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Uploaded byDan McDowell
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Western Economic Systems - Early Modern Period

The document summarizes the transition from feudalism to capitalism in Western economic systems during the early modern era. As political stability increased, populations grew in cities and towns as serfs escaped manors to take advantage of open markets. Merchants gained more wealth than feudal lords and supported kings, shifting power. Governments adopted mercantilist policies to increase state power domestically and internationally through controlling trade and granting trading monopolies. Increased trade with colonies provided raw materials and wealth, fueling the rise of joint-stock companies and criticism of restrictions by Adam Smith who advocated for free markets and laissez-faire policies.

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