Mercantilism

Definition

Mercantilism is an economic theory and practice that dominated European economic policy from the 16th to the 18th century, emphasizing the role of the state in managing the economy to increase national power. This theory advocated for a favorable balance of trade, where a country would export more than it imported, thereby accumulating wealth in the form of gold and silver. The connection between mercantilism and exploration, particularly in the context of fur trade and global trade relationships, is significant as countries sought to establish colonies and control resources to enhance their economic standing.

5 Must Know Facts For Your Next Test

1. Mercantilism held that national strength could be maximized by limiting imports via tariffs and maximizing exports.
2. Countries engaged in mercantilist practices often established colonies to secure raw materials and new markets for their manufactured goods.
3. In the context of fur trade, mercantilism influenced French policies that aimed to control North American territories rich in furs.
4. Mercantilism contributed to intense competition among European powers for overseas colonies, impacting global trade networks.
5. The decline of mercantilism in the late 18th century paved the way for the rise of free-market capitalism and modern economic theories.

Review Questions

• How did mercantilism influence European nations' approaches to exploration and trade during its peak?
  • Mercantilism significantly influenced European nations by driving them to explore new territories for resources and trade opportunities. As countries sought to create colonies, they aimed to secure raw materials that could be sent back home for manufacturing. This approach not only increased national wealth but also intensified competition among European powers, as each nation raced to establish trade routes and monopolies over valuable commodities like furs.
• Evaluate the effects of mercantilist policies on the fur trade in North America during the colonial period.
  • Mercantilist policies had profound effects on the fur trade in North America as European powers, particularly France, focused on exploiting the region's natural resources. These policies encouraged the establishment of trading posts and alliances with Native American tribes, essential for acquiring furs. The fur trade became a critical economic driver for colonies, reinforcing mercantilist goals of increasing exports while maintaining strict control over imports, thereby benefiting the home country economically.
• Analyze the transition from mercantilism to capitalism and its implications for global trade relationships in the late 18th century.
  • The transition from mercantilism to capitalism marked a significant shift in global trade dynamics as economic theories evolved toward free-market principles. This change resulted in reduced government intervention in trade and a focus on supply-and-demand economics. The implications were profound: countries began to embrace open markets, which led to increased competition and innovation. As nations moved away from protective tariffs and colonial monopolies, new trading partnerships emerged, reshaping global relationships and fostering interdependence among nations.

Related terms

Colonialism: The practice of acquiring full or partial control over another country or territory, often involving the establishment of settlements and exploiting resources.

Balance of Trade: The difference between a country's exports and imports, where a positive balance indicates more exports than imports, contributing to wealth accumulation.

Trade Monopoly: The exclusive control over the supply or trade of a particular commodity or service, often established through colonial powers to dominate markets.