Mercantilism Theory
Belief: the world has scarce resources and
economic limitations
Consequently, each country’s goal must be to increase the total wealth of the nation and practice close governmental control of the economy including economic restraints.
Objectives of Mercantilism:
1. Attract maximum gold and silver – “hard money” is necessary to conduct war.
2. Export more than import – encourage a favorable balance of trade
3. Increase exports by stimulating domestic industries (i.e., encourage merchants to invest in domestic industries.
4. Discourage imports by levying import taxes. This protects English industries and agriculture.
5. Acquire colonies to assure markets. These are for natural resources and profit, not settlement.
6. Restrict colonial manufacturing. Colonies are seen as inferior to the needs of the mother country.
7. Colonies are to trade only with the mother country.
8. Navies and merchant shipping are the keystones for mercantilism.
What is the role of a mother country under mercantilism?
What is the role of a colony under mercantilism?
How did England apply the principles of mercantilism to its North American and West Indian colonies?
How did the colonies respond?
England's Four Purposes:
1. Encourage growth of native merchant marine fleet so England might control shipping of her own goods.
2. Provide protection for English manufacturers.
3. Protect England's agriculture (especially her grain farmers).
4. Accumulate as much hard money as possible.
(Gerald N. Grob and George A. Bilias)
By the early 18th century, mercantilist assumptions were far removed from the economic realities of the colonies. Colonial and home markets failed to mesh.
1. Colonies could not sell wheat, flour, and fish to England.
2. Colonies found it sometimes more profitable to trade with Spain, France, and
the Dutch who were excluded from the trade.
3. Spain could not produce sufficient goods for South America.
4. Economic productivity in the British North American colonies challenged
English manufacturing.
5. English colonists could buy sugar more cheaply from the French West Indies
than from English suppliers.
6. Traders and merchants of one nation hoped to break the monopoly of another.
7. 18th century: The Golden Age of Smugglers
8. Clashes among colonists could and did bring about conflicts between governments
i.e., English and French colonies in North America clash over fishing rights,
fur trade, Indians.
Kagan, The Western Heritage
Treaty of Utrecht 1713 (War of the Spanish Succession)
Belief: one national economy could only grow at the expense of the other;
struggles emerge over maintaining a balance of power.
Strategic purpose of colonies:
1. to attack enemy nations
2. to help control the seas
3. to help the balance of power
4. to safeguard colonies already in existence
Terms of Treaty:
Portugal: Brazil
Spain: mainland South America, Cuba, Hispaniola, Florida,
Mexico, California
British: colonies along North Atlantic seaboard, Jamaica,
Barbados, Nova Scotia, Newfoundland, India trade stations
France: St. Lawrence River Valley, Ohio and Mississippi River
Valleys, West Indian islands of Saint Domingue,
Guadeloupe, Martinique, stations in India
Dutch: Surinam, stations in Ceylon, Bengal, Java
Discussion Questions
1. What motivated the English to develop a more rational,
uniform structure to their empire in the colonies? Why
should they reorganize?
2. How would this reorganization support the policy of
mercantilism?
3. Is mercantilism strictly an economic policy?
4. Although mercantilism, in theory, appears to be beneficial to
the colonies, why did the colonists believe it wasn't? Were
there any benefits to the colonies?
5. What were the Navigation Acts? Why were they enacted?
How were they enforced? How do they reflect the marriage
of mercantilism and politics?
“America, the Atlantic, and Global Consumer Demand, 1500-1800”
Carole Shammas, OAH Magazine of History, January 2005
(Holder of John R. Hubbard Chair in History at the University of Southern California)
Thesis: The Atlantic migration of Europeans and Africans to America and the commercial activities associated with it created an economy that for the first time in history could be called global. The use of the Atlantic as a highway for migrants, capital, and commodities represented the period’s biggest change in world trade patterns and consumer demand of the societies bordering the ocean had much to do with that change.
Three approaches to understanding the place of pre-1800 America in the international
economy: 1) mercantilism (imperial rivalries); 2) Atlantic World; 3) Atlantic World & Asia
1. Recent research reveals the concept of an Atlantic world economic community
that eclipses the mercantilism paradigm.
2. The commerce of the Atlantic was not a separate world (Triangle Trade) unto itself, but existed within a system of global trade.
3. Major markets in the Americas included West Indian sugar islands and silver mines
in Peru and New Spain (not just “the scrappy, slave-trading, rum-running, smuggling-prone merchant communities of Boston, Newport, New York, Philadelphia, and Charleston).
4. The Atlantic was a meaningful economic entity where coastal inhabitants from all
continents exchanged people and goods without always honoring imperials borders.
(Market place desires of individuals proved more important than empires vying for
a balance of trade.)
5. The demand for groceries and silver were most responsible for the continuing flow
of capital, labor, and governmental military services across the Atlantic. (groceries = tobacco, sugar, molasses, rum, tea, coffee, cocoa) Late 1700s: tobacco and sugar made up 74% of imports into Amsterdam/85%+ of imports into London.
6. Initially, western European governments gave little encouragement to the
consumption of such commodities. Support for commodities came from
transatlantic merchant-planter alliances along with consumers in maritime
communities and urban centers. However, as revenue from import duties poured in,
governments began to support the consumption of commodities.
Impact: changed world dietary habits, spread the plantation system
7. Colonists mobilized against the British in the American Revolution in order to halt
any heavy-handed imperial state meddling that would interfere with supply & demand.
8. Global commerce from the mid-15th century until the later 20th century was dominated
by nations around the Atlantic. New alignment on the horizon? (emergence of the Pacific Rim, the European Union, and NAFTA)
Problem with Atlantic World argument: Ignores Asia as a significant part of the early modern network of trade. Is there enough evidence to argue that a fully integrated global economy existed? i.e., Columbus and his search for the “Indies”; the British search for a Northwest Passage; China had an enormous demand for silver & exported porcelain and silk. Cotton cloth from India weakened demand for light woolens Europe sold.