04
Principles of Mercantilism: National Wealth The economic health or wealth of nation can be measured by the amount of precious metal, gold, or silver it holds.
vs.
Productivity and available resources
Investments in
Labor
Infrastructure
Capital goods<br>
05
Principles of Mercantilism: Trade A favorable balance of trade is required
Purchase of products/resources from external sources allowed specie to leave the country<br>
06
Principles of Mercantilism: Self-sufficiency Economic self sufficiency is vital. It demands increasing domestic production, new domestic industry.
Protection for infant industries.
Jefferson vs. Hamilton
North vs. South
Business vs. consumer gains from trade<br>
07
Principles of Mercantilism: Agriculture Sufficient agricultural production to support the domestic population.
Agricultural products can be imported but they will be traded for manufactured goods.<br>
08
Principles of Mercantilism: Tariffs & Subsidies High on imported manufactured goods.
Republicans from Lincoln forward
Subsidies in the form of land and money for infrastructure (railroads)
Low on imported raw materials<br>
09
Principles of Mercantilism: Ships Merchant fleet is a necessity to facilitated the flow of goods in and out of a nation.
Naval fleet assures protection of transport.
Focus changes from the protection of resources through military might to protection/ support through regulation<br>
10
Principles of Mercantilism: Colonization Provides raw materials necessary to produce manufactured goods.
Provides a constant market for manufactured goods.
Continuing debate on the role of developing nations today<br>
11
Principles of Mercantilism: Population Provide a source of labor for domestic production
Provide a source of labor for settlement of colonies
Issue of immigration today<br>
12
Principles of Mercantilism: Government Appropriate for the government to be heavily involved in directing economic activity.
change from a military presence to a policy presence which protects economic development<br>
13
Global Conditions Spain/Portugal 1500’s Portugal rules the high seas
Exploration of South America/Mexico
Cortes
Pizarro
Gold/Silver exported to Europe
Elizabeth I – develop navy
Sir Francis Drake
1580 – Dutch vs. Portugal (trade with Germany)<br>
14
Characteristics of VOC & East India Privately held, multinational companies
Guaranteed monopolies in exchange for rights paid to government
Develop trade links – utilized their own ships and military
Development of colonial outposts<br>
15
Dutch East India Company VCO; Verenigde Oost-indische Compagnie Took over trade routes from Portugal
Dominated the spice trade throughout the 1600’s and early 1700’s
Sri Lanka (Ceylon), Batavia(Indonesia), Cape Town (Africa)
Sophisticated shipping system
Political and military powers given to companies<br>
16
Dutch vs. ………. Anglo-Dutch Wars
1652-1654
1665-1667
1672-1674
1781-1784
Dutch had 4,785 ships
East India Company had 2,690 ships with about 1/5 of the tonnage
Franco-Dutch Wars<br>
17
Navigation Laws 1600’s Protect the wealth of the British Empire
profits from shipping
value added to manufactured goods
require all natural/raw resources to be sold to England<br>
18
Regulating Commerce Navigation Act 1651 – all crews ½ English, goal to eliminate Dutch competition from colonial trade
Navigation Act 1660- all colonial trade on English ships, ¾ English
Staple Act 1663- All goods bound for colonies from Africa, Asia or Europe must first land in England
Plantation Duty Act 1673 – All colonial ship captains to guarantee that they would deliver enumerated goods to England<br>
19
Regulating Commerce Navigation Act 1696 – Created admiralty courts to enforce trade regulations and punish smugglers, authority to board ships and search cargo
Woolens Act 1699 – Prohibited colonial export of woolen cloth
Hat Act 1732 – Prohibited export of colonial produced hats
Molasses Act 1733- All non – English molasses taxed heavily
American Revenue Act (Sugar Act) 1764 – Enforcement of acts to reduce smuggling<br>
20
Adam Smith 1776 Corruption inherent in mercantilism was inefficient
To profit from the gains in specialization would require that materials/labor were free to move where they were most effectively utilized<br>
21
United States Hamilton
Support of policies which would provide the necessary infrastructure to protect industry
Banking, infrastructure, tariffs, subsidies
Jefferson
Support of policies which provided for agrarian markets that functioned with minimal government intervention<br>
22
US Tariffs 1790’s 15%
1830’s 60%
1833 Compromise Tariff of 1833
Phased out tariffs over 20% over 9 years
1830-1860 alliances for legislation
North High tariffs
South Low tariffs
West swing area<br>
23
England and “free trade” England supported “free trade” beginning in 1840’s
Protection of industry no longer necessary
Gains from “free trade” surpassed those of protectionism<br>
24
Post Civil War High tariffs maintained to protect US industry
McKinley Tariff on tinplate 1890
No measureable production of tinplate
Tariffs for six years
Domestic production must equal 1/3 of imports
1910 domestic price of US tinplate were below those produced in UK<br>
25
Neo-Mercantilism Focus on increasing production, employment, and thus standard of living through trade restrictions and commercial development
Significant export industries provide the necessary tools for economic development<br>
26
International Trade Agreements GATT -Created in 1948 to promote/ liberalize trade globally
NAFTA – 1994 US/Canada/Mexico
Agricultural support for 10 – 15 years<br>
27
WTO Replaced GATT in 1995 as a part of the Marrakesh agreement.
Supported the liberalization of trade and created a forum for enforcement of global trade discussions
Continues the debate over the developmental role of policy to support/detract from growth<br>
28
Current debate Developmentalism
Basic unit of the economy is the nation-state
Competition between countries is the central focus
Governments are responsible for facilitating favorable conditions to encourage this.<br>
29
Current debate Producerism
Central role of the government is to support the utopia that is created through free trade.
Act to remove barriers to trade and serve as a umpire
Emphasis on protection for small businesses
Creates favoritism and opportunities for political corruption.<br>
