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?
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