The World Economy Early Modern World CE Early Modern World CE

Commercial Revolution period of European economic expansion, colonialism, and mercantilism which lasted from approximately 1450 until 1650 Increase in… –general commerce –non-manufacturing jobs –banking, insurance, and investing build vast, international trade networks New sources of wealth New ways to spend wealth period of European economic expansion, colonialism, and mercantilism which lasted from approximately 1450 until 1650 Increase in… –general commerce –non-manufacturing jobs –banking, insurance, and investing build vast, international trade networks New sources of wealth New ways to spend wealth

Commercial Revolution New Business Methods –Banking families –Joint-stock companies Increase in Money –Led to inflation New Business Methods –Banking families –Joint-stock companies Increase in Money –Led to inflation

Mercantilism Theory that a state’s power depended on its wealth Mercantilism fueled colonialism under the belief that a large empire was the key to wealth Sought to export more than import- balance of trade Theory that a state’s power depended on its wealth Mercantilism fueled colonialism under the belief that a large empire was the key to wealth Sought to export more than import- balance of trade

2 ways to gain wealth/power 1.Extract gold/silver from your (or others who you have conquered) mines 2.Sell more goods to other countries to get their gold - Balance of Trade: difference in value between imports and exports over time 1.Extract gold/silver from your (or others who you have conquered) mines 2.Sell more goods to other countries to get their gold - Balance of Trade: difference in value between imports and exports over time

Problems to Mercantilism Not sustainable: inflation Not a way to increase wealth or benefits to all societies –Zero sum: your benefits/costs come directly from another Not sustainable: inflation Not a way to increase wealth or benefits to all societies –Zero sum: your benefits/costs come directly from another

Mercantilism developed as an economic system based on: private property. the use of markets for basic organization of economic activity. a focus on self-interest of the state, the government exercising control over production, exchange, and consumption. the state being preoccupied with accumulating national wealth in form of gold and silver. the best way to acquire gold and silver being through trade private property. the use of markets for basic organization of economic activity. a focus on self-interest of the state, the government exercising control over production, exchange, and consumption. the state being preoccupied with accumulating national wealth in form of gold and silver. the best way to acquire gold and silver being through trade

Early Capitalism –Mercantilism leads to form of early capitalism Private parties offer goods and services Own means of production Private initiative, rather than initiative of gov’t –Impact on Rural Life: Improved access to manufactured goods Increased opportunities in urban centers lower population in rural areas –Mercantilism leads to form of early capitalism Private parties offer goods and services Own means of production Private initiative, rather than initiative of gov’t –Impact on Rural Life: Improved access to manufactured goods Increased opportunities in urban centers lower population in rural areas

Capitalism Adam Smith, The Wealth of Nations (1776) –Capitalism would ultimately improve society as a whole –Free-market economy –Prices and wages set by competition –Controlled by Individual and private interests –Laissez-Faire –“The Invisible Hand” - self-regulating and self-correcting economy Adam Smith, The Wealth of Nations (1776) –Capitalism would ultimately improve society as a whole –Free-market economy –Prices and wages set by competition –Controlled by Individual and private interests –Laissez-Faire –“The Invisible Hand” - self-regulating and self-correcting economy