ANSWER TO QUESTION NUMBER-1

During the 16th and 17th century earliest period off mercantilism Europe was going through a
phase where they had to deal with shortage of gold and silver. As a result they could not expand
as much as they wanted. Strict restrictions were exerted on the economy in order to stop the
exporting of Gold and Silver. Although many Spanish capitalist manage to overcome this barrier
and gain huge amount of profit. They did this by corrupting High officials or by smuggling large
quantities of bullions out of the countries. All this occurred in Bulluionist period. This resulted in
high amount of inflation for lengthy period of time. Later shipping and insurance means were
introduce in order to export goods. The British merchants wanted a monopolistic economy, an
economy without competition. Although they were successful in keeping out English merchants
their efforts went in vain in stopping the Spanish, French and Dutch from entering the Market.
Mercantilism is based on the idea that strong nation states used military power in order to protect
the local market and the suppliers of the market. In order for this to happen a positive balance of
trade was required. Mercantilism eventually led to failure as nations could not have everlasting
surplus of export. In order to reduce imports agriculture products were used.
Laissez Faire is an economic theory that became popular in 18th century. The main concept
behind this theory was that the less the government got involved in free market capitalism the
better off the business were as well as the societies. In a laissez Faire economy the involvement
of the government less productivity of the economy. Between the 9th and 15th centuries a
combination of legal and military customs was followed all over Europe and it was known as
Feudalism. It was a mixture of social, political and economic system that ruled the medieval life
of the European people. Lords estates or manor was the center of feudalism through which
Europe became flourished economically. The system of feudalism slowly changed and modern
industrial capitalism took over Europe. In this system capitalists accumulated capital and used
that for production. All the investment decisions were taken by the private individuals that is the
capitalists and there were very less government control. Market controlled all the decisions
regarding the production of goods and decisions needed to be taken.
In order to compare both mercantilism and laissez faire, we must compare both their
fundamental theories. Their founding principles and assumptions are quite different.
Mercantilismas fixed throughout the world. IN order to make someone better-off you must make
someone else worse-off. Mercantilist were more selfish at that time they wanted to take over
others wealth also. The laissez faire supporters formed a different opinion were the more they
traded the more wealth they formed.During the 16th and 18th century, mercantilism was very
dominant in Europe. It is also known as an economic theory which lies on the belief that trade
leads to aggregation of profitable balances and in order to do so government should encourage
trade by using different means of production. It was used to make the economy powerful and
wealthy. Its main aim was to restrict imports and encouraged exports using different policies of
protectionism. This was a dominant thought and policy used widely in western Europe from the
16th to the late 18th century. The aim of mercantilism was to have a favorable trade balance in
the country and that could lead to the generation of employment. This view was quite
contradictory to the views of phsiocrats or the laissez faire view that prevailed in the 19th and
early20th century. The system was very helpful for the merchants and producers such as the
British east India Company, which remained well protected by the state.
The most important role of mercantilism can be defined by the end of the feudal era. The feudal
era was known to be between the 9th and the 15th century. This lead to the growth of the
European commerce and industries, increased trade and earnings and moreover generated more
gold and silver. The theories were mostly based on the relationship between the government and
the mercantilist class. Government protected them from imports and foreign competition and
lead to the development of domestic industries.
The policies were:
Providing capital to new industries
Exempting new industries from taxes and trade restrictions
Grant tiles
Pension to successful producers
Imposition of tariffs, quota and other restriction on imports
Encouraging exports though tax holidays, subsidies etc.

This view was contradictory to the laissez faire doctrines. The publication of the wealth of nation
marked the of the mercantilist era, slowly with the development of new industries it became hard
to regulate the new industries and policies. At around the 1860s, it was the end of the mercantile
era. England became a dominant power in Europe and thus free trade evolved. Modern
economist s such as Adam smith was very much in support of the free market economy. He
believed that free trade could be better by making everyone better off and thus it will also lead to
specialization of labor. Thus all the modern economic theories and policies do lie to the belief of
ensuring free trade among countries as it makes everyone better off.

We come to know from history that European nation states like the British, French and the
Germans emerged by adopting Mercantilism principles at the initial stage of the manufacturing
era. These nations initially tried to maximize exports as much as possible and minimize imports.
These tendencies lead to mass colonization of land in other continents and increase self-
sufficiency. In modern days the developed countries tend to force Laissez-faire doctrine over the
developing nations which is completely opposite if we compare the developing period of Europe
where their government followed of Mercantilists policies to furiously protect their own
industries