Western Economic Systems - Early Modern Period

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Western Economic Systems - Early Modern Period

  1. 1. Western Economic Systems in the Early Modern Era AP World History
  2. 2. Transition from Feudalism <ul><ul><li>Growth of political stability in late middle ages = increased population in cities/towns </li></ul></ul><ul><ul><li>Serfs could escape manors to cities </li></ul></ul><ul><ul><li>Open markets broke down traditional manors </li></ul></ul><ul><ul><li>Merchants able to acquire more wealth than feudal lords - supported kings, shifting power away from aristocrats to merchants </li></ul></ul>
  3. 3. Economic Control <ul><ul><li>Governments, Kings want to use economic power to increase political power - domestically and internationally </li></ul></ul><ul><ul><li>Government helped focus economic pursuits that benefited the state </li></ul></ul><ul><ul><li>Called mercantilism   </li></ul></ul>
  4. 4. Mercantilism Basics <ul><ul><li>Strength of a nation based upon wealth - especially possession of gold and silver </li></ul></ul><ul><ul><li>Balance of trade had to be favorable </li></ul></ul><ul><ul><li>Protective economic policies - high tariffs, subsidies for domestic industries </li></ul></ul><ul><ul><li>Colonies to provide raw materials, only trade with controlling nation </li></ul></ul><ul><ul><li>Governments grant monopolies to companies </li></ul></ul>
  5. 5. Mercantilism Basics <ul><ul><li>British East India Company </li></ul></ul>
  6. 6. Transition to Capitalism <ul><ul><li>New World trade increased wealth of merchants </li></ul></ul><ul><ul><li>Money reinvested </li></ul></ul><ul><ul><li>Rising prices keep profits high - due to influx of New World silver and gold </li></ul></ul><ul><ul><li>New business organizational methods develop </li></ul></ul><ul><ul><ul><li>Joint-stock companies </li></ul></ul></ul><ul><ul><ul><li>Shares </li></ul></ul></ul><ul><ul><ul><li>Companies finance colonies </li></ul></ul></ul>
  7. 7. Adam Smith <ul><ul><li>1776 - Wealth of Nations </li></ul></ul><ul><ul><li>Advocated for a free market, with no government control - more beneficial to society, people would be more productive </li></ul></ul><ul><ul><li>Laissez Faire - Hands Off </li></ul></ul><ul><ul><li>Believed in the &quot;invisible hand&quot; of the market </li></ul></ul><ul><ul><li>Opposed trade restrictions </li></ul></ul>

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