Mercantilism and the British Colonies in America

In order to understand the prosperity created in the Americas during the British colonial period, as well as the political developments leading to American independence, one must understand the concept of mercantilism. Prominent in the Era of Exploration (15th-18th century), mercantilism was an economic system that was self contained and practiced in Europe and colonial North America. Mercantilism can be defined as the antithesis of free trade economics because it encourages isolationism, promotion of domestic businesses over foreign industry, and the sole use of domestic (read: British) vessels for trade. In the British colonial structure, mercantilism was meant to preserve money in order to pay colonists, who would in turn buy only English goods. 

The Navigation Acts, created between 1660 and 1760 by the British Parliament, exemplify mercantilism’s policies. The Acts forbade English trade on anything but English vessels in English ports and commodities made within the colonies (like sugar and tobacco) had to be shipped within Empire. The advantages of such a system are apparent. Instead of competing with other nations and businesses for the money and commerce of their colonists, the mercantilist empire can dictate the prices for their goods and keep capital within their possessions. For example, colonists in New York would go to market and the price of British goods like tea pots and clothing were comparatively low because of restrictive tariffs on other nation’s goods (if these goods were at market in the first place). 

However, the disadvantages of mercantilism are also apparent because of the free market principles we live within today. While the concept of keeping capital within a nation’s economy is promising to the economy, the concept of spreading capital and opening markets has been proven a far more efficient economic system. In the colonial era, the concept of free markets and democratic governments were novel indeed, and the mercantilist system made the American colonists an underclass of people within the British Empire.