Mercantilism

I. Introduction/Review

Exploration European Colonization Trade Networks

Mercantilism Rivalry Among European States

II. Background

1. Mercantilism was an economic “system” that developed in Europe during the period of _____ _______ ______(c.1500), and developed with the rise of the _________ _________ (c.1600 – 1700).

2. It was NOT a strict economic theory with _______ ________.

3. Underlying principles:1. The amount of wealth in the world is _____________________.

2. A country’s wealth was based on _________________________.

3. A favorable balance of trade meant:_______________________.

4. A large population valuable because_______________________.

5. The crown or state should have a __________ role in directing the ________________ & __________________economies.

III. Merchant Capitalism1. A term applied to merchants because they

_____________&_____________ from it.

2. This is the earliest phase of __________________.

3. Mercantile era drew to a close around ________, giving way to_______________.

IV. Pre-Mercantilism

1. A reaction again the economic problems of the period when:

a. States were too weak to __________________________.

AND

b. When towns levied their own ______________ on goods

passing through their borders.

V. New Monarchies of the late 15th& 16th c.1. New monarchs readily accepted mercantilism because

______________________________________.

2. Examples:

a. Spain (Charles I & Philip II)

b. England (Henry VIII & Elizabeth I)

VI. Proponents of Mercantilism1. Adherents to absolutism:

1. Stuart Monarchs:

2. Oliver Cromwell:

3. Jean-Baptist Colbert, France, & Louis XIV: a. Colbert embraced Mercantilism b/c his ultimate goal was to_________________________________________.

b. Biggest obstacle for France = ___________________.

c. France would prosper only if__________________________.

VII. Resulting Rivalry: France & the Dutch

1. Colbert’s anti-Dutch strategy came from his beliefs on ____________ economy.

2. He believed the volume of world trade was _____________, so for France to increase its share meant:__________________________

_____________________________________________________.

3. Setbacks from difficulties in war strained the French economy.

4. At Colbert’s death, France was on the road to ________________.

VIII. How Mercantilism Affected European Colonies

1. Led to enormous _______________ ______________, which

___________________________________________________.

2. Colonies were to supply __________ & _________ to the Mother country then colonies were to be markets for _________ ___________.

3. This balance-of-trade was thought to _________ _______ _______.

4. Belief: no great nation could exist & be self sufficient without___________________________.

IX. Britain and its Colonies1. England began the first large-scale approach to mercantilism during

________________.

2. British gov demanded trade in gold & silver bullion, seeking a __________ ___ _______.

3. Colonies lacked sufficient bullion to circulate in their markets, so issued _______ _________, resulting in periods of inflation.

4. This relationship b/t Britain and American colonies would contribute to the Revolutionary War.

X. British Trade Laws Based on Mercantilism

1. Navigation Acts – 1660s.

2. Laws designed to make colonists dependent on_____________

_______________ from England.

3. Established “protected” goods that could ONLY be sold to British merchants, e.g. ____________________________.

4. Again, this economic arrangement would contribute to the Revolutionary War.

XI. Opponents of Mercantilism

1. During the 18th century the __________ of mercantilism became increasingly obvious.

2. Louis XIV’s failures revealed the limitations of the state directing the economy for its frequently ________, if not ______-_________ purposes.

3. Merchant Capitalism reached a level within the mercantilist system where state intervention/direction of the economy was __________ and even preventing __________ ___________.

XII. Physiocrats1. Intellectuals who were critical of existing Old Regime structures.

2. Influenced by _______________ ideas.

3. Applied “natural laws” doctrines to the ______________.

XIII. Lassiez-Faire1. A theory arguing the economy functioned best when it’s own

__________ __________ were allowed to function without ______________ _____________________.

2. David Hume

3. Adam Smith

XIV. Rise of Capitalism: the Dutch, Market Economy and Joint Stock Companies

1. “Capitalist” in the mid-17th century referred to how some people used their money.

a. Invested their money to make money

b. Most lucrative business opportunity for them?

____________________.

2. The Dutch

a. Led the way in implementing capitalist ideas as they engaged

in _____________________.

b. Built warehouses to store goods so they could _____________

_______________________________________.

c. Netherlands became the leading __________ ___________

in Europe in the 16th century.

d. Amsterdam is the site of the first __________ ____________.

3. Joint-stock companies & the global network of trade:

a. A new economic structure that allowed ordinary investors to

buy shares in _____________ _________ that were run by a

board of directors.

b. Easier to ____________________

c. English and Dutch joint-stock companies ____________ trade

in Asia.

d. Private companies with remarkable__________

e. Generated huge profits, and contributed to the early formation

of __________________________________.

The creation of the British East India Co. was the quintessential mark of mercantilism and economic exploitation and mastery of trade by western civilization. The company made Great Britain an international giant.

XV. A New “Money” Economy 1. New World mines run-out of easily mined silver.

2. Bartolome Medina (a Spaniard) figures out a process and:

3. The amount of silver leaving the New World explodes

4. Silver from the New World is used for global trade.

a) this is the worlds FIRST universal currency

b) this is the true beginning of economic globalization

4. Amsterdam•Dutch control ½ of all global shipping•Wealthiest country on the planet•New wealth creates a demand for luxuries •Merchants are innovators and become “speculators”

(Buying a product before it has been harvested – in this case tulips.)

XVI. Looking Forward: Britain and the Industrial Revolution

1. By 1860 England had removed the restrictions of the mercantile era., e.g. ___________________________________________________.

2. Because of its ________ ________ policies, England became the dominant ______________ _______________ in Europe.