European Expansion and Business Notebook # 6 Analyze the beginnings of capitalism, and the ways it was affected by mercantilism, the developing market economy, international trade and the rise of the middle class.

trading among the Americas, Europe, & Africa changed the way nations earned wealth trading among the Americas, Europe, & Africa changed the way nations earned wealth govts. became involved in business ventures (like starting colonies) govts. became involved in business ventures (like starting colonies) major nations involved were Portugal, Spain, England, France, & the Netherlands major nations involved were Portugal, Spain, England, France, & the Netherlands

A. A New Economic Theory European economic thinkers came up with mercantilism—the theory that a nation became powerful by building up a large supply of bullion (gold & silver) European economic thinkers came up with mercantilism—the theory that a nation became powerful by building up a large supply of bullion (gold & silver) Spain built its bullion by conquering the Aztecs & Incas Spain built its bullion by conquering the Aztecs & Incas mercantilism gave govts. a step-by-step plan to get rich: mercantilism gave govts. a step-by-step plan to get rich:

1. export (sell to other countries) more goods than you import (buy from other countries) 1. export (sell to other countries) more goods than you import (buy from other countries) 2. build colonies that will supply raw materials & products not available at home (you won’t have to buy them & you will have a place to sell goods) 2. build colonies that will supply raw materials & products not available at home (you won’t have to buy them & you will have a place to sell goods) 3. keep foreign goods out by placing high tariffs (taxes) on them 3. keep foreign goods out by placing high tariffs (taxes) on them 4. prevent colonies from trading with other nations 4. prevent colonies from trading with other nations 5. help businesses set up colonies 5. help businesses set up colonies

B. Commercial Revolution new ways of doing business sparked a commercial revolution new ways of doing business sparked a commercial revolution commerce—buying & selling of goods in large quantities over long distances commerce—buying & selling of goods in large quantities over long distances make decisions based on supply & demand make decisions based on supply & demand demand—what people want & at what price demand—what people want & at what price supply—what people want to sell & at what price supply—what people want to sell & at what price items difficult to get  pay a lot of $$ items difficult to get  pay a lot of $$ plentiful or people don’t want it  cheap plentiful or people don’t want it  cheap sugar trade was prosperous because it was cheap in Caribbean colonies (plentiful) & expensive in Europe (scarce) sugar trade was prosperous because it was cheap in Caribbean colonies (plentiful) & expensive in Europe (scarce)

C. Risk-taking Entrepreneurs entrepreneur—person who risks money in hopes of earning a profit entrepreneur—person who risks money in hopes of earning a profit some projects were too big for just one person, so govts. encouraged joint-stock companies— allows individuals to buy stocks (shares) in a company some projects were too big for just one person, so govts. encouraged joint-stock companies— allows individuals to buy stocks (shares) in a company merchants would share profits and/or losses merchants would share profits and/or losses wealth from trade created a new middle class— made of merchants & artisans wealth from trade created a new middle class— made of merchants & artisans middle class earned its income by investing in commerce middle class earned its income by investing in commerce

D. Seeds for Capitalism capitalism—a system where people, not govts., own property, make goods, & buy and sell them freely capitalism—a system where people, not govts., own property, make goods, & buy and sell them freely seeds that led to capitalism: seeds that led to capitalism: 1. build up of capital (money) to invest in business 1. build up of capital (money) to invest in business 2. growth of middle class that supported commerce 2. growth of middle class that supported commerce 3. raw materials (from colonies) to produce manufactured goods 3. raw materials (from colonies) to produce manufactured goods 4. markets to sell manufactured goods 4. markets to sell manufactured goods

critics of mercantilism said that for capitalism to grow, things had to change critics of mercantilism said that for capitalism to grow, things had to change Adam Smith wrote Wealth of Nations, in which he said that govts. need to stay out of business Adam Smith wrote Wealth of Nations, in which he said that govts. need to stay out of business led to a belief in free enterprise—freedom of businesses to compete for led to a belief in free enterprise—freedom of businesses to compete for profits without govt. involvement profits without govt. involvement this idea would finally take hold this idea would finally take hold during the Industrial Revolution during the Industrial Revolution