The Commercial Revolution

In this lesson, students will be able to define the following terms:

The Commercial RevolutionMercantilism

ColoniesMother Country

CapitalismJoint Stock Company

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The Commercial Revolution markedan important step in Europe from

local economies to a global economy.

Mercantilism

• Mercantilism was an economic policy aimed at self-reliance and strengthening the national economy of a nation.

•

In order to acquire gold and silver, European countries established overseas colonies.

Colonies provided gold and silver.E. Napp

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Mercantilists believed that a country’swealth was based on the amount of

gold and silver it acquired.

Basic Ideas of Mercantilism

There is a fixed amount of wealth in the world.

In order to build up a supply of gold and silver, a nation must export more goods and it imported

Government regulation of the economy to support a favorable balance of trade

Wealth needed to create/support a large military

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Role of Colonies

Colonies existed for the benefit of the parent country

Colonies provided resources and raw materials not available in Europe

Colonies enriched the parent country by serving as a market for its manufactured goods E. Napp

Role of Colonies Cont.

To achieve this European powers passed strict laws regulating trade with their colonies

Colonies could not set up their own industries to manufacture goods

Enumerated goods – items that can only be sold to the parent country. Examples include tobacco, sugar, and cotton.

Colonies couldn’t buy goods from foreign countries

In addition, only ships from the parent (“mother”) country and the colonies could be used to trade goods back and forth

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Mother Countries and Colonies

Mother countries were conquerors.

The conquered land was a colony.

In addition to mining for gold and silver, Mother countries imported natural resources or raw materials and exported finished goods.

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Mother countries imported cheapraw materials like cotton and

exported more expensive finishedgoods like shirts.

Increasing National Wealth

Mercantilists urged the government to increase revenue and the national wealth. Therefore, the governments exploited natural resources like minerals and timber, built roads, and funded new industries.

A single national currency was created along with standard weights and measures

Governments created monopolies in certain industries

Protectionist policies Tariffs

In this case, taxes on imported goods Protected local industries from competition by increasing

price of foreign goods

Capitalism

Merchants and bankers laid the foundations for capitalism.

In a capitalist system, business owners risk their capital (money) to start new businesses hoping to make profits.

Individuals formed joint-stock companies. E. Napp

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A stock certificate represents partialownership in a business.

Joint Stock Companies

A Joint stock company is a privately owned company that sells stock or partial ownership in the company to investors.

Investors risk their capital or money when they purchase stock.

If the company is successful, the investor receives his share of the profits. E. Napp

Who gained & lost with Mercantilism?

Merchants – invested in overseas ventures gained wealth. Business people formed the new middle class and their power increased.

Nobles – wealth rested in land ownership did not benefit. Those who sold off their land reduced their income further

Colonists –losing out as a result of mercantilism. Restrictions on trade and production meant they could not earn money at their full potential. Still, colonists did benefit in some ways from mercantilism. For example, colonists gained a built-in market for their raw products/materials.

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Europeankings

increasedtheir

wealth andpower

throughconquest

andcolonization.

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While European Kings and capitalistsincreased their wealth, Native American

Indians and Africans were terribly exploited.

Global Trade/ Imperialism

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Global Trade/ Imperialism

Competition for empire sparked wars between European powers such as the French and Indian War (part of the Seven Years’ War) fought between France and Great Britain.

Europeans transplanted their culture and goods throughout the world

Effects Taxation and a greater role for the government in

the economy led to increased royal power. Governments consolidated power and strengthened national unity.

Questions for Reflection:

Define mercantilism.

How did European nations increase their wealth and power?

Define capitalism.

Why did individuals invest in Joint stock companies?

What was “Triangular” trade?

What was the relationship between a mother country and a colony?

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