SAQ TOPIC: Mercantilism (Ap World History Unit 3/4)

Key Characteristics of Mercantilism:

1. Wealth is Finite: Mercantilists believed that the world's wealth was limited, and the goal of national economic policy should be to accumulate as much of that wealth as possible, especially in the form of precious metals like gold and silver.

2. Positive Trade Balance: Nations sought to export more than they imported. The idea was that a country could amass wealth by selling more goods abroad than it bought from other countries, leading to a trade surplus. This would result in an inflow of gold and silver, increasing the nation's wealth.

3. Colonial Expansion: Colonies were seen as sources of raw materials (such as sugar, tobacco, and precious metals) and markets for manufactured goods. Colonies were expected to benefit the mother country by providing resources and wealth that would not be allowed to trade with rival powers.

4. Government Intervention: Governments played a central role in controlling the economy, implementing tariffs, subsidies, and monopolies to protect domestic industries and ensure favorable trade. State-sponsored ventures, such as joint-stock companies, were also common.

5. Accumulation of Precious Metals: Gold and silver were considered the primary indicators of a nation's wealth. Countries used their colonies and trade networks to extract precious metals, which were seen as the foundation of economic power.

Mercantilism and European Expansion (Unit 3):

1. Age of Exploration (15th–17th centuries):

   • The desire for wealth and resources was a major motivator behind European exploration. Nations like Spain, Portugal, France, and later England sought to establish direct trade routes to Asia and the Americas.

   • Spain and Portugal: Early pioneers of overseas expansion, motivated by the search for wealth (gold and silver), and the desire to control trade routes. Spain's colonization of the Americas and Portugal's control over parts of Africa and Asia were key examples of mercantilist policies in action.

   • Other European Powers: After the Treaty of Tordesillas (1494), which divided the New World between Spain and Portugal, other European powers like France, England, and the Netherlands began to establish their own colonies in the Americas, seeking to profit from resources such as sugar, tobacco, and later cotton.

2. The Atlantic System and the Columbian Exchange:

   • The development of the Atlantic slave trade was integral to the success of mercantilism. African slaves were forcibly transported to work on plantations in the Americas, producing goods that could be sold to European markets.

   • The Columbian Exchange transferred plants, animals, and diseases between the New World and Old World, creating a global network of trade that would be central to mercantilist economic policies.

3. Joint-Stock Companies:

   • European nations established joint-stock companies like the Dutch East India Company and the British East India Company to control and profit from trade. These companies were instrumental in consolidating mercantilist economic practices and expanding European influence globally.

   • Mercantile Monopoly: The joint-stock companies often had exclusive rights to trade in certain areas, allowing them to monopolize lucrative markets.

Mercantilism and the Development of Capitalism (Unit 4):

1. Transition to Early Capitalism:

   • Mercantilism laid the foundation for the rise of early capitalism. While mercantilism focused on state control and regulation, the rise of capitalism (emerging in the late 17th and early 18th centuries) emphasized private enterprise and market competition. However, the state's role in protecting and regulating trade remained strong.

   • The development of financial institutions like banks, stock exchanges, and insurance companies were crucial in supporting the global trade networks that emerged during the period of mercantilism.

2. Capital Accumulation and the Growth of Empires:

   • European nations sought to increase their capital by investing in colonies, exploiting natural resources, and creating favorable trade conditions. Mercantilism was integral to the growth of large empires, particularly the Spanish Empire, British Empire, and French Empire.

   • The wealth generated by these colonies and global trade routes fueled further European industrial and military expansion.

3. Trade Networks and the Growth of Global Commerce:

   • Mercantilism contributed to the expansion of transoceanic trade. The triangle trade (involving Europe, Africa, and the Americas) is a prime example of how European nations profited from the exchange of slaves, raw materials, and finished goods.

Criticism and Decline of Mercantilism:

1. Adam Smith's Critique:

   • Adam Smith, in his seminal work The Wealth of Nations (1776), criticized mercantilism for its focus on hoarding wealth and the restrictive nature of its policies. Smith argued that free markets and the concept of laissez-faire economics (minimal government intervention) would lead to greater prosperity for nations and individuals alike.

2. Shift to Free Trade:

   • Over time, mercantilist policies began to give way to more liberal economic ideas, particularly during the Industrial Revolution and the rise of capitalism. Free trade agreements, the reduction of tariffs, and the growing influence of industrial capitalists led to a more globalized economy.

3. End of Colonialism and Global Trade Shifts:

   • The decline of colonial empires, especially in the 19th century, marked the decline of mercantilism as nations moved towards more open economic systems, including capitalism and imperialism driven by industrial powers.

Key Terms and Concepts:

• Bullionism: The belief that wealth is measured by the amount of precious metals a country holds.

• Colonialism: The establishment of colonies to control resources and markets.

• Triangle Trade: The trade system between Europe, Africa, and the Americas, including the transport of slaves, raw materials, and finished goods.

• Joint-Stock Companies: Privately owned companies chartered by governments to control trade and colonization.

• Monopoly: Exclusive control over trade or industry, often granted to a specific company or group.

Mercantilism's Legacy:

• Global Trade Networks: Mercantilism laid the groundwork for the global economy by establishing vast networks of trade between the Old and New Worlds.

• Colonial Exploitation: European mercantilism was closely tied to the exploitation of indigenous peoples and Africans, particularly through slavery, which has lasting social and economic impacts.

• Economic Thought: Mercantilism’s focus on wealth accumulation through state control influenced later economic theories, including the development of capitalism and the debate over free vs. regulated markets.