Friday, June 29, 2012

Did the colonies benefit from mercantilism?

During the 17th and 18th centuries, mercantilism was the prevailing philosophy of trade. The concept behind mercantilism is the control of raw materials, production, and finished goods. The American colonies provided the raw materials to British manufacturers in England. The finished products were sold to European and American colonies. The critical component of the international trade pursued by Great Britain under the policies of mercantilism was to maintain the manufacturing and production of products in Great Britain. The objective was to restrict the American colonies from developing their production capabilities and competing with factories in Great Britain.
The British placed restrictions upon the types of products the colonists were allowed to purchase. British mercantilism required the American colonists to use only British ships for transportation. Taxes and tariffs for non-British goods were imposed on the American colonists. The additional cost of purchasing non-British products made them too expensive for the colonists and less attractive to buyers.
The primary objective was to increase the wealth of the supplier country (Great Britain) by creating a dependency (American colonists) on Great Britain as the leading supplier of finished products. In one sense, Great Britain was able to control the price of the purchase of the raw goods from the American colonies and the cost of the finished product. Under mercantilist philosophy, the benefactor can profit from supply and demand by eliminating competition.
In the earliest years of the colonies, it can be argued that the American colonists benefited, as they had no way to produce goods, and selling raw materials to an economically stable country generated revenue that assisted in the economic development of the colonial economy. As time progressed and more skilled labor immigrated to the American colonies, the relationship began to sour. Limiting the colonies to one trading partner was not good economically for the Americans, and they started to find ways to circumvent the British trade system.

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