Changes Within
Europe: Government
and Economics
ECONOMICS
Mercantilism
Characteristics of Mercantilism
1. Power = wealth [gold or silver bullion]
• Export more than you import
[a trade surplus].
2. Needs = A strong state to control
economics
3. Sea power = control foreign markets.
Characteristics of Mercantilism
4. Colonies = provide markets for
manufactured goods & a supply of
raw materials.
Manufactured goods
Mother
Country
Colony
Raw
materials
Cheap labor
5. Trade is a “zero-sum” game.
Capitalism:
a.k.a. Laissez Faire
Economics
Adam Smith (1723-1790)
£ 1776  wrote
The Wealth of Nations
The Wealth of Nations
Basic Capitalist Principles
1. Individuals driven by self-interest
2. The “Invisible Hand” (consumer’s
choices)
 the economy is self-regulating!
Basic Capitalist Principles
3. The Law of Supply and Demand
 Individuals free to pursue
self-interest will produce goods and services
that others want, at prices others will be
willing to pay.
Basic Capitalist Principles
4. Law of Competition
 Ensures production of needed
goods
5. Government interference = low
 Laissez faire [“Leave things
alone.”]
Government
Absolute Monarchy
£ Absolute Monarchy =
 A ruler with total power
 Ruler backed by “divine right”
(God-given right to rule)
 Tried to create trained bureaucracies,
usually using the new middle class
(bourgeoisie)
Louis XIV
£ Best example of an
absolute monarch
£ "L'État, c'est moi" (I
am the State)
£ Called “The Sun King.”
(b/c he gave light and
life to his subjects).
£ Often shown as the Sun
God Apollo
Châteaux de Versailles
£ King’s residence
and center of
government.
£ Nobles required
to live there
£ Able to keep an
eye on
nobles…&
therefore,
power
Henry VIII of England
£ Broke with the
Catholic Church b/c
Pope wouldn’t grant
him a divorce from
his first wife – he
wanted a male heir
£ Founds and makes
himself head of the
Anglican Church
(Church of England)
£ Example of a
monarch exerting
personal power
Constitutional Monarchies
£ Some European nations developed
Boo Hoo.
My heads
are ALL
gone.
Constitutional Monarchies, instead of
Absolute Monarchies
£ England is the best example
£ English Civil War – 1640s – fought over
who would hold more power, the King or
the Parliament
£ Parliament wins out (and chops off
Charles I’s head)- - they would rule
TOGETHER
Balance of Power
Idea that Europe would remain more stable
if no one family/nation had too much
power
 Nations had quickly shifting alliances to
prevent too much gain
 European nation-states’ boundaries and
identities being built at this time