NEO-MERCANTILISM
Mercantilism was ultimately
rejected by the liberal and British Adam Smith, who also refused to wade into
monetary policy – believing that products, people and institutions constitute
the foundations, on which general well-being can be built on peacefully, and
under conditions of freedom and democracy.However, many economists believed
that mercantilism, in some cases, is not erroneous.
The most important among
them was J.M. Keynes, who incorporated some elements of mercantilism in his
theory – stating that the money supply, the foreign trade balance and prime
interest rates are very important for an economy (believes that where later
used to set the grounds for modern monetarism).
Adam Smith rejected the sole
focus on production mercantilists thought to be the key – believing that
consumption is the only way to develop an economy. In contrast, Keynes
considered both the production and the consumption as being equally important
for economic growth – recognizing also, that...
