Week 4: Part 1; An overview of international trade (lecture) Flashcards
What is mercantilism & its doctrine? What century(ies) was it dominant in?
Mercantilism is an economic system of trade, stating that wealth was static (finite) and that the government was the one to regulate and build wealth and power. Mercantilism argued that wealth and power were best served by increasing exports and reducing imports (Buy less, sell more)
What are the requirements of a nation for mercantilism to work?
Mercantilism always needs to…
> Maintain a trade surplus
> Have a large population
> Perfectionism
-Protect a nation’s ability to build and maintain trade
-Restrict colonies from trading with each other
What book did ‘Adam Smith’ write and when? What did it argue?
Adam Smith was an economist who wrote “The wealth of nations” in 1776, argued that trade was both beneficial to the buyer and seller’s economies
How was colonialism used to exercise mercantilism/what is the method called?
Mother colonies such as Great Britain prohibited other colonies from trading with each other and mandated all goods to be bought and sold by the Mother country. This was called the ‘Triangle of Trade’.
How does colonialism relate to Mercantilism?
European colonial powers used the mercantilist system most ardently.
They embraced the idea of economic strength coming from reducing imports and getting more exports, and tightly grasping their gold supply and increasing it.
To create this, they created colonial systems that allowed them to extract resources
What are 3 key ideas involving Mercantilism?
Mercantilism was the dominant economic system from the 16th century to the 18th century
Mercantilism was based on the idea that a nation’s wealth and power were best served by increasing exports and reducing imports
And due to the nationalistic nature of mercantilism nations frequently used military might to protect local markets and supply sources
What are the Corn Laws?
A control system used by the English from the later 1700s until 1848 in order to protect British farmers. Later they gave some preferential rates to colonies such as Canada but maintained their protection. By the 1840s it was clear that food was too expensive and that people were going hungry. The Robert Peel government repealed Corn Laws to let more inexpensive food into Britain.
What are The Navigation Acts?
Created in 1660, England passed the Navigation Acts which prevented their colonies from selling directly to other European countries.
What did the first navigation act do?
Forced other European nations to buy goods in England - they could not go to American colonies seeking goods or raw materials. For the colonists, this stripped away any notion of free trade and restricted their markets severely.
- What was the primary principle of mercantilism?
A) Trade should be entirely free and unregulated
B) The world’s wealth is static, requiring nations to build their own wealth
C) Nations should focus solely on agricultural exports
D) Military force should never be used in economic matters
b
- Which of the following best describes the “Triangle of Trade”?
A) A system where colonies could trade freely with any nation
B) A trade network designed to benefit the mother country by extracting resources from colonies
C) A trade agreement between three countries to lower tariffs
D) An alliance of countries working to stabilize currency values
b
- What role did the Navigation Acts play in mercantilism?
A) They encouraged colonies to trade with any European nation
B) They allowed European nations to sell goods directly to American colonies
C) They restricted colonial trade to benefit England and prevent direct trade with other countries
D) They eliminated tariffs on goods coming from the colonies
c
- What was one major consequence of mercantilist policies in the American colonies?
A) Increased independence and economic prosperity for colonies
B) A strong sense of partnership with European nations
C) The development of local markets independent of the mother country
D) Growing tensions that contributed to the American Revolution
d
- What were the Corn Laws designed to do?
A) Encourage imports of cheap grain from all countries
B) Protect British farmers by placing tariffs on imported grain
C) Eliminate tariffs on grain imports from colonies
D) Allow unrestricted trade of food products with European nations
b
- How did Adam Smith view mercantilism?
A) As a beneficial system that promoted national power
B) As a system based on a false premise that hindered trade
C) As the best economic system for colonial powers
D) As a necessary step towards modern capitalism
b
