World History
Assignment #30
Mercantilism
Directions: Read the article about mercantilism which follows the questions below. Please do the work
below on a separate sheet of paper, and be sure to use complete sentences in your definitions and answers.
Grading Rubric for Short-Answer Questions
Default Grade
0
Clear, identifiable, and plausible answer to question
F
Uses appropriate and specific evidence/examples
Explains and analyzes the evidence/examples
Appropriate length of response (short paragraphs),
vocabulary, grammar & spelling
Historically accurate answer
+1 letter grade
+1 letter grade
+1 letter grade
+1 letter grade
(1) Define the following words: bullion, export, import
(2) Why did kings and queens seek to improve their nations during the mercantile period? Explain.
(3) How did mercantilist governments become more powerful? Explain USING YOUR OWN WORDS.
(4) Why is mercantilism still appealing today, even when people know what its major weaknesses are?
(Extra Credit): Why was mercantilism hugely beneficial to merchants and middle-class folk in Europe?
What was mercantilism?
Based on The Economist, Aug 23rd 2013, 8:48 by C.W.
Original article: http://www.economist.com/blogs/freeexchange/2013/08/economic-history
The school of mercantilism, common in Europe between the 16th and 18th centuries, is now considered
old-fashioned —no modern economist would describe themselves as mercantilist. The end of
mercantilism led to the start of modern economics. Yet its core ideas remain very appealing even today.
At the heart of historical mercantilism is “bullionism”: the idea that the only true measure of a country’s
wealth and success was the total amount of gold (and silver) that it had. If one country had more gold than
another, it was by definition considered better off. This idea had important consequences for government
actions. The best way of ensuring a country’s prosperity was to buy few things and sell many things,
thereby bringing in more money by trade than went out, and maximising the country’s totals of gold.
Accumulating gold was thought to be necessary for a strong, powerful state. Countries such as Britain
created laws designed to control its merchants and maximise gold income. The Navigation Acts, which
severely restricted the ability of other nations to trade with England’s Thirteen Colonies in the Americas –
and which were so hated by the colonists that it helped lead to the American Revolution – were one such
example. The royal family also directly funded the most successful British merchants from rivals, and
their diplomats even encouraged talented traders from other nations to move to Britain. And the British,
like all other European nations, commonly increased taxes on goods from other countries (tariffs), to
discourage citizens from buying from – and giving away their precious gold and silver to – other nations.
Because ships were so important for trade, and control of colonies and their resources, control of the
oceans was considered vital to national power. Because ships could be used both for trade and for war,
governments in the 1600s and 1700s developed powerful navies. The French under King Louis XIV
(1661-1683) famously charged high taxes on foreign ships coming to France, and gave huge bonuses to
shipbuilders who moved to France to work.
And there are some amusing (and possibly fictional) stories of mercantilism in action. During the 1700s,
warring governments did not prevent their foes from buying food (and thereby did not actively starve
them). But they did try to make it difficult for their opponent to sell goods. Less outward trade (exports)
would according to mercantilism lead to chaos, as supplies of gold dwindled. Starving foes of gold, rather
than actually starving them of food, was perceived to be the most devastating way to destroy the enemy.
Mercantilism began to slowly fade with the publication of Adam Smith’s "Wealth of Nations" in 1776 –
and Smith is certainly the one who made the term widespread. Smith believed strongly that mercantilism
was actually harmful to economies, because it limited trade and the potential for even more growth.
Though the world's major countries today believe in Smith’s vision of “free trade” (with very little
government interference), mercantilist ideas are still common. China and Germany are often envied as
economic models, and both nations have very deliberately encouraged their citizens to sell far more goods
to other nations (export) than buy them from other nations (import). President Barack Obama wishes to
double American exports as part of his plan to help America "win the future". Nowadays, however, this
sort of economic logic is based less on the desire to collect gold and silver, and more on the desire to
make sure a nation’s citizens all have jobs. When nations stopped using metal bullion as money, they no
longer felt pressure to collect as much of it as possible. The mercantilist temptation remains strong,
however, especially when unemployment grows and economies weaken. More than two centuries after
Smith's book was published, the allure of mercantilism continues.