According to mercantilist theory, colonies had one purpose: to generate revenue for the mother country. One way this could be accomplished was through extracting cheap raw materials from the colonies. These included silver and gold, furs, and timber as well as cash crops—particularly sugar and tobacco. These proved astonishingly lucrative when processed and sold on European markets and served as a major source of revenue.
The aim of mercantilism was the creation of a positive balance of trade. Securing a positive trade balance was viewed as essential by mercantilist promoters, and colonies played a direct role in this by serving as exclusive, captive markets for finished goods manufactured in the mother country. In other words, according to mercantilist theory, European nations could secure raw materials cheaply and sell finished goods to other European nations and to their colonies at a higher price.
In order to maintain a monopoly over trade with the colonies, European monarchies established laws and monopolies. The Spanish asiento, for example, was a recognized monopoly over the West African slave trade that passed to England in the eighteenth century after a series of wars. The Navigation Acts, first passed by Parliament under Oliver Cromwell, forbade English colonies from shipping goods on ships belonging to other countries, particularly the Netherlands. And of course, the desire to ensure the profitability of tea for the royally-chartered East India Tea Company led Parliament to pass unpopular legislation in the colonies. The same was true of the Sugar Act of 1764 and the Townshend Duties of a few years later, each of which were intended to tighten control over trade with the American colonies in accordance with mercantilist theory.
The British established colonies for many reasons. One purpose for having colonies was so that the British could profit economically. The British needed raw materials in order to make products in their factories in Great Britain. It was cheaper for the British to establish colonies and get the raw materials from those colonies than it was for the British to buy those raw materials from other countries. Once the British got the raw materials, they manufactured products that they could then sell to the colonies. Thus, by having colonies, the British had a guaranteed market for the products that were made in their factories. This helped Great Britain’s economy, and it helped Great Britain profit from having the colonies.
The British established rules to help make sure this arrangement would work. For example, the colonists had to buy certain products only from Great Britain. The colonists also had to use only British ships to ship certain items. While these rules were loosely enforced, they still helped the British industries grow and prosper.
The colonies had an important role in the system of mercantilism.
First and foremost understanding the concept of mercantilism is essential. Mercantilism is intended to function as an economy by which a nation, such as England or Great Britain obtains colonies throughout the world. Those colonies in return are to supply the mother country with wealth. The American colonies role in mercantilism was to do this very thing; early on, dating back to Jamestown, the colonies provided tobacco; eventually other valuable cash crops were sent back such as indigo. The other arena of this topic is just simply the vast amount of natural resources the colonies could also provide. Such resources as lumber were extremely valuable to British trade because of their limited amount of it in Europe. Lastly, one cannot go without understanding that the colonies also acted as very lucrative market place for British goods. Britain, in a mercantilistic economy, took raw materials and made them into finished products and then sold them back to the colonists. When the colonist later in the colonial era began to trade with other areas world themselves, and bypassed direct trade with England, trade restrictions were placed upon the the Colonies to prevent this occurring. This of course demonstrates the importance of the Colonies in British mercantilism.
Under the mercantilist system, the role of a colony was to help its "mother country." The mother country wanted to export things that were more valuable than whatever it had to import. The American colonies' role in the British mercantilist system was to help make this happen. They were supposed to provide products that could be exported by England and they were supposed to buy valuable things from England.
This meant a couple of things. First, it meant that the colonies would not be allowed to export things directly to other countries. Instead, they had to send them to England first so England could benefit when the goods were exported. Second, it meant that the colonies were not allowed to make things that would compete with things made in England. England wanted the colonists to import things, not to make their own.
All in all, then, the colonies' role was to provide things that the British could export and buy things from Britain. In both ways, they would help England be able to export more than it imported.