key term - Mercantilism

Definition

Mercantilism is an economic theory that emphasizes the role of the state in managing international trade to enhance national power and wealth. This theory promotes the idea that a country should export more than it imports and accumulate precious metals, like gold and silver, as a measure of wealth, leading to significant impacts on colonial expansion and trade policies.

5 Must Know Facts For Your Next Test

1. Mercantilism played a crucial role in shaping European powers' policies in the 16th to 18th centuries, leading to increased colonial competition.
2. Under mercantilist policies, colonies were often restricted to trading only with their mother country, ensuring that profits remained within the empire.
3. The emphasis on accumulating gold and silver led to mercantilist countries seeking precious metals through exploration and conquest.
4. Mercantilism laid the groundwork for modern economic theories by highlighting the importance of trade balance and state intervention in the economy.
5. Criticism of mercantilism by economists like Adam Smith in the 18th century paved the way for the development of free market capitalism.

Review Questions

• How did mercantilism influence European countries' approaches to overseas expansion during the 16th to 18th centuries?
  • Mercantilism significantly influenced European countries by driving them to establish colonies as sources of raw materials and markets for their manufactured goods. This approach encouraged intense competition among European powers for control over territories that could bolster their trade surplus. By viewing colonies primarily as economic assets, nations aimed to strengthen their position in international trade, leading to a wave of exploration and colonization.
• Discuss how mercantilist policies affected the Atlantic Slave Trade and its implications for both Europe and Africa.
  • Mercantilist policies greatly contributed to the Atlantic Slave Trade by creating a demand for labor-intensive cash crops such as sugar, tobacco, and cotton in European markets. To maximize profits from these colonies, European powers sought enslaved Africans to work on plantations, leading to a horrific transatlantic trade system. This not only enriched European economies but also had devastating social and economic effects on African societies, contributing to long-term consequences that are still felt today.
• Evaluate the transition from mercantilism to capitalism in the context of global trade dynamics during the late 18th century.
  • The transition from mercantilism to capitalism involved a shift in economic thought that emphasized individual entrepreneurship and free market principles over state-controlled trade. This change was influenced by critiques from economists like Adam Smith, who argued that free competition would lead to greater wealth creation than mercantilist restrictions. As industrialization began in Europe, new trade dynamics emerged that favored capital investment and innovation over strict governmental control, laying the foundation for modern global capitalism.

Related terms

Colonialism:

A practice of acquiring control over another country or territory, often involving settling and exploiting resources for the benefit of the colonizing nation.

Bullionism: An economic theory focusing on the accumulation of bullion (gold and silver) as the primary measure of national wealth and economic strength.

Navigation Acts:

A series of laws enacted by England to regulate colonial trade and enable England to collect taxes from its colonies, thus reinforcing mercantilist policies.