Yesterday and Today Previous Class (1.6): Checked Required Materials Notes for Topic 1.6 Homework Due Today (1.7): Read Chapter 1, Section 3, Pages 16-21: Trade Networks of Asia and Africa (Textbook). Continue working on the Unit 1 Map Project and studying for the map portion of the Unit 1 Exam with the practice quizzes on the Seterra Geography website (due for Topic 1.13). Today’s Agenda (1.7): Notes for Topic 1.7

1.7:Mercantilism and Monarchs Unit 1: Three Worlds Collide (c. 982-1784)

I. Introduction In the last class you learned about the push-pull theory of human migration, which is a general explanation for why human beings have moved around the globe throughout history. Several examples of push-pull pair factors were discussed. Today we will look more specifically at the economic factors from the perspective of the European monarchs and governments of the time that pulled them overseas in search of new colonies. “We shall always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them.” - Sir Thomas Smith

II. Mercantilism A. A primary motivation for European monarchs and governments to seek out overseas colonies was the popular economic philosophy of the time known as mercantilism. 1. mercantilism – economic philosophy (dominant in Europe from the 1500s through the 1700s) that believed nations could become powerful by accumulating gold and silver, primarily by regulating the economy to ensure a favorable balance of trade 2. The goal of mercantilists is to ensure a favorable balance of trade. a) Favorable Balance of Trade = Exports > Imports (1) exports – goods leaving your country; money coming in (2) imports – goods coming into your country; money going out b) If the value of exports (goods you are selling) is greater than the value of imports (goods you are buying), you will have a favorable balance of trade and end up with money left over.

c) Other ways of saying it: (1) Favorable Balance of Trade = (+) Net Exports = Trade Surplus (2) Unfavorable Balance of Trade = (-) Net Exports = Trade Deficit d) Who do you think the US has an unfavorable balance of trade with today? What about a favorable balance of trade? We will use your guesses to look at examples together from the US Census Bureau website to see how balance of trade figures are calculated and what they mean. (1) Table of US Trade Statistics:

US Balance of Trade with Various Countries (in Millions) Country Exports To Imports From Balance of Trade or Net Exports (Exports – Imports)  

III. How to Get a Favorable Balance of Trade A. A favorable balance of trade could be achieved in various ways through government regulation of the economy. It was easy to accomplish if a nation had colonies that were rich in raw materials. Thus, colonies became essential to the philosophy of mercantilism. 1. Colonies could be used for two things: a) source of cheap raw materials (imports) b) captive market for finished products (exports) 2. Theoretical Example of Mercantilism and Colonial Trade:

$15 E RM FP $5 America FP $20 RM $10 Europe RM = Raw Materials FP = Finished Products

a) England artificially lowers the value of its imports (from $10 to $5) because they are the only buyer with two sellers. b) England artificially raises the value of its exports (from $15 to $20) because they are the only seller with two buyers. c) Because of this competitive effect, and various economic regulations, England artificially gives itself a more favorable balance of trade (from $5 to $15), and becomes rich at the expense of its colonies. 3. With a more favorable balance of trade, more gold and silver is flowing into England, both for business (often government granted monopolies) and government (in the form of taxes).

IV. Navigation Acts A. The above scenario and discussion was a very theoretical example of how having colonies could give a nation a more favorable balance of trade. More realistically, England simply passed laws regulating the trade of its colonies, which eliminated any competition and allowed England to manipulate the value of its imports and exports Navigation Acts – series of laws passed by the English Parliament beginning in 1651 that regulated trade with its colonies and were designed to give England a more favorable balance of trade 1. Specific example and its effect: a) Certain goods like tobacco, rice, and sugar produced in America could only be sold to England or other English colonies. (1) With free trade, maybe the Dutch would be willing to pay a higher price for American tobacco, but the American colonies are only allowed to sell it to England, and therefore must accept England’s lower price.

V. Conclusion The economic philosophy of mercantilism, with its goal of achieving a favorable balance of trade, was one of the primary factors that caused European monarchs and governments to seek out overseas colonies during the Age of Discovery. In the next class, we will look at how religion served as a primary push-pull factor for the individual colonists and settlers.

Homework for Next Class 1. Read Chapter 1, Section 4, Pages 22-31: The European Heritage (Textbook). 2. Continue working on the Unit 1 Map Project and studying for the map portion of the Unit 1 Exam with the practice quizzes on the Seterra Geography website (due for Topic 1.13).