1. Mercantilism: theory held that each nation’s power was measured by its wealth, especially gold.

2. Mercantilism New Economic Policy Intense Competition
Founding of colonies, new goods in Europe led to significant changes
1500s, Europeans developed new economic policy, mercantilism
Nation’s strength depended on its wealth
Wealthy nation had power for military and expanded influence
New Economic Policy
Wealth measured by amount of gold, silver possessed by nation
Mercantilists believed there was fixed amount of wealth in world
For one nation to become wealthier, more powerful—had to take wealth, power away from another nation
Mercantilism led to intense competition between nations
Intense Competition

3. Balance of Trade Imports Exports
Mercantilists built wealth two ways—extract gold, silver from mines at home, in colonies; sell more goods than it bought from foreign countries, creating favorable balance of trade
With favorable balance of trade, country received more gold, silver from other nations than it paid to them
Increased its power; weakened foreign competitors
To achieve favorable balance of trade, could reduce amount of imports by placing tariffs on imported goods
Importer paid tariff, added cost to price of good
Imported goods more expensive, discouraged people from buying
Imports
Encourage exports that could sell for higher prices than raw materials
Countries encouraged manufacturing and export of manufactured goods
Governments provided subsidies to help start new industries
Exports

4. Mercantilism Advantages Disadvantages Great Britain Great Britain
Created favorable balance of trade for England
Colonies produced raw materials England needed
England had a growing, stable market for its finished goods
Finished goods sold back to the colonies for LARGE profit
England became wealthy at expense of colonies
Goods from other countries came through England to colonies
Taxes paid were paid on these goods by the colonies with gold and silver, adding to England’s wealth.
Great Britain
Naval supplies (pitch, wooden masts, etc) were paid for with a “bounty” or very high price.

5. Mercantilism Advantages Disadvantages British Colonies
Colonists could obtain goods from other countries with permission from England (i.e. wine from France and tea from India)
Naval supplies were paid for with a “bounty” or very high price from England
British citizens in the colonies who owned ships benefited because all ships who traded with the colonies had to be owned by British citizens
British Colonies
Colonists could only trade with one country which limited competition for its goods resulting in lower prices paid by England for raw materials
The Advantages for Great Britain.

6. 1660: Navigation Acts British Action: Colonial Response:
Designed to keep trade in England and support mercantilism
Colonists could only trade goods with England
All colonial ships must stop in a British harbor before going to another country
Ignored them (profitable to trade with other countries)
Salutary Neglect (relaxed enforcement for continued loyalty)

8. The circular flow model
The colonists supplied raw materials to England for either manufacture or re-export and they provided additional markets for the finished products produced from those resources (England also sold them in European markets).
The colonies played a large role in England’s becoming self-sufficient.
For this system to succeed, the Parliament needed to pass laws and regulations to protect wealthy British merchants and industrialists, even at the expense of its colonists (i.e. those laws were intended to benefit the English economy exclusively).
A mercantilist economy is a managed economy, managed by the larger and stronger power (i.e. the home/mother country).

9. Colonies Building colonial empires essential to mercantilist system
European powers wanted to establish colonies
To control sources of raw materials
To provide new markets for manufactured goods
To mercantilist, colonies existed only to benefit home country
Colonies
Monarchs restricted economic activities in colonies
Colonists could not sell raw materials to other countries
Could not buy manufactured goods from other nations
Strict laws forbade colonies from manufacturing goods
Forced to buy only from home country
Strict Laws

10. MERCANTILISM COLONIES ENGLAND $$$ RESOURCES TIMBER IRON FISH
MANUFACTURED GOODS
ENGLAND
INDIGO
RICE
COTTON

12. Mercantilist policies
As its colonies in North America became more successful and profitable, the home government began to increase its control over them.
Between 1651 and 1673, the Parliament passed four Navigation Acts intended to ensure a favorable balance of trade.

13. The purpose of the various navigation acts was to protect the wealth that the colonies brought to England. By the late 17th century England had a trade policy for the colonies that went like this: 1. Any ship carrying goods to and from America or England had to be English built with primarily English crews (Remember the colonies were still part of England) 2. The colonists were required to buy certain manufactured goods (those enumerated) only from England. Exceptions were allowed with things England didn't produce. Non-English goods had to go to England first where a tax was assessed/levied before its shipment to the colonies (thus, the goods became either less profitable to sell or less affordable to buy). 3. Certain raw materials coming from the colonies (those enumerated) could only be sold back in England (later this included grown farm products).
4. Americans were forbidden to manufacture certain goods from their own raw materials (those enumerated). For example, tobacco could only be processed back in England where the English manufactures would receive the majority of the profit from selling the cured tobacco.

14. Only English or English colonial ships could carry cargo between imperial ports. (Some colonists got rich through shipping or shipbuilding)
Certain enumerated goods (e.g. tobacco, rice, and furs) could not be shipped to foreign nations except through England or Scotland. (Added costs to colonial shipments of goods, 3-5% “tax”)
The Parliament would pay “bounties” to colonists who produced certain raw goods, while raising protectionist tariffs on the same goods produced in other nations. (helped diversify colonial economy)
Colonists could not compete with English manufacturers in large-scale manufacturing. (kept colony agricultural, esp. South)