By Agbesi BCIL
31st August, 2021

Mercantilism prevailed in the 16th to 18th century. The mercantilist idea was to make a country strong and powerful through wealth accumulation which is in terms of gold, silver, and other precious metals. They believed that the creation of wealth is the major source of power and strength for a nation; the wealthy are the ones that control and rule over others. The mercantilists were a group of merchants, business classes and the elites who after personally acquiring gold proposed the same ideas for the whole country. Though their ideas were relevant in their time, it is not considered a traditional school of thought because they didn’t officially put their ideas into unified writing but instead just implemented the views of the various merchants and business classes in their time. The mercantilists tried to regulate the political and economic activities of the people. Mercantilism also was known sometimes as “commercialism” is a system where a country attempts to amass wealth through trade with other countries; exporting more than its import and increasing stores of gold, silver and other precious metals. In mercantilism, the government strengthens the private owners of factors of production. This system is characterized by increasing domestic production to maximize exports, while simultaneously discouraging the import of similar goods from other countries to reduce competition. Mercantilism was someway abolished but it gave rise to capitalism which advocates for the private sector to be the engine of growth, development and job creation while the government’s responsibility is to create the enabling environment for the private sector to operate. Some of the initiatives by the government are creating monopolies, tariffs, and quotas on imports, and prohibits the emigration of skilled labour, capital, and tools. In return, the firms pay taxes that are used to increase national growth and political power. Some of the ideas and views of Mercantilism are still relevant in our time and Ghana can adopt and adapt them in order to help our economy to grow and develop. This write up seeks to discuss the various ways in which these ideas proposed by the mercantilists are compatible with the state of the Ghanaian economy.

The idea of value, wealth and money
The mercantilists recognized the market value of all commodities through prior to them, the value was seen as the intrinsic quality of a product. Value was thus considered to be different from price. The market value of a product was determined by the cost of production. They suggested that money was identical to capital. During their time, they viewed money to be very essential in conducting wars and later introduced paper money which led to inflation. The mercantilist proposed that even if there is money, it should have value. They held that taxation could only be possible if money was used as a measure of value and trade depended on money. The strength of the country was found in the wealth of the country, especially that portion of wealth that consisted of precious metals like gold and silver.
Using this ideology, Ghana sees money as a form of value. There is also the introduction of fiat money. The system of barter trade has been totally abolished in the economy while people go about their trade using money as a form of value in exchange for goods and services. Money plays an important role in the economy of Ghana. With money, Ghana can obtain factors of production to produce goods and services. The central bank now prints money for the economy. It also has the responsibility of regulating the money supply in the economy to avoid inflation which is caused by an increase in the money supply. And the value of wealth is now stored in the form of liquid assets and illiquid assets can be valued in monetary terms. Also, with Ghana’s currency, it is not valuable especially against the various trading currencies all over the world due to the continuous depreciation.

The idea of foreign trade
They accented that, the only source of wealth is gold and silver hence those countries who do not possess gold and silver, as well as other precious metals, could only obtain them through foreign trade. They however mentioned that a country’s value of export should be greater than the value of import in order to keep a favourable balance of trade. This assertion was made based on bi-national trade or what they called “particular trade” rather than “general trade” which is multinational.
Ghana has adopted the strategy of the balance of trade. Policymakers and governments over the years have tried to reduce the balance of trade deficit. For the past two fiscal years, Ghana has recorded a balance of trade surplus which is an indication of more export than imports. However, Ghana mainly exports primary goods whose prices are not stable in the world market. This causes a lot of deviations in the estimated gains from trade and the actual gains recorded. It also let the nation gain little from trade. Ghana should invest more in the manufacturing sector in order to export more manufactured goods rather than primary goods so we gain more from foreign trade with other nations.

Commerce and Industry ideology
The mercantilists considered commerce and industry as the most important branches of the national economy. They had the commerce and industry regulated for it to be efficient. They saw industrialization as the main driver of the economy than the agricultural sector. They believed that the industry has more connection with commerce than the agricultural sector hence the need for the government to pay more attention to the industrial sector by supporting it financially and making policies that would enable the private owners of the factors of production to make good use of them. They believed that commerce and trade were the most productive occupation and agriculture was the least productive.
In Ghana today, we are trying as much as possible to move away from the agricultural sector to industrialization. This initiative started from Dr Kwame Nkrumah’s time when a lot of domestic factories were built (they were however state-owned). This industrialization agenda is being championed by the current government with its “one district one factory” initiative (which is a partnership with the private sector to establish at least a factory in each district of the country). It can be observed that we gain little from agriculture though over 60% of the labour force are into agric. If we invest in the industry, it will create the linkage effect and there will be economic growth through shortages as proposed by the unbalanced growth strategy propounded by Albert Hirschman. Ghana cannot totally neglect the agricultural sector. We should hence invest in mechanized agriculture to augment the other sectors and feed the various factories that will use agricultural produce in their production.

The idea of Natural Resources
In the time of the mercantilists, they laid emphasis on the utilization of natural resources. Their utilization of the natural resources they had helped them to produce more for export. They also said in order to solve the food problem, agriculture must be boosted. If their countries were not having the capacity, they formed allies who produced and exported the raw materials to their countries only.
Ghana has got many natural resources such as gold, diamond, bauxite, forest reserves and above all oil. However, these resources are not exploited in the right way. For instance, the canker of “galamsey” has destroyed the various water bodies in the country. The Land and natural resources Minister suggested in 2018 that if proper measures are not put in place to curb the “galamsey” menace, Ghana may be forced to import water by the year 2030. This shows how we are destroying our resources. Deforestation is on the rise; we gain little from our oil exploitation because the oil mines are being mounted by foreigners. Even the Tema Oil Refinery has to import crude oil before refining though there is oil exploration in Ghana. In my view, the government should put drastic measures in place to protect our water bodies and forest reserves while also try to add value to the primary goods produced in order to gain more from their export.

Taxation
One of the much-talked ideas of the mercantilist is taxation. They proposed that each person should pay tax based on the benefits they derive from the state. Broadly speaking, the mercantilists were in favour of a multiple tax system. The government of Ghana should widen the tax net to robe in all and sundry especially those in the informal sector in order to reduce the burden on those in the formal sector.

The role of Government
The mercantilists believed that the role of the government is to regulate commercial activities, laying an embargo on the import of food items but encouraging the import of raw materials; this will reduce import but increase export. They held that the role of the state is very important and the state was seen as the master while the citizens are the servants. The state controls a chunk of the resources found in Ghana. But misappropriation of resources has led to inefficiencies thereby making the country recess rather than grow and develop.
In a nutshell, Ghana has adopted the modernized versions of the ideologies as proposed by the mercantilists. Ghana is into multinational trade as compared to the proposed binational trade by the mercantilist while trying to achieve a balance of trade surplus in order to obtain more foreign reserves. Also, we are trying to encourage a taste for local content while supporting the local industries to produce more to substitute imports through policies like “one district one factory”. Another ideology adapted is the value of goods and services which is determined by the cost of production. The mercantilism ideas worked in their time and help them to achieve their aims and objectives. However, modern-day economies like Ghana’s just apply portions of their preposition but not everything in totality.



REFERENCES
Amadeo, K. (n.d.). Is Mercantilism Back in Vogue? The Balance. Retrieved 18 February 2020, from https://www.thebalance.com/mercantilism-definition-examples-significance-today-4163347
Andrew Bloomenthal. (n.d.). Mercantilism. Investopedia. Retrieved 18 February 2020, from https://www.investopedia.com/terms/m/mercantilism.asp
Mercantilism | Definition & Examples | Britannica. (n.d.). Retrieved 18 February 2020, from https://www.britannica.com/topic/mercantilism
Mercantilism: Concept, Factors and Characteristics. (2016, May 16). Economics Discussion. http://www.economicsdiscussion.net/mercantilism/mercantilism-concept-factors-and-characteristics/20980

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