mercantilism nations/kings control prices, items power comes from wealth wealth represented by...
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MERCANTILISM
• Nations/Kings control prices, items
• Power comes from wealth• Wealth represented by bullion (precious metals)
• Get more gold than anyone else
• Ex. Chartered Co’s, high tariffs, colonies only trade with their ships (Navigation Acts), do not allow manufacturing in colonies
MERCANTILISM – CONT.
HOW TO GET WEALTH
1.Exploit colonies
2. create a favorable balance of trade (power) with rival nations-Protectionist role – encourage exports/ discourage imports, Chartered Co’s, high tariffs, colonies only trade with their ships (Navigation Acts), no manufacturing in colonies
-Encouraged wars, imperialism,
ADAM SMITH – Wealth of Nations
• Rejected mercantilist theory in 1800’s• Believed in Laissez-faire – let the market
control itself – no govt. interference
Natural Laws:1. Self-interest – people work for own good2. Competition makes better products3. Supply and demand controls price
CAPITALISM
• Based on private ownership and investment of resources for profits
• Government not the sole owner of wealth
• Merchants make money and reinvest to create a cycle of wealth
• Steady rise of money = more demand
• less products = inflation (supply & demand)
RESPONSES TO IR
• CAPITALISM overtakes MERCANTILISM
• UNIONS & LABOR LAWS
• SOCIALISM (Karl Marx, Jeremy Bentham & Friedrich List thought govt. should manage the economy to deal w. social issues)
• POSITIVISM (scientific method could solve social & technical problems)
• UTOPIAN SOCIALISTS (Robert Owen)
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