There are four types of economy and the way limited resources get distributed within an economy determines the type of economic system. Each society decides which economies type its follows as each economy has strengths and weakness.
What is Capitalism:
A wholly fledged capitalism has been generally thought to have emerged at North-Western Europe primarily in the low nations like the Netherlands, Flanders as well as Great Britain during the 16th to 17th centuries as such. Over the following centuries, capital has accumulated by a variety of different methods, as well as had been associated with a more significant deal of variation at the concentration of economic power as well as wealth. Hence, capitalism has gradually become the dominant financial system across the entire world (Desai, 2013). The pros of capitalism are that capitalism encourages innovation; capitalism promotes equality; it provides freedom; it helps free regulation. The cons of capitalism are that competition has forced out of the market, there has been no material point of focus, equal opportunities could be brief as well as fleeting, and capitalism creates an economy that has been based upon consumption. The pros of market economic systems are consumers drive choices, freedom to innovate, absence of red tape, etc. The cons of commercial market systems are market failures, limited ranges of commodities, dangers of the profit motive, and so on.
What is Mercantilism?
Mercantilism refers to an economic system of trade which spanned from the sixteenth century towards the eighteenth century. Mercantilism banked upon the principle that the wealth of the world had been static as well as a lot of Europeans countries attempted towards accumulating the most significant possible share of that wealth utilizing maximizing their exports as well as limiting their imports using tariffs (Frieden, 2015).
The British colonies had been subjected to the direct as well as indirect effects of mercantilist policy at home. Mercantilism led towards the adoption of enormous trade restrictions that stunted the growth, development as well as freedom of the colonial business as such. The trade became triangulated between the British Empire, its colonies as well as the foreign markets, fostering the development of the slave trade at several territories that includes America too. The colonies provided cotton, rum as well as other commodities demanded by the imperialists of Africa. In turn, the slaves had been returned to America or the islands of West Indies as well as traded for molasses as well as for sugar too (McCusker & Menard, 2014).
The British government demanded that the trades had been conducted by using silver as well as gold bullion, ever seeking a positive balance of the trade. The colonies had insufficient bullion leftover for circulating in their markets. As such, they issued paper currency instead. The mismanagement of printed money resulted in inflationary periods. In addition to it, as England had been in a near-constant state of war, heavy taxation had been required concerning prop up its navy as well as the army. Both the combination of taxes as well as inflation caused great colonial discontent as a whole. The British government set in place the policies which restricted the trading of their territories only towards the mother nation as such. In these ways, the government pursued mercantilist policies as well (Pincus, 2012).
Also Read: Types of Market Efficiency
Other major types of Economy:
There are four main types of economic systems, and these are the command economy, the traditional economy, the mixed economy, as well as the market economy. Traditional economy- This has been a kind of economy that has been based upon fishing, hunting as well as agriculture as such. Command economy- This refers to a sort of economic system where the government has a monopoly over the market as such. Market Economy- In this economy, there has been competition among the business because there has been not much government intervention as such. Mixed economy- This refers to a kind of economic system where there has been a combination of all the three economies such as command, traditional as well as market.