Merchantile System in the American Early Colonies

Merchantile Sytem in the American Early Colonies

Tori Nuariza Sutanto


Merchantilism is the political and economic strategic used by the European nations states as a doctrine in the early capitalist era around 1500 to 1850. The goal of this policies was to increase the wealth and power of the mother country by creating a balance between trade and domestic manufacturing. This paper aims to describe how the merchantile system shaped American early colonies. Throughout the paper I intend to demonstrate that the merchantile system create such a rapid change in the colonies ; land expansion, enslavement, forming wealthy elites and etc.  


According to Laura La Hayye, Merchantilism is economic nationalism for the purpose of building a wealthy and powerful state. While Adam Smith tells merchantile system as the system of political economy that sought to enrich the country by restraining imports and encouraging exports. According to the book of History and Economics, The economic trends change from feudalism to merchantilism because three powerful forces ; the rise of the nation states, the commercial revolution, and the decline of the medieval economy. Also, the new ways of thinking about economic activity emphasizes on production.

The emergence of the nation states, move away from feudalism, have a consequence that is a competition among European nation states. Holland, France, Spain, England competed each other to became the most powerful nations. The main point of merchantilism is to increase the wealth of the nations. Those nations were frequently fighting in war. As a consequence, money needed to support their expansion to the other land in terms of military (army and navy). To be wealthier, those nations needed the other nations, states, or city or land to be exploited. Trade, conquest, colonialism, became their ways to increase wealth. Contextually, this condition triggers the commercial revolution which encompasses on the increasing of volume of trade, widened geographical scope of the trade, and creating new products.

According the book of History and Economics, The basic principle of merchantilism are exploits natural resources abroad by building colonies to expand wealth, maximize export to import ratios by encouraging exports to the colonial land but holding the domestic consumption as a way of dumping political way, prevents other states obtaining their wealth by creating exclusive trade relationship, attacking and conquering other foreign colonies or countries.

Merchantilism can be regarded as the powerful alliance between merchants and the monarchial system. It has been associated with the rise of a particular form of European Capitalism referred to merchant capitalism. The most benefited group of  merchantile system were the monarchs, merchant capitalists, joint stock companies, and government officials.

The implementation of the merchantile system were : a) getting many natural resources as states can b) encouraging foreign trade/ exports than imports/domestic trade c) forcing a large population to become the labors for the factories, plantations, industries d) doing state interference or intervention with policy in the process of trade if it is necessary.


Mechantilism in the American Colonies

America continent is the land which was fought by france, spain, england, seemed profitable to be the colonial land . The conflict and war occured frequently to have the authority toward the land. Before 1754, France, Spain dominated the America. England only controlled the eastcoast later on called as thirteen colonies. After French Indian Wars, in 1763 England dominated the America with Spain in the soutwest and the sothern part of the continent. It leads to create a new colonial system to govern the big scale of territory.  

To be stonger and wealthier, England should implement the mechantile system hollistically. They needed to explore, expand and conquer  other territorial expansion. They controlled the thirteen colonies and divide them to be northern, middle, and southern. The role of the colonies simply were ; providing the mother country England raw materials and consuming the finished products or manufactured goods from England. Colonies exploited as commodities of raw materials, working population, and consumer of their finished products. This concept can be regarded as the monopoly of the state.  

The goal of Merchantile economic activity was to maximize production not consumption. The idea of making the wealth of the nations by increasing production, exports and holding down the domestic consumption will enrich the England. This system supported with policies that intefere the process of trade to their colonies. Between 1651 and 1673, the British Parliament passed four Navigation Acts meant to ensure the proper mercantilist trade balance. Navigations Laws was the real examples of England intervention by creating an exclusive trade relationship and restricting the colonies to do commerce with the other states. 

            Colonial trade was the main point of the merchantile system. One of the ambitious and disgusting colonial trade was well-known as triangular trade. It connected American colonies, west indies, africa, and england. Rum, mollasess, and slaves were the primary commodities that are economically profitable for each of territory. In general, it was the implementation of merchantile system as colonies providing the raw materials to the England and consuming the finished products form England. But, it would be more profitable in particular for the purpose of each territory. Africa supported the working population by trading slaves to the southern colonies which were plantations. Mollasses brought to the northen part to produce into Rum.  Finally rum exported to England.

            This trade shaped the characteristics of colonies. Northern economy tended to be more industrial which were shipbuilding, commerce, and trading. Southern economy tended to be more agricultural which were plantation, farming (tobacco, rice , indigo). Merchantile system implicated on the economic oppression of the working population. Slavery in the northern and southern provided agricultural workers, servants, and artisan. The affair of merchant capitalist and monarchs formed a new class wealthy elites but the working class only became commodity. The increasing of merchant population was as well as the more increasing of slave population. It enlarged the disparity between poor and rich, merchant and workers, boss and slaves.

            American colonies felt a rapid change in terms of socio-political dynamics. Conflict, wars, and excess of policies occured as a implication of the ideal of  merchantile system. Merchantile system in the American colonies also indirectly damaged the fate of natives Indian, clash of land expansion, and enslavement of african. Merchantile system encouraged the development of young industries in the northern part of america where there never had been any manufacturing before. Road and canals as way for transportations built to support the growing industries. Merchant got better social position but it weakened the power of landlord/aristocrats.  

In 16th century till the 18th century American colonies was shaped by the merchantile system. But, history taught us, the effect of too many controlled by the England with policies, acts, laws and the feeling of oppressed trigger the spirit to do rebellion and later on contributed to the American revolution. 



            The merchantilism in terms of political and economic strategies was shaped American early Colonies. The system is a cycle of need and interest even a damage by England to the colonies, native Indian and the african slaves.  In England,  the application of mercantile system needed 4 professions of importance to the nation ; agriculture, trade, army, navy. It led to the development of a skilled labor force at home country and the creation of a large navy, army and merchant marine.

 The merchantile system create conflicts, wars, clash, enslavement and domination in the american colonies. This system exploited and gave economic oppression to the working population. The rise of merchant population formed a class of wealthy elites that dominated trade and politics throughout the colonies while the rise of slave population formed a new lower class whose didn’t have right to be educated, to have free time, and money. This system was the earlier model of capitalism called merchant capitalism which was noted as one of  historical periods in the 16th to 18th century.



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http://www.u-s- The Colonial Economy :Merchantilism. , “Merchantilism The Triangular Trade The effects of triangular trade














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