Mercantilism is the economic theory that a nation's prosperity depends on its supply of gold and silver; that the total volume of trade is unchangeable.

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Mercantilism is the economic theory that a nation's prosperity depends on its supply of gold and silver; that the total volume of trade is unchangeable. This theory suggests that the government should play an active role in the economy by encouraging exports and discouraging imports, especially through the use of tariffs. Spain and England used the mercantile system to benefit the mother countries. The mercantile system had special regulations, which usually extracted some sort of reaction from the colonies. If necessary, the policies would be changed to better suit the mother country.  

        The favorable balance of trade was upheld through certain regulations. No foreign trade was allowed for the colony unless it passed through the mother country first and it moved on mother country ships. Furthermore, no foreign settlers were allowed in the colony. No colonial industry was allowed. The colony had to remain dependent on the mother country for industrial necessities, it was not allowed to become competition for foreign markets, and migrations restrictions limited availability of skilled artisans. Regulatory taxation was another mercantile regulation. Protective “tariffs” were used on foreign imports to the colony, and revenue was raised for the mother country. No colonial self-government was allowed, either. The mother country avoided challenges to its economic authority, and the colonies couldn’t enact pro colonial/anti-mother country laws. The Spanish used three mercantilist devices to protect their commercial monopoly in the New World. They prohibited foreign ships from entering Spanish colonial ports, and no foreigner could send goods to the colonies or take gold bullion out of Spain in payment for goods sold to Spanish merchants without having a special license. Thus, the Spaniards gained the middleman’s profit on all European goods going to their colonies, since such goods had to be funneled through Spain. Also, theoretically, the colonies were designed to be economically complementary to Spain. Manufacturing was forbidden in certain colonies to keep the market open for imports. The economic health of the colony was always a secondary consideration. And finally, all colonial trade was channeled through a single port, first Seville until 1720, and then Cadiz. Spain’s mercantilist regulation was extreme almost to the point of absurdity. Smuggling could not be controlled, since it was in the interest of too many Spaniards on both sides of the .Atlantic to participate. Great Britain had four major aims in it’s mercantile policy:  to encourage growth of a native merchant marine fleet, to protect English manufacturer’s from foreign competition, to protect English agriculture, especially grain farmers, and to accumulate as much hard money as possible (Americans had to pay for everything with hard currency, which drained gold from America. Colonial paper was not legal in England).). The Navigation Acts were efforts to put the theory of mercantilism into actual practice. Under the provisions of this legislation, trade with the colonies was to be conducted only in English or colonial ships. Certain "enumerated" items (such as sugar, tobacco and indigo) were to be shipped only within the empire. Trade destined for nations outside the empire had to go first to England. Some of the legislation was designed to protect colonial interests. For example, tobacco production in England was prohibited, leaving the colonies as the sole source of this lucrative product. The American colonists were never fully comfortable with these acts, but became ardently opposed with the passage of the Sugar Act of 1773.

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        Some of the regulations and restrictions placed on the colonies, however, extracted a negative reaction from the colonies. The Navigation Acts, more properly called the British Acts of Trade, angered the colonies and created certain resentment between the colonies (American colonies) and the mother country. The acts were an outgrowth of , and followed principles laid down by Tudor and early Stuart trade regulations. The rise of the Dutch carrying trade, which threatened to drive English shipping from the seas, was the immediate cause for the Navigation Act of 1651, and it in turn was a major cause of ...

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