mercentalism

Business in the American colonies developed under the system of political economy known as mercantilism. Mercantilism was based on the theory that the purpose of economic activity was to increase the rising power of a nation-state. In order to build up gold and silver reserves that could be used to pay for soldiers and weapons in time of war, nations sought to export more goods than they imported. To achieve this more favorable balance of trade, government had the right to exercise control over industry and trade. In the case of the American colonies, this meant that business existed to serve the needs of the English crown.Under the English mercantile system, the monarchy determined who could enter many businesses by giving monopolies to guilds and chartered companies. The crown often taxed these businesses heavily so that it could raise money for armies and navies, especially in the 1600s and 1700s, a period of near constant war. European nation-states promoted certain enterprises so that they could increase their ability to export goods and decrease their dependence upon other European nations. For example, monopolies for shipbuilding assured nations that they would have vessels for their navies, which were also used to protect their trade.English colonies in the New World offered both a chance to extend national power to new territories and to tap sources of vital raw materials so that the crown did not have to rely upon other potentially hostile nations. Mercantilism encouraged business based upon private ownership of property, but it was not capitalism because the purpose of the activity was to strengthen the crown, not to enrich an individual.Church authorities also limited free enterprise in the American colonies. For example, following European traditions, Puritans in the early years of the Massachusetts Bay Company placed communal needs before individual profit by setting the prices of goods and wages and prohibiting usury (charging of interest).