The Purpose of the Colonies: Mercantilism
Economic decisions and policies have benefits and costs. Analyzing the benefits and costs of mercantilism helps to explain why
the doctrine became controversial.
At least five groups benefited from mercantilism, an economic plan that aimed to make a country wealthy primarily by
exploiting the markets and resources of its colonies. Such was the case of England and its thirteen colonies in North America.
One group that benefited was the English owners of export companies that sold exports to the colonists.
A second group that benefited was colonial producers of raw materials. Not only did they collect their profit, but the English
government gave them special privileges in the English market.
Owners of England’s shipping industry were a third group the benefited from mercantilism. The Navigation Acts of 1651
required that all English goods be transports on English vessels. Without competition from foreign shippers English shippers
made a comfortable profit. However, shippers did have to compete with a fourth group that also benefited from mercantilism:
smugglers. These entrepreneurs smuggles foreign goods past the English tax collectors and reaped huge profits.
The desire to combat smugglers and the need to protect shippers benefited a fifth group: England’s Navy. As the police of the
sea, the Navy became powerful and respected.
While mercantilism benefited many groups it brought severe costs to many others. Workers paid one of the higher costs.
According to economist William R, Allen,
(workers) wages…were to be kept low to minimize production costs, avoid excessive consumption and spur greater
effort by workers.
By keeping wages low owners kept the cost of making goods low. In addition, workers with little money could buy few goods.
This helped create the ideal mercantile situation: many goods available for export and few demanded for import. Owners also
discovered that paying workers s low wage compelled them to work longer hours and harder to satisfy basic needs.
A second group that paid the high price of mercantilism was companies that sold imports. English law forced them to sell goods
produced within the empire. Therefore they could not legally take advantage of cheaper or better products made in other
countries.
A third group that suffered was colonists who wanted to start industries that England had banned. For example, colonists were
forbidden to compete with England by making hats, woolen or iron goods.
Colonists in the 16oo’s and early 1700’s rarely questioned mercantilist theory. However, after the mid-1700’s people
throughout the empire increasingly began to wonder if the benefits were worth the costs. This questioning planted the seeds
of discontent that grew into the American Revolution.
Definition of Salutary Neglect
Salutary Neglect was a long-standing British Policy in the 13 colonies which allowed the colonists to flout, or violate,
the laws associated with trade. There were no effective enforcement agencies and it was expensive to send British
troops to America so few colonists followed British trade laws or were prosecuted for trade violations. The British
policy of Salutary Neglect was not documented. The policy and era of Salutary Neglect lasted from the 1690's to
the 1760's and benefited the colonists boosting their profits from trade.
Reversing the Policy of Salutary Neglect
The British reversed their policy of Salutary Neglect to raise taxes in the colonies to pay for the massive war debt
incurred during the French and Indian Wars. The reversal of the policy of Salutary Neglect led to insurrection in the
colonies, the Boston Tea Party, the American Revolution and the Declaration of Independence. This explains why
the policy of Salutary Neglect, and the British attempts to reverse the policy of Salutary Neglect, was so important
to U.S. history.