The first mercantile companies were formed; among the most famous were the British East India Company in 1600 and the Dutch West India Company in 1602.

The wealth accumulated in this way was then used to strengthen the military apparatus of the state, which in turn was a determining factor in the conquest of new territories and the assertion of economic supremacy over rival nations.

When precious metals began to flow into or out of a country in proportion to its sales or purchases of foreign goods, mercantilists suggested that sovereigns strengthen international trade, as the fundamental premise of mercantilism was to encourage exports and discourage imports. To attain this goal mercantilists suggested that sovereigns apply trade protectionism, a trade policy that states adopted to discourage imports (the purchase of goods from other states) through the imposition of heavy duties; the purpose was to prevent gold and precious metals from leaving the country.

International trade was considered a “zero sum game”: enriching one country could only be accomplished by impoverishing others.

Thus in a trade exchange one party became wealthier (the party that increased the gold entering the country due to sales) and the other became poorer (the one that decreased its gold supply because it was spent to purchase goods not produced within its territory). It took centuries before this idea of market exchange disappeared (and it still has not completely vanished).

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Classical theories of consumption

Bingxin Wu, in Consumption and Management, 2011

The consumption thoughts of William Petty

English classical political economics is considered to be the beginning of Western economics. Classical political economics reflects the age and class characteristics of capitalism during its inception and development period; it emphasizes capital accumulation and advocates consumption frugality. It affirms the status and role of consumption compared with mercantilism.

The core of Petty’s consumption thought insists on less consumption and more accumulation. He thinks that abundance of products for consumption leads to over-consumption, and over-consumption can make people become lazier. Workers are satisfied with a minimum living standard, so he thinks that law should only ensure that the workers can get the most necessary life materials. If the life materials extended to the workers are doubled, then, what the workers do will be halved compared with what they are capable of completing when their wages are not doubled. For society, that is tantamount to losing the products created by the same amount of labor. He also classifies capital expenditure according to the degree to which the expenditure is favorable to production; they are eating and drinking, purchasing clothing and furniture, building houses, improving land, mining and fishing as well as the enterprise of importing gold and silver from abroad in turns. It indicates that his thought is also heavily marked by mercantilism. He insists on using taxation to change the proportional relation between consumption and accumulation: ‘Through imposing taxation on people who indulge in eating and drinking, the fund accumulated can be used for useful practice, such as improving land, fishing, mining and opening factories. It is obvious that this kind of taxation is beneficial for the country where these people are located’ (Petty, 1662).

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Liberalism and War

R. Latham, in International Encyclopedia of the Social & Behavioral Sciences, 2001

3.3 The Development of International Trade

In much liberal thinking, the rise of commercial classes was to be complemented in the international realm by the emergence of a robust system of international free trade for them to participate in. An overriding concern of liberals in this area has been to counteract mercantilist tendencies in the foreign policies and relations of states. Mercantilism was associated with the pursuit by autocratic states of exclusive economic access to trade routes and special concessions for the extraction of resources—the economic benefits of access for one state would be closed off to other states. Liberals feared that gaining access or enforcing exclusivity constituted grounds for war.

Even as mercantile practices became less prominent in the nineteenth and twentieth centuries as compared with the seventeenth and eighteenth centuries, liberals still worried that protectionist policies could reinforce the sense of rivalry between states. Indeed, colonialism, which had reached new heights in European policy at the end of the nineteenth century, was mostly understood by liberals to be a mercantilist phenomenon that fed competition (annexation brings a set of people and places into the orbit of one state and not another). Liberals generally believed that states were willing to go to war over colonies to protect their interests.

The effectiveness of international trade as an antidote to these practices in the international realm rests on the prospect that, instead of seeking colonies or exclusive access, states would simply promote trade between their citizens and the rest of the world. A vested state interest in securing open access to resources, peoples, and places would develop and concerns with facilitating market competition between individual economic actors would shape policies. The connections between individuals across national boundaries would deepen and widen and rivalry would take form in the productive field of the market rather than the interstate system. This ultimately would reinforce, as John Stuart Mill (Silberner 1946) believed, an interest in peace rather than war (an activity that could be highly disruptive in the international economy).

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Handbook of the Economics of Innovation, Volume 2

W. Edward Steinmueller, in Handbook of the Economics of Innovation, 2010

3.1.4 Protectionist measures

In recent times, protectionist measures aimed at bolstering infant industries or providing an incentive for import substitution have generally been proscribed through international trade agreements. While it is generally accepted that countries would seek to support and promote domestic industries, doing so by shielding them from domestic competition from imports or financing their competitive struggles with foreign firms was prohibited as being inconsistent with the general principle of free trade. Even if some merit might exist for supporting infant industries, as many countries have done historically, implementing this support through protectionist measures would complicate trade governance by blurring the boundary between mercantilism and efforts at industrial promotion.

Acceptance of this argument is by no means universal. In the context of this chapter, the pivot of the controversy is the assumption that the prohibited actions are either ineffective or redundant to other policies that would be similarly effective. This assumption is supported to the extent that knowledge is a global public good or that the available processes of knowledge generation and distribution, that is, ones that do not contravene agreements (such as thematic funding), will suffice to allow entry into new areas of production or commercial activity. The assumption is contradicted if these conditions do not hold. While it is straightforward to find examples of countries entering new industries, contradicting a strong version of the infant industry argument, it is possible, although nearly impossible to establish, that prohibitions of protectionist measures have prevented entry into “important” industries (a broad counterfactual) or created “weak” entrants (for which there may be many other reasons).

The same problems apply to the analysis for historical examples where it is claimed that protectionist measures were of critical importance in supporting domestic technology development. While the fact of such measures is undisputed, the counterfactual claim of what would have happened in their absence is largely speculative. For example, in the case of the United States, domestic pig iron-making capacity was aided by protectionist measures in the nineteenth century with greater effect prior to the Civil War than following—however, in neither period is it likely that the industry would have disappeared without the tariff (Davis and Irwin, 2009; Irwin, 2000). The counterfactual (without protectionist measures) international division of labor in steel making in the latter half of the nineteenth century, during the most active period of American industrialization, is thus a matter of pure speculation.

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Colonialism and Imperialism

Dierk Walter, in Encyclopedia of Violence, Peace, & Conflict (Second Edition), 2008

Economy

The economy of imperialism was characterized by various structures, but overall it was a trading system.

Trade

From the first voyages to India in search of spices, trade was the aim and the means of expansion. Even where expansion began with conquest, destruction, and pillage, trading systems eventually evolved under the protection of the new colonial governments.

The classical pattern of colonial trade was the exchange of colonial produce, either natural resources or agricultural produce, for manufacturing commodities from the mother country. A key feature was the global trade network, which connected the specific trading potential of several continents. Thus, for instance, the Atlantic triangular trade (sixteenth to nineteenth century) typically exchanged cheap manufactured goods and firearms from Europe for slaves in West Africa, brought them to the American plantation colonies, where the profit from their sale would buy colonial goods for the journey home or would be transferred to Europe in bills of exchange.

Where even an imperial trade network could not provide for adequate exchange commodities, bullion gained overwhelming importance. The economy of Spain as well as the bulk of European trade in Asia until well into the nineteenth century was based on large shipments of Peruvian silver, benefiting from the fact that silver was comparatively cheaper in America than in Asia. Until the nineteenth century, trade with Asia was also the most important exception to the classical pattern: Europe imported not only raw materials but also manufactured goods (dyed textiles, porcelain) from there.

Through systems of trade regulations, governments attempted to maximize the share of their subjects in world trade, thus supporting both the home economy and the treasury (tariffs, taxation). Until the nineteenth century, the theory of mercantilism dominated these attempts. Typically, a mercantilist trade system confined colonial trade to shipping raw materials and cash crops to the mother country, and receiving in turn manufactured goods. Many commodities (the classical ‘colonial’ produce such as sugar, tobacco, coffee, dyestuffs) were also re-exported. Colonial manufacturing was restricted to domestic needs. But the differences between the powers were great: Whereas British mercantilism was comparatively liberal and marked by exceptions, Spain and Portugal surrounded their colonial empires with almost impregnable walls of regulations.

The second half of the nineteenth century witnessed the introduction by Great Britain of free trade principles into the world economy. Britain’s superior industries needed vast, open markets worldwide rather than protection. Other colonial empires followed only reluctantly. By the end of the century, new protective tariffs began to regulate trade with their respective colonies in favor of the colonial powers. Nevertheless, only in the case of Great Britain was the share of trade with its own colonies of any significance. Even here the bulk went to the Dominions (see Table 2).

Table 2. Share of own dependencies in export trade of colonial powers

ca. 1870 (%)ca. 1900 (%)ca. 1930 (%)
France 10 12.7
Germany <1
Netherlands (EastIndia only) 40.6 16.8
UK: whole empire 26.8 34.1 37.2
UK: dominions only 12.0 16.7 20.6
USA 5

Agriculture

Except when the indigenous population already produced export commodities (as in some African regions), colonies with favorable natural conditions were adapted for the world market through the establishment of plantations or farming. The various forms of colonial agriculture, from sheep or cattle breeding (Australasia, South Africa, South America) to European-style farming (North America), to sugar, tobacco, oil, rubber, coffee, or tea plantations (tropical climates in America, Africa, and Asia), all had an immense need for cultivable land in common. But whereas plantations were capital- and labor-intensive, farming was not. And while the farms produced at least partially for domestic consumption, plantations merely provided cash crops for the world market.

Industry

Although few manufacturing branches (armaments, textiles) had produced at least partially for the colonial export trade since the seventeenth century, industrial production as a whole only began to play a part in imperial expansion in the early nineteenth century, and even then it was not a major driving force. Undeveloped world regions were not a profitable market, and the bulk of the industrial output of the colonial powers went to other industrial countries. The development of colonial industries did not really begin before World War II.

Finance

Investments on the periphery were more important. From the early Caribbean plantations to the great infrastructural projects of the twentieth century (railroads, channels, roads), investment in the colonies was a risky, but, if successful, highly profitable business. Still, investment was not necessarily confined to the colonies of the respective country (see Table 3). But where investments of its subjects were, or appeared to be, threatened, an imperial power had a very good reason for intervention.

Table 3. Share of own dependencies in foreign investment of colonial powers 1913–14

France 8.8%
Germany 2.1%
UK: whole empire 47.3%
UK: dominions only 34.6%

Service sector

Shipping, banking, and insurance were key branches of the global trade network. They benefited from its existence, but even more from its expansion. This did not necessarily involve advocating formal rule, but the service sector could not lose where it was established.

Taxation

The state also profited from the colonial economy through taxation of its subjects in the colonies. Some possessions with large indigenous populations first seemed to be goldmines for the state that had the opportunity to siphon off the profits of the colonial economy and tax the inhabitants. Eventually, most colonies turned out to be very costly in terms of running and defending them, so that the home government, in contrast to businessmen, benefited little or not at all.

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The Pacific alliance during détente (1969–78)

Matteo Dian, in The Evolution of the US–Japan Alliance, 2014

Military self-sufficiency as a reaction to abandonment

We have analysed the consequences brought about by the changed international environment and the effect the new US strategy in East Asia had on political settlement of the alliance. The next step will be to assess the impact these variables had on military preparedness; namely, long-term burden sharing and the degree of military and technological interdependence.

In 1969, US analysts assessed the SDF as incapable of repelling a major invasion by Soviet or Chinese forces without substantial assistance. The strongest branch of the Japanese military was the navy, which the DNSA defined as ‘strongest non communist maritime force in Asia, fully operational and in excellent combat readiness’ (DNSA, 1969f). The military value of the MSDF, nonetheless, was partly undermined by being exclusively defensive.

Assessments on the Air Self-Defense Force were similar. Despite being ‘the most advanced air force in non-communist Asia’, Japan’s air capabilities were damaged by the absence of offensive systems, such as long-range bombers, and by the shortage of jet fighters. Altogether, Japan’s forces were considered unable to carry out the duties assigned them by the Nixon Doctrine. After 1969 Japanese military planning and the size of Japanese forces were fundamentally influenced by the changing international environment and by American retrenchment from mainland Asia.

As far as military preparedness is concerned, the immediate reaction to the Nixon Doctrine was the pursuit of kokusanka (autonomy, self-sufficiency). This was a central feature of the political and strategic debate during the 1950s and the 1960s (Pyle, 1969; Samuels, 1991). However, at that time the indigenisation of defence production was oriented towards technological autonomy rather than military self-sufficiency. Until the late 1960s, autonomous defence was subordinated to economic advancement and technological diffusion between military and non-military sectors (Samuels, 1994).

The conceptualisation of autonomy that marked the Japanese political discourse up to the 1960s was ‘techno-national’. Put simply, it was aimed at establishing a coherent strategy of catch-up industrialism that would assure economic prosperity and self-sufficiency, rather than simply military self-reliance.4 In the postwar period, this strategy was based on two main phases: first, acquiring and indigenising foreign military design development and manufacturing capabilities; second, diffusing these capabilities as widely as possible throughout the economy. The new course taken by the US undermined the strategic underpinnings of this approach. Therefore, since 1970 the concept of autonomy assumed a decisively military connotation (Friedman and Samuels, 1993). Proponents of military self-reliance foresaw a Japanese military independent of the United States and technologically completely autonomous. This conceptualisation of kokusanka implied that Japan needed to acquire independent national–industrial and military strength.

In 1969 the JDA proposed comprehensive reform of force structures. It was aimed at increasing the quality of the JSDF, enhancing autonomous defence production and defence exports. The proposed size of the SDF was close to one million. In 1970, the JDA noted, in its Basic Policy on Equipment and Development, that ‘Autonomous defence production is crucial to autonomy for autonomous defence and more generally for autonomy in foreign policy.’ Moreover, it added, ‘it is desirable for Japan to be defended with equipment developed and produced by Japan alone. From this point on, the development and production of any military equipment will be limited to Japanese industries as a matter of principle’ (Green, 1995, p. 55). As the Japan Business Federation (Keidanren) confirmed in a policy statement in 1972, ‘There is a worry that if Japan has to rely completely on another country’s good intentions or power, our ability for independent military strength is neither possible nor appropriate, then we have to choose the alliance as our first policy. In that case, balancing and adjusting dependence on the US with the maintenance of Japanese autonomy will became a serious problem’ (Green, 1995, p. 55).

Such statements testify to how kokusanka inspired technological indigenisation and diffusion but had been reversed. After the Nixon Doctrine, the concept of autonomy was increasingly intended to increase room for manoeuvre in the alliance and more generally on the international scene, deviating from the techno-national project enshrined in the Yoshida Doctrine.

During early 1971, US intelligence registered the effect the Nixon Doctrine was having on Japanese military planning. It was argued that ‘recent adjustment in the US military posture and the enunciation of the Nixon Doctrine, have shaken Japanese complacency and led to considerable questioning of US intentions’ (DNSA, 1971c). Moreover, it was estimated that the ongoing Third Defense Build-up Plan had increased the military budget by 80 per cent compared with the second plan and by 500 per cent compared with the first.

The Fourth Build-Up Plan (which established defence procurement from 1972 to 1976) assumed indigenisation to be the centrepiece of JDA procurement policy. The new basic plan stressed that ‘a nation’s ability to equip itself for self-defence centres on industrial capacity. The SDF will consider the nation’s industrial capacity and promote the domestic development and production of equipment’ (DNSA, 1973). The plan also contained recommendations for military planners tasked with undertaking arms exports to do so ‘with care’. In quantitative terms the plan proposed spending on the military and associated R&D to be increased by 350 per cent and a general increase in military expenses of 220 per cent over four years. The impact of the Fourth Build-Up Plan was reduced by the second Nixon Shock and devaluation of the dollar, making foreign purchases more attractive. Moreover, the same Nixon administration helped alleviate the impact of the Fourth Defense Build-up Plan by pressurising the Japanese to buy American equipment, particularly submarines and aircraft, in order to rectify bilateral trade imbalance. As Green (1995, p. 61) highlights, ‘Without understanding for consequences, the Nixon Administration had upset the momentum of the kokusanka, which had been intentionally created two years earlier with the Guam doctrine.’

Notwithstanding devaluation of the dollar, by the middle of the 1970s Japan’s military power, in terms of the number of men under arms, weapon systems, operational range and industrial support capability, had emerged as a very important factor in the balance of power in East Asia and the Western Pacific. Even though annual expenditure remained under the 1 per cent ceiling for the entire decade, the annual rate of increase in military expenditure was one of the highest in the world (between 8 and 10 per cent per year) (Welfield, 1988, p. 103) (Figure 3.6). The impact of the second Nixon Shock, together with pressure from the US and domestically based criticism, did not significantly reduce expansion of the SDF; but, it did frustrate the plan of Nakasone and the so-called ‘revisionist faction’ of the LDP5 of reaching self-reliance in defence production. At the end of the fourth plan, the level of domestic production did not significantly exceed the level of 1971 when the third plan expired.

Which of the following is the main principle of mercantilism group of answer choices?

Figure 3.6. Japan military expenditure

Source: Singer (1987)

The Miki government delivered the final blow to kokusanka by extending the Three Principles of Export Bans to all nations and by banning the export of all military equipment.6 The attempt to pursue technological autonomy in defence production was fundamentally inhibited by the ban on arms exportation. The exportation ban de facto stopped the Japanese arms industry from reaching the necessary scale to be self-reliant and economically sustainable (Hughes, 2004).

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Civil Society, Concept and History of

H. Islamoglu, in International Encyclopedia of the Social & Behavioral Sciences, 2001

2 Koinonia Politike Transformed

In the sixteenth and the seventeenth centuries, following a period of religiously-driven civil wars, the idea of a Christian koinonia politike was replaced by the concept of the overriding sovereignty of the secular ruler who subordinated religious claims and restored peace. This was the Hobbesian moment in which the modern state rose to define, limit, and enforce moral alternatives to God's order (Maier 1987). Competition among European monarchies, warfare, civil war, and peasant uprisings all contributed to centralization of political power. By the end of the seventeenth century, this was reflected in the institution of the sovereign monarch as a site of bureaucratic administration and regulation. Commercial expansion in the seventeenth and eighteenth centuries meant that economic activity became a primary target of state regulation. The administrative, regulatory state was represented in discourses on economic administration that combined cameralism, mercantilism, political arithmetic, and bullionism.

Thus political or civil society was no longer the politically constituted community characterized by a diffusion of political power. Instead, political society referred to the sphere of absolute sovereignty. Social harmony, which remained the legitimizing objective of rule, was the product of bureaucratic regulations and no longer the outcome of reciprocal exchanges or negotiated settlements between the ruler and the different sectors of society.

Attempts to formalize the sovereign state also had the effect of pointing to the existence of a sphere outside the political domain. In the latter part of the eighteenth century, a new conception of civil society as the site of self-regulation developed, referring to voluntary associations freed from the corporate grip of the Church and urban institutions and to the sphere of economic activity . This concept of a self-regulatory, self-governing society was often in opposition to the regulatory, political domain of the state.

The dichotomous conception of state and civil society, was, however, preceded by the distinction in Natural Law theory between status civilis and status naturalis (Tribe 1988). The latter was the sphere of discord which the English philosopher Thomas Hobbes (1588–1674) described as bellum omnium contra omnes—barter society in which individuals contracted with and against one another (Hobbes 1949), and to which his countryman John Locke (1632–1704) assigned the contentious process of the formation of private property. For Hobbes, the state of nature ended when it submitted to the ‘civil union’ ‘called state or civil society.’ For the Prussian Cameralists of the same period, organization of economic activity in political society, or its regulation, ensured the security and prosperity of the commonwealth, including providing the population with subsistence and productive employment. For the English mercantilist, James Steuart (1712–90), self-interest had to be restrained and directed by the ‘reason of state’ if it were not to damage public good, which he defined in terms of England's increasing commercial success.

Concentration of political power in administrative monarchies had resulted in a decline in the importance of the corporate bodies and deliberative institutions that had earlier served to mediate power. Groups that were excluded from the political process, as well as new bureaucratic elites and commercial classes, sought inclusion through societal associations and political institutions that could provide them with a voice against absolutism. In France, Britain, and Germany respectively, Montesquieu (1689–1755), Ferguson (1723–1816), and Kant (1724–1804) proposed conceptions of civil society focused on delineation of associational spaces, of environments for societal negotiations, of civility, and of publicity (Jacob 1991).

Responding to the despotism of the eighteenth-century French ancient regime, Montesquieu saw in civil society (l'état civil) a context for the societal negotiation of the absolute power of the monarch that was not a domain separate from the monarchy. His concept of division of powers addressed a situation in which the monarchy had severed itself from the network of power relations within the political society and had appropriated for itself a separate sphere of power (l'état politique). It sought to reintroduce the monarch into the l'état civil by means of institutions that would check the absolute authority of the ruler and balance it against the authority of the landed aristocracy, their advocates in the judiciary, and commercial interests (Richter 1998).

Kant first employed the notion of civil society, or bürgerliche Gesellschaft, in the sense of political society inseparable from the Prussian absolutism of Frederick the Great (1712–1786), which he considered indispensable for social stability. Secondly, bürgerliche Gesellschaft referred to the public sphere or a domain of literate citizenry that was separate from the arena of political power and action. Kant regarded the political arena as the reserve of the state, or the ruler. Bürgerliche Gesellschaft referred to a sphere ‘beyond the political order,’ ‘beyond the particularistic concerns of political action’ where practical issues of governance could be debated on the basis of universal principles of reason. For Kant, the critical practice of exposing actual state policies to the light of universal reason could act to restrain the absolute power of the ruler as well as legitimizing his power (Ellis 2000). Kant's bürgerliche Gesellschaft was composed of individuals from the Prussian bureaucratic and bourgeois elites, educated and trained in state schools and administrative offices, as well as members of social clubs and associations, who could by dint of reason rise beyond the trappings of class or official status.

The thinkers of the Scottish Enlightenment who addressed the issue of civil society did not limit themselves to the issue of restraints to centralized state authority. Adam Ferguson pointed to the corrosion of civic spirit in political society, where the successful commercial classes became servile to the administrative state, which provided them with a ‘rule of law’ but deprived them of their traditional rights (Keane 1988, Ferguson 1995). He conceived of civil society as networks of self-governing and self-regulating voluntary associations, such as self-help groups and ‘friendly’ or charitable societies, which had expanded rapidly in the eighteenth century and, in Britain, played an important part in poverty relief efforts. Ferguson pointed to the potential of voluntary associations for engendering civility beyond the special interests of state administration and the commercial classes. The central question facing Ferguson and other eighteenth century European thinkers was how society increasingly differentiated administratively and economically, could remain integrated and harmonious. For Ferguson, as for his compatriot, David Hume (1711–1776), civility was the basis for social cohesion, and he saw it as rooted in sociability or moral and emotional communication among persons ‘that fostered social bonds and friendships and cultivated manners and moral tastes’ (Trentmann 2000). Ferguson did not place civil society in opposition to the state; rather, civil society constituted a protective shield from the uncertainties of social and political life.

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Not just for profit: civil enterprises and values-based organizations

Leonardo Becchetti, ... Stefano Zamagni, in The Microeconomics of Wellbeing and Sustainability, 2020

10.9 The difficult innovations of a civil enterprise

Before concluding this chapter dedicated to companies that are more complex than those motivated purely by profit, there is more we can say about the market, VBOs, and civil entrepreneurs. We begin not from a economist from the past, but from one of the classical mainstream economists, David Ricardo. In 1817 this great British economist formulated one of the first real economic theories, which is still relevant today.

In previous theory, and in mercantilism in particular, trade and exchange happened when there were “absolute” advantages. If Britain and Portugal have the following cost structure, then specialization and international trade are advantageous (Table 10.1).

Table 10.1. Absolute advantages (numbers express costs).

BritainPortugal
Cotton products: 5 Cotton products: 8
Wine: 6 Wine: 5

Ricardo demonstrated that even in cases where there were only “relative” advantages, trade is advantageous for both (Table 10.2):

Table 10.2. Relative advantages.

BritainPortugal
Cotton products: 5 Cotton products: 8
Wine: 6 Wine: 7

Ricardo showed us that even in a world in which Britain is more efficient than Portugal in both sectors, it can be advantageous for Britain to specialize in the sector where is relatively the strongest (where it has a comparative advantage). The point is that even in this case trade with the weakest benefits the strongest as well. The classic example is that of a lawyer who, although she can type faster on her computer than her secretary, still has an advantage in hiring a secretary and concentrating instead on her legal work; this is the well-known concept today of “opportunity cost.” Just as in the case of Britain, in hiring a secretary who is not as fast as she is the lawyer is not offering aid or charity, rather, she and the secretary both benefit from the exchange. When the market includes the weakest and turns it into an opportunity for the common good, for the good of all and of each one, then it is playing its civilizing role.

Why is this theory significant for VBOs? Consider the important innovation of the emergence of social cooperation in Italy. Disadvantaged people who are included in companies often become opportunities for mutual benefit, even for the companies that hire them, rather than being a “cost” or an act of charity. (There is also public participation in the costs of hiring these people, which is nearly always socially efficient.) Disabled workers were essentially seen as a cost or a burden by companies and trade unions; social cooperation was truly innovative when ways were found for these disadvantaged workers to become a resource for companies as well.

In such cases the persons who are “helped” feel that they are in a reciprocity-based relationship, which is an expression of greater dignity. They do not feel they are being helped, but rather that they are agents in a contract that is mutually beneficial, and so they feel themselves more free and equal. Even a person affected by Down syndrome can participate in a mutually advantageous contract with a company, although it requires truly innovative abilities by civil entrepreneurs. Mutual advantage is always a possibility, but it does not happen automatically or always; it requires creativity and much more, but when it happens the market becomes a true instrument of inclusion and authentic human and civil growth. In fact, a benefactor's sacrifice is not always a good sign for those who receive the help, because it can express a power relationship that may be concealed by good faith.

Civil entrepreneurs should give themselves no peace until the people included in their VBOs feel themselves to be useful to the company and to society, rather than assisted by a philanthropist. Consider micro-credit. Bringing the excluded into the banking system was one of the principal economic innovations of our time. It liberated people – women in particular – from poverty and exclusion much more efficiently than many international aid interventions. If an intervention does not help all parties involved, it can hardly be of real help for someone. If I do not feel benefited less than I benefit someone else, the other will rarely feel truly benefited by me, especially when the relationship endures over time. Diversity is the law of life, enabling relationships that do not deteriorate, but rather grow in mutual dignity.

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What is the main principle of mercantilism?

Mercantilism was based on the idea that a nation's wealth and power were best served by increasing exports and reducing imports. It's characterized by the belief that global wealth was static and that a nation's economic health relied heavily on its supply of capital.

What are the 3 main beliefs of mercantilism?

The 7 characteristics of mercantilism are:.
Desire to accumulate gold..
Belief that Wealth is Static..
Desire for Large Population..
Positive Balance of Trade..
Reliance on Colonies..
State Monopolies..
Trade Barriers..

What is mercantilism short answer?

Mercantilism is an economic practice by which governments used their economies to augment state power at the expense of other countries. Governments sought to ensure that exports exceeded imports and to accumulate wealth in the form of bullion (mostly gold and silver).

What is mercantilism quizlet?

What is Mercantilism? an economic system in which nations seek to increase their wealth and power by obtaining large amounts of gold and silver and by establishing a favorable balance of trade.