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European Commercial Revolution

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Essential Question

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

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Introduction

Commercial Revolution occurred as Europe entered into global trade.

Mercantilism encouraged growth of manufacturing & colonies.

Europe remained agricultural, but trade grew quickly.

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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

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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

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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

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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

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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

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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)

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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

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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

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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

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Essential Question

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