Question

Under early mercantilism, European nations sought to import raw materials from the Americas and ship manufactured goods the other colonies. Has that pattern changed in today’s world?

Answer 1

European nations were the most powerful in the world and their economic model involved earning profits by dominating new territories (such as the American or African colonies) and importing raw materials from them. Back in the metropolis and using those raw materials as inputs, more sofisticated goods were manufactured and sold at a much bigger price both there and back in the colonies.

In the current world shaped by globalization forces, a not very different process takes place. On one hand, the developed nations, such as the US or Western Europe, and on the other hand countries with developing economies (for example some Latin American such as Brazil or Argentina) or still with traditional agricultural economies (for instance many African nations). The two latter types, commercialize raw materials and agricultural commodities at cheap prices in the international markets, which are imported by developed nations that have the technology for profitably transforming them into final goods which are again exported all over the world, including those countries were the raw materials came from. Of course, these final goods are much more expensive than the raw inputs used in their production, and a very profitable businesses is done by the developed countries.

This is why it is difficult for developing countries to break the cycle and establish themselves as powerful trade nations.