Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the importance of accumulating wealth, primarily gold and silver, through a favorable balance of trade. This approach advocates for strong governmental regulation of the economy to enhance national power and secure resources, which significantly shaped colonial policies and international trade relationships during the early modern period.

5 Must Know Facts For Your Next Test

1. Mercantilism dominated European economic thought from the 16th to the 18th centuries, influencing colonial powers like Spain, France, and England.
2. Under mercantilist policies, colonies were expected to supply raw materials to the mother country and purchase manufactured goods in return, reinforcing economic dependency.
3. The theory promoted state intervention in the economy, encouraging the establishment of monopolies and exclusive trading rights for certain companies.
4. Mercantilism contributed to fierce competition among European powers for colonies, as nations sought to expand their wealth and influence through territorial acquisition.
5. Critics of mercantilism, like Adam Smith, argued for free trade and minimal government interference, laying the groundwork for modern economic theories.

Review Questions

• How did mercantilism influence colonial policies in Europe?
  • Mercantilism significantly shaped colonial policies by enforcing a system where colonies existed primarily to serve the economic interests of their mother countries. This meant that colonies were expected to provide raw materials while being restricted from trading with other nations. The desire for a favorable balance of trade drove European powers to establish and maintain colonies, which ensured a steady flow of resources back to Europe and allowed for profit generation through controlled trade routes.
• Evaluate the impact of the Navigation Acts on colonial economies under mercantilist policies.
  • The Navigation Acts had a profound impact on colonial economies by enforcing mercantilist principles that prioritized trade with England. These laws mandated that goods imported or exported from the colonies be carried on English ships, effectively limiting trade options and increasing costs. While this bolstered English shipping interests and created a steady market for colonial goods, it also fostered resentment among colonists who felt constrained by these regulations, ultimately leading to tensions that contributed to the American Revolution.
• Assess how the principles of mercantilism set the stage for economic conflict and competition among European powers during the age of exploration.
  • The principles of mercantilism created a competitive atmosphere among European powers during the age of exploration, as nations vied for dominance over lucrative colonies and trade routes. By promoting the accumulation of wealth through a favorable balance of trade, countries were motivated to expand their empires to access new resources. This competition often led to conflicts over territorial claims, wars for control over key regions, and diplomatic struggles that shaped global relations. Ultimately, these mercantilist ambitions laid the groundwork for a complex web of international interactions that influenced political dynamics well beyond the age of exploration.

Related terms

Balance of Trade: The difference in value between a country's exports and imports, where a favorable balance means exporting more than importing.

Navigation Acts:

A series of laws enacted by England to regulate colonial trade and enable England to collect taxes from the colonies.

Colonial Economy: The economic system in the colonies that was heavily influenced by mercantilist principles, focusing on resource extraction and trade with the mother country.