What is the origin of the wealth of nations? This question posed by Adam Smith, the architect of classical economics, is appropriate starting point to understand how economic systems are essential to understanding national development. The wealth gap between countries can be attributed to the divergent national economic histories each nation possesses. Smith equates wealth with economic growth that arises from a growing source of labour and capital stock, increased efficiency in the use of capital and labour through greater division of labour and technological progress, and the promotion of foreign trade. Smith contends that the primary cause of the wealth gap arises from differences in productivity resulting from the division of labour.
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The main catalysts include the “emergence of national political units in Europe…slow decay of the religious spirit…and rise in scientific curiousity” (Worldly Philosophers 34-36). The idea of seeking a profit appeared alien to any plebian in a planned feudal economy. This changed with the emergence of the mercantilists and physiocrats in the 16th and 17th centuries. Thomas Mun, head of the Dutch East India compnay, was a renown mercantilist who perpetuated the mercantilist ideology that trade is the exlusive mechanism that promotes economic growth. In his most famous work England 's Treasure by Foreign Trade, Mun claims that England has “no other means to get Treasure but by foreign trade” (Mun). The rise of nation states at the end of Feudalism prompted the focus on an individual country’s development and focused on production. Mun’s idea that “wee must ever observe this rule; to sell more to strangers yearly than wee consume of theirs in value,” presents a fascinating look into the post-feudal economy where development was strictly looked at as national advancement at the expense of the raw material producers (Mun). This focus on trade to build a trade surplus was important in expanding the world economy, but the idea that exchange with strangers is the most important if not only way to enrich the commonwealth, was toppled by Hume’s Specie Flow mechanism and Smith’s more comprehensive understanding of the global economic
The main catalysts include the “emergence of national political units in Europe…slow decay of the religious spirit…and rise in scientific curiousity” (Worldly Philosophers 34-36). The idea of seeking a profit appeared alien to any plebian in a planned feudal economy. This changed with the emergence of the mercantilists and physiocrats in the 16th and 17th centuries. Thomas Mun, head of the Dutch East India compnay, was a renown mercantilist who perpetuated the mercantilist ideology that trade is the exlusive mechanism that promotes economic growth. In his most famous work England 's Treasure by Foreign Trade, Mun claims that England has “no other means to get Treasure but by foreign trade” (Mun). The rise of nation states at the end of Feudalism prompted the focus on an individual country’s development and focused on production. Mun’s idea that “wee must ever observe this rule; to sell more to strangers yearly than wee consume of theirs in value,” presents a fascinating look into the post-feudal economy where development was strictly looked at as national advancement at the expense of the raw material producers (Mun). This focus on trade to build a trade surplus was important in expanding the world economy, but the idea that exchange with strangers is the most important if not only way to enrich the commonwealth, was toppled by Hume’s Specie Flow mechanism and Smith’s more comprehensive understanding of the global economic