Capitalism vs Mercantilism: Meaning And Differences

Capitalism and mercantilism are two economic systems that have shaped the world in different ways. While capitalism is often associated with free markets and individualism, mercantilism is associated with protectionism and nationalism. In this article, we will explore the differences between these two economic systems and their impact on society.

Let’s define what we mean by capitalism and mercantilism. Capitalism is an economic system in which private individuals and businesses own and operate the means of production and distribution of goods and services. In a capitalist system, the market determines prices and production levels, and individuals are free to buy and sell goods and services as they see fit.

Mercantilism, on the other hand, is an economic system in which the state controls the means of production and distribution of goods and services. The goal of mercantilism is to increase the wealth and power of the state through trade and commerce. In a mercantilist system, the state regulates trade and commerce to ensure that exports exceed imports, and that the state accumulates gold and silver.

Now that we have defined these two economic systems, let’s explore their differences in more detail. In the following sections, we will examine the key features of capitalism and mercantilism, and their impact on society.

Capitalism

Capitalism is an economic system in which private individuals or businesses own and operate the means of production and distribution of goods and services. This system is characterized by the free market, where prices of goods and services are determined by supply and demand. In a capitalist system, the goal is to maximize profits and accumulate wealth, and competition among businesses is encouraged. The government’s role is minimal, with limited intervention in the market.

Mercantilism

Mercantilism is an economic system that was popular in Europe from the 16th to the 18th century. It is based on the idea that a nation’s wealth is determined by the amount of gold and silver it possesses. To increase their wealth, mercantilist countries sought to export more goods than they imported, creating a favorable trade balance. The government played a significant role in regulating trade, with policies such as tariffs, subsidies, and monopolies. Mercantilism was criticized for being a zero-sum game, where one country’s gain was another’s loss.

How To Properly Use The Words In A Sentence

When discussing economic systems, it is important to use the terms correctly to avoid confusion. Here’s a guide on how to properly use the words capitalism and mercantilism in a sentence.

How To Use Capitalism In A Sentence

• Capitalism is an economic system based on private ownership of the means of production and their operation for profit.
• Many argue that capitalism promotes innovation and competition, leading to economic growth.
• Some critics of capitalism argue that it leads to income inequality and exploitation of workers.
• Capitalism has been the dominant economic system in the Western world since the Industrial Revolution.
• Examples of countries with capitalist economies include the United States, Japan, and Germany.

How To Use Mercantilism In A Sentence

• Mercantilism is an economic system that emphasizes the accumulation of wealth through trade.
• Under mercantilism, a country’s wealth was measured by its stockpile of gold and silver.
• Many historians consider mercantilism to be a precursor to modern capitalism.
• Mercantilism was the dominant economic system in Europe during the 16th, 17th, and 18th centuries.
• One of the key principles of mercantilism was the belief in protectionism, which involved limiting imports and promoting exports.

More Examples Of Capitalism & Mercantilism Used In Sentences

In order to further understand the differences between capitalism and mercantilism, it is helpful to examine how these economic systems are used in everyday language. Here are some examples of how the terms capitalism and mercantilism can be used in a sentence:

Examples Of Using Capitalism In A Sentence

• Capitalism is the economic system that dominates the world today.
• Under capitalism, individuals are free to pursue their own economic interests.
• The success of capitalism is often measured by the amount of economic growth it generates.
• Capitalism has been criticized for creating inequality and concentrating wealth in the hands of a few.
• In a capitalist system, prices are determined by supply and demand.
• One of the key features of capitalism is the private ownership of property.
• Capitalism is often contrasted with socialism, which advocates for greater government control over the economy.
• Many argue that capitalism is the most efficient way to allocate resources.
• Capitalism has been the dominant economic system in the West since the Industrial Revolution.
• The rise of capitalism has led to unprecedented levels of economic growth and technological innovation.

Examples Of Using Mercantilism In A Sentence

• Mercantilism was the dominant economic system in Europe during the 16th and 17th centuries.
• Under mercantilism, a nation’s wealth was measured by the amount of gold and silver it possessed.
• Mercantilism was characterized by government intervention in the economy and the promotion of exports over imports.
• Many historians view mercantilism as a precursor to modern capitalism.
• Mercantilist policies often led to trade wars and conflicts between nations.
• The mercantilist system was based on the idea that a nation’s economic power was directly tied to its military power.
• One of the key features of mercantilism was the use of tariffs and other trade barriers to protect domestic industries.
• The decline of mercantilism was brought about by the rise of free trade and the Industrial Revolution.
• Mercantilism has been criticized for being a zero-sum game, in which one nation’s gain is another nation’s loss.
• Many of the economic policies advocated by mercantilists, such as protectionism and government intervention, are still debated today.

Common Mistakes To Avoid

When discussing economic systems, it’s important to understand the differences between capitalism and mercantilism. Unfortunately, many people use these terms interchangeably, leading to confusion and misunderstandings. Here are some common mistakes to avoid:

Mistake #1: Assuming That Capitalism And Mercantilism Are The Same Thing

Capitalism and mercantilism are two distinct economic systems with different goals and principles. Capitalism is based on the idea of free markets, where individuals and businesses are free to produce and sell goods and services without government intervention. On the other hand, mercantilism is a system where the state controls the economy and seeks to maximize exports and minimize imports to accumulate wealth.

Mistake #2: Believing That Capitalism And Mercantilism Can Coexist

Some people argue that capitalism and mercantilism can coexist, but this is not true. Capitalism relies on free markets and competition, while mercantilism requires government intervention and protectionism. The two systems are fundamentally incompatible and cannot exist together.

Mistake #3: Confusing Capitalism With Corporatism

Corporatism is a system where businesses and the state work together to control the economy. While it shares some similarities with capitalism, such as the emphasis on private property and free markets, it is fundamentally different. In a corporatist system, the state has a significant amount of control over the economy, which is not the case in capitalism.

Tips To Avoid These Mistakes

• Do your research before discussing economic systems to ensure that you are using the correct terminology.
• Be clear about the differences between capitalism and mercantilism, and avoid using the terms interchangeably.
• Understand that capitalism and mercantilism are incompatible systems, and cannot coexist.
• Be aware of other economic systems, such as corporatism, and understand how they differ from capitalism and mercantilism.

Context Matters

When it comes to choosing between capitalism and mercantilism, context is key. Both systems have their advantages and disadvantages, and which one is more appropriate depends on the specific circumstances in which they are being used.

Examples Of Different Contexts

Let’s take a look at some examples of different contexts and how the choice between capitalism and mercantilism might change:

1. Economic Development

In the context of economic development, capitalism is often seen as the better choice. This is because capitalism promotes competition and innovation, which can lead to economic growth and prosperity. Mercantilism, on the other hand, tends to focus on protecting domestic industries and accumulating wealth through trade, which can stifle competition and innovation.

2. National Security

When it comes to national security, mercantilism may be the better choice. This is because mercantilism emphasizes the importance of a strong domestic economy and the accumulation of wealth, which can be used to fund military endeavors. Capitalism, on the other hand, may prioritize profit over national security concerns.

3. Environmental Protection

In the context of environmental protection, capitalism may not be the best choice. This is because capitalism often prioritizes economic growth over environmental concerns. Mercantilism, on the other hand, may be more focused on protecting domestic resources and industries, which could lead to more environmentally sustainable practices.

As you can see, the choice between capitalism and mercantilism depends on the specific context in which they are being used. It is important to carefully consider the advantages and disadvantages of each system before making a decision.

Exceptions To The Rules

Identifying Exceptions

While capitalism and mercantilism are often seen as opposing economic systems, there are situations where the rules for using them may not apply. It is important to identify these exceptions in order to understand the limitations of each system and when they may not be the best approach.

Exceptions For Capitalism

Capitalism is based on the idea of free markets and competition, but there are situations where this approach may not work as intended. Some exceptions to the rules of capitalism include:

• Monopolies: In cases where a single company dominates a market, competition is limited and the benefits of capitalism may not be realized. This can lead to high prices and reduced innovation.
• Externalities: When the costs or benefits of a transaction are not reflected in the market price, capitalism may fail to account for the true social costs or benefits. For example, pollution from a factory may not be factored into the cost of production, leading to environmental damage.
• Public Goods: Capitalism may not be effective in providing public goods, such as national defense or public parks, as there is no clear way to assign property rights or ensure that everyone pays their fair share.

Exceptions For Mercantilism

Mercantilism is based on the idea of maximizing exports and minimizing imports, but there are situations where this approach may not be the best option. Some exceptions to the rules of mercantilism include:

• Globalization: In a globalized economy, trade barriers and protectionist policies may limit economic growth and lead to retaliation from other countries. This can ultimately harm domestic industries and consumers.
• Resource Dependence: Mercantilism may not be the best approach for countries that are heavily dependent on imports for key resources, such as oil or minerals. Restricting imports can lead to higher prices and reduced economic growth.
• Coordination Problems: In some cases, mercantilist policies may require coordination between multiple countries in order to be effective. This can be difficult to achieve, as each country may have its own interests and priorities.

By understanding these exceptions to the rules of capitalism and mercantilism, we can better evaluate the strengths and weaknesses of each system and determine when they may or may not be the best approach for a given situation.

Practice Exercises

Practicing the use of capitalism and mercantilism in sentences can be an effective way to improve one’s understanding of these economic systems. Below are some practice exercises that can help readers enhance their knowledge of capitalism and mercantilism:

Exercise 1: Fill In The Blank

Complete the following sentences with the correct word (capitalism or mercantilism):

1. _________ is an economic system based on private ownership of the means of production and the creation of goods and services for profit.
2. _________ is an economic system that emphasizes the accumulation of wealth through trade and the establishment of colonies.
3. Under __________, the government plays a limited role in the economy, while under __________, the government plays a significant role in regulating trade and commerce.
4. In a __________ system, prices are determined by supply and demand, while in a __________ system, prices are set by the government.

Answer Key:

1. Capitalism
2. Mercantilism
3. Capitalism, mercantilism
4. Capitalism, mercantilism

Exercise 2: Sentence Completion

Complete the following sentences with a word or phrase related to capitalism or mercantilism:

1. In a __________ system, individuals are free to pursue their own economic self-interest.
2. __________ is often associated with the development of capitalism in Europe.
3. In a __________ system, the government may restrict imports in order to protect domestic industries.
4. The __________ Revolution played a significant role in the development of capitalism.

Answer Key:

1. capitalist
2. mercantilism
3. mercantilist
4. Industrial

By practicing these exercises, readers can gain a better understanding of the differences between capitalism and mercantilism and how they are applied in real-world situations.

Conclusion

After examining the differences between capitalism and mercantilism, it is clear that these economic systems have distinct features that set them apart. Capitalism emphasizes the free market and individual ownership, while mercantilism focuses on government intervention and trade protectionism.

One key takeaway is that capitalism has been associated with economic growth and innovation, while mercantilism can lead to inefficiencies and limited economic growth. However, it is important to note that both systems have their advantages and disadvantages, and the best approach may depend on the specific context and goals of a society.

Another important takeaway is the role of language in shaping economic discourse. The way we talk about economic systems can influence our understanding and perceptions of them. Therefore, it is crucial to use precise and accurate language when discussing capitalism and mercantilism.

Continuing To Learn

If you are interested in learning more about grammar and language use, there are many resources available online and in print. Some recommended sources include:

• The Elements of Style by William Strunk Jr. and E.B. White
• Grammarly Blog
• Merriam-Webster Dictionary
• The Chicago Manual of Style

By continuing to improve your language skills, you can enhance your ability to communicate effectively and make informed decisions about economic systems and other important topics.