Mercantilism and Currency Control

Definition

Mercantilism is an economic theory that emphasizes the importance of government regulation in promoting national power through a favorable balance of trade. In the context of colonial currencies, mercantilism sought to control the flow of money and resources to ensure that colonies primarily benefited the mother country, leading to various restrictions on colonial currency use and trade practices.

5 Must Know Facts For Your Next Test

1. Mercantilism led to the establishment of trade monopolies, where certain goods could only be traded with the mother country.
2. Colonial currencies were often deemed inferior and faced restrictions, leading to reliance on British currency for trade.
3. The need for currency control in colonies stemmed from the desire to maintain a stable economy that favored British interests.
4. Colonists sometimes resorted to bartering or creating their own currencies when faced with British restrictions on currency use.
5. Conflicts over currency and trade regulations contributed to growing tensions between the colonies and Britain, eventually fueling revolutionary sentiments.

Review Questions

• How did mercantilism shape the economic policies regarding colonial currencies in North America?
  • Mercantilism shaped colonial economic policies by prioritizing the interests of the mother country over those of the colonies. This meant that colonial currencies were often restricted or regulated to ensure they did not compete with British currency. The goal was to maintain a favorable balance of trade for Britain, compelling colonies to depend on British goods and currency, which ultimately hindered their economic autonomy.
• Evaluate the impact of currency control on colonial trade practices and economic development during this period.
  • Currency control significantly impacted colonial trade practices by limiting how colonists could conduct business. With restrictions on using their own currencies, colonists often had to rely on British currency, which created dependency and disrupted local economies. This dynamic stunted economic development in the colonies as it hindered their ability to innovate or grow independently, reinforcing the mercantilist goals of maintaining control over colonial economies.
• Synthesize how mercantilism and currency control influenced revolutionary sentiments among American colonists in the 18th century.
  • Mercantilism and strict currency control contributed to revolutionary sentiments by fostering resentment among American colonists towards British economic policies. As colonists experienced restrictions on their currencies and faced barriers in trading freely, they began to view these policies as oppressive measures that limited their rights and economic opportunities. This growing dissatisfaction, coupled with a desire for self-governance and economic independence, played a crucial role in rallying support for revolution against British rule.

Related terms

Balance of Trade: The difference between the value of a country's exports and imports, where a favorable balance means more exports than imports.

Colonial Economy: An economic system in which colonies provided raw materials to the mother country and served as markets for its finished goods.

Navigation Acts: A series of laws passed by England to regulate colonial trade and ensure that trade benefited England's economy.