Western Civilization

region in the north, and central Europe, whose inland

trade depended on the Rhine and Danube Rivers. As

overseas trade expanded, however, the Atlantic sea-

board began to play a more important role, linking the

Mediterranean, Baltic, and central European trading

areas together and making the whole of Europe into a

more integrated market that was all the more vulnera-

ble to price shifts.

The commercial expansion of the sixteenth and sev-

enteenth centuries was made easier by new forms of

commercial organization, especially the joint stock

company. Individuals bought shares in a company and

received dividends on their investment while a board

of directors ran the company and made the important

business decisions. The return on investments could be

spectacular. During its first ten years, investors

received 30 percent on their money from the Dutch

East India Company, which opened the Spice Islands

and Southeast Asia to Dutch activity. The joint stock

company made it easier to raise large amounts of capi-

tal for world trading ventures.

By the seventeenth century, the traditional family

banking firms were no longer able to supply the numer-

ous services needed for the expanding commercial capi-

talism. New institutions arose to take their place. The

city of Amsterdam created the Bank of Amsterdam in

1609 as both a deposit and a transfer institution and

the Amsterdam Bourse, or Exchange, where the trading

of stocks replaced the exchange of goods. In the

first half of the seventeenth century, the Amsterdam

Exchange became the hub of the European business

world, just as Amsterdam itself had replaced Antwerp as

the greatest commercial and banking center of Europe.

Despite the growth of commercial capitalism, most

of the European economy still depended on an agricul-

tural system that had experienced few changes since

the thirteenth century. At least 80 percent of Euro-

peans still worked the land. Almost all of the peasants

of western Europe were free of serfdom, although

many still owed a variety of feudal dues to the nobility.

Despite the expanding markets and rising prices, Euro-

pean peasants saw little or no improvement in their lot

as they faced increased rents and fees and higher taxes

imposed by the state.

Mercantilism

Mercantilismis the name historians use to identify a

set of economic tendencies that came to dominate eco-

nomic practices in the seventeenth century. Funda-

mental to mercantilism was the belief that the total

volume of trade was unchangeable. Therefore, states

protected their economies by following certain princi-

ples: hoarding precious metals, implementing protec-

tionist trade policies, promoting colonial development,

increasing shipbuilding, supporting trading companies,

and encouraging the manufacturing of products to be

used in trade.

According to the mercantilists, a nation’s prosperity

depended on a plentiful supply of bullion (gold and sil-

ver). For this reason, it was desirable to achieve a

favorable balance of trade in which goods exported

were of greater value than those imported, promoting

an influx of gold and silver payments that would

increase the quantity of bullion. Furthermore, to en-

courage exports, governments should stimulate and

protect export industries and trade by granting trade

monopolies, encouraging investment in new industries

through subsidies, importing foreign artisans, and

improving transportation systems by building roads,

bridges, and canals. By imposing high tariffs on foreign

goods, governments could keep them out of the country

and prevent them from competing with domestic

products. Colonies were also deemed valuable as sources

of raw materials and markets for finished goods.

The mercantilists also focused on the role of the

state, believing that state intervention in some aspects

of the economy was desirable for the sake of the

national good. Government regulations to ensure the

superiority of export goods, the construction of roads

and canals, and the granting of subsidies to create

trade companies were all predicated on government

involvement in economic affairs.

Overseas Trade and Colonies:

Movement Toward Globalization

Mercantilist theory on the role of colonies was

matched in practice by Europe’s overseas expansion.

With the development of colonies and trading posts in

the Americas and the East, Europeans embarked on an

adventure in international commerce in the seven-

teenth century. Although some historians speak of a

nascent world economy, we should remember that

local, regional, and intra-European trade still predomi-

nated. About one-tenth of English and Dutch exports

were shipped across the Atlantic; slightly more went to

the East. What made the transoceanic trade rewarding,

however, was not the volume but the value of its

goods. Dutch, English, and French merchants were

bringing back products that were still consumed largely

by the wealthy but were beginning to make their way

Toward a World Economy 353

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

`ˆÌi`Ê܈̅Ê̅iÊ`i“œÊÛiÀȜ˜ÊœvÊ

˜vˆÝÊ*ÀœÊ*Ê

`ˆÌœÀÊ

/œÊÀi“œÛiÊ̅ˆÃʘœÌˆVi]ÊۈÈÌ\Ê