They also had strict rules regulating quality, prices, and working conditions.

Enterprising capitalists devised a way to bypass the guilds called the “putting-out” system. It was first used to produce textiles but later spread to other industries. Under this system, for example, a merchant capitalist distributed raw wool to peasant cottages. Cottagers spun the wool into thread and then wove it into cloth. Merchants bought the wool cloth from the peasants and sent it to the city for finishing and dyeing. Finally, the merchants sold the finished product for a profit.

The “putting-out” system, also known by the term “cottage industry,” separated capital and labor for the first time. In the 1700s, this system would lead to the capitalist-owned factories of the Industrial Revolution.

These Irish women are boiling flax and spinning yarn to make linen cloth. Enterprising capitalists employed peasant cottagers like these in the “putting-out” system.

Mercantilism

European monarchs enjoyed the benefits of the Commercial Revolution. In the fierce competition for trade and empire, they adopted a new economic policy, known as mercantilism, which was aimed at strengthening their national economies. Mercantilists believed that a nation's real wealth was measured in its gold and silver treasure. To build its supply of gold and silver, they said, a nation must export more goods than it imported.

The Value of Colonies

To mercantilists, overseas colonies existed for the benefit of the parent country. They provided resources and raw materials not available in Europe. In turn, they enriched a parent country by serving as a market for its manufactured goods. To achieve these goals, European powers passed strict laws regulating trade with their colonies. Colonists could not set up their own industries to manufacture goods. They were also forbidden from buying goods from a foreign country. In addition, only ships from the parent country or the colonies themselves could be used to send goods into or out of the colonies.

As European rulers embraced mercantilism and expanded trade, their ports became thriving centers of commerce. This painting depicts the crowded port of Toulon, France, in the mid-1700s.

Increasing National Wealth

Mercantilists urged rulers to adopt policies that they believed would increase national wealth and government revenues. To boost production, governments exploited mineral and timber resources, built roads, and backed new industries. They imposed national currencies and established standard weights and measures.

Governments also sold monopolies to large producers in certain industries as well as to big overseas trading companies. Finally, they imposed tariffs, or taxes on imported goods.

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