Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the role of the state in managing the economy to increase national power, primarily through the accumulation of wealth in the form of precious metals and a favorable balance of trade. This approach prioritizes exporting more than importing, with government intervention being crucial in regulating economic activity and supporting domestic industries. The implications of mercantilism were especially significant during the Civil War, as the economic strategies employed by both the Union and Confederacy reflect mercantilist principles.

5 Must Know Facts For Your Next Test

1. During the Civil War, the Union implemented mercantilist policies such as high tariffs to protect its growing industries and fund military efforts.
2. The Confederacy attempted to adopt mercantilist principles by encouraging cotton exports while relying heavily on imports for war materials, leading to economic challenges.
3. Mercantilism led to competition for resources and markets, which intensified tensions between the North and South prior to and during the Civil War.
4. The economic strategies rooted in mercantilism influenced wartime policies, such as blockades that aimed to weaken the enemy's economy by restricting trade.
5. After the war, mercantilism's focus on state control over economic matters began to shift towards more free-market principles as industrialization progressed.

Review Questions

• How did mercantilism influence the economic strategies employed by the Union during the Civil War?
  • Mercantilism played a significant role in shaping the Union's economic strategies during the Civil War. The Union implemented high tariffs on imported goods to protect its burgeoning industries and foster domestic production. This approach not only aimed at strengthening its economy but also provided crucial funding for military operations. By prioritizing exports and ensuring a favorable balance of trade, the Union's mercantilist policies directly contributed to its ability to sustain prolonged warfare.
• Discuss how the Confederacy's adoption of mercantilist policies impacted its overall economic stability during the Civil War.
  • The Confederacy attempted to leverage mercantilist principles by focusing on cotton exports to finance its war efforts while being reliant on imports for essential supplies. This strategy, however, led to significant economic instability as blockades implemented by the Union severely restricted their access to foreign markets and goods. The reliance on a single commodity for export without diversifying its economy resulted in crippling shortages and weakened their overall war effort, demonstrating the challenges of maintaining a mercantilist approach under duress.
• Evaluate the long-term effects of mercantilism on post-Civil War American economic policies and practices.
  • In evaluating the long-term effects of mercantilism on post-Civil War American economic policies, it becomes clear that while initially strong government intervention remained prevalent, there was a gradual shift towards more laissez-faire practices. The experience of wartime economies exposed inefficiencies in heavy reliance on mercantilist strategies, prompting policymakers to embrace free-market principles that encouraged competition and innovation. This transition laid the foundation for modern American capitalism, emphasizing less direct government control while still recognizing the importance of protecting national interests in global trade.

Related terms

Protectionism: An economic policy aimed at shielding a country's domestic industries from foreign competition through tariffs and import quotas.

Tariffs: Taxes imposed on imported goods, used to protect domestic industries and generate revenue for the government.

Colonialism: A practice of acquiring full or partial political control over another country, exploiting it economically while benefiting the colonizer's wealth and power.