Which economic theory is considered the forerunner of modern-day protectionism?

Which economic theory is considered the forerunner of modern-day protectionism?

• A. Comparative Advantage
• B. Absolute Advantage
• C. Mercantilism
• D. Factor Endowments

Answer: (C)

Mercantilism is recognized as the forerunner of modern-day protectionism due to its focus on accumulating wealth, primarily through a positive balance of trade, and the regulation of the economy by the state. This economic theory, which prevailed from the 16th to the 18th centuries, emphasized the importance of maintaining gold and silver reserves and advocated for policies that would protect domestic industries against foreign competition. Under mercantilism, governments implemented tariffs, quotas, and subsidies as means to enhance exports and limit imports, therefore directly influencing trade policies and relationships between countries. This foundational idea of protecting local economies and promoting domestic production remains a significant aspect of contemporary protectionist practices, which aim to shield national industries from international competition. In contrast, other theories, such as comparative advantage and absolute advantage, promote free trade by suggesting that countries should specialize in producing goods where they have an efficiency edge, ultimately leading to mutual benefit in international exchanges. Factor endowments focus on production factors, suggesting differences in resource availability drive trade patterns rather than advocating for protectionist policies.

Mercantilism is recognized as the forerunner of modern-day protectionism due to its focus on accumulating wealth, primarily through a positive balance of trade, and the regulation of the economy by the state. This economic theory, which prevailed from the 16th to the 18th centuries, emphasized the importance of maintaining gold and silver reserves and advocated for policies that would protect domestic industries against foreign competition.

Under mercantilism, governments implemented tariffs, quotas, and subsidies as means to enhance exports and limit imports, therefore directly influencing trade policies and relationships between countries. This foundational idea of protecting local economies and promoting domestic production remains a significant aspect of contemporary protectionist practices, which aim to shield national industries from international competition.

In contrast, other theories, such as comparative advantage and absolute advantage, promote free trade by suggesting that countries should specialize in producing goods where they have an efficiency edge, ultimately leading to mutual benefit in international exchanges. Factor endowments focus on production factors, suggesting differences in resource availability drive trade patterns rather than advocating for protectionist policies.