Essay question regarding globalisation

Table of Contents

The International Trade theory3

Mercantilism3

Absolute advantage8

Comparative advantage9

Free Trade and Protectionism11

Protectionism: Who Gains?13

Factor Driving Globalization Advantage and Disadvantage14

The Economic System Advantage and Disadvantage16

The Trends That Shape the 21st Century Economy18

Essay question regarding globalisation

The International Trade theory

International Trade Theory agreements with the distinct forms of worldwide trade have been evolved to interpret the varied concepts of exchange of goods and services over the global boundaries. The ideas of worldwide trade have undergone several alterations from time to time. The rudimentary standard behind worldwide trade is not very much distinct from that engaged in the household trade. The prime target of trade is to maximize the profits from trade for the parties committed in the exchange of goods and services (Bienefeld? 1994).

Be it household or worldwide trade, the underlying motivation continues the same. The cost engaged and components of output distinct worldwide trade from household trade. International trade engages over boundary exchange and this rises the cost of trading. Factors like tariffs, limits, time charges and charges associated with lawful schemes of the nations engaged in trade make the international trade a exorbitant affair; while the span of limits and lawful hassles are substantially reduced in case of household trade.

Mercantilism

Adam Smith was searching for a name to identify the body of economic ideas generally accepted in the century or two before he wrote? he called it Mercantilism? because of the emphasis placed upon trade. In earlier chapters we have already encountered the outstanding representatives of this general theory of economic life: Mun? Petty? Child? Steuart? Montchretien? and von Hornick. Briefly stated the Mercantile doctrine identified wealth with money.

It therefore emphasized the necessity of a community so conducting its affairs as to acquire an abundance of precious metals. The surest method of doing this? especially for those countries without mines? was to export the utmost quantity of its own manufactures? and to import the absolute minimum from other nations. The excess of exports over imports would be paid for in gold and silver (Bienefeld? 1994). A favorable balance of trade? that is? when more coin is received than is paid out? was considered the only satisfactory condition of commerce. The establishment and maintenance of such a favorable balance was not alone the responsibility of individual merchants; the government carried a heavy obligation as well. It was agreed that by prohibitions against foreign goods? subsidization of exports? restriction upon the export of precious metals? and the creation of monopolies among the trading companies? the government might assure the nation of a steady influx of gold—as the means of making the state strong and powerful. While most economists of the period must be classed as Mercantilists? not all of them would subscribe to the above summary of Mercantilist ideas. Many of them were too clear sighted to be trapped by certain obvious errors in the Mercantilist line of reasoning (Bienefeld? 1994).

However? these men were in a sense merely expressing in terms of ideas what was the actual practice of the ...