Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the importance of accumulating wealth, primarily gold and silver, through a favorable balance of trade. This theory drove European nations to establish colonies and control resources, as they believed that a nation’s power was directly linked to its economic strength and the amount of precious metals it possessed.

5 Must Know Facts For Your Next Test

1. Mercantilism promoted the idea that colonies existed primarily for the benefit of the mother country, supplying raw materials and markets for finished goods.
2. Under mercantilist policies, European nations sought to create a self-sufficient economy that minimized reliance on foreign imports.
3. Nations competed aggressively to acquire colonies, leading to conflicts and rivalries among European powers as they vied for control of lucrative trade routes and resources.
4. Mercantilism contributed to the growth of naval power, as countries needed strong fleets to protect their trade routes and colonies from rivals and pirates.
5. The principles of mercantilism laid the groundwork for later economic theories, including capitalism, by highlighting the importance of trade and wealth accumulation.

Review Questions

• How did mercantilism influence European exploration and the establishment of colonies?
  • Mercantilism significantly influenced European exploration as nations sought to expand their territories to access new resources and markets. The desire for gold and silver drove countries like Spain, England, and France to explore uncharted territories. Colonies were established to provide raw materials back to Europe while creating markets for manufactured goods, reinforcing the belief that wealth accumulation through trade was vital for national power.
• Discuss the role of mercantilism in the conflicts that arose during the colonial period among European powers.
  • Mercantilism played a central role in escalating tensions and conflicts among European powers during the colonial period. As nations competed for dominance over trade routes and colonial territories, aggressive policies fueled rivalries. The pursuit of exclusive trading rights and access to valuable resources often led to military confrontations, such as the Anglo-Dutch Wars or conflicts over North American territories between Britain and France.
• Evaluate how mercantilist policies impacted economic relationships between the colonies and their mother countries leading up to the American Revolution.
  • Mercantilist policies created a strained economic relationship between the American colonies and Britain as the colonies were restricted in their trading practices. The Navigation Acts forced colonies to trade primarily with Britain, limiting their economic freedom and growth. As colonists began to resent these restrictions, along with taxation without representation, it fueled revolutionary sentiments. This growing frustration highlighted how mercantilism could backfire, leading to demands for independence rather than cooperation.

Related terms

Colonialism: A practice where a country establishes control over foreign territories, often exploiting resources and establishing settlements for economic gain.

Trade Balance: The difference in value between a country's imports and exports, with a positive balance indicating more exports than imports.

Navigation Acts: A series of laws enacted by England in the 17th century to regulate colonial trade and enable England to collect taxes from its colonies.