The paper 'How Did Mercantilism Work' is a good example of a Macro and Microeconomics Assignment. A distinct society emerged in the colonies by the early 1750s and was united by the intellectual currents like the Enlightenment and the Great Awakening (McCusker, 2008). The colonies had a distinct religious, social, and demographic characteristic, however, the developing economic and political upheaval strengthened their primitive sense of unity. In the 17th and 18th centuries, Europeans held the notion that a country needed strong power to exist, and that to be powerful a country had to be wealthy (McCusker, 2008).
This idea was referred to as mercantilism. In order to gain wealth, a nation had to acquire colonies. Colonies served as a constant source of Materials and provided markets for the manufactured products to the nation that owned them. For instance, colonists would cut down trees in their colonies, send the trees to England where craftsmen created furniture, paper, tools, or barrels. Later, these products were transported to the colonies and sold to the colonist residing there. The revenue would be sent back to England.
This procedure helped colonists to establish a favorable balance of trade. A country aimed at exporting more goods to other countries than it imported from them (Mendoza and Rouhnier, 2012). Marquis de Mirabeau come up with the term mercantilism in 1763, but Adam smith a political economist based in Scotland helped to popularize it in 1776 in his book called the wealth of nations (McCusker, 2008). Mercantilism is derived from two Latin words; meaning 'goods' and mercury, meaning 'to operate a trade'. Mercantilists practiced which can be described as a belief that a nation's wealth should be determined by the gold and silver reserves (Ferguson, 2001).
Countries engaging in mercantilism sought to increase their wealth by increasing their supply of gold, silver, and trade value by taking part in a protectionist role in the economy. The protectionist role involved promoting exports and discouraging imports, particularly via the use of tariffs. The mercantile systems portray a world where countries believed in rivalry and power and wealth were linked. During this period, the European's influential nations such as England, France, and Spain believed that the quantity of gold and silver in the world was limited.
To achieve these, countries engaged in war with competing countries; promote local manufacturers through monopolies as well as subsidies to produce more products internationally (Mendoza and Rouhnier, 2012). The country created and protected its own shipping and obtained colonies as a source of raw materials. Colonies provided goods such as grain, sugar and tobacco, and this helped colonists to create jobs and industries in their home countries. The British began to control colonial trade to increase profits under the mercantilist system during the early 1660s.
The king banned direct exportations to competing countries. For instance, tobacco produced in Jamestown had to be transported to England first; it was taxed then sold off elsewhere. Production of tobacco in Virginia and Sugar in West Indies influenced England's rise to power. With time, the North American colonies started trading with the West Indies directly. They would supply colonials with horses, agricultural, food, and lumber products. The West Indies gave them gold, species, silver, or money in exchange for the goods.
The North Americans would then purchase manufactured goods In England. As years passed, the dependency existing amongst the West Indies and North Americans become stronger, however, England did not try to limit trade. The Dutch started trading in the Caribbean and North America (Ferguson, 2001).
Ferguson, N., (2001). The cash Nexus: Money and power in the Modern world, 1700-200(New York: basic books.
Jacob, V., (1991). Essays on the Intellectual History of Economics. Princeton, NJ: Princeton University Press
Magnusson, L., (1994). Mercantilism: The Shaping of Economic Language. London: Routledge, 1994.
Mendoza, j., and Rouhnier, S., (2012). Economists at Eurocite Brussels.
McCusker J., (2008) British Mercantilist policies and the American colonies: Hardback ISBN:
Steele, G., (1998). The Money Economy: Mercantilism, Classical Economics, and Keynes' 'General Theory: American Journal of Economics and Sociology.