Question

The South African economy is considered an open economy, with significant external trade (International trade). According to an article in Business Day, published on 22 March 2017, “South Africa’s current account deficit narrowed to 1.7% of GDP during the fourth quarter of 2016, from 3.8%, exceeding expectations as exports outpaced import growth” (Asha Speckman, Business Day, 22 March 2017). Does the above statement follow or go against the ideology of the mercantilists? Explain your response, basing your discussion on the mercantilist ideology.

Answer 1

• Mercantilists believes that trade is zero sum game and one country benefit at the expanse of another country. Both trading partners can be benefited from trade. Thus, one country must increase its export and discourage import. By doing this, country would be earning Bullion.
• Here in this illustration, South African has witnessed sharp rise in its export and same time, import has fallen drastically. Thus, this statement follows the ideology of the Mercantilists.