Mercantilism

Definition

Mercantilism is an economic theory and practice that emphasizes the role of government in promoting national power through the regulation of the economy, particularly by maximizing exports and minimizing imports. It encourages the accumulation of wealth, especially gold and silver, as a measure of a nation's strength and success. This economic approach significantly influenced trade patterns and colonial policies during the early modern period, leading to interconnected economies and competitive colonial expansion.

5 Must Know Facts For Your Next Test

1. Mercantilism dominated European economic thought from the 16th to the 18th centuries, shaping trade policies and colonial ventures.
2. Under mercantilism, colonies were viewed primarily as sources of raw materials and markets for finished goods, promoting a system where the mother country controlled trade.
3. The competition for wealth under mercantilism led to conflicts among European powers, contributing to wars over colonial territories.
4. Mercantilist policies often included tariffs and subsidies to protect domestic industries from foreign competition.
5. The decline of mercantilism in the late 18th century was influenced by emerging economic theories advocating for free trade and market competition.

Review Questions

• How did mercantilism shape the relationship between European powers and their colonies during the early modern period?
  • Mercantilism significantly shaped relationships between European powers and their colonies by positioning colonies as vital components in a nation's economic strategy. Colonies were exploited for their raw materials, which were then processed into goods in the mother country. This system created a dependency where colonies were expected to provide resources while only purchasing manufactured goods from Europe, reinforcing an unequal economic relationship that benefited European nations at the expense of colonial economies.
• Discuss the impact of mercantilist policies on trade practices in the Atlantic World.
  • Mercantilist policies had a profound impact on trade practices in the Atlantic World by prioritizing national interests over free market principles. These policies promoted heavy government involvement in regulating trade routes and ensuring that economic advantages accrued to the mother countries. The Navigation Acts exemplified this approach, restricting colonial trade to English ships and creating monopolies that stifled competition while fueling resentment among colonists who felt economically constrained.
• Evaluate how mercantilism contributed to both the economic development of European nations and the exploitation of African resources during the age of exploration.
  • Mercantilism fueled the economic development of European nations by encouraging them to expand their influence globally through exploration and colonization. The pursuit of resources, particularly in Africa, led to an extractive economy that prioritized profit over local welfare. This exploitation facilitated the transatlantic slave trade, where enslaved Africans were transported to work on plantations in the Americas, thus intertwining mercantilist practices with severe human rights abuses. Ultimately, this created a legacy of economic inequality and cultural disruption that affected both Europe and Africa for centuries.

Related terms

Colonialism: The practice of acquiring and exploiting territories for economic gain, often involving the establishment of settlements and the extraction of resources from those regions.

Trade Balance: The difference between the value of a country's exports and imports; a positive trade balance occurs when exports exceed imports, which is a key goal of mercantilism.

Navigation Acts: A series of laws enacted by England in the 17th century to regulate colonial trade and ensure that economic benefits flowed back to the mother country, aligning with mercantilist principles.