european commercial revolution 1. essential question how did mercantilism help to create a better...

1

European Commercial Revolution

2

Essential Question

How did Mercantilism help to create a better environment for Free Enterprise?

3

Introduction

Commercial Revolution occurred as Europe entered into global trade.

Mercantilism encouraged growth of manufacturing & colonies.

Europe remained agricultural, but trade grew quickly.

4

Global Trade

Europe produced more goods for sale

Exports: America – Sugar, Rice, Tobacco, Precious Metals

Ming China – Silk, Porcelain

India – Tea

East Indies – Spices

Africa – Slaves

Europe – Woolen Cloth, Lumber, Finished Goods

5

Mercantilism

Def. – Increasing a nation’s wealth by limiting imports using tariffs & maximizing exports.

Kings used this to increase their power

Tried to remove internal trade barriers

Wealth & power based on gold & silver – Used to pay soldiers

Only ways to gain wealth – Trade, War

6

Mercantilism

Most European countries established colonies

Exported expensive finished goods to colonies in return for cheap raw materials

Competition for colonial empire led to war: 1600s: England v Holland – Shipping Routes

1700s: England v France – North America & India

7

Free Enterprise

Def. – An economic system in which basic economic questions are answered by free actions of producers & consumers. AKA Capitalism

Business owners risked capital (money) to make profits

Growth of businesses led to demand for money – Used to pay for facilities & materials

8

Free Enterprise

Ships insured because of high risk of loss from accidents, bad weather, & war.

Joint-Stock Companies Formed to raise money

Private companies offered shares of stock in exchange for money

Investors bought stock for share of profits

Money used by companies to buy materials & equipment

9

Free Enterprise

Banks developed ways of lending money Financial Revolution

Governments issued certificates & sold to public

Government paid interest to holders

Governments used money to expand militaries

Holland – Rich merchants establish oligarchy (rule by a few)

10

Adam Smith

“Father of Economics”

Wealth of Nations – Documented industrial development in Europe

Didn’t invent many ideas, 1st to compile & publish them

Laissez Faire – Government has no control over business

11

Adam Smith

Invisible Hand Theory Invisible hand guides supply & demand

Each person inadvertently helps everyone by doing what is best for themselves

Ideas associated with Smith became foundation for classical economics

12

Results

Europeans had more products to choose from Tea

Sugar

Cotton Cloth

More Books

Learning & Entertainment – Theater Groups, Schools

Created more choices in occupations

Raised overall standard of living in Europe

13

Essential Question

How did Mercantilism help to create a better environment for Free Enterprise?