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Mercantilism

American Eras

Mercantilism

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Economic Practice. Nations established colonies as outposts to promote their interests in their expanding empires. Rather than actual gold and silver, the British sought natural resources for their factories. They also wanted to develop markets to purchase their manufactured goods, goods they could tax to increase revenue. By controlling trade with colonies the parent nations wanted to establish a balance of trade that would bring national benefits to the government. Initially this economic strategy proved beneficial for both England and her colonies. The demand for labor to process the abundant natural resources of North America provided opportunities for English workers who could not find employment in England. The efficient efforts of immigrant labor provided the raw materials England needed to avoid reliance on other nations. The growing population in the British colonies increased the flow of consumer goods from England to the colonies, which in turn stimulated the English economy. Ultimately this expanded trade and its revenue produced the much sought after gold and silver.

Exchange of Goods. The British colonies provided a variety of foodstuffs, minerals, and forest products for English consumption and manufacture. Furs and raw tobacco were the first commodities in demand. Whether traded with Indians or harvested in colonial fields, the commodities were exported to England, where they were processed. The finished product, tobacco or fur hats, could then be reexported in the international free market. The ideal trading situation for a nation and its colony was the production of what a colony did not need to use and the consumption of what they could not produce. The southern colonies came closest to the ideal since they produced rice and tobacco for export and imported consumer goods from other colonies and England. Eventually the colonies exported fish, furs and pelts, grain, indigo (blue dye), livestock, lumber, naval stores (masts, pitch, tar, turpentine), rice, and rum. England’s primary market lay in its colonies. Half of the copperware, ironware, glassware, earthenware, silk goods, printed cotton, and flannel that England exported went to British America. Between two-thirds and three-quarters of cordage, iron nails, beaver hats, and linen went there, too. Although these exchanges were privately financed,

the government needed to intercede to protect the British economic interests at home and abroad.

Government Regulation. In order to protect British trade and imperial gains, it was essential that the government impose regulations and restrictions on colonial trade. Between 1651 and 1733 the English Parliament directed those restrictions to both the domestic and overseas economy. With regard to colonial trade, Parliament enacted a series of navigation laws that controlled shipping and markets. In 1651 Parliament specified that colonial commodities be carried only in British-owned ships. This was an effort to prevent Dutch domination of the seas. In 1660 certain goods, such as furs, indigo, naval supplies, rice, sugar, and tobacco could be sold only to England or other English colonies. An act in 1663 stipulated that goods imported into the colonies must first pass through English ports. Finally, Parliament prohibited the colonies from manufacturing goods that would have directly competed with English exports. The Woolen Act of 1698, the Hat Act of 1731, and the Iron Act of 1750 limited the mass production of these specified goods for export. This intentional effort to control imperial trade prevented a competitive free market that would shape the American economy in the nineteenth century.

Sources

Ralph Davies, The Rise of the Atlantic Economies (Ithaca, N.Y.: Cornell University Press, 1973);

John J. McCusker and Russell R. Menard, The Economy of British America, 1607–1789 (Chapel Hill: University of North Carolina Press, 1985).

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