Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the role of the state in managing the economy to increase national power, advocating for a positive balance of trade and the accumulation of wealth through exportation and the control of resources. This approach shaped colonial policies, trade practices, and the motivations for exploration, as European powers sought to enhance their wealth and power through a regulated economic system.

5 Must Know Facts For Your Next Test

1. Mercantilism dominated European economic thought from the 16th to the 18th centuries, influencing colonial expansion and trade regulations.
2. European nations believed that wealth was finite, leading to competition for resources and markets among competing powers.
3. Under mercantilism, colonies were expected to provide raw materials to the mother country and serve as markets for finished goods, creating an economic dependency.
4. The theory promoted state intervention in the economy, encouraging governments to implement protective tariffs and subsidies to bolster domestic industries.
5. Mercantilism contributed to conflicts like the French and Indian War, as colonial powers sought to expand their territories and access more resources.

Review Questions

• How did mercantilism influence Spanish exploration and conquest during the Age of Discovery?
  • Mercantilism greatly influenced Spanish exploration as Spain sought new territories rich in resources to exploit. The Spanish Crown encouraged explorers like Columbus, Cortés, and Pizarro to claim lands for Spain and extract wealth through gold, silver, and other commodities. This not only aimed at increasing Spain's wealth but also aimed at establishing a favorable balance of trade by ensuring that these resources benefited the Spanish economy directly.
• Analyze how mercantilist policies shaped colonial economies in North America during the 17th and 18th centuries.
  • Mercantilist policies heavily influenced colonial economies in North America by enforcing regulations that prioritized the interests of the mother country. Colonies were required to produce raw materials like tobacco and cotton while importing finished goods exclusively from Britain. This created a system where colonial economies were tightly controlled, limiting their ability to trade freely with other nations. Such restrictions fostered resentment among colonists, contributing to growing demands for economic independence.
• Evaluate the long-term impacts of mercantilism on U.S. economic development following independence.
  • The legacy of mercantilism significantly shaped U.S. economic development post-independence by instilling a mindset focused on trade and resource management. The desire for free trade led to policy shifts away from strict mercantilist controls towards more liberal economic principles. However, remnants of mercantilist thought persisted in U.S. policies promoting protectionism during certain periods, influencing debates over tariffs and trade agreements well into the 19th century, ultimately shaping the nation's approach to global commerce.

Related terms

Balance of Trade: The difference between the value of a country's exports and imports, where a positive balance means exports exceed imports, which is a key goal of mercantilism.

Colonialism: The practice of acquiring and exploiting colonies, often associated with mercantilist policies that sought to control resources and markets to benefit the colonizing nation.

Navigation Acts:

Laws passed by England in the 17th century aimed at controlling colonial trade to ensure that it benefited the mother country, reflecting mercantilist principles.