Neomercantilism facts for kids

Neomercantilism is a way a government manages its country's economy. It's like a strategy to make the country strong and wealthy. Governments that use neomercantilism want their country to sell more goods to other countries (these are called exports) than they buy from them (these are called imports).

They also like to control how money and investments move in and out of the country. This helps them build up a special savings account of foreign money, called "foreign reserves." Having lots of foreign reserves gives the government more control over its own money and economy.

What is Neomercantilism?

Neomercantilism is an economic policy where the government plays a big role. It tries to make the country's economy stronger by focusing on a few key things:

• Boosting Exports: The government encourages companies to sell more products and services to other countries. This brings money into the country.
• Limiting Imports: It might make it harder or more expensive to buy goods from other countries. This helps local businesses sell more within their own country.
• Controlling Money Movement: The government watches and sometimes limits how much money or investments can leave or enter the country. This is known as "capital movement."
• Managing Currency: The government also has power over its own money, called "currency." It can make decisions that affect how much its currency is worth compared to other countries' money.

The main goal of these actions is to increase the country's "foreign reserves." Think of foreign reserves as a country's savings account filled with money from other countries. When a country has a lot of foreign reserves, its government has more power and stability in the global economy.

Where Did This Idea Come From?

The idea of neomercantilism is based on older economic thoughts. One of these is called Keynesian economics, named after a famous economist named John Maynard Keynes.

Neomercantilism also connects to an even older idea called mercantilism. Mercantilism was popular hundreds of years ago. It was the belief that a country's wealth and power depended on how much gold and silver it had. Governments back then tried to get as much gold and silver as possible by selling a lot and buying very little from other countries.

Today, neomercantilism is a modern version of this idea. Instead of just gold, it focuses on building up foreign money reserves and making the country's economy strong and independent. The United Nations' educational and scientific organization, UNESCO, explains that mercantilism is about the government protecting a country's wealth. This means that a country's money and economic strength become a very important national goal.