Mercantilism

1. Mercantilism 16th to 18th century

2. What is mercantilism? • Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and military security of the state. In particular, it demands a positive balance of trade. • Mercantilism dominated Western European economic policy and discourse from the 16th to late-18th centuries • Mercantilism was a cause of frequent European wars in that time and motivated colonial expansion. • Favours for powerful interests were often defended with mercantilist reasoning.

3. Mercantilist policies have included: • Building a network of overseas colonies • Forbidding colonies to trade with other nations • Monopolizing markets with staple ports; • Promote accumulation of gold and silver • Forbidding trade to be carried in foreign ships; • Export subsidies; • Maximizing the use of domestic resources; • Restricting domestic consumption with non-tariff barriers to trade.

4. Jean-Baptiste Colbert's work in seventeenth century France exemplified classical mercantilism. In the English-speaking world its ideas were criticized by Adam Smith with the publication of The Wealth of Nations in 1776 and later David Ricardo with his explanation of comparative advantage. • Mercantilism was rejected by Britain and France by the mid-19th century. The British Empire embraced free-trade and used its power as the financial centre of the world to promote the same.

5. Influence • Mercantilism was the dominant school of thought in Europe throughout the late Renaissance and early modern period (from the 15th to the 18th century). Mercantilism encouraged the many intra-European wars of the period and arguably fuelled European expansion and imperialism — both in Europe and throughout the rest of the world — until the 19th century or early 20th century.

6. Mercantilism helped create trade patterns such as the triangular trade in the North Atlantic, in which raw materials were imported to the metropolis and then processed and redistributed to other colonies.

7. Policies • Mercantilist ideas were the dominant economic ideology of all of Europe in the early modern period, and most states embraced it to a certain degree. Mercantilism was centered in England and France, and it was in these states that mercantilist polices were most often enacted.

8. The beginning of the Imperialism • England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). An early statement on national balance of trade appeared in Discourse of the Common Weal of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them.

9. France Mercantilism arose in France in the early 16th century, soon after the monarchy had become the dominant force in French politics. In 1539, an important decree banned the importation of woollen goods from Spain and some parts of Flanders. The next year, a number of restrictions were imposed on the export of bullion. • Spain Spanish mercantilism had its basis on gold and silver from America and the prohibition of buying anything which didn’t come from Spain in America, or selling anything but Spain. To sum up, Spanish economy was based not in production but on precious metals.

10. What is Imperialism/Absolutism? • Louis XIV – “L’Etat, c’estmoi” • King on Earth and God in heaven Can you ad some characteristics of Absolutism? Read pp. 192

11. Kings and Queens and National States • One big State (fixed marriages) • Diplomacy (foreign affairs) • Guilds • Powerful Army • Full power over economy (Taxes)

12. Parlamentarism vs. Absolutism • Contrary to Absolutism, Parlamentarism didn’t agree with the King as absolute ruler. • The King had to share power with the Parlamentwhose members were in charge of writing laws and controlling the government. • John Locke explained that people had elected the Parlament representatives and they could rebel themselves to the authority of the king.

13. Wars and Imperialism • Mercantilism was economic warfare and was well suited to an era of military warfare. Since the level of world trade was viewed as fixed, it followed that the only way to increase a nation's trade was to take it from another. • A number of wars, most notably the Anglo-Dutch Wars and the Franco-Dutch Wars, can be linked directly to mercantilist theories. Most wars had other causes but they reinforced mercantilism by clearly defining the enemy, and justified damage to the enemy's economy.

14. Research and answer • What is the difference between Absolutism and Enlightened Despotism? • Define the last one. • Read pp. 193 and solve page 195. • Before next class read from pp. 194 to 200

15. Analyze this paragraph about Mercantilism • Mercantilism foundation is the belief that trading is the source of a nation wealth.For example, countries such as Spain and Portugal got gold and silver from America which was useful to buy commodities and supplies for war. On the other hand, countries such as England, Holland and France encouraged their national industry, and achieved a positive trade balance. This means they produced and exported more goods than the ones they imported from other countries. Therefore, they supplied the European market with their production. In conclusion, Mercantilism was an economical system where nation’s economy was based on how much they produced and not on how much gold and silver they had.