Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the role of the state in managing the economy to enhance national power, primarily by accumulating wealth through trade. This theory asserts that a nation's strength is directly related to its wealth, particularly in precious metals, and encourages a positive balance of trade by exporting more than importing. The principles of mercantilism significantly influenced colonial policies and the economic development of regions, including their involvement in global trade networks.

5 Must Know Facts For Your Next Test

1. Mercantilism was a dominant economic theory from the 16th to the 18th centuries, shaping colonial policies and international relations.
2. Under mercantilist policies, colonies like Georgia were expected to produce raw materials for the mother country while importing finished goods exclusively from it.
3. The idea of a favorable balance of trade led to competition among European nations to acquire colonies rich in resources.
4. Mercantilism promoted government intervention in the economy, leading to regulations that benefited national interests and limited colonial autonomy.
5. As tensions grew over mercantilist policies, dissatisfaction among colonists contributed to the revolutionary sentiments against British rule.

Review Questions

• How did mercantilism influence colonial policies and trade practices in regions like Georgia?
  • Mercantilism shaped colonial policies by enforcing a system where colonies were expected to supply raw materials to the mother country while being restricted to purchasing finished goods only from it. In Georgia, this meant that local economies were designed around producing crops like silk and indigo for export to England. The emphasis on maximizing exports and minimizing imports created dependencies that often frustrated colonists who desired more economic freedom.
• Discuss the impact of the Navigation Acts on Georgia's economy during the mercantilist period.
  • The Navigation Acts significantly impacted Georgia's economy by mandating that all trade between the colonies and other countries had to be conducted on English ships. This regulation reinforced mercantilist goals by ensuring that profits from colonial resources flowed back to England. As a result, while it provided some economic opportunities for colonists, it ultimately limited their trading options and kept them under strict control of English merchants, fueling resentment.
• Evaluate how mercantilism contributed to the tensions leading up to the American Revolution.
  • Mercantilism played a crucial role in creating tensions between American colonies and Britain by enforcing restrictive trade policies that prioritized British economic interests over colonial autonomy. Colonists grew frustrated with limitations on their ability to trade freely and produce goods for themselves without heavy taxation and regulation. This growing sense of economic oppression fueled revolutionary sentiments, as colonists sought greater independence not just politically but economically as well, believing they could prosper without such stringent controls from Britain.

Related terms

Navigation Acts: A series of laws passed by the English Parliament that regulated colonial trade and enabled England to collect taxes from colonies, reinforcing mercantilist policies.

Triangular Trade: A historical trade system that involved the exchange of goods and enslaved people between Europe, Africa, and the Americas, demonstrating the economic motivations behind mercantilism.

Balance of Trade: The difference between the value of a country's exports and imports, which mercantilism seeks to maximize by promoting exports over imports.