Mercantilism

Definition

Mercantilism is an economic theory and practice that emphasizes the role of the state in managing the economy, particularly through the accumulation of wealth, primarily gold and silver, and maintaining a favorable balance of trade. This approach was crucial during the colonial period, as European powers sought to enrich themselves by exploiting colonial resources and limiting imports from rival nations, thus shaping economic policies and colonial institutions that influenced both societal structures and independence movements.

5 Must Know Facts For Your Next Test

1. Mercantilism was prevalent from the 16th to the 18th centuries, influencing European powers' policies during the age of exploration and colonization.
2. Under mercantilist theory, colonies were viewed primarily as sources of raw materials and markets for finished goods from the mother country.
3. Mercantilist policies led to the establishment of trade monopolies, restricting colonies from trading with other nations.
4. The competition for resources and markets under mercantilism fueled conflicts between colonial powers, contributing to wars and diplomatic tensions.
5. As colonies began to push for independence, mercantilist practices became one of the grievances against colonial rule, as they limited local economic growth and autonomy.

Review Questions

• How did mercantilism influence the economic policies of European colonial powers?
  • Mercantilism shaped European colonial powers' economic policies by encouraging them to accumulate wealth through strict control over trade and resources. Colonies were seen as vital assets for extracting raw materials while serving as markets for manufactured goods. This led to laws that restricted colonial trade to favor the mother country, ultimately creating economic dependencies that were integral to maintaining power in the colonies.
• Discuss the role of mercantilism in the tensions leading up to independence movements in Latin America.
  • Mercantilism played a significant role in fueling tensions leading up to independence movements in Latin America by imposing economic restrictions on colonies. The laws that prioritized trade with Spain limited local economies, stifled growth, and created widespread dissatisfaction among colonists. These grievances contributed to growing nationalist sentiments, as people began to resent foreign control over their economies and sought greater autonomy to develop their own trade relationships.
• Evaluate how mercantilist policies affected social hierarchies and class structures within colonial Latin America.
  • Mercantilist policies reinforced existing social hierarchies and class structures within colonial Latin America by privileging certain groups over others. The Spanish crown's regulations favored Spanish-born elites (peninsulares) who controlled trade and resources at the expense of local populations (creoles) and indigenous peoples. This created deep social divides and resentment that fueled class struggles and played a critical role in shaping revolutionary ideologies during the independence movements.

Related terms

Colonialism: The practice of acquiring and maintaining control over foreign territories, often for economic gain, which was a key element of mercantilist policies.

Balance of Trade: The difference between the value of a country's exports and imports, with mercantilism advocating for a surplus to increase national wealth.

Protectionism: Economic policy of restricting imports from other countries through tariffs and regulations, often used to support mercantilist goals.