European mercantilism

Definition

European mercantilism was an economic theory and practice that dominated European economic policies from the 16th to the 18th centuries, focusing on strengthening national economies through government regulation of trade, accumulation of wealth, and maintaining a favorable balance of trade. This system emphasized the importance of exporting more than importing, thereby enriching the nation and increasing its power in the global arena.

5 Must Know Facts For Your Next Test

1. Mercantilism viewed wealth as finite, leading to intense competition among European nations to accumulate gold and silver through trade surpluses.
2. Nations implemented strict regulations on colonial trade, often forcing colonies to only trade with the mother country under mercantilist laws.
3. The rise of joint-stock companies in this period, such as the British East India Company, exemplified how mercantilism fueled colonial expansion and trade monopolies.
4. Mercantilism played a significant role in shaping European rivalries, as countries competed to control trade routes and colonial territories.
5. The decline of mercantilism in the late 18th century eventually led to the rise of capitalism and free market principles, reshaping global economic practices.

Review Questions

• How did European mercantilism influence trade practices among nations during the 16th to 18th centuries?
  • European mercantilism significantly influenced trade practices by encouraging nations to focus on exporting more than they imported, which was seen as a means to enhance national wealth. Countries established strict trade regulations that favored their own industries and sought to monopolize resources from their colonies. This created a competitive environment where nations engaged in aggressive trade policies to ensure a favorable balance of trade, often leading to conflicts over trade routes and territories.
• Evaluate the impact of mercantilist policies on colonial economies and their relationship with European powers.
  • Mercantilist policies had profound effects on colonial economies by restricting their ability to engage in free trade. Colonies were often required to provide raw materials exclusively to their mother countries while being forced to purchase finished goods from them at higher prices. This created an exploitative relationship, limiting colonial development and fostering dependency on European powers. As a result, colonization became increasingly focused on maximizing profits for the home country at the expense of local economies.
• Assess how the transition from mercantilism to capitalism affected European economies and global trade in the 19th century.
  • The transition from mercantilism to capitalism marked a significant shift in economic practices that transformed European economies and global trade. With the decline of mercantilist restrictions, markets became more open, allowing for increased competition and innovation. Capitalist principles encouraged investment in industries, leading to industrialization and greater productivity. This shift facilitated the growth of international trade networks, diminished colonial monopolies, and ultimately contributed to economic globalization by fostering an environment where free markets could thrive.

Related terms

Balance of Trade: The difference between the value of a country's exports and imports, where a favorable balance indicates that exports exceed imports.

Colonialism: The practice of acquiring and exploiting territories beyond a nation's borders for economic gain, often associated with mercantilist policies.

Protectionism: Economic policy of restraining trade between nations through tariffs and regulations to protect domestic industries from foreign competition.