Capitalism vs. Mercantilism: A Comparison for AP World History

📚 Capitalism vs. Mercantilism: A Comparison for AP World History

Understanding the economic systems that shaped the world is crucial for AP World History. Two of the most important are capitalism and mercantilism. While both deal with trade and wealth, their underlying principles and goals differ significantly.

🏛️ Definition of Mercantilism

Mercantilism was the dominant economic theory in Europe from the 16th to the 18th centuries. It emphasizes the accumulation of wealth, particularly gold and silver, by the mother country through strict government regulation of trade. The goal was to create a favorable balance of trade, exporting more than importing, to enrich the nation at the expense of other nations.

• 👑 A key feature of mercantilism was the belief that the world's wealth was finite.
• 🛡️ Colonies existed to provide raw materials and serve as markets for the mother country's manufactured goods.
• 🚢 Governments imposed tariffs and other restrictions to protect domestic industries and limit imports.

💰 Definition of Capitalism

Capitalism is an economic system based on private ownership of the means of production, free markets, and the pursuit of profit. Individuals and businesses are free to invest capital, produce goods and services, and trade in competitive markets with minimal government intervention. Prices are determined by supply and demand, and competition drives innovation and efficiency.

• 🧑‍💼 Private individuals or companies own capital goods.
• 💸 Production is based on supply and demand in the general market (market economy).
• 🤝 Owners of capital goods (capitalists) employ labor.

🆚 Capitalism vs. Mercantilism: A Head-to-Head Comparison

🔑 Key Takeaways

• ⚖️ Mercantilism focused on national wealth and power through government control, while capitalism emphasizes individual freedom and economic growth through free markets.
• 🕰️ Mercantilism was prevalent in the early modern period, while capitalism rose to prominence during the Industrial Revolution.
• 🌐 The shift from mercantilism to capitalism led to increased global trade, innovation, and economic development, but also created new challenges such as income inequality and environmental degradation.