Mercantilism and the Colonies of Great Britain

British mercantilism

History Illustrated / YouTube 

Mercantilism is an economic policy designed to increase a nation's wealth through exports, which thrived in Great Britain between the 16th and 18th centuries. The country enjoyed the greatest benefits of mercantilism between 1640 and 1660 when the prevailing economic wisdom suggested that the empire's colonies could supply raw materials and resources to the mother country and subsequently be used as export markets for the finished products.

The resulting favorable balance of trade was thought to increase national wealth and Great Britain was not alone in this line of thinking. The French, Spanish, and Portuguese competed with the British for colonies under the belief that no great nation could exist and be self-sufficient without colonial resources. Because of this heavy reliance on its colonies, Great Britain imposed restrictions on how its colonies could spend their money or distribute assets.

Key Takeaways

  • Mercantilism exists to increase a country's wealth through its exports.
  • British economic growth was propelled by raw materials supplied by its colonies so the nation could export finished products.
  • Mercantilism brought about many acts against humanity, including slavery and an imbalanced system of trade.
  • During Great Britain's mercantilist period, colonies faced periods of inflation and excessive taxation, which caused great distress.
  • Angry and frustrated American colonists revolted against the British, which led to the American Revolution and the end of mercantilism.

British Mercantilism's Control of Production and Trade

Mercantilism led to the adoption of enormous trade restrictions, which stunted the growth and freedom of colonial business. Much of the trade that took place before the mid-17th century was controlled by the Spanish and Dutch, including to and from England. That was until the British decided to take the reins of their own shipping rights and eliminate these other nations completely from the equation.

In the 1660s, England passed the Acts of Trade and Navigation. Also known as the Navigation Acts, they were a series of laws designed to make American colonies more dependent on manufactured products from Great Britain. In this vein, British authorities further enumerated a set of protected goods that could only be sold to British merchants, including sugar, tobacco, cotton, indigo, furs, and iron.

But Britain's rise in the shipping wars didn't come without a cost. In fact, there were many transgressions and human rights violations that were committed by imperial the country (not to mention other European empires) on its colonies in Africa, Asia, and the Americas during this time. One of the key things to remember, though, is that not many of these transgressions were directly rationalized by mercantilism. 

In Wealth of Nations, the father of modern economics Adam Smith argued that free trade promotes a flourishing economy—not mercantilism.

The Slave Trade

Slavery was a common practice throughout the history of human civilization. The earliest records date back thousands of years to Mesopotamia. The Spanish, French, and Dutch used it to take advantage of the resources in parts of the New World. When local Indigenous populations started to decline, Blacks were transported from parts of Europe and Africa to the West Indies and South America, The British also used slavery to boost their position and advance their own interests.

Trade became triangulated during the mid-1600s between the British Empire, its colonies, and foreign markets. This fostered the development of the slave trade by England in many colonies, including America. The colonies provided rum, cotton, and other products that were heavily demanded by imperialists in Africa. In turn, slaves were returned to America or the West Indies and traded for sugar and molasses.

Not only did these new resources provide England with a large source of revenue, but so too did the slave trade. English company Royal Adventurers Trading to Africa and its successor, the Royal African Company were given a monopoly in the trade of slaves as early as the 1660s. By 1698, trading slaves was a right given to every Englishman, and the construction of large ships allowed as many as 40,000 slaves to be transported to and from English ports.

The colonists were, to some degree, seen as tenants who lived on British soil under mercantilist rule. As such, the taxes imposed by the British and the raw materials sent back to England were effectively a form of rent.

Inflation and Taxation

The British government demanded the trade of gold and silver bullion and was always seeking a positive balance of trade. As such, the colonies often had insufficient bullion left over to circulate in their own markets so they took to issuing paper currency instead. The mismanagement of printed currency resulted in periods of inflation.

Great Britain was also in a near-constant state of war. Taxation was needed to prop up the army and navy. The combination of inflation and taxation caused great colonial discontent. Some of the most notable taxes in early American history include

  • In 1733, the British Empire enacted the Molasses Act, which imposed a tax on foreign molasses imports per gallon.
  • The British raised revenue by enacting the Sugar Act of 1764. Although it cut the tax on molasses, the law (also called the American Revenue Act or the American Duties Act) was enforced even more strictly.
  • The Stamp Act of 1765 required all American colonists to pay a direct tax to England that would help pay for British troops in America. The act also required colonists to use stamped paper produced in England for any printed material.
  • Other laws aimed at increasing revenue and ensuring the enforcement of trade regulations included the Commissioners of Customs Act 1767 and the Indemnity Act of 1767.

And of course, there were the Townshend Acts that were passed between 1767 and 1768. These laws imposed taxes on 72 different items imported by England to America, including the tax imposed on tea. The colonists revolted against the tea tax, leading to the Boston Tea Party. Angry over the tax they said provided them with no taxation and the fact that they weren't able to control their resources and finished goods on their own, colonists dumped crates of imported British tea into Boston's Griffin's Wharf in 1773.

How Did Mercantilism Affect the British Colonies?

England enacted new laws during the 16th and 18th centuries, putting tariffs on imports of foreign goods and restricting shipping through English channels. As such, mercantilism became the key economic model of the time. It encouraged the colonists to purchase goods from England rather than rival nations. The colonies sent raw materials to England where they were manufactured into finished products and sold to the colonists. This allowed Britain to monopolize the slave trade, transporting slaves from English ports to America. High inflation and heavy taxation on the colonies caused a rift between the colonists and the British.

How Did Mercantilism Create Discord Between Britain and Its Colonies?

Britain used mercantilism as a way to secure its interests in the New World. Raw materials were shipped back to England where they were converted to finished goods. These products were then shipped back to the colonies as exports, which the colonists purchased. In order to continue its stronghold in America, Britain had to ensure its military was paid for and did this by imposing a series of taxes on the colonists. This included taxes on goods like molasses, sugar, and tea. Angry at being taxed without representation and not being able to control their own resources, the colonists revolted. This eventually led to the American Revolution and independence.

Why Did American Colonists Oppose British Mercantilism?

Britain used mercantilism to boost its own interests during the mid-1600s. But it was almost always at war with its rivals to keep its trade and colonial interests in place. This required a regular stream of revenue, which England received through a series of taxes imposed on the colonists. These laws required that taxes be paid by every colonist on items like sugar, molasses, tax, and printed materials. The colonists, on the other hand, were enraged that they were forced to pay taxes without having a voice in the British government. They were also angry that the British government was the one in charge of how their resources and goods were used and distributed. This discord is what led to the American Revolution.

The Bottom Line

British mercantilism flourished during the middle of the 17th century at a time when England was flexing its muscle in the New World. The idea behind this economic policy was that the colonies existed for the benefit of the Empire, providing a stream of revenue and much-needed resources.

But all this came at a cost. England's need to enforce its trade regulations and place in the world led to the slave trade and human rights violations in America. England would ultimately pay the price, though, after frustrated colonists who were unhappy about the lack of control on their own soil revolted against heavy taxation.

Article Sources
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  1. Parliament of the United Kingdom. “Living Heritage: The Navigation Laws.”

  2. The National Archives, United Kingdom. "Britain and the Slave Trade."

  3. Britannica. "Slave trade."

  4. Cynthia Clark Northrup and Jerry H. Bentley. "Encyclopedia of World Trade from Ancient Times to the Present," Page 624. Routledge, 2015.

  5. Library of Congress. "Trade & Mercantilism."

  6. Tax Foundation. "History of Taxes."

  7. History. "Boston Tea Party."

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