New Economic Systems: Mercantilism and Capitalism
New economic systems of mercantilism and capitalism emerged in Europe as wealth from colonial trade transformed economic thinking: mercantilism held that national power depended on accumulated wealth through favorable trade, while capitalism emerged based on private ownership, investment, and profit. In Pengi Social Studies (Grade 7), Chapter 10: The Early Modern World, students learn how these systems shaped European colonialism.
Key Concepts
The wealth flowing from colonies changed Europe's economy. Nations adopted an economic policy called Mercantilism , which held that a country's power depended on its wealth (gold and silver). The goal was to export more than you import. Colonies were vital because they provided raw materials and a market for finished goods.
At the same time, Capitalism emerged. This system is based on private ownership and the investment of money for profit. Merchants, not just nobles, began to grow rich. They formed Joint Stock Companies to fund expensive voyages, sharing both the risks and the profits of colonization.
Common Questions
What is mercantilism?
Mercantilism was an economic policy where a nation sought to build wealth by exporting more than it imported. Colonies provided raw materials and markets for finished goods, making them essential to the mercantilist system.
What is capitalism and how did it emerge?
Capitalism is an economic system based on private ownership and investment for profit. It emerged in early modern Europe as merchants grew wealthy from trade and formed joint-stock companies to fund colonial ventures.
What were joint-stock companies?
Joint-stock companies allowed merchants to pool investment to fund expensive voyages, sharing both the risks and profits. They were an early form of corporate investment that financed European colonization.
Where are mercantilism and capitalism covered in Grade 7 social studies?
New economic systems are covered in Pengi Social Studies (Grade 7), Chapter 10: The Early Modern World.