The Commercial Revolution

17th CENTURY EUROPE

Although most of Europe remained agricultural during this period, the fastest growing part of the European economy was the trade of goods. This was due to European exploration.

Why Early Leaders Declined

• Spain and Portugal – very wealthy in 16th century

• from New World gold– Spent money on wars and luxuries– Did not have to make things

• could buy them– Did not have to improve agriculture

• could buy food– Eventually money ran out

Why Early Leaders Declined

• Italy was a renaissance center of trade and manufacture– But no colonies in New World– Old power structures

prevented change

Venice, Italy

Dutch East Indies Company1602-1798

• Netherlands– Half the population lived in

cities: industrial– Prosperous shipping, trading:

Middlemen– Money lending allowed– Protestant

• Spain wages war on Protestantism in Netherlands

• Dutch send own ships to Indian Ocean: – Dutch East Indies Company

       

                                                                                                                                                                  

Dutch East Indies Company1602-1798

• Soon dominant in Spice Trade

• Virtual Monopoly on spice Islands of Indonesia

British Rise

• British pirates– better ships, guns

• American Colonies– settled by dissidents to start a new

life • Britain ahead of Europe in

– Textiles– Iron– Coal– Agriculture– Roads– Freedoms

http://keidahl.terranhost.com/Spring/EUH3501England/ImagesElizabethI.htm

Queen Elizabeth, 1600

GLOBAL TRADEThe Commercial Revolution in Europe marked an important step from Europe being a local economy TO the formation of a truly global economy.

TRADE

• People began to produce more goods for sale rather than for their own use.

• Europe imported goods from the Americas, Ming China, and India.

• Europe exported goods such as woolen cloth, lumber, and finished goods.

MERCANTILISM

European kings hoped to increase their power through the system of mercantilism.

Mercantilism - an economic system used to unify and increase the power and monetary wealth of a country by strict government regulation of trade and foreign trading monopolies.

MERCANTILISM• Mercantilists removed

trade barriers with other countries.

• Wealth and power were based on amassing gold and silver to pay soldiers to defend the state.

• For this reason, European countries began to establish overseas colonies.

Bullionism (gold)

Bullionism was the belief that the economic health of a nation could be measured by the amount of precious metal, gold, or silver, which it possessed.

The rise of a money economy, the stimulation produced by the influx of bullion from America, the fact that taxes were collected in money, all seemed to support the view that hard money was the source of prosperity, prestige, and strength.

Bullionism dictated a favorable balance of trade. That is, for a nation to have gold on hand at he end oft he year, it must export more than it imports. Exports were later defined to include money spent on freight, or insurance, or travel.

Each nation tried to achieve economic self-sufficiency. Those who founded new industries should be rewarded by the state.

MERCANTILISM• What is the easiest

way to ensure you have the resources you need?– Take over that land,

and take the resources (colonies)

– This led to a series of wars between the major European powers. They each wanted control for resources.

TRANS-OCEANIC TRADE

• The creation of European colonial empires resulted in increased trans-oceanic trade (trade across oceans).

• As a result, new institutions were created to aid people in trade. These included– Banks– Stock Exchanges– Insurance Companies

England vs. SpainEngland was late in joining the competition for Asian trade, but England also reached out. In the New World England and Spain were bound to come in conflict. England had participated little in the process of exploration yet insisted that its occupation provided a legitimate claim to title. Of course, Spain claimed that discovery provided the claim to title. The Spanish not only desired to monopolize the trade of their colonies, but the also wished to prevent the English from establishing a foothold which would constitute a base for penetration of Spanish territory. Generally speaking, the English disliked the Spanish.

New Colonial Rivals (slave trade)New Colonial Rivals (slave trade)

Trans-Atlantic Slave TradeTrans-Atlantic Slave Trade

“Coffin” Position Below Deck“Coffin” Position Below Deck

Slave ShipSlave Ship

Favorable Balance of Trade

Regulated commerce could produce a favorable balance of trade. In general, tariffs should be high on imported manufactured goods and low on imported raw material.

CAPITALISM

• The rise of capitalism occurred as the private ownership of goods and opportunities for investment led to a merchant class.

• Business owners risked their capital (money) in a business in order to make profits.

• The growth of new businesses led to a demand for huge sums of money.

• Over time, a middle class grew and money became a sign of wealth in the growing social classes.

Merchant Class

JOINT-STOCK COMPANIES• To raise the large sums,

joint-stock companies were formed. They were privately owned companies that sold stock to investors. – Investors bought the stock for

a share of the profit.– It reduced individual risk in

new expeditions. – When investors purchased

stock, the companies accumulated money to buy large amounts of raw materials.

Investors buying stock

BANKING• Banks developed new

ways of raising and lending money.

• Bankers and merchants became more influential in government.

• Banking became a respectable profession as the Church eased restrictions on money lending and the charging of interest.

THE COMMERICAL REVOLUTIONA SUMMARY

• The Commercial Revolution occurred as Europeans entered a new age of global trade.

• As a result of the Commercial Revolution, Europeans had many more products from which to choose.– tea, sugar, coffee, cotton cloth– more books and new forms of learning and

entertainment– more choices in occupation as well as consumption– these advances led to a rising standard of living