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  • Essay / Importance of Mercantilism - 1423

    The greatest critic of the mercantilist system was the Scottish philosopher, political economist and classicist David Hume who, in 1752, pointed out an intrinsic flaw in the doctrine proposed by mercantilism, later called mechanism cash flow. The idea is that the trade surplus, the ultimate goal of mercantilist policies, and the accumulation of gold and silver were unsustainable in the long term. He advocated the trade surplus, which puts in place forces which tend to be reversed. According to him. If one country has a surplus relative to another, the influx of gold and silver would inflate the supply of the national economy and lead to inflation - there would be too much money chasing few goods, the system would operate at full capacity and money would not be spared but would continue to circulate. In the other country, on the other hand, the flight of gold and silver leads to a fall in prices. The deficit country becomes more and more competitive, which modifies the trade balance. That being said, Hume argued that a free circulation of gold would lead to an equilibrium in the balance of payments.