THE ORIGINS OF
MERCANTILISM
Mercantilism


Discovery and conquest left their marks on
the economy and politics of Europe.
Without consulting anyone else in Europe,
the rulers of Portugal and Spain, the first
two economics powers in world trade,
quickly divided any new lands to be found
in any part of the world between them.
Mercantilism

After the Treaty of Tordesillas of 1494,
another treaty, in 1529, drew a line east of
the Moluccas which allocated everything
on its pacific side to the Spanish, and
Africa, the Indian Ocean and the Spice
Islands to the Portuguese.
Red/pink = Spanish territory
Blue/light blue = Portuguese territory
Mercantilism


This arrangement did not sit well with the
other major powers in Europe.
One way to deal with the influx of new
wealth was to tap the new-found Spanish
wealth either through legal or illegal
means.
Drake
Mercantilism


The sixteenth century has often been
called the “Golden Age” of Spain. The
influence of the Spanish armies, Spanish
Catholicism, and Spanish wealth was felt
all over Europe.
This greatness rested largely on the influx
of precious metals from the New World.
Mercantilism

To protect this treasure from French and
English pirates, armed convoys transported
it each year to Spain. Between 1503 and
1650, 16 million kilograms of silver and
185,000 kilograms of gold entered Spain.
The Spanish Main
Mercantilism



Meanwhile, Spain was experiencing a
steady population increase, creating a
sharp rise in the demand for food and
goods.
Spanish colonies in the Americas also
represented a demand for products.
Because Spain had expelled the Jews and
Muslims, they could not meet the new
demands.
Mercantilism



Prices rose and with them, the costs of
manufacturing cloth and other goods.
As a result, Spanish products could not compete
in the international market and cheaper products
made elsewhere.
Prices spiraled upward faster than the
government could levy taxes to dampen the
economy. Money flowed out of Spain to the rest
of Europe through the increased demand for
cheap products and the religious wars of Philip
II.
Mercantilism


Another way Europeans dealt with the newly
discovered lands and their bounty was through
competition. The discoveries has opened a
global battleground for traders and soldiers.
Each country developed economic policies to
protect themselves from foreign competition.
Mercantilism became the theory of trade
espoused by the major European powers from
roughly 1500 to 1800.
Mercantilism


Mercantilism advocated that a nation
should export more than it imported and
accumulate bullion (especially gold) to
make up the difference.
The exportation of finished goods was
favored over extractive industries like
farming. Underlying this theory was the
belief that wealth was finite.
Mercantilism


If one nation hoped to grow richer, it had
to do so at the expense of some other
nation. The development of colonies
became very attractive during the era.
Wealth could be kept by a nation if its
colonies provided raw materials to the
mother country and the mother country
could sell finished goods to the colonies.
Mercantilism


European merchants, with the support of their
home governments, acted upon the mercantilist
theories often using force, robbery, bribery,
extortion, and government regulations.
In the 16th century, the Portuguese won
dominance over the Asian trade routes from
India to the Spice Islands from the Arabs by
fortifying bases at the entrance of to the Red
Seas and the Persian Gulf. The Portuguese
treated any non-Christian ship as a lawful prize
Portuguese Empire at its height
Portuguese Empire in 1800
Mercantilism



By the end of the 16th century, the Portuguese
were being elbowed aside by the Dutch who set
up the East India Company with the aim of
replacing the Portuguese control of the spice
trade to Europe.
Through ruthlessness, and sometimes bloodshed, the Dutch pushed the Portuguese aside
and then fought to keep the English out of the
Spice Islands as well.
Dutch dominance of Indonesia caused the
British to focus on India and the Caribbean
Islands in the 17th century.
Dutch Empire
Mercantilism



Despite its own civil war in the middle of the 17th
century, the British tried to establish themselves as world
merchants.
The result was the series of Anglo-Dutch wars
throughout the later half of the 17th century in which
England gained control of several overseas possessions
from the Dutch, including New Amsterdam and many
Caribbean Islands.
By the 18th century, the importance of overseas
possessions became more and more important in
European affairs leading to the first world war: The
Seven Years’ War or the French and Indian War.
THE SLAVE TRADE, 1400–1860