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)