European Commercial Revolution 1

Essential Question  How did Mercantilism help to create a better environment for Free Enterprise? 2

Introduction  Commercial Revolution occurred as Europe entered into global trade.  Mercantilism encouraged growth of manufacturing & colonies.  Europe remained agricultural, but trade grew quickly. 3

Global Trade  Europe produced more goods for sale  Exports:  America – Sugar, Rice, Tobacco, Precious Metals  Ming China – Silk, Porcelain  India – Tea  East Indies – Spices  Africa – Slaves  Europe – Woolen Cloth, Lumber, Finished Goods 4

Mercantilism  Def. – Increasing a nation’s wealth by limiting imports using tariffs & maximizing exports.  Kings used this to increase their power  Tried to remove internal trade barriers  Wealth & power based on gold & silver – Used to pay soldiers  Only ways to gain wealth – Trade, War 5

Mercantilism  Most European countries established colonies  Exported expensive finished goods to colonies in return for cheap raw materials  Competition for colonial empire led to war:  1600s: England v Holland – Shipping Routes  1700s: England v France – North America & India 6

Free Enterprise  Def. – An economic system in which basic economic questions are answered by free actions of producers & consumers. AKA Capitalism  Business owners risked capital (money) to make profits  Growth of businesses led to demand for money – Used to pay for facilities & materials 7

Free Enterprise  Ships insured because of high risk of loss from accidents, bad weather, & war.  Joint-Stock Companies  Formed to raise money  Private companies offered shares of stock in exchange for money  Investors bought stock for share of profits  Money used by companies to buy materials & equipment 8

Free Enterprise  Banks developed ways of lending money  Financial Revolution  Governments issued certificates & sold to public  Government paid interest to holders  Governments used money to expand militaries  Holland – Rich merchants establish oligarchy (rule by a few) 9

Adam Smith  “Father of Economics”  Wealth of Nations – Documented industrial development in Europe  Didn’t invent many ideas, 1 st to compile & publish them  Laissez Faire – Government has no control over business 10

Adam Smith  Invisible Hand Theory  Invisible hand guides supply & demand  Each person inadvertently helps everyone by doing what is best for themselves  Ideas associated with Smith became foundation for classical economics 11

Results  Europeans had more products to choose from  Tea  Sugar  Cotton Cloth  More Books  Learning & Entertainment – Theater Groups, Schools  Created more choices in occupations  Raised overall standard of living in Europe 12

Essential Question  How did Mercantilism help to create a better environment for Free Enterprise? 13