CHAPTER 14
THE UNIFICATION OF
WORLD TRADE
*By 1500, capitalism became the emerging economic
system of the world
*Capitalism is dedicated to the pursuit of private
economic profit through the private ownership of
of wealth & the means of producing wealth.
Decisions on prices, production, & distribution of
goods are made within the free, competitive
Mercantilism also emerged as an economic policy
by many European nations between the 16
th&
18
thcenturies. It aimed to strengthen a nation’s
economic power at the expense of rivals by
stockpiling reserves of gold & silver by regulating
trade
Capitalists & Governments
*Capitalists regularly persuaded gov’ts to support
& protect their money-making projects. In
return, c-ists lent financial support to the
government & produced taxes for the state
Adam
Smith
Smith argued that:
-Wealth should be measured by productivity
& trade, not precious metals
-Productivity increases & the economy
improves when workers specialize in what
what they do best, then exchange their
products in the free market
-Unwanted goods produce no profit, supply &
demand leads to goods customers will buy
-Wealth is produced by people pursuing their
own economic self-interest (not to be
confused with greed) & profits are
re-invested to increase production
Laissez-faire
*Smith believed gov’ts should keep its “hands off”
and the free market would deal with most
problems & correct most economic imbalances
(concept of the “invisible hand”)
*To Smith, gov’ts necessary role in economic
growth was crucial in providing security,
building & maintaining public works (roads,
canals, bridges, harbors), providing public
education, & breaking up monopolies
4 Voyages of Christopher
Columbus (1492-1504)
showed the Spanish crown
that America was full of
opportunities for
agricultural development,
religious conversion, and
Spain’s New World Conquests
Hernán Cortés
Francisco Pizarro
Conquered Aztecs of Mexico in 1521
Conquered Incas of Peru in 1532
Both managed to conquer the largest empires
in America with a few hundred men
Reasons for Spanish Victories
Native Americans were divided and the
Spanish found many allies willing to help
Reasons for Spanish Victories
Superior Spanish military technology
(firearms, steel armor & weapons, the horse)
and organization
Reasons for Spanish Victories
Highly centralized American empires were
demoralized when Moctezuma II (Aztec) and
Atahualpa (Inca) were captured & murdered
Moctezuma captured by Cortés
Reasons for Spanish Victories
European diseases, such as smallpox,
severely weakened native populations
*Native Americans were enslaved & forced to
work in cruel conditions
*Attempts were made to convert them to
Christianity
*Gold & silver were the most valuable exports
from the Americas in the 16
thcentury
Merchant Profits
Bulk of profits did not go to Spain, which lacked
commercial infrastructure.
Experienced merchants of Europe arranged
necessary services
Welfare and Bankruptcy
Charles V used Spanish
profits for personal goals
& religious wars,
bankrupted Spain
Africa
-Sought souls for Christianity, gold, grain, fish,
and slaves to work sugar plantations
-Built forts along African coast for trade but
did move inland in some areas
Brazil
-Initial contact an accident of weather
-Seen as a consolation prize after rest of Europe
acquired sugar plantations in Caribbean
-Profit came from gold mining with slaves,
but no long term benefit for Portugal
Portugal’s Empire
Indian Ocean
-Fought their way into Asian ports and economy during 16th century
-Forced ocean traders to pay them a tax to pass -Corrupt trade officers, undisciplined military, lack of man power prevented continuation of system -More powerful European nations (Netherlands, France,
England) entered the region in force during 17th century
Lessons From Spanish and Portuguese Empires
-Exploitation of people and resources not the key to wealth -Must have economic infrastructure to use wealth (banks, efficient means of transportation, established
strategies for investment of capital)
-Both countries were hierarchical as nobility used trade
wealth for personal rather than investment goals to buy land, then stopped trading
-Culturally, they were successful as their languages & culture still dominate Latin America
The Reformation
*By 1500s, many Catholics felt the Church had
strayed from simple message of Jesus
*Martin Luther, a pious German monk claimed
the Church was corrupt &
held too much power over
individual conscience
*Church officials were not
needed to mediate between
humans and God
*Selling of indulgences by the
church was the final straw
The Reformation
*1517 – Luther nailed 95 Theses (statements of his beliefs) to the Castle Church in Wittenberg, Germany
*Urged a religious revolt from within the Church
*Kings of Denmark & Sweden supported Luther, as well as many local German rulers
*These areas became followers of Protestantism (Lutherans in U.S.) *Spain was the only major
European power that remained strictly Catholic throughout the Reformation
The Reformation
John Calvin
– Swiss preacher who, like Luther, preached the supremacy of theindividual over the church. Taught that God granted salvation to whomever He chooses regardless of individual behavior. Calvinism spread in western & central Europe.
(Known as Presbyterians in U.S.)
Henry VIII of England
also split from the Church by asserting personal authority over all Church establishments in England. Originally was done to gain a divorce which the Pope had denied to Henry. Became the Anglican Church (Episcopalians in U.S.)Catholic (or Counter) Reformation
Council of Trent (1545-1563) was Catholic Church response to Reformation
-Reaffirmed basic doctrines
-Reasserted necessity of celibate clergy
-Called for greater religious devotion from clergy -Created religious orders to purify Church (Jesuits) -Church wanted single universal church while
Dutch Republic, France, and England
Spanish Defeats
-Netherlands (today’s Holland & Belgium)revolted against Spanish authority, inspired by Protestants -Elizabeth I of England opposed Spanish power and supported Protestants across Europe
-Defeat of Spanish Armada in 1588 started long era of decline for Spain
-Flow of gold from Americas ended in mid-1600s
The Dutch: Seaborne Merchant Enterprise
-Had most efficient economy in early 1600s -Fishing was dominant industry but also were efficient farmers who introduced crop rotation -Dominated northern European shipping
-Had developed commercial institutions
-Displaced Portuguese in Asia & developed trade route to Java & Indonesia
-Reached Caribbean, Brazil, and North America -Ultimately could not overcome competition from English & French
France: Consolidating the Nation
*40 years of civil war between Catholics & Huguenots (French Protestants) had weakened the country
*Henry IV (1589) was a Huguenot but converted to Catholicism to bring peace & stability
*Issued Edict of Nantes (1598) which gave Huguenots
same rights as Catholics *Assassinated by a
-Louis XIII (1610) followed Henry & encouraged nobles to invest heavily in trade, built
up the military, & made a truce with the Huguenots
-Louis XIV (1643) made France the most powerful country in Europe
-With help of advisor Jean-Baptiste
Colbert, pursued mercantilist policies & increased gov’t control of the economy
LOUIS XIII
Britain: Establishing Commercial Supremacy
-Won right to transport all Spanish slaves (asiento) in wars with Spain in early 1700s
-Won control of North America through wars with France, who lost all N. American holdings by 1763 -Dominant because of business sophistication
-Created the Bank of England (1694) & earned the trust of international bankers
The Nation-State
-Nation-State - a geographic territory with an independent government, a shared language and history, and a sense of shared ethnic identity
-Developed in Europe as empires dissolved
-Efficient government and interest in welfare of the people -Competition over trade and colonies spurred development of nation-state
Russia Under Peter the Great
*Russia isolated from Europe, formation of modern state began after overthrow of Mongols in 1480 *Tiny urban trading class & few city markets
*Most were serfs tied to the land
*Peter I (1682-1725) the Great, wanted cultural as well as economic development based on ways of western Europe
*Saw Sweden as greatest enemy, and fought 2 wars against them
*Made major reforms in
administration that made his bureaucracy more efficient
*Invited military leaders of western Europe to train & lead his troops
Ottomans and Mughals
-Rise and decline paralleled Spain and Portugal-Ottomans did not control their own trade, authority of the Ottoman Empire was undermined in the 1500s in part because of open trade with
the English and the Dutch
- Emperor Akbar built Indian Mughal empire (1556-1605)
-Fostered widespread economic activity, nationalized monetary system
-Could not protect coastal & oceanic trade
-Trade relations were personal, not corporate
Ming and Qing Dynasties in China
-Ming withdrew from ocean commerce & focused on inland transportation canals
-Western presence was severely limited
-Chinese only interested in silver as payment
-Qing (1644-1911) continued patterns & managed to keep European merchants out
Tokugawa Japan
-Welcomed western missionary Francis Xavier as avenue to western culture and trade (1549)
-Growth and power of west prompted restriction and
expulsion of most westerners (by 1624) and persecution of Japanese Christians (1637-38)
-Consolidation of government
under control of samurai (warrior class) and chonin (wealthy
