The Commercial Revolution 13 th -18 th c. Objective: What was the Commercial Revolution and what role did economics play in peoples’ lives? Do Now: Where in the world do your food, clothes, and luxury goods come from? Using your phone look up the definition of: commercial revolution Mercantilism Capitalism Write them in your notes.

17 th 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 and re-establishing trade networks.

Cottage Industry Advantages & disadvantages

Advantages of the Cottage Industry System 1.Peasants could supplement their agricultural incomes.  Take advantage of winter months when farming was impossible. 2.Merchants could avoid the higher wages and often demanding regulations of urban labor.  Easier to reduce the number of workers when the economy was bad. 3.Merchants could acquire capital, which would later play a part in funding industrialization itself.  Peasants acquired future skills. 4.Young people could start separate households earlier, thus contributing to population growth.

Disadvantage of the Cottage Industry System?? When demand rose [which it did in the 18c] this system proved inefficient.  Merchant-capitalists found it difficult to induce peasant-workers to increase their output. This dilemma eventually led to the factory system  All the workers were concentrated in one place under the supervision of a manager.  Water or steam power could easily be applied there.

The Commercial Revolution The expansion of trade and business that transformed Europe during the 16 th and 17 th Centuries Most trade took place in towns Many serfs left the manor and urban centers (cities) increased in population Trade routes were re-established with the East and North Africa (WHAT CAUSED THIS?)

Causes of the Commercial Revolution Population growth – Since 1450 slow recovery from Black Death – Continues to rise until mid-17 th century when religious and dynastic wars and new plagues led to the “age of crisis” – Growth of middle class – wealthy merchants (think Fuggers & Medicis) Increased Agricultural Productivity – Cultivation of more land (e.g. forests and marsh lands; reclaiming land from North Sea) – Results in agricultural surplus = additional money for investment – Rural industry– primarily woolen and textile manufacturing Shift in Economic Centers – Italy fades away and Spain, France, Dutch Republic and England emerge as major European powers

Causes of Commercial Revolution Expansion of trade within Europe – Growth in small scale manufacturing – Principal European Waterways Rhine, Scheldt, Danube, Seine, Rhone Merchants are backed by national monarchies – Intercursus Magnus: Henry VII (1496) with Flanders – 16 th century France with Ottoman Empire – 18 th century France – Jean Baptiste Colbert’s reforms

Causes of Commercial Revolution Growth of Trade outside of Europe – 16 th century = Mediterranean, Low Countries, Baltic region – 17 th century = Dutch (UPS of Europe), England, France Opening of the World Market – East Indies: spices and pepper – West Indies & Brazil: sugar, molasses, rum – New World: tomatoes, corn, bell peppers, tobacco, potatoes – Asia: coffee, tea, cotton – Baltic: timber, wheat – France: wine – Spain: wool, fruit – Italy: silk

Causes of Commercial Revolution Growth of banking – Banks of Amsterdam and London – Bills of Exchange – birth of the stock market – Amsterdam Bourse, 1609 – Joint-stock companies Investors buy stock shares in company in return for permanent funding of capital – unless they go bankrupt!! – 1600 English East India Company – 1602 Dutch East India Company – 1664 French East India Company

Causes of Commercial Revolution How to make ENORMOUS profits: – Shipbuilding – Mining & metallurgy (new extraction technology) Jacob Fugger (bankrolled Charles V) = monopoly in silver, copper and mercury mines = 50%+ profit per year BUT Charles V can’t pay back his loans AND House of Fugger goes bankrupt HOWEVER most of Europe still dependent on agricultural economy – 80 % of Europeans worked the land – Western peasants are free from serfdom BUT they still pay feudal dues, increased rents, and higher taxes – Eastern peasants suffer under resurgence of serfdom = even more bound to the land and feudal lord than before

GLOBAL TRADE The 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.

European kings Increased their wealth and power through conquest and colonization

While European Kings and capitalists increased their wealth, Native American Indians and Africans were terribly exploited.

Three-Field System BeforeAfter FallowFarm Fallow Farm Fallow means left unfarmed

The Three-Field System Could farmers yield more crops using half of their land or two-thirds of their land?

The Guild A group of individuals working together to improve economic and social conditions for its members – Blacksmiths – Wine makers – Bakers – Artisans What is the purpose of a guild? What is an example of a guild?

The Commercial Revolution Impact Merchants evolve from small roving traders to large businessmen operating from a central base of operations. Merchants evolve from small roving traders to large businessmen operating from a central base of operations. – Establishes offices in other cities, hires managers, and keeps regular correspondence on activities. – Allowed for diversity of interests. Provided opportunity and freedom to more individuals. Provided opportunity and freedom to more individuals. Marco Polo

Impact of Commercial Revolution sixteenth century change the social structure of the West absolute monarchy of the seventeenth century use of mercantilism as state-controlled economic system.

Mercantilism in History Between the 15 th and the 18 th centuries in Europe, powerful states were created and were dedicated to the pursuit of economic power and wealth. Governments organized their then-limited capabilities to increase the wealth of the country. Mercantilist governments promoted… exports over imports industrialization over agriculture the protection of domestic production against competition from imports the intervention in trade to promote domestic employment

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. -the strength of a nation-state came from its gold supply, a nearly self-sufficient economy, and expansion of trade.

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.

Factors Of Mercantilism Involved a number of things that a nation needed to control. Involved a number of things that a nation needed to control. – Protection of domestic industries with high tariffs (taxes on imports). – Low tariffs on raw materials. – Regulation of a nation’s commerce by the government. – Encourage a thriving agricultural base. – Establish power at sea. – Obtain overseas colonies for raw materials and market for excess goods. – Prohibit the export of tools, capital, and skilled labor.

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

CAPITALISM - an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. 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 Commercial Revolution

THE COMMERICAL REVOLUTION A 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

What was the relationship between the rise of capitalism and the decline of feudalism? Middle class gaining power Monarchs gain power Capitalism decreases need for feudalism Increase in trade What impact did capitalism have on the Renaissance? Capitalism  Trade  Money  Using money to fund the arts

Define (using pgs ): Import Export Supply Demand Supply and demand Subsidy Tariff Balance of trade Bullion Mercantilism

Commercial Revolution Summary? What was the commercial revolution? Why was it important? How/why was trade re-established? What do you think the increase in trade did for towns? How did European exploration change the 17 th century?

Critical Thinking 1.Explain the interrelationship between growing markets, inventors, and entrepreneurs. 2.What social problems were emerging in these expanding cities and why was this so?