What is the relationship between the mercantilists policies and absolute advantage?

Mercantilism and absolute advantage are very different in that the former posits a zero-sum approach to international trade, with the strong preying on the weak, while the latter assumes a more benign relationship between trade partners wherein each benefits from being able to specialize in producing and exporting that which each produces more efficiently.

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The relationship of mercantilism to “absolute advantage” is largely antithetical. Whereas mercantilism posits a zero-sum relationship between two entities (in this context, nations) wherein a stronger entity exploits the resources of the weaker entity while limiting or blocking imports from the weaker entity and forcing upon the weaker entity the stronger entity’s exports, absolute advantage is more of a “win-win” proposition, in which both sides benefit from the arrangement.

Mercantilism was an economic theory developed during the 16th century intended to allow for already strong, advanced nations to grow more powerful, especially relative to other, generally European, continental powers. It provided the intellectual foundation for the process of colonization that dominated global politics and that positioned Europe’s monarchies in competing postures. Nations, especially Britain, would force its exports into weaker markets while restricting the flow of finished goods from those weaker nations into its own markets. The exception to the restrictions on imports were the natural resources, mainly gold and silver, that provided the wealth upon which sat those monarchies.

In contrast to the one-sided nature of mercantilism, the concept of absolute advantage was founded (intellectually, by Adam Smith in his The Wealth of Nations) upon the notion that trade should be mutually beneficial and should revolve around the specialization in production of specific goods that each individual nation possessed. Inherently less mercenary in concept, absolute advantage played to each entity’s natural strengths with the assumption that, in the long-term, benefits would even out. Modern, mainly Western, international trade policy presumes a large degree of absolute advantage among actors, although the reality can be quite different depending upon relative levels of technological and economic development. Absolute advantage can also be undermined through the political influence of special interests, such as organized labor, that suffer from the very advantages accruing to foreign trade partners that are supposed to make this approach to trade mutually advantageous. In other words, Country A may be more efficient at producing automobiles than Country B and, consequently, should be exporting automobiles to Country B, but the latter’s domestic industries often object to foreign competition, which often results in the imposition of tariffs on imports to the detriment of consumers in Country A because of the increase in purchase price that results from tariffs.

In short, mercantilism and absolute advantage are very different approaches to international trade, with the former the foundation of the predatory imperialist policies of the 16th and 17th centuries and the latter a reaction to those policies on the part of economists less inclined to want economies dominated by entirely mercenary considerations.

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