Rise of Capitalism

Economics

Nations need to find ways to distribute the unequal resources that are needed to support the state. Because resources are always limited while needs and wants are unlimited, all nations are faced with a problem called scarcity.
 

As a result, nations try to develop economic systems to help deal with scarcity. As the Age of Exploration and Colonization gave way to the Industrial Revolution, the mercantile economic system of early imperialism would give way to a new form of economic development called capitalism. Today, forms of capitalism are dominant in most parts of the world.

In the early days of imperialism, most European countries used an economic system called mercantilism. In this system, the new emerging national governments of many European nations would try to increase their wealth through restricted trade practices. Governments, usually controlled by a monarchical system, regulated trade and tried to discourage trade imports from other nations. At the same time, internal businesses would be encouraged to export their goods. In this way, nations would grow wealthy with the growth of industry and return on investment would come through export. Nations like France or England would put high tariffs (a system of economic taxation) on imported goods and control business opportunity through strict licensing laws. This is a system called protectionism. A mercantile system relied on a tightly controlled system of trade using colonies as both sources of raw materials and marketplaces. Colonies produced raw materials, such as sugar cane in the West Indies, cotton in India, and furs or wood in Canada, which were exported to the mother country, where they were manufactured into sugar, textiles, felt, or ships. These finished products were then sold back to the colonies. Imperial nations could buy raw materials cheap and sell finished goods at higher prices, and through the system of taxes and licensing, governments would become wealthy.