Mercantilism

Mercantilism2018-11-28T09:54:28+00:00

Mercantilism for APUSH®

Mercantilism for APUSH

About the Author: Warren Hierl taught Advanced Placement U.S. History for twenty-eight years. He has conducted 250+ AP US History workshops for teachers. He was a member of the committee that wrote the original Advanced Placement Social Studies Vertical Teams Guide and the Advanced Placement U.S. History Teachers Guide. He has been a reader, a table leader, and, for the past eight years, the question leader on the DBQ at the AP U.S. History reading.

In other words- Mr. Hierl grades the essays you will write for the APUSH exam.

Ideas Have Consequences

Mercantilism is the economic idea that a country’s wealth is measured by the amount of gold it owns. The goal of mercantilist economic policy is to export more goods than you import, so that you bring more money into the country than you send out to other nations.

The goal of mercantilist economic policy is to export more goods than you import, so that you bring more money into the country than you send out to other nations.

Under mercantilism, national governments were deeply involved in the economic development of the country, largely through protectionist trade policies; governments placed high tariffs on imported goods to discourage citizens to buy foreign, imported goods and thus keep money from within the country.  The system developed during the fifteenth and sixteenth centuries as powerful nation-states emerged in Western Europe. Each of these new European states attempted to gain dominance over their rivals through political, military, and economic means. As European nations began to develop their economies, the idea of mercantilism drove these European nations to establish colonies throughout the world; the purpose of these colonies was to support the economy of the mother country.

As European nations began to develop their economies, the idea of mercantilism drove these European nations to establish colonies throughout the world; the purpose of these colonies was to support the economy of the mother country.

Great Britain was especially aggressive in pursuing colonies.  As a part of the British Empire, the British North American colonies were expected to contribute to the accumulation of wealth for their mother country.  Ultimately, British attempts to enforce mercantilist policies in the colonies contributed to the rift between the two that led to the American Revolution; Britain hindered the colonist pursuit of trade with other countries. While this was helpful for Britain, it was frustrating and harmful for the American colonists as they could not trade with other countries.

Gold Equals Power

With the emergence of nation-states, countries developed standing armies that had to be supported.  To support those armies, hard currency began to replace barter as the primary means of trade and nations sought to accumulate as much gold and silver as possible.  Thus, national governments had to have extensive control over their economies to strengthen so that they could control the imports and exports of the economy.  The concept of mercantilism arose in which the government, in alliance with commercial and mercantile elements of their society, attempted to increase exports and limit imports so that money flowed into the national treasury.

All About the Mother Country

As the “Age of Discovery” dawned in the late fifteenth century, colonies were used as tools to enhance the mother country’s prosperity.  Colonies existed for the good of the mother country.  This was accomplished by colonies providing the raw materials necessary to fuel economic manufacturing in the mother country and serving as markets for the manufactured goods produced by the mother country.  Since manufactured goods were more expensive than raw materials, the net result was that money would flow from the colonies to the mother country.  It was not long until colonies began to resent their status as economic pawns to the mother country.  In the context of U.S. history, the British control over colonial trade in the Americas was one of the major catalysts to the Revolutionary War.

Colonies existed for the good of the mother country.  This was accomplished by colonies providing the raw materials necessary to fuel economic manufacturing in the mother country and serving as markets for the manufactured goods produced by the mother country.

Britain enacted mercantilist economic policies in the American colonies through a series of measures known as the Trade and Navigation Acts.  These acts, among other things, provided bounties to colonial producers of certain raw materials; these raw materials had to be sold to England. Additionally, all imports to the colonies had to first come through England.  Finally, all goods had to be carried in English ships with English crews.  In truth, the mercantilist system benefitted both the British North American colonies as well as the mother country.  The requirement that goods be carried in British ships with British crews stimulated the shipbuilding industry in the colonies (along with collateral industries) and provided employment opportunities for seamen.  Suppliers of raw materials found a captive market in Britain as their goods monopolized the market.  However, there were also ways in which the Trade and Navigation Acts restrained the colonies.  At times raw materials commanded a higher price in other European markets than in Great Britain.  The requirement that imported foreign goods first go through England increased the cost of those items to the colonists.  However, Britain was unable to effectively enforce the Trade and Navigation Acts because of their preoccupation with internal and European conflicts. Britain allowed colonial smugglers to break the Trade and Navigation Acts in certain areas. This situation of Britain’s inability to enforce the Acts is generally known as “salutary neglect“.  In general, the colonists abided by the law when it benefitted them and ignored the law when it didn’t.

Why the Colonist Revolt

The French and Indian War led to an increased British presence in the colonies and exposed the fact that the colonies were not behaving in a mercantilist manner.  Following the war, with internal and European affairs under control, England attempted to begin stricter enforcement of the Trade and Navigation Acts. One of the biggest reasons for Britain’s sudden interest in enforcing the Trade and Navigation Acts was the heavy debt Britain accrued during the French and Indian War; Britain wanted the colonies to help pay for the war.

The French and Indian War led to an increased British presence in the colonies and exposed the fact that the colonies were not behaving in a mercantilist manner.

To establish control and peace in the colonies, Britain began a series of Acts. The first notable act, the Proclamation Act of 1763, limited colonial settlement west of the Appalachian Mountains.  The Sugar Act, Townshend Acts, and writs of assistance were designed to prevent smuggling of non-British goods into the colonies. Having been allowed a considerable degree of freedom for much of their existence, the colonists chaffed under these restrictions, ultimately rebelling and declaring their independence.

The Idea Won’t Die (Synthesis)

While mercantilism faded in the late eighteenth century, elements of the philosophy periodically reappeared in the history of the United States.  Under Alexander Hamilton’s economic plan, one function of the national government was to promote industry and commerce.  That required creating a flow of money from the agrarian south to the commercial northeast for investment in manufacturing growth.  Hamilton sought to accomplish this investment through a high protective tariff (which did not pass) and a discriminatory excise tax (that did pass).  Hamilton viewed the United States as two different economies: the southern agrarian economy and the northern industrialized economy. Hamilton’s economic ideas sought to use the South to develop the North with little consideration for the economic impact on the South. This sectional view of the Americas would prevail in the 19th century in both the North and the South, and eventually lead to the Civil War.

While mercantilism faded in the late eighteenth century, elements of the philosophy periodically reappeared in the history of the United States.

Late in the nineteenth century, the federal government became heavily involved in the economy once again, despite claiming to be laissez-faire.  In providing high protective tariffs, that protected big business from foreign competition, subsidies, and land grants to business, as well as through a lack of regulation, a clear partnership between government and big business emerged.

Imperialism: Mercantilism in the 20th Century

Imperialism also had elements of mercantilism.  Large countries acquired smaller territories to supply powerful countries with raw materials; the acquired territory would then serve as market for the goods produced by the large country.  This was the purpose of rapid European colonization of Africa and Asia. During this time, there was pressure for the U.S. to get involved in the scramble for colonies before all the good stuff was gone.  As one contemporary put it, “We must not fall behind.”

The Spanish-American War provided just such an opportunity.  While Cuba was promised its freedom by the Teller Amendment, the United States picked up Guam, Puerto Rico, and the Philippines as a result of the war.  In the debate over the acquisition of the Philippines, one forceful argument was that the islands could provide the U.S. with resources while serving as a market for manufactured goods.  Additionally, the United States might use the Philippines as a jumping off point to increase trade with the Far East.  Other examples of foreign meddling for economic gains were seen in the U.S. taking Panama, the Open Door policy in China, and the pursuit of Dollar Diplomacy in Latin America.

Just as the Age of Discovery provided European countries with the means to pursue mercantilist policies, so the Age of Imperialism provided the United States with similar opportunities.

Mercantilism Today

Just as the Age of Discovery provided European countries with the means to pursue mercantilist policies, so the Age of Imperialism provided the United States with similar opportunities.

Mercantilism dominated economic thoughts of Europe from the end of the fifteenth century until the end of the eighteenth century.  Under it, national governments significantly increased their role in economic matters and colonies existed for the good of the mother country.  While the mercantilist philosophy initially benefitted both the mother country and her colonies, over time the colonies suffered from economic exploitation.  In the British North American colonies, the impact of salutary neglect (the inability of Great Britain to enforce mercantilist measures) created a sense of economic freedom in the colonies.  When Great Britain attempted to end salutary neglect, the colonies rebelled.  However, that did not mean that elements of mercantilism were subsequently pursued by the United States.  Even today, debate over protective tariffs (America First policies or economic nationalism) stimulate debate concerning consumer prices (increased by protective tariffs) and job opportunities for American workers that advocates of America First policies tout as a positive benefit of protectionism.

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