1. MERCANTILISM Nations/Kings control prices, items Power comes from wealth Wealth represented by bullion (precious metals) Get more gold than anyone else Ex. Chartered Co’s, high tariffs, colonies only trade with their ships (Navigation Acts), do not allow manufacturing in colonies

2. MERCANTILISM – CONT. HOW TO GET WEALTH 1.Exploit colonies 2. create a favorable balance of trade (power) with rival nations -Protectionist role – encourage exports/ discourage imports, Chartered Co’s, high tariffs, colonies only trade with their ships (Navigation Acts), no manufacturing in colonies -Encouraged wars, imperialism,

3. ADAM SMITH – Wealth of Nations Rejected mercantilist theory in 1800’s Believed in Laissez-faire – let the market control itself – no govt. interference Natural Laws: 1.Self-interest – people work for own good 2.Competition makes better products 3.Supply and demand controls price

4. CAPITALISM Based on private ownership and investment of resources for profits Government not the sole owner of wealth Merchants make money and reinvest to create a cycle of wealth Steady rise of money = more demand less products = inflation (supply & demand)

6. RESPONSES TO IR CAPITALISM overtakes MERCANTILISM UNIONS & LABOR LAWS SOCIALISM (Karl Marx, Jeremy Bentham & Friedrich List thought govt. should manage the economy to deal w. social issues) POSITIVISM (scientific method could solve social & technical problems) UTOPIAN SOCIALISTS (Robert Owen)