MercantilismMercantilism

MercantilismMercantilism An economic system where a nation An economic system where a nation

establishes colonies to provide raw establishes colonies to provide raw materials and serve as a market for materials and serve as a market for manufactured goods creating a manufactured goods creating a favorable balance of trade for that favorable balance of trade for that country which in turn increases that country which in turn increases that nation’s wealth and power.nation’s wealth and power.

Goals of Mercantilism Goals of Mercantilism

To become To become wealthiest, most wealthiest, most powerful nationpowerful nation

Become self-Become self-sufficient = meet all sufficient = meet all needs within the needs within the empireempire

Develop favorable Develop favorable balance of tradebalance of trade Export more than Export more than

import = profitimport = profit

Exporting more than you import Exporting more than you import

ExportsExports: : goods that are goods that are sent from your sent from your country to country to another or to another or to your colony to your colony to be soldbe sold

ImportsImports: : goods brought goods brought into your into your country from country from another another country or country or from your from your colonycolony

Favorable Balance of Trade

Favorable Balance of TradeFavorable Balance of Tradepg. 52 in Textbookpg. 52 in Textbook

Mercantilism in EffectMercantilism in Effect Establish coloniesEstablish colonies

Build colonial empire to provide Build colonial empire to provide base of raw materials and base of raw materials and market for manufactured goodsmarket for manufactured goods

Develop strong militaryDevelop strong military Strong army and navy to Strong army and navy to

defend empiredefend empireNavy especially important to protect Navy especially important to protect

tradetrade

Make rules/policiesMake rules/policies Must maintain control over Must maintain control over

colonies and protect from colonies and protect from foreign interferenceforeign interference

TIMBERTIMBER

FISH

IRONIRON

INDIGOINDIGO

RICERICE COTTONCOTTON

RESOURCES

RESOURCES

MANUFACTURED GOODS

French MercantilismFrench Mercantilism

Purpose of Colonies/Benefits to Mother Purpose of Colonies/Benefits to Mother CountryCountry

Raw materials for Raw materials for manufacturing manufacturing industry or re-export industry or re-export (trade)(trade)

Markets for Markets for manufacturing goodsmanufacturing goods

Growth of merchant Growth of merchant fleetfleet

Additional bases for Additional bases for NavyNavy

Benefits for ColoniesBenefits for Colonies Bounties: incentive Bounties: incentive

payments to payments to encourage encourage production of highly production of highly desired goods desired goods (tobacco)(tobacco)

Steady market for Steady market for raw materials & raw materials & cash cropscash crops

Defense -> protect Defense -> protect coloniescolonies

Shipbuilding Shipbuilding industry developed industry developed in coloniesin colonies

Enforcement of MercantilismEnforcement of Mercantilism Restrictions on buyingRestrictions on buying

Buy only from mother country; Buy only from mother country; duties on foreign goodsduties on foreign goods

Restrictions on sellingRestrictions on selling Could only ship/sell to mother Could only ship/sell to mother

country(enumerated goods)country(enumerated goods)

Restrictions on shippingRestrictions on shipping All trade only on mother All trade only on mother

county’s ships, all goods county’s ships, all goods shipped through mother shipped through mother country’country’

Restrictions on manufacturing Restrictions on manufacturing Prohibited in colonies: keep Prohibited in colonies: keep

colonies dependent on mother colonies dependent on mother country, prevent competition country, prevent competition (monopoly) (monopoly)

Cons of MercantilismCons of Mercantilism Limited profits of Limited profits of

colonists (threatened colonists (threatened prosperity)prosperity)

Foreign goods more Foreign goods more expensive (taxes)expensive (taxes)

Colonists resentful of Colonists resentful of restrictionsrestrictions

Colonists treated as Colonists treated as inferiors – “colonials”inferiors – “colonials”

Need for cheap labor Need for cheap labor leads to slavery leads to slavery

Viewpoint on MercantilismViewpoint on MercantilismThomas MunThomas Mun

““Although a kingdom may Although a kingdom may be enriched by gifts be enriched by gifts received, or by purchases received, or by purchases taken from some other taken from some other nations, yet these things nations, yet these things are uncertain and of small are uncertain and of small consideration when they consideration when they happen.happen.

The ordinary means The ordinary means therefore to increase our therefore to increase our wealth and treasure is by wealth and treasure is by foreign trade, where we foreign trade, where we must observe this rule: to must observe this rule: to sell more to strangers sell more to strangers yearly than we consume of yearly than we consume of theirs in value.”theirs in value.”

Viewpoint on MercantilismViewpoint on MercantilismAdam SmithAdam Smith““Consumption is the sole end Consumption is the sole end and purpose of all production; and purpose of all production; and the interest of the and the interest of the producer ought to be producer ought to be attended to, only so far as it attended to, only so far as it may be necessary for may be necessary for promoting that of the promoting that of the consumer. The maxim is so consumer. The maxim is so perfectly self-evident, that it perfectly self-evident, that it would be absurd to attempt to would be absurd to attempt to prove it. prove it.

But in the mercantile system, But in the mercantile system, the interest of the consumer the interest of the consumer is almost constantly sacrificed is almost constantly sacrificed to that of the producer. And it to that of the producer. And it seems to consider production seems to consider production and not consumption, as the and not consumption, as the ultimate end of all industry ultimate end of all industry and commerce.”and commerce.”

QuickWrite #4QuickWrite #4

The mercantilist system The mercantilist system would/would notwould/would not be an be an

effective system to a country effective system to a country and its colonies because…and its colonies because…