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European Commercial Revolution

European Commercial Revolution. Essential Question. How did Mercantilism help to create a better environment for Free Enterprise?. Introduction. Commercial Revolution occurred as Europe entered into global trade. Mercantilism encouraged growth of manufacturing & colonies.

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European Commercial Revolution

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  1. European Commercial Revolution

  2. Essential Question • How did Mercantilism help to create a better environment for Free Enterprise?

  3. Introduction • Commercial Revolution occurred as Europe entered into global trade. • Mercantilism encouraged growth of manufacturing & colonies. • Europe remained agricultural, but trade grew quickly.

  4. Global Trade • Europe produced more goods for sale • Exports: • America – Sugar, Rice, Tobacco, Precious Metals • Ming China – Silk, Porcelain • India – Tea • East Indies – Spices • Africa – Slaves • Europe – Woolen Cloth, Lumber, Finished Goods

  5. Mercantilism • Def. – Increasing a nation’s wealth by limiting imports using tariffs & maximizing exports. • Kings used this to increase their power • Tried to remove internal trade barriers • Wealth & power based on gold & silver – Used to pay soldiers • Only ways to gain wealth – Trade, War

  6. Mercantilism • Most European countries established colonies • Exported expensive finished goods to colonies in return for cheap raw materials • Competition for colonial empire led to war: • 1600s: England v Holland – Shipping Routes • 1700s: England v France – North America & India

  7. Free Enterprise • Def. – An economic system in which basic economic questions are answered by free actions of producers & consumers. AKA Capitalism • Business owners risked capital (money) to make profits • Growth of businesses led to demand for money – Used to pay for facilities & materials

  8. Free Enterprise • Ships insured because of high risk of loss from accidents, bad weather, & war. • Joint-Stock Companies • Formed to raise money • Private companies offered shares of stock in exchange for money • Investors bought stock for share of profits • Money used by companies to buy materials & equipment

  9. Free Enterprise • Banks developed ways of lending money • Financial Revolution • Governments issued certificates & sold to public • Government paid interest to holders • Governments used money to expand militaries • Holland – Rich merchants establish oligarchy (rule by a few)

  10. Adam Smith • “Father of Economics” • Wealth of Nations – Documented industrial development in Europe • Didn’t invent many ideas, 1st to compile & publish them • Laissez Faire – Government has no control over business

  11. Adam Smith • Invisible Hand Theory • Invisible hand guides supply & demand • Each person inadvertently helps everyone by doing what is best for themselves • Ideas associated with Smith became foundation for classical economics

  12. Results • Europeans had more products to choose from • Tea • Sugar • Cotton Cloth • More Books • Learning & Entertainment – Theater Groups, Schools • Created more choices in occupations • Raised overall standard of living in Europe

  13. Essential Question • How did Mercantilism help to create a better environment for Free Enterprise?

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