[Sidenote: Mercantilism]
The new nations founded their power not on the fearlessness of their
chevaliers, but on the extent of their financial resources. Wealth was
needed to arm and to pay the soldiers, wealth to build warships, wealth
to bribe diplomats. And since this wealth must come from the people by
taxes, it was essential to have a people prosperous enough to pay
taxes. The wealth of the nation must be the primary consideration of
the legislators. In endeavoring to cultivate and preserve the wealth of
their subjects, European monarchs proceeded upon the assumption that if
a nation exported costly manufactures to its own colonies and imported
cheap raw materials from them, the money paid into the home country for
manufactures would more than counterbalance the money paid out for raw
materials, and this "favorable balance of trade" would bring gold to
the nation. This economic theory and the system based upon it are
called mercantilism. In order to establish such a balance of trade, the
government might either forbid or heavily tax the importation of
manufactures from abroad, might prohibit the export of raw materials,
might subsidize the export of manufactures, and might attempt by minute
regulations to foster industry at home as well as to discourage
competition in the colonies.
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