1. 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.

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

3. 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)
Spain built its bullion by conquering the Aztecs & Incas
mercantilism gave govts. a step-by-step plan to get rich:

4. 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)
3. keep foreign goods out by placing high tariffs (taxes) on them
4. prevent colonies from trading with other nations
5. help businesses set up colonies

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

6. C. Risk-taking Entrepreneurs
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
merchants would share profits and/or losses
wealth from trade created a new middle class—made of merchants & artisans
middle class earned its income by investing in commerce

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

8. 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
led to a belief in free enterprise—freedom of businesses to compete for
profits without govt. involvement
this idea would finally take hold
during the Industrial Revolution