If you’re like me, you likely thought that mercantilism described some sort of awful disease. But, considering this is a topic you need to know for the APUSH exam, mercantilism does not describe the next biohazard. Keep reading to figure what this odd sounding economic system is all about.
What is mercantilism?
Simply put, mercantilism (pronounced MUR-cantilism) is the idea that a country’s economic strength was measured by the amount of gold (also known as bullion) it had in its reserves.
Let’s break this down a bit more. Let’s say we live in a fictional universe where you and I both have marbles. In this fictional universe, I want more of your marbles and you want more of mine because the kid with the most marbles is the Marble King/Queen/Gender-Nonconforming Ruler.
Are you just going to give me your marbles because I ask nicely? No.
I have to give you something in exchange for payment of marbles. Let’s say I am a fantastic artist and you are trying to redecorate your room with art. I set up a price where in exchange for 1 picture, you give me 5 marbles. You think this is a fair exchange, and so I continue to export my pictures and import your marbles until the point at which you no longer want to trade. In our fictional universe, I have now gained more power because I have more marbles.
Now, let’s substitute marbles for gold, and instead of one trade interaction between two groups, there are many. This is, essentially, mercantilism. The goal is to export as many raw materials as you can (because you will get gold in return) and limit your imports (because you will have to give up your gold).
See? Not so scary.
But what does this all have to do with APUSH?
As the saying goes, you have to ‘follow the money’ to understand a story. Mercantilism – at least up until the 18th century – explained where the money went and why.
The Navigation Acts were a prime example of mercantilism in action. These acts were designed to make sure that the British colonies – that includes the original thirteen that became the United States – only traded with Great Britain in an attempt to bolster British power.
Think about it: you, young colonist of Virginia, have access to all these natural resources. You want to get the best price for your tobacco, right? But you couldn’t under the Navigation Acts. You could only trade with Great Britain. Not surprisingly, this set up of trade made many colonists in the United States upset – see my other blog post on the Whiskey Rebellion and salutary neglect. The economic policy of mercantilism, then, was, in part, a cause of the American Revolution.
Mercantilism was also used as the justification for the Triangular Trade, where slave ships left Great Britain, the men aboard sailed to the west coast of Africa and violently captured slaves, and then sailed to the Americas to contribute to the slave population. These ships then sailed back home to Great Britain with the resources the slaves had harvested, such as tobacco, cotton, and indigo.
The effects of this triangular trade were dramatic. Not only were colonists exporting goods to Great Britain, they were also importing goods from them (remember: the only people the colonists were allowed to trade with were the British). This had some negative unintended consequences, which have come to be known as the Columbian Exchange. Many resources native to the Americas – including its people – were destroyed as a result of this relationship.
Isn’t mercantilism just capitalism, then?
While it is fair to make that point – after all, numerous historians have made the argument that slavery formed the foundation for modern capitalism in the Americas – mercantilism, as an economic theory, favored balanced trade and did not believe in “productive debt” in the same way that capitalism allows. Realistically, however, mercantilism operated on a day-to-day basis much like other capitalist markets would operate. The most important thing about this concept to understand is how it informed the logic that linked economic and foreign policy together.
What kinds of questions will you be asked on the APUSH exam about mercantilism and its effects?
The policy of mercantilism adopted by Great Britain in relation to the thirteen colonies was designed to
A. make the colonists self-sufficient
B. allow the colonists to establish trading posts with Native Americans on the frontier
C. strengthen the defenses of the colonies against attacks by the French
D. improve and strengthen the economy of the mother country
E. promote better relations among the thirteen colonies
The correct answer is (D). The philosophy of mercantilism is to strengthen one’s economic (and, as a result, one’s political power as well) through trade.