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AmEconHist_ClassNotes - American Econ History Notes Lecture...

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American Econ History Notes January 25, 2008 Lecture 1 Colonial Period - Mercantilism 1. Definition of “Mercantilism” The opposite of free trade, a belief that government regulation of foreign trade Mercantilism supports “favorable balance of trade”, which means more exports than imports. EXPORTS > IMPORTS Tariffs on imports Subsidies for exports Mother country – England – export manufactured goods Colonies – raw materials Sir James Steuart Wrote Principles of Political Oeconomy (1767) Today republicans are generally supporters of free trade (they were mercantilists back in 1920s) 2. Goals of the Mercantilists” Military Power “Autarky” – means no trade, self-sufficient (so we are okay even when we go to war with a country) Jobs were really important to the mercantilists. There was a lot of surplus labor, much unemployment. But if you’re EXPORTING MORE THAN IMPORTANT, then you create more jobs. (today USA has the same job problems) Monetary Policy – Exports > Imports = Inflow of Gold, interest rates go down. Stimulate economy 3. Examples of Mercantilist Policies Navigation Acts – all about shipping, ship from colonies in English/Colonial ships They wanted to create exports earnings because they’re paying English ship owners, and it keeps the shipping companies vibrant. 3/4 of the crews had to be English All goods to be shipped on English ships Foreign merchants have to deal with merchants residents in England instead of dealing directly with colonies. “Enumerated Goods” – first have to be exported to Britain, or first imported from Britain, it can be manufactured in other countries, but had to go
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American Econ History Notes through Britain. In Colonial period, TOBACCO was the leading exports, COTTON wasn’t that important during the colonial period (it was not important until after the revolutionary war). Thomas Jefferson grew tobacco on his plantation. Flour/Sugar/Coffee…etc. was also produced. Timber for ships Wine? Limits on manufacturing colonies You want your colonies to be producing, not manufacturing HAT ACT (1732) Beaver hats were in fashsions. The HAT ACT says these acts has to be manufactured in England. Iron Act (1750) Says you can manufacture a little bit of iron for local use, can’t manufacture large amounts in the colonies. 4. Birth of Modern Economics THE GREATEST ECONOMIST Adam Smith, his greatest book is Wealth of Nations (1776) The book attacks on Sir James Steuart. He says mercantilism is wrong, says we need free trade = Laissez Faire Says Mercantilism is all about Special interests of hat makers, British wine merchants…etc.
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