Mercantilism as a bankrupt theory in the modern world

Mercantilism is a bankrupt theory that has no place in the modern world. Discuss.

One of the most common economic theories that have been utilized throughout the history is mercantilism. This is when one nation will engage in trade practices that are designed to increase their total number of exports. The way that this is accomplished is through flooding their partners with cheap exports in order to realize some kind of trade surplus. While at the same time, it is making it difficult for other counties imports to match the prices of domestic firms in local markets. The combination of these different elements, mean that every nation will focus on looking out for their own self-interests over everything else (through: having effective trade policies). ("Mercantilism," 2011)

As a result, this theory has been proven to be ineffective. The reason why, is because the focus on each nation's self-interests will lead to increased competition with each other for the various natural resources. A good example of this can be seen with colonialism. What happened was; the intense rivalries among the largest countries for natural resources in Europe fueled an expansion westward. Once the explorers arrived in the new world is when they would, use the objectives of mercantilism as an excuse for a host of activities (i.e. slavery and the exploitation of entire regions). This led to attitude of arrogance and selfishness, as everyone believed that they were making the right decisions. Over the course of time, this meant that the various European powers would collide in an attempt to control more resources to improve their status and power. (Vaggi, 2003, pp. 3 -- 15)

After World War II, this theory was proven to be ineffective and it is one of the main causes for hostilities occurring (which lead to various conflicts). As the intense rivalries, would lead to: heated emotions and a desire by everyone to achieve their goals by any means necessary. This is when fighting began to occur and trade was disrupted by the hostiles. As time went by, these views were shown to have led to more severe and intense conflicts. At which point, the world community demand, that nation states change their behavior and begin following international standards. This is when there was a change in their actions, as this theory was proven to be a mistake that was supported for too long. (Vaggi, 2003, pp. 3 -- 15)

However, the last twenty years have seen a shift in how everyone is looking at economic theories. The reason why, is because globalization has changed the way nations are trading with one another. As it has been, transforming the discussion about economics. This is because, when nations are rapidly developing, they will often use a combination of theories. (Vaggi, 2003, pp. 273 -- 320)

A good example of this can be seen with China, as they are known for having a communist government. Yet, they have reduced trade barriers and are practicing free market policies. While at the same time it is embracing mercantilism in: its trade practices and how they are purchasing natural resources through a host of partnerships. The combination of these factors is important, because they are showing how kind of approach is leading to increased hostilities between China and it neighbors. (Hubbard, 2010, pp. 83 -- 145) (McGregor, 2011)