Discuss the three essential pillars of the theory of mercantilism

What will be an ideal response?

The trade theory that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports is called mercantilism. It states that other measures of a nation's well-being, such as living standards or human development, are irrelevant. Nation-states in Europe followed this economic philosophy from about 1500 to the late 1700s. The most prominent mercantilist nations included Britain, France, the Netherlands, Portugal, and Spain. The practice of mercantilism rested upon three essential pillars: trade surpluses, government intervention, and colonialism.
Trade Surpluses-Nations believed they could increase their wealth by maintaining a trade surplus-the condition that results when the value of a nation's exports is greater than the value of its imports. In mercantilism, a trade surplus meant that a country was taking in more gold on the sale of its exports than it was paying out for its imports. A trade deficit is the opposite condition-one that results when the value of a country's imports is greater than the value of its exports. In mercantilism, trade deficits were to be avoided at all costs.
Government Intervention-Governments actively intervened in international trade to maintain a trade surplus. According to mercantilism, the accumulation of wealth depended on increasing a nation's trade surplus, not necessarily expanding its total value or volume of trade. The governments of mercantilist nations did this by either banning certain imports or imposing various restrictions on them, such as tariffs or quotas. At the same time, they subsidized industries based in the home country to expand exports. Governments also typically outlawed the removal of their gold and silver to other nations.
Colonialism-Mercantilist nations acquired territories (colonies) around the world to serve as sources of inexpensive raw materials and as markets for higher-priced finished goods. These colonies were the source of essential raw materials, including tea, sugar, tobacco, rubber, and cotton. These resources would be shipped to the mercantilist nation, where they were incorporated into finished goods such as clothing, cigars, and other products. These finished goods would then be sold to the colonies. Trade between mercantilist countries and their colonies were a huge source of profits for the mercantilist powers. The colonies received low prices for basic raw materials but paid high prices for finished goods.