Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the role of the state in managing the economy to increase national power, particularly through the regulation of trade and accumulation of wealth. This system held that a nation’s strength depended on its wealth, which was often measured in gold and silver, and that to achieve this, a country should export more than it imports. This concept greatly influenced British colonial policies and the resistance that arose in America as colonists reacted against these restrictive economic practices.

5 Must Know Facts For Your Next Test

1. Mercantilism was widely practiced in Europe from the 16th to the 18th centuries and significantly shaped trade relationships between European powers and their colonies.
2. Under mercantilist policies, colonies were expected to supply raw materials to the mother country while being forced to buy finished goods exclusively from it.
3. The mercantilist approach fostered resentment among American colonists, as they viewed these economic restrictions as exploitative and contrary to their interests.
4. This economic theory laid the groundwork for later economic independence movements as colonies sought to break free from restrictive trading practices imposed by Britain.
5. Mercantilism's focus on state control of the economy helped create tension between Britain and its American colonies, ultimately contributing to revolutionary sentiments.

Review Questions

• How did mercantilism influence British colonial policies and what impact did it have on colonial economies?
  • Mercantilism heavily influenced British colonial policies by mandating that colonies trade exclusively with Britain, which meant exporting raw materials while importing finished goods from England. This control limited economic growth in the colonies and generated widespread resentment as colonists felt exploited by these restrictions. The imposition of such policies led to growing discontent among colonists who desired more autonomy over their economic affairs, ultimately setting the stage for resistance movements.
• Discuss the ways in which colonial resistance was a reaction against mercantilist policies imposed by Britain.
  • Colonial resistance emerged as a direct reaction against mercantilist policies that restricted trade and limited economic opportunities for American colonists. Many colonists protested against laws such as the Navigation Acts, which they viewed as unfair taxation without representation. Events like the Boston Tea Party were fueled by frustrations over mercantilist practices, showcasing how colonists united against what they considered oppressive regulations that undermined their rights and freedoms.
• Evaluate the long-term effects of mercantilism on the development of American economic independence and its transition towards free-market principles.
  • The long-term effects of mercantilism on American economic independence were profound, as it instilled a desire for self-determination among colonists. The restrictive nature of mercantilist policies prompted a push towards free-market principles following independence, allowing for greater competition and innovation. As the United States shifted away from these early economic controls, it laid the foundation for a market-oriented economy where trade could flourish without government interference, reflecting a significant transformation from colonial dependency to a robust independent economy.

Related terms

Navigation Acts: A series of laws passed by the British Parliament that regulated colonial trade and enabled England to collect taxes from colonies, aiming to ensure that trade benefited the mother country.

Balance of Trade: The difference between a country's exports and imports, where a favorable balance means more exports than imports, which mercantilism aimed to achieve.

Colonial Economy: The economic systems in place within colonies, which were often heavily controlled by the mother country under mercantilist principles to benefit the imperial economy.