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Final answer:
Adam Smith argued that the purpose of the mercantile system was to serve the interests of producers, particularly merchants and manufacturers, at the expense of consumers. He proposed free trade, competition among producers, and minimal government intervention as alternatives.
Explanation:
Adam Smith, in his seminal work, The Wealth of Nations, criticized the mercantile system, an economic policy focused on accumulating wealth through control of colonial and foreign markets. He argued that this system served the interests of producers, particularly merchants and manufacturers, rather than consumers. The mercantile system demanded restrictive practices, including the imposition of tariffs, monopolies, and subsidies, all designed to protect domestic markets and producers. It also exploited colonial holdings for raw materials and as guaranteed markets for domestic goods.
Smith proposed an alternative economic approach that opposed strict government control. Instead, he believed in a free market economy regulated by competition among producers. Smith asserted that wealth was not finite and trade could be mutually beneficial for nations. He criticized monopolistic practices that kept prices artificially high and caused harm to consumers. According to him, businesses without government support would either have to operate efficiently to reduce prices or fail.
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Answer: Adam Smith coined the term “mercantile system” to describe the system of political economy that sought to enrich the country by restraining imports and encouraging exports. This system dominated Western European economic thought and policies from the sixteenth to the late eighteenth centuries.
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