Mercantilism

Mercantilism

Mercantilism was an economic system of the major trading nations, based on the idea that national wealth and power would enhance by increasing exports and decreasing imports from foreign lands. It is the idea that one nation could grow rich at the expense of another.

Europe for example started acquiring more and more colonies that would become the source of raw materials. England, France, Holland and Spain all restricted their colonies' foreign trade. They were encouraging the production of raw materials; while their right to produce manufactured goods that would compete with those produced by the mother country was restricted. The plan was to become self-sufficient so other countries imports were not needed. By doing this, the nation also enjoyed the benefits of specialization, which increased the nation's productivity.

In the 1650s and 1660s Parliament passed a set of Navigation Acts to help regulate colonial trade. The first of the Navigation Acts closed the colonies to all trade except that carried by English ships, and it required that other items be exported only to England or English possessions. The second act stated that all goods sent from Europe to the colonies must first pass through England, where they would be subject to English taxation. The third and final Act appointed customs officials to enforce the Navigation Acts.

These polices provided some benefits to the colonies, including protection from foreign competition. Colonists benefited when they exported to Europe because competing goods were subject to tariffs, theirs were not. On the other hand, colonists paid more than they otherwise would have for imports from foreign countries because they had to be shipped through England and undergo English taxation.

Some economic historians do not believe restrictions on colonial manufacturing imposed much of a burden on the colonies because they were in no position to establish much of a manufacturing area due to the high cost of labor and capitol; the small size of the colonial market, and the lack of necessary knowledge and skills.