Commercial Revolution

Mercantilism•an economic theory •world only contained a fixed amount of wealth •to increase a countries wealth, one country had to take some wealth from another either•through having a higher import/export ratio•or in actual conquest of new lands and resources.

Mercantilism• Between 1600 and 1800 most of the states of

western Europe were heavily influenced by a policy usually known as mercantilism.

• essentially an eff ort to achieve economic unity and political control.

• Generally it may be thought of as a collection of policies designed to keep the state prosperous by economic regulation.

• These policies may or may not have been applied simultaneously at any given time or place.

Bullionism (gold)Bullionism was the belief that the economic health of a nation could be measured by the amount of precious metal, gold, or silver, which it possessed.

Bullionism dictated a favorable balance of trade.

That is, for a nation to have gold on hand at he end oft he year, it must export more than it imports. Exports were later defined to include money spent on freight, or insurance, or travel.

Each nation tried to achieve economic self-sufficiency.

Those who founded new industries should be rewarded by the state.

Treasures from the Americas!Treasures from the Americas!

Favorable Balance of Trade

Regulated commerce could produce a favorable balance of trade. In general, tariffs should be high on imported manufactured goods and low on imported raw material.

What was needed to maintain mercantilism

Regulation of international trade State intervention Monopoly Protection of manufacturers Strong state government

Mercantilism, Purpose of Colonies

FleetsSea power was necessary to control foreign markets. A powerful merchant fleet would obviate the necessity of using the ships of another nation and becoming dependent on foreign assistance. In addition, a fleet in being could add to a nation's prestige and military power.

ProductionThriving agriculture should be carefully encouraged. Domestic production not only precluded imports of food, but farmers also provided a base for taxation.Colonies could provide captive markets for manufactured goods and sources of raw material.A large population was needed to provide a domestic labor force to people colonies.

Need to keep wealth at home

Luxury items were to be avoided because they took money out of the economy unnecessarily.State action was needed to regulate and enforce the above policies.

England

Lead to:Competition between nationsNavigation and other Trade ActsAvoidance of tariffsNeed for large labor forceSlave TradeConflict on the seasLarger Ships more maneuverable ships

England vs. Spain

New Colonial Rivals (slave trade)New Colonial Rivals (slave trade)

Mercantilism in HistoryBetween the 15th and the 18th centuries in Europe, powerful states were created and were dedicated to the pursuit of economic power and wealth.Governments organized their then-limited capabilities to increase the wealth of the country.Mercantilist governments promoted…

exports over importsindustrialization over agriculturethe protection of domestic production against competition from importsthe intervention in trade to promote domestic employment

Mercantilism in HistoryJean-Baptiste Colbert (1619-83) an advisor to Louis XIV, argued that states needed to accumulate gold and silver to guarantee power and wealth.Alexander Hamilton (1757-1804) advocated policies to protect the growth of the state’s manufactures.Friedrich List (1789-1846) advocated strong government intervention for economic development and government aid to technology, education and, like Hamilton, to industry.

Mercantilist Perspective Views of human natureRelationship between individuals, society, state and marketRelationship between domestic and international society

Humans are aggressive and have conflictual tendenciesGoal is to increase state power, achieved by regulating economic life; economics is subordinate to state interests.International economy is conflictual; insecurity of anarchy breeds competition; each state defends itself.

• Individuals and corporations invest money - using their capital, not labor, to make more money

• Production, distribution, and exchange of goods are controlled by private individuals or corporations, not by the state

• Prices are set by supply and demand in the marketplace, not by the government

The Rise of Capitalism

• Individuals pooled their resources to form companies larger than any one individual or family could finance

• Shares of the company (stock) were issued• Stockholders shared in the profits of the

company in proportion to the percentage of the stock they held

• Some, such as the East India Company, were endorsed and given special treatment by the government

Joint Stock Companies

Impact of Commercial Revolutionsixteenth century change the social structure

of the West

absolute monarchy of the seventeenth century

use of mercantilism as state-controlled economic system.