Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the role of the state in managing the economy, promoting exports, and accumulating precious metals to enhance national power. This approach shaped trade policies and colonial expansion, driving European nations to seek new markets and resources, which directly impacted various global activities and interactions.

5 Must Know Facts For Your Next Test

1. Mercantilism was a dominant economic theory in Europe from the 16th to the 18th century, focusing on increasing national wealth through a positive balance of trade.
2. The establishment of trading companies like the VOC (Dutch East India Company) and WIC (West India Company) was driven by mercantilist principles, emphasizing state support for these enterprises to secure resources and markets.
3. Mercantilist policies often led to colonial rivalries and conflicts as nations competed for valuable territories and trade routes.
4. Under mercantilism, colonies were viewed primarily as sources of raw materials and markets for manufactured goods, limiting their economic independence.
5. The decline of mercantilism began in the late 18th century with the rise of free trade ideas, leading to changes in economic thought and policy across Europe.

Review Questions

• How did mercantilism influence European colonial expansion during the Age of Discovery?
  • Mercantilism drove European nations to expand their empires during the Age of Discovery by encouraging them to establish colonies that could provide raw materials and serve as markets for finished goods. This quest for wealth led countries like Spain, Portugal, and the Dutch Republic to seek new territories across the globe. The desire to create a favorable balance of trade motivated these nations to secure strategic locations for trading posts and resource extraction, fostering competition among European powers.
• Evaluate the role of mercantilism in shaping the structure and operations of the VOC.
  • The VOC was founded under mercantilist principles, which provided it with significant governmental support and a charter granting it a trade monopoly in Asia. This allowed the VOC to control trade routes and access valuable commodities like spices and textiles. Mercantilism's focus on accumulating wealth through trade directly influenced how the VOC operated, as it sought to maximize profits for the Dutch Republic while minimizing competition from rival nations. The company’s success exemplified how mercantilism shaped economic structures that prioritized national interests over individual enterprise.
• Analyze how mercantilist policies contributed to conflicts between European powers in Asia and Africa during the 17th century.
  • Mercantilist policies fueled intense competition among European powers in Asia and Africa during the 17th century as nations sought to secure exclusive access to lucrative trade routes and resources. The pursuit of colonies led to conflicts such as the Dutch-Portuguese rivalry in the Indian Ocean, where both empires aimed to dominate spice trade. Additionally, this competition extended to regions like West Africa, where European powers vied for control over lucrative slave trade routes. As nations implemented aggressive mercantilist strategies, conflicts escalated into wars and territorial disputes that reshaped global trade dynamics.

Related terms

Colonialism: The practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically.

Navigation Acts: A series of laws that restricted colonial trade to England and its colonies, aiming to ensure that wealth generated in the colonies benefited the mother country.

Trade Monopoly: The exclusive control of a commodity or service in a market, often established through government charter or legislation to limit competition.