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The Atlantic Economy

As the population grew in the eighteenth century, Europe looked beyond its borders to meet the ever-increasing demands of its ever-increasing consumers. Overseas expansion provided a plethora of goods and allowed some of Europe’s population to migrate overseas to relieve the population pressure in the British Isles and on the continent. In the eighteenth century, as with proto-industrialization, Britain led the way in building an economy centered on trade and colonization across the Atlantic Ocean. Other countries eventually followed suit in the prosperous Atlantic Economy.

The Atlantic Economy grew out of the spirit of overseas exploration and colonization and the economic policy of mercantilism, both of which began long before. Britain wasn’t the only nation that sought to expand across the Atlantic. The French, Dutch, and Spanish also had interests there dating back two or three hundred years. So many hands in the pot was bound to create conflict. Over the seventeenth and eighteenth centuries, the desire for control of the Atlantic Economy, particularly land in North America, resulted in a number of armed conflicts.

Would You Believe?

The Seven Years' War was known in North America as the French and Indian War.

In the second half of the seventeenth century, three separate armed conflicts between the English and Dutch dealt setbacks to the Dutch, including the English capture of New Amsterdam, which was renamed New York. After the War of Spanish Succession (see Chapter 10), Britain won from France parts of Canada and it won from Spain control of the slave trade. Then in 1763, at the end of the Seven Years War, a virtual world war that was fought in Europe and in North America, Britain won the rest of the French holdings in North America. Little did Britain know that in just a few short years, all their hard work in the North American colonies would go up in smoke (see Chapter 14).

Colonies as a Function of Mercantilism

The basic economics of mercantilism dated back to French advisors like Colbert. French mercantilism involved government regulation of the economy so that everything within the economy benefited the national economy. The roads, the laws, and especially the colonization were intended to strengthen the national economy. The English take on mercantilism, though, varied slightly. While the French never considered sharing the wealth with private interests, the English mercantilists believed both the government and private interests could benefit from mercantilism.

The Navigation Acts served as a great example of such thinking. The Navigation Acts required that imported goods be carried on British ships. The same policy applied to goods heading in and out of British colonies. These laws gave British shipping companies a monopoly on overseas trade. Eventually these laws would offend the colonists; all their goods had to go to England, even when they might have commanded higher prices elsewhere.

One of the most significant manifestations of mercantilist ideas was colonization.

The French typically sponsored the colonies abroad so that the financial rewards would go directly into French coffers. The English, on the other hand, allowed private investors to back the colonization efforts. These investors, through joint stock companies, provided the capital needed to establish trade colonies. With groups of investors, no single investor faced financial ruin if a colony failed.

The English crown benefited because it, along with the investment companies, reaped the rewards of the goods imported from the colonies—and it could tax the colonists. The mercantilist ideas, though seemingly restrictive and arguably oppressive, were based on the idea that the colonists would be guaranteed a market for their goods. In spite of the arguments against mercantilism, the system allowed English colonists in North America to enjoy tremendous prosperity relative to other people of equivalent social status in other parts of Europe.

Adam Smith

As the mercantilist policies filled the treasuries of the English, French, and even the Spanish, some opposition arose over the oppressive nature of mercantilism. Small merchants were bullied out of business by the large trading companies. The small merchants wanted their fair share; they argued against the monopolies created by mercantilism and in favor of free trade. Perhaps the loudest voice for such things came from the Scottish professor and philosopher Adam Smith (1723-1790).

A great lecturer of philosophy at the university in Glasgow, Smith was heavily influenced by the economic theory of the physiocrats. The physiocrats were philosophes who applied Newton’s mechanistic view of the universe to economics. They believed that physical laws governed economics just like the universe. According to these laws, the economy would benefit from individuals being allowed to compete for their own self-interests. Physiocrats were not fans of mercantilism because it repressed the individual and did not allow competition.

As a Matter of Fact

It has been said that Adam Smith often seemed scatter-brained and absent- minded, particularly at the beginning of lectures, but that he possessed the gift for gab and could really speak well once he got going. Even though Smith advocated free trade and competition, he considered humans to be greedy, selfish, and generally untrustworthy. Nevertheless, he believed the unhindered economy driven by competition would tend to benefit society.

Adam Smith published his landmark economic philosophical work, Inquiry into the Nature and Causes of the Wealth of Nations, in 1776. Often called Wealth of Nations, Smith’s work called for economic liberalism and described mercantilism as oppressive, restrictive, and unfair. Smith argued that individuals had no chance to profit unless they were favorites of the government. Smith proposed a laissez faireeconomic policy instead, in which the government stayed out of the way and let the economy play out. He disapproved of most government restrictions on trade and commerce, including tariffs.

According to this ideology, the economy would benefit from competition among individuals. Prices would be lower because of competition and products would be better because people would be free to pursue the skills they were best at. Smith argued that a government’s responsibility was to protect its citizens from foreign threats, keep order within its borders, and maintain public works. Beyond that, Smith maintained, if the people were allowed to pursue their own self-interests, an “invisible hand” would move the economy toward that which is best for the nation. While Smith’s work was initially dismissed by many, it became one of the most influential works ever in the field of economics and is still studied by economists and economics students today. Smith’s work helped establish economics as a systematic discipline in its own right and led to the dismissal of many earlier economic schools of thought.


Many of the settlers who made the journey to the colonies of North America did so as indentured servants. In exchange for their paid passage across the Atlantic, they agreed to work for a period of years. After a while, an interesting problem developed in the colonies. Labor to work the vast amounts of land was hard to find and expensive. The large plantations of cotton, tobacco, and sugar cane faced the same problems.

Would You Believe?

The Europeans turned to Africa for slaves because the Native Americans who were used first as slaves died quickly in bondage.

The practice of importing slaves from Africa to the New World dated to the sixteenth century when the Spanish and the Portuguese first brought slaves to the New World. The Dutch followed suit later and so did the English. By the turn of the eighteenth century, the use of African slaves in the Caribbean islands had spread to the large plantations in the southern colonies like Virginia. After the introduction of African slaves into the British colonies in North America, production skyrocketed. The slaves proved so popular that landowners bought more and more and more. By the end of the eighteenth century, slaves represented almost one fifth of the population of the colonies.

The Triangle Trade

Over the course of the more than four centuries that African slaves were transported to the Americas, a general pattern of trade existed, known as the Triangle Trade. Manufactured goods including fabric, liquor, and guns were used by European slave traders to acquire African slaves from along the west African coast. Many of the Africans exploited by the slave traders were actually captured in the African interior by other Africans and sold to the traders in coastal ports. The slaves then made the difficult journey across the Atlantic to the Americas, where they were traded for raw materials such as sugar, cotton, and tobacco. The ships then headed back to Europe where they unloaded the raw materials for refinement and processing. A new shipment of manufactured goods was loaded onto ships and the cycle began again. The Triangle Trade proved lucrative for all involved—except the humans who were enslaved.

It has been estimated that millions upon millions of Africans were uprooted and shipped against their will to the Americas. For many, the hardships began long before they arrived in the New World; many died en route in what is referred to as the Middle Passage, the route from Africa to the Americas. Slaves were packed into ships like sardines and barely fed and watered. Almost immediately, slaves found themselves ill from lack of sanitation and from exposure to European diseases. Those who died were simply tossed overboard. The Middle Passage alone claimed perhaps millions of slaves who never even made it to the Americas.

The slave trade eventually slowed, but not until the end of the eighteenth century did the slave trade finally end. Of course, so many slaves lived in the Americas by that point that trade across the Atlantic was no longer necessary. Most European nations had emancipated the slaves in their overseas colonies by the mid-1800s.

The Least You Need to Know

The Agricultural Revolution was revolutionary in that new techniques, crops, and devices allowed Europeans to increase the total amount of food produced and the amount of food produced per person.

Crop rotation, enclosure, draining swamps, the use of nitrogen-fixing plants, and selective breeding were among the innovative ideas used to produce record amounts of crops. The increase in food started a chain reaction that contributed to a population explosion.

The population boom precipitated a need for more goods and more jobs. The surplus of rural workers made it possible for entrepreneurs to employ the rural workers in cottage industries, particularly in the production of textiles.

Mercantilist governments used colonies to bolster both national economies and private interests. Opponents of mercantilism, including the physiocrats and Adam Smith, argued for laissez faire economic policies.

The slave trade sent millions of Africans across the Middle Passage as part of the Triangle Trade to the Americas. The slaves were traded for raw materials that were then sent to Europe for manufacturing.

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