THE BRITISH MERCANTILE SYSTEM

MERCANTILISM = 16th – 18th century

political/economic philosophyWealth = PowerWealth is measured in gold

and silverSo…need to export more

than import, known as “favorable balance of trade”“favorable balance of trade”

Role of American Colonies in British Mercantile System:1. Provide raw materials, esp. for

shipbuilding2. MARKETS - purchase finished

goods3. Grow products that would

otherwise have to be purchased from other nations: e.g., tobacco, sugar, rice …

The most infamous of the laws to enforce mercantilism were the:

NAVIGATION ACTS, 1650s – originally aimed at what rival?

Laws restricting colonial trade & manufacturing: All commerce to & from colonies must be in

British vessels European goods destined to America must

stop in British ports first Certain enumerated goods can only be sent

from the colonies through England … not directly to European markets (tobacco, rice, indigo)

Certain goods (e.g., woolen cloth and beaver hats) forbidden from manufacture in colonies – why?

Benefits of Mercantilism: SALUTARY NEGLECT!

BR laws only loosely enforced Smuggling abounds! John Hancock is

King of Smugglers (sugar) Price supports for makers of naval goods Ready markets for specific products

VA tobacco has monopoly on BR market Tobacco growing in England/Ireland

prohibited Protection by British Navy without much

taxation Trickle Down Prosperity

Avg. American was better off than avg. Englishman

The Downside of Mercantilism: England begins enforcing policies more vigorously

after 1763 Stifles economic initiative

Americans not at liberty to buy, sell, ship or manufacture under conditions most profitable to them

Perpetual indebtedness to mother country VA forced to sell in BR & thus at mercy of BR

buyers, who drive price down Perpetual debt cycle; planters mortgage future

crops to pay for English goods Resentment at being used for the benefit of the

empire “Revolution broke out because England failed to recognize

an emerging nation when it saw one.” Theodore Roosevelt

CURRENCY CRISIS: Colonies buy more than they sell to

England Drains hard currency from the

Colonies Not enough cash left to make

everyday transactions in the colonies Solutions: barter system & calls

for paper $ Paper money schemes restrained by

Parliament