Old style mercantilism vs free trade

Question 1

What is mercantilism

Answer 1

• system of regulations governing trade whereby colonies had ben obliged to send most of their produce to Britain, to buy British manufactured good and use British ships both for imports and exports.
• It was a highly regulated protectionist system using tariffs to regulate trade.

Question 2

Why did free trade become more popular than mercantilism

Answer 2

• first half of the 19th century, the highly regulated protectionist system of mercantilism had been dismantled, under the influence of new theories of ‘free trade’ advocated in Adam Smith’s book, The Wealth of Nations.
  -> argued that wealth was indefinitely expandable and freedom from commercial restrictions was
  the only way to maximise prosperity.
• Britain benefited from free trade and was active in supporting
  free trade agreements around the world, even ready to resort to threats to achieve them.
  -> navy enforced the British terms when nations were reluctant
  e.g. in China with the Opium Wars in the mid-19th century.
• The idea of free trade was closely linked to the other humanist ideas of free labour and the attack in the slave trade and slavery.
  -> It encouraged the British to see themselves as liberators.

Question 3

What were the consequences of free trade

Answer 3

• Many colonies continued trading with Britain, party out of loyalty, partly out of ease.
  -> Trading patterns were
  already well established and the Empire used a common language, currency and commercial law.
• London became the world’s financial capital and sterling became the main currency of international trade.
• Borrowing in London capital markets was also cheaper because British possessions were trusted.