Mercantilism explained

Teach Social Studies

18 Sept 201603:37

EducationalLearning

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TLDRMercantilism, prevalent in 15th-17th century Europe, was an economic system where national wealth was equated with gold and silver reserves. Countries sought a favorable trade balance, exporting more than they imported to accumulate these precious metals. Colonies were crucial to this wealth-building, providing raw materials for mother countries to manufacture and sell back at a profit. However, mercantilism was a zero-sum game, with laws like the Navigation Acts enforcing trade monopolies and high prices. This system often came at the expense of colonists and indigenous peoples, who faced displacement and the introduction of new diseases.

Takeaways

🏛 Mercantilism was an economic system used by European countries during the 15th to 1700s.
🏅 A country's wealth under mercantilism was determined by its accumulation of gold and silver.
📈 To gain gold and silver, countries aimed for a favourable balance of trade, exporting more than they imported.
🛑 Colonies were crucial for European countries to increase their wealth through the exploitation of raw materials and as new markets.
🚢 The mother country would use colonies' raw materials to produce manufactured goods, which were then sold back at a higher price.
🚫 Colonies were not allowed to trade freely due to laws like the Navigation Acts, which gave the mother country a monopoly on trade.
💡 Mercantilism was based on a zero-sum view of wealth, where one country's gain was seen as another's loss due to the scarcity of gold.
🔄 Today's view of trade is positive-sum, where both sides can gain and the total value of trade can increase through specialization and trade.
🌐 Mercantilism benefited some European countries, but it was detrimental to colonists and the native populations.
🌿 Colonists and natives faced negative consequences such as the introduction of new diseases and displacement from their homes.

Q & A

What is mercantilism?
-Mercantilism is an economic system used by European countries in the 15th to 17th centuries where a nation's wealth was determined by its accumulation of gold and silver.
How did a country ensure wealth under mercantilism?
-A country ensured wealth by maintaining a favorable balance of trade, exporting more than it imported, thus accumulating more gold and silver.
What role did colonies play in a European country's wealth during mercantilism?
-Colonies played a significant role as they provided raw materials that the mother country used to produce manufactured goods, and later served as new markets for those goods.
How did the mother country utilize the raw materials from its colonies?
-The mother country would use its industrial capabilities to turn the raw materials from colonies into manufactured goods, which were then sold back to the colonies or other countries.
Why were colonies not able to trade with each other under mercantilism?
-European countries made laws like the Navigation Acts to control trade, preventing colonies from trading with each other, thus maintaining a monopoly on trade and high prices.
What is the zero-sum view of wealth in mercantilism?
-The zero-sum view of wealth in mercantilism is the belief that if one side gains, the other must lose an equal amount because gold is a scarce resource.
How does the modern view of trade differ from the mercantilist view?
-Modern trade views it as positive-sum, where both sides can gain and trade can increase overall wealth by specializing in what they are efficient at.
What was the impact of mercantilism on the colonists and the natives?
-Mercantilism benefited some European countries but hurt the colonists and the natives, who faced exploitation, the introduction of new diseases, and displacement from their homes.
Why couldn't the colonies cut out the middleman like in the grocery example?
-The colonies couldn't cut out the middleman because they may have lacked the ability to efficiently process raw materials into manufactured goods, and European laws controlled trade.
What is an example of a law that restricted trade between colonies?
-The Navigation Acts in Britain restricted trade by requiring that imports and exports from British colonies be transported on British ships.
How did the specialization of goods and trade in the modern view increase overall wealth?
-By specializing in one crop and trading surplus goods for other needed items, the overall size of the economic pie grows, allowing both parties to gain from the trade.

Outlines

00:00

💰 Understanding Mercantilism

Mercantilism is an economic system used by European countries in the 15th to 17th centuries, where a country's wealth was measured by its accumulation of gold and silver. Governments aimed to achieve a favorable balance of trade, meaning they exported more than they imported, thus gaining more gold and silver. Colonies played a crucial role in this system by providing raw materials to the mother country, which then manufactured goods to sell back to the colonies and other markets.

🌍 Colonies and Trade Dynamics

European countries set up colonies to extract raw materials and convert them into manufactured goods. These colonies became new markets for selling these goods. Unlike a town where residents could process and trade food themselves, colonies were restricted by laws like the Navigation Acts, which mandated that trade be conducted using British ships. This created a monopoly for British merchants and kept prices high.

🔄 Zero-Sum Wealth Perspective

European countries viewed wealth as a zero-sum game, where one country's gain in gold meant another country's loss. This perspective was rooted in the belief that gold, being a scarce resource, had a fixed supply. Modern trade, however, is often seen as a positive-sum game, where both trading parties can benefit by specializing in their strengths and exchanging goods.

🌿 Impact on Native Populations

While some countries benefited from mercantilism, it had detrimental effects on colonies and even more severe impacts on the native populations. The introduction of new diseases and the displacement from their lands threatened their way of life and existence.

Mindmap

Keywords

💡Mercantilism

Mercantilism is an economic system used by European countries in the 15th to 18th centuries. Under mercantilism, a country's wealth was determined by its accumulation of gold and silver. Governments implemented policies to ensure they gained more gold and silver, often through a favorable balance of trade, which means exporting more than importing.

💡Favorable Balance of Trade

A favorable balance of trade refers to a situation where a country exports more goods than it imports. In mercantilist theory, this surplus in exports helps accumulate wealth in the form of gold and silver. This concept is central to mercantilism, as it was believed to increase a nation's wealth and power.

💡Colonies

Colonies played a significant role in mercantilism by providing raw materials to the mother country, which then turned them into manufactured goods. These colonies also served as new markets for the mother country’s goods, helping to increase exports. European countries often controlled trade and prevented colonies from trading with each other to maintain this system.

💡Navigation Acts

The Navigation Acts were laws enacted by Britain to control colonial trade. These acts required that imports and exports from British colonies be transported on British ships, ensuring a monopoly on trade. This allowed British merchants to maintain high prices and protect their business from foreign competition.

💡Zero-sum

In the context of mercantilism, wealth was viewed as a zero-sum game, meaning one country's gain was another country's loss. This belief stemmed from the idea that gold and silver were finite resources, so accumulating more meant reducing another country’s share. This competitive outlook shaped international trade policies during the mercantilist period.

💡Raw Materials

Raw materials are natural resources or agricultural products that colonies provided to the mother country. These materials were then processed into manufactured goods. This process allowed the mother country to export higher-value products, contributing to a favorable balance of trade and accumulating wealth.

💡Manufactured Goods

Manufactured goods are products that have been processed or refined from raw materials. In mercantilism, European countries used their industrial capabilities to convert raw materials from colonies into manufactured goods, which they then exported back to the colonies or other countries at higher prices, enhancing their wealth.

💡Monopoly

A monopoly refers to exclusive control over trade or supply of a particular product or service. Under mercantilism, countries like Britain used laws such as the Navigation Acts to establish monopolies on colonial trade, ensuring that only their merchants profited from the exchange of goods, thus securing economic dominance.

💡Trade Restrictions

Trade restrictions were policies implemented to control and limit the trade of colonies. These restrictions, such as the Navigation Acts, prevented colonies from trading with other nations or each other, ensuring that the mother country retained control over the flow of goods and maximized its profits from colonial resources.

💡Specialization

Specialization involves focusing on the production of goods in which a region or country has a comparative advantage. The video compares this to farmers growing specific crops they are good at and trading them. In mercantilism, specialization allowed countries to maximize efficiency and trade surplus goods, although colonies were often restricted from such practices by their mother countries.

Highlights

Mercantilism was an economic system prevalent in 15th to 17th century Europe.

A country's wealth under mercantilism was measured by its accumulation of gold and silver.

Governments aimed for a favorable balance of trade, exporting more than importing.

A country's trade strategy was analogous to a business selling more than it buys for profit.

Colonies were crucial for European countries to increase wealth through raw material exploitation.

Mother countries used colonies' resources to produce manufactured goods.

Colonies, as populated areas, became new markets for the mother country's products.

The analogy of a town's grocery illustrates the concept of trade and profit within a community.

Colonists were unable to bypass the mother country's trade monopoly due to laws like the Navigation Acts.

European countries enforced trade control to prevent colonies from trading with each other.

Mercantilism was based on the zero-sum view of wealth, where one's gain was another's loss.

Contemporary trade views are positive-sum, allowing for mutual gains through specialization.

The example of Bob and Sandie's farming illustrates the benefits of trade through specialization.

Mercantilism benefited some countries but harmed colonists and indigenous populations.

Indigenous peoples faced existential threats due to new diseases and displacement from their homes.

Transcripts

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Mercantilism explained

Takeaways

Q & A

What is mercantilism?

How did a country ensure wealth under mercantilism?

What role did colonies play in a European country's wealth during mercantilism?

How did the mother country utilize the raw materials from its colonies?

Why were colonies not able to trade with each other under mercantilism?

What is the zero-sum view of wealth in mercantilism?

How does the modern view of trade differ from the mercantilist view?

What was the impact of mercantilism on the colonists and the natives?

Why couldn't the colonies cut out the middleman like in the grocery example?

What is an example of a law that restricted trade between colonies?

How did the specialization of goods and trade in the modern view increase overall wealth?