Mercantilism, Free Trade, Globalization, and Companies
Mercantilism
Advantages:
- Capital accumulation through increased holdings of gold and silver (mercantilism), which was a sign of wealth for the nation.
- Emergence of manufacturing production (manufacturing facilities), which is labor-intensive.
- Source of wage labor.
Cons:
- The process of capital accumulation through capital appreciation.
- Relentless pursuit of profits for companies.
- Socioeconomic system is unethical because it favors some and disadvantages others.
Free Trade
Free trade is an economic concept relating to the sale of products between countries free of tariffs and other trade barriers. Free trade involves the removal of artificial barriers (governmental regulations) to voluntary trade among individuals and companies from different countries.
Advantages:
- Improves the quality of life through comparative advantage.
- Countries become economically dependent on each other.
- Decreased warfare between countries.
- Generates rapid changes in living conditions.
Disadvantages:
- Developed countries exploit third-world countries.
- Destruction of local industry in underdeveloped countries.
- Third-world producers cannot compete with large companies, causing poverty.
Globalization
It is a fundamentally economic process of the various economies in the world, allowing free trade, mergers of multinational companies, increasing privatization, and prioritization of free trade agreements.
Benefits:
- Increased efficiency as market competition increases, decreasing monopoly power.
- Improved communication and cooperation that can lead to better utilization of resources.
- Boosts scientific and technological development to be profitable.
- More room to maneuver against fluctuations in national economies.
- Elimination of barriers to entry in the labor market, and for financial goods and services.
Risks:
- Lack of democratic control over markets and multinationals.
- Increased economic, social, and territorial imbalances.
- Concentration of wealth: increasing inequality.
- Loss of factors that do not adapt to competition.
The Company
A company is understood as any economic activity organized for the production, processing, circulation, administration, and custody of goods or services in a given geographical area. The company is a legally constituted organization that can be owned by one or more natural persons or legal entities. It has human, material, economic, and financial resources, is intended to produce goods, sell, or provide services, and its basic objective is to obtain income (profit, income, surplus) and effectively increase it over time.
Elements of the Company
They are the fundamental resources needed for use by the administration in the direction, management, and execution of all activities carried out to obtain the objectives; the primary purpose is to return in a certain period.
Company Classification
A. By Constitution
- Natural Person: These are sole proprietorships that are not established by public deed but through municipal steps.
- Legal Person: These are companies that are constituted by public deed and registered in the registry of legal persons.
B. Organizational Form
- Corporation: Carries out activities under this name or acronym (SAC) and has more than 20 members.
- Open Joint-Stock Company: Carries out activities under this name or initials (SAA), has an unlimited number of partners, and its shares are traded on the Stock Exchange.
- Limited Liability Company: Whose initials are SRL, has a maximum of 20 members, and is represented by equity capital.