Adam Smith: The Principle Of The Mercantile System Essay, Research Paper

Adam Smith wrote that commerce in Europe, but more specifically Great Britain, went from a system where the producers changed to adapt to what the consumers needed, to a system where the producers would try their hardest to corner the market, and in that, would leave the consumers with a mediocre product. In response to tightened importation laws, he wrote that a strong foreign trade system would be the only way to provide good products to the English public. Adam Smith was accurately seeing the future of the world’s commerce. He saw that as producers tried to make more and more money, they were forced to cut corners. This resulted in products that were worse than they could be. He knew that the way to improve product quality in Great Britain was to import goods from other counties.

When looking at almost any “first-world” country, you can see that the country is not a producing country, but rather a servicing country. Production of goods in the United States has dropped tremendously since the 1950’s, and services have taken over. A perfect example is in the production of televisions. In the early days of television, GE made all of the US’s televisions in the US itself. Now, there is not one television made anywhere but Japan. Now, in the US, the main product is not a television, but rather a service, what is broadcast on that television. Adam Smith predicted that with local products getting worse, foreign products would be necessary, and that if Britain did not start abolishing the prohibitions on importation, those products definitely would get worse.

It discourages the exportation of the materials of manufacture, and of the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations in all foreign markets; and by restraining, in this manner, the exportation of a few commodities, of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities

Smith, Adam; The Wealth of Nations 1776

In this paragraph, it is the Mercantile System, a system recommended by Smith to fix the problems in British commerce. In the Mercantile system, foreign trade is highly encouraged because it helps benefit the consumers, and helps lower cost for the consumer. It is a very consumer based system. It limits the exportation of goods, for the benefit of the local workmen , and welcomes the importation of foreign goods, to benefit of local consumers. This is unfortunately not how the Mercantile System actually worked.

Smith believed that commerce had been warped in the minds of greedy consumers. Unfortunately, with prohibitions on import in Great Britain, the Mercantile System could only work half way. The key aspect to the Mercantile System is that it allows goods from other countries to be imported. When importation is blocked, the Mercantile System can no longer be effective, and it leads commerce in a new direction.

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce

Smith, Adam; The Wealth of nations. 1776.

It was obvious to Smith that the consumer should be the most important aspect of commerce, but in the British Mercantile System, the most important aspect became the producer.

Adam Smith’s was trying to preserve the old fashioned way of life. In Britain, in the past, producers were only there to earn what they needed to live. They were now trying to make a profit.

“In Shakespeare’s time the object of life for the ordinary citizen, for everbody, in fact, except the gentility, was not to advance his station in life, but to maintain it.”

The Economic Revolution p.25

Times in Britain had changed. The object of life was no longer to maintain one’s station in life, but rather to advance it as much as possible. Smith was quite apparently against this idea. He wanted things to stay the way they were. Smith was trying to preserve a way of life where only royalty could be extravagant; a merchant could never earn enough to build a castle. This was, of course, during and after the feudal system had managed to expand Europe’s population enormously. With an increasing population, comes the need for some sort of change in society. The change from a society with little personal gain, to the British Mercantile System, may have been that change.

Smith may have been trying to preserve the old way of life, but that isn’t to say that he just wanted things the way they used to be. His profession was an economist; he knew what he was talking about. He saw where things were going, provided commerce continued in this fashion. And he was right. You can look at any European country, or the US (which could be considered an extension of Europe), and you can see that commerce is a very warped business. If you go to a store now, you will find products that have been made in the absolute worst conditions, by people who get an outrageously small amount of money, and with materials that are the cheapest you can find. Is any of this to benefit the consumer? No, because the prices are still high, it is only so that the producer can make more money.

Bibliography

Smith, Adam; The Wealth of Nations 1776