Mercantilism

Definition

Mercantilism is an economic theory and practice that emphasizes the importance of accumulating wealth, particularly gold and silver, through a favorable balance of trade. This concept was prominent from the 16th to the 18th century and significantly influenced trade policies, including those established during early trade relations with China, particularly under the Canton System.

5 Must Know Facts For Your Next Test

1. Mercantilism aimed to increase national power by maximizing exports and minimizing imports, often leading to trade monopolies.
2. Under the Canton System, European traders were required to operate through a limited number of Chinese merchants known as Cohong, which exemplified mercantilist practices by limiting competition.
3. Mercantilist policies were often justified by governments as necessary for national security and economic independence.
4. European countries viewed trade with China through a mercantilist lens, seeking to export their goods while importing valuable Chinese products like tea and silk.
5. The rise of mercantilism contributed to increased competition among European powers for access to Asian markets, shaping early global trade dynamics.

Review Questions

• How did mercantilism influence trade relations between European powers and China during the Canton System?
  • Mercantilism influenced trade relations by promoting a favorable balance of trade where European powers sought to export more than they imported from China. The Canton System's restrictive practices were aligned with mercantilist goals, as it allowed only specific Chinese merchants to handle foreign trade, thereby ensuring that the Chinese economy benefited while limiting foreign competition. This system reinforced mercantilist policies by ensuring that precious metals flowed into Europe while maintaining strict control over what could be imported from China.
• Discuss the implications of mercantilist policies on the economic relationship between China and Western nations during the 18th century.
  • Mercantilist policies had significant implications for the economic relationship between China and Western nations in the 18th century. Western powers sought to establish a favorable balance of trade by promoting their exports, such as opium, while facing strict regulations from the Chinese government on imports. This imbalance led to tensions and conflicts, particularly as Western demand for Chinese goods like tea increased. The mercantilist emphasis on accumulating wealth and resources contributed to these mounting pressures, ultimately impacting diplomatic relations.
• Evaluate the long-term effects of mercantilism on global trade patterns as established during early interactions with China.
  • The long-term effects of mercantilism on global trade patterns are evident in how it laid the foundation for modern economic relationships between nations. Early interactions with China under mercantilist principles encouraged European powers to expand their trading networks and establish colonial outposts aimed at securing resources and markets. This pursuit of wealth not only intensified competition among Western nations but also initiated a shift toward more integrated global trade systems. The legacies of these mercantilist practices can be seen in contemporary trade policies that continue to emphasize export-driven growth strategies.

Related terms

Canton System: A trading system in China that restricted foreign trade to specific ports, particularly Canton (Guangzhou), to control and regulate foreign merchants and ensure the Chinese economy remained strong.

Balance of Trade: The difference between the value of a country's exports and imports, where mercantilism seeks to ensure that exports exceed imports to accumulate wealth.

Navigation Acts: Laws passed by England that required goods imported into the country to be transported on English ships, showcasing the mercantilist belief in controlling trade for national advantage.