Mercantilism was an economic system in which European nations such as England created colonies around the world to benefit their own economies through trade. With colonies all around the world, England became a very powerful nation. It was said that “the sun never set on the British Empire.” COLONIES EXISTED ONLY TO BENEFIT THE MOTHER COUNTRY

The mother country takes cheap resources and raw materials from their colonies. Those resources are then used to make goods that can be sold back to the colonies and other nations for a profit! People in the colonies are only allowed to buy goods from England and sell their goods to England.

Step #1: Raw materials such as furs are sold by the colonies at a low price. The colonies may ONLY sell these furs to England. People around the world wanted items made from fur. The fur trade was big business in the American colonies.

Step #2: Raw materials are turned into completed goods by English tradesmen and prepared for sale back to the colonies and other nations for a profit. English tradesmen use the furs to create items for sale to the colonies and other nations at a profit.

Step #3: Completed goods are sold to the colonies and other nations. Colonies may only buy good from England. Colonists may not shop around for the lowest price. England makes a profit! English makes money selling the finished product back to the colonies and other nations. This is repeated with other goods!