MERCANTILISM Flashcards
What is mercantalism?
Economic theory recommending a country export more than it import
*Intuitive logic: we want to be sellers and not buyers in the market
What does mercantilism say about money?
*There is only so much money in the world, you either have it or someone else does
*Money and goods need to flow
*You must always be liquid in order for mercantilism to work
What does the state do under mercantilism?
The state takes a stronger interest in economics and private business, sets economic policies
*Mercantilism is part of state centralization
What was the Renaissance an era of?
economic innovation
What were two economic inventions in the era?
- Multi-branch banks with transferable balances & credit
- Double entry book keeping
(two columns
debit= out account
credit = in account)
Why were the innovations made?
Innovations make it easier to track your exact exports and imports (credits and debits)
*Theory that the strongest economic theory is one in which you have more exports than imports
How did the english crown initially interact with imports exports?
duties = every tun (cask) of wine imported and every pound of imported or exported merchandise
*This was the extent of the Crown’s involvement with trade, which was generally treated as a private business matter
How did English crown interact with imports exports under mercantilism?
increasing English exports would hurt other colonial competitors, especially Spain
English colonial policy was to undermine other colonizers.
Which english monarch adopts mercantilism? Why?
Queen Elizabeth I adopts mercantilism
Period of prejudice, didn’t like foreign merchants coming in and selling stuff, then leaving)
How did Elizabeth 1 try to avoid immigrants / foregin trades people?
Merchant navy
her merchants (brititsh) will be protected
- Created navigation acts (protecting fishers)
- Meaning England cannot import things they already produce
Important english export?
Important colonial exports?
Key English exports: textiles (especially wool)
Key colonial exports: tobacco, sugar, cotton, ginger, cocoa beans, indigo and other dye
How was the dutch republic organized?
7 states, each had a regent
*Each of the states had its own interests and they sometimes compete
Republic was governed by the States General (an assembly), who voted for a single executive leader called the Stadtholder
Note: Netherlands does not have a king until 1815
What was common ground in the dutch repoublic?
Economic policy as common ground = the most important people in the Dutch Republic were businesspeople who had funded the wars against Spain
*Expanding shipping capacity & domestic canals and roadways
*Mercantilist policy
*Rise of the stock exchange in Amsterdam = opportunity to invest in Dutch merchant companies and commodities
Why was there a dutch golden age?
*Already the most productive agricultural region of Europe
*Economic policy
*Relative toleration (Attracts crypto-jews)
What are Features of the Dutch Golden Age?
Economic strength meant more money in middle-class hands, which leads to a boom in art commissions and the rise of the Dutch Master
*Already a center of the Northern Renaissance
What is the Dutch East India Company?
amalgamation of existing companies to compete with English monopoly companies
Who was the Dutch East India Company ran by?
Run by the Lords Seventeen (Heeren XVII), major shareholders who represented the Dutch states
*Quasi-militarized: empowered to take military action, issued with uniforms and armaments,
What does the the Spice Trade mean for the dutch?
Dutch expansion into the Indian Ocean (especially present-day Indonesia)
*Pushing the Portuguese out and taking over their forts and trading posts
*Forming alliances with local rulers (often Muslim) to liberate them from Portuguese rule and demanding spice harvests in return
For the dutch exports (Building spice monopolies, especially in cloves, cinnamon, and nutmeg) where did they go?
*Most of what the Dutch transport out of the Indian Ocean is destined for other
European buyers = mercantilism in action
What did the dutch use superiority in numbers of the Dutch fleet for?
run blockades, sabotage shipping lines, and otherwise dominate the region
*This includes resorting to violence against local populations who were uncooperative (e.g. the 1620 Banda Massacre)
Did the french engage in mercantalism?
Mercantilism gradually grew in force from the 16th century onward, especially in terms of protectionism
*E.g. France bans imports of wool from Spain in 1539
Which french monarch took an interest in mercantilism?
Louis XIV & Colbert
*The economy should serve the state = economic centralization
*Selling abroad, buying at home
*Competing with the Dutch economy with local production (implemented strict quality regulations)
*Stimulating trade and colonization by incentivising traders to form companies
What is Colbertisme? (French)
Targets dutch economy
Centralizes French economy
French economy & productivity grew = most powerful European economy
But Dutch stays on top
What did the french economy try do to keep exports up?
- Strict quality controls
- Imported craftsmen
What is the idea behind the triangle trade?
Europeans take people from africa then transport them to americas, where they produce commodities that are sold in europe
Why is the French and Dutch economies dominant in the 17th & 18th centuries?
they invest in overland infrastructure (canals and roads)
What is the theory used in colonial policy?
Mercantilism
What type of economy emerged?
Rise of the colonial extraction economy, which runs on enslaved labour
What is a metropole?
What is a colony?
Metropole: Parent country (england)
Colony: ex. Canada
How do metropoles exert control over colonies trade?
s limit who their colonies can trade with
*Metropole: the parent state of a colony (e.g. Virginia is the colony; England is the metropole)
*E.g. England requires that all colonial commodities be shipped either to England or to other English colonies (at that point they can be exported)
*The idea is to make sure the population in the metropole does not need foreign imports to obtain colonial commodities
What two things are governments sanctioning? (what are they monopolizing)
geographic regions (e.g. Dutch East India Company)
and over individual commodities (e.g. Dutch spice trade)
What game is mercantilism?
Mercantilism is a zero-sum game: either you are winning or your competitors are
*Every client state is a potential competiton
What does the reliance on maritime trade lead to?
a naval arms race = who has the biggest fleet
Which wars does the naval arms race start?
Anglo-Dutch Wars (1652 – 54, 1665 – 67, 1672 – 74, 1780 – 84)
*Causes: trade & overseas colonies (in the Indian Ocean & Caribbean)
- Fight over northern sea, England wants it and dutch wants to run it
*Franco-Dutch War (1672 – 78)
*Dutch attempt to conquer the Netherlands, ultimately unsuccessful although France makes significant territorial gains in the Peace Treaty
- Very destructive (destroying boats u spent years building)
How did mercantilism decline?
Undermined by Enlightenment-thinkers in the late 17th and 18th centuries
Criticism of mercantilism by John Locke?
Money isn’t fixed
You don’t have to fight over “a piece of the pie”
This fluxates
Criticism of mercantilism by David Hume?
a constant influx of money (bullion) into a country will cause inflation and decrease the value of that money, making it less and less cost-effective to export goods (especially to countries where prices remain low)
Criticism of mercantilism by Adam Smith?
Money (bullion) is just another commodity; when we export goods, we import a different good
(so money isn’t success, but another good)
Side note: Invisible hand guy and possibly invented capitalism
