Capitalism vs. Mercantilism

By Jaxson

Main Difference

The main difference between Capitalism and Mercantilism is that the Capitalism is a economic system based on private ownership of the means of production and the creation of goods or services for profit and Mercantilism is a economic policy emphasizing exports

  • Capitalism

    Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system and competitive markets. In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.Economists, political economists, sociologists and historians have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free-market capitalism, welfare capitalism and state capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership, obstacles to free competition and state-sanctioned social policies. The degree of competition in markets, the role of intervention and regulation, and the scope of state ownership vary across different models of capitalism. The extent to which different markets are free as well as the rules defining private property are matters of politics and policy. Most existing capitalist economies are mixed economies which combine elements of free markets with state intervention and in some cases economic planning.Market economies have existed under many forms of government and in many different times, places and cultures. Modern capitalist societies—marked by a universalization of money-based social relations, a consistently large and system-wide class of workers who must work for wages, and a capitalist class which owns the means of production—developed in Western Europe in a process that led to the Industrial Revolution. Capitalist systems with varying degrees of direct government intervention have since become dominant in the Western world and continue to spread. Over time, capitalist countries have experienced consistent economic growth and an increase in the standard of living.

    Critics of capitalism argue that it establishes power in the hands of a minority capitalist class that exists through the exploitation of the majority working class and their labor; prioritizes profit over social good, natural resources and the environment; and is an engine of inequality, corruption and economic instabilities. Supporters argue that it provides better products and innovation through competition, disperses wealth to all productive people, promotes pluralism and decentralization of power, creates strong economic growth and yields productivity and prosperity that greatly benefit society.

  • Mercantilism

    Mercantilism is a national economic policy that is designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries before falling into decline, although some commentators argue that it is still practiced in the economies of industrializing countries in the form of economic interventionism.It promotes government regulation of a nation’s economy for the purpose of augmenting state power at the expense of rival national powers. Mercantilism includes a national economic policy aimed at accumulating monetary reserves through a positive balance of trade, especially of finished goods. Historically, such policies frequently led to war and also motivated colonial expansion.Mercantilist theory varies in sophistication from one writer to another and has evolved over time. High tariffs, especially on manufactured goods, was an almost universal feature of mercantilist policy. These policies aim to reduce a possible current account deficit or reach a current account surplus.

    With the efforts of supranational organizations such as the World Trade Organization to reduce tariffs globally, non-tariff barriers to trade have assumed a greater importance in neomercantilism.

  • Capitalism (noun)

    A socio-economic system based on private ownership of resources or capital.

  • Capitalism (noun)

    An economic system based on private ownership of the means of production and their operation for profit.

  • Capitalism (noun)

    A socio-economic system based on private property rights, including the private ownership of resources or capital, with economic decisions made largely through the operation of a market unregulated by the state.

  • Capitalism (noun)

    An economic system based on the abstraction of resources into the form of privately owned capital, with economic decisions made largely through the operation of a market unregulated by the state.

  • Mercantilism (noun)

    The theory that a nation must always have a positive balance of trade, in the manner that a merchant would operate a shop. Typically this model presupposes protectionism.

  • Mercantilism (noun)

    The theory that holds that the prosperity of a nation depends upon its supply of capital, and that the global volume of trade is unchangeable.

  • Mercantilism (noun)

    belief in the benefits of profitable trading.

  • Mercantilism (noun)

    the economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism.

Oxford Dictionary

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