The Commercial Revolution / The Price Revolution

Political Motives in Exploration

• Spain wanted to beat Portugal to the East

• creating maritime trading empires

• competition between countries to discover (Spain and Portugal along the Iberian Peninsula with compasses, caravel, and astrolabe)

• glory/bragging rights

• Treaty of Tordesillas (1494): created the line of Demarcation (imaginary north and south line from point in middle of North Atlantic, through north pole, and across eastern Asia), Spain got all the Americas, Portugal got Brazil, all rights to trade in Africa, Asia, East Indies and the slave trade; nobody respected it

Economic Motives in Exploration

• source of precious metals: silver, gold → mines
• source of free labor → encomienda
• source of agriculture and food: American potato, tobacco, spices, sugar, drugs!
• source of luxury goods: silk, porcelain, rugs, cotton, jewelry, fine steel
• more customers for goods (force them to buy)
• trade with the East: silver from Americas was tho only thing Chinese wanted
• finding a cheaper way of transporting goods
• creating a maritime trading empire (Manilla→Mexico→Europe→Manilla)
• wool, textile, and spice trading

Social and Religious Motives in Exploration

• Roman Catholic Church wanted to convert and spread
• Fame → Amerigo Vespucci mapped the coast of South America and the Americas are named after him
• spread Christianity (specifically Catholicism because it was believed to be better) → however, religious wars delayed Britain and France
• divine right (superiority complex)
• GOD
• people report back that the new land was like the Garden of Eden
• De las Casas wrote a book on the mistreatment of native slaves in America, so Spain turned to Africa

Other Motives in Exploration

• the thrill of traveling/exploration

Technological advances in exploration

• military fortified stations
• superior firearms (guns)
• compasses
• caravel ships
• astrolabe: could calculate dates and times, measure distances and heights, find stars in the sky (even during the day), and navigate the globe
• germs/disease (smallpox) → gave sickly blankets to non-immune people (natives) causing them to get sick and die
• steel
• horses

Portugal's early lead in the Age of Exploration

• 1450: Portuguese settle on Azores Islands in the mid Atlantic
• 1498: Portuguese navigator Vasco de Gama rounded Africa and found himself in Arab Commerce. Landed on the Malabar Coast in southwest India and found a busy commercial population of the same religion. These people did not know much of Europe but a Jew was able to help translate for de Gama. People realized the Portuguese arrival would disturb their channels of commerce, but de Gama played on local rivalries and loaded his ship with coveted wares. de Gama makes 600 times the investment in his voyage
• 1502: De Gama's second voyage brought a fighting fleet of 21. War erupted between Portugal and the Arab merchants (supported by Egyptians, Turks, and Venetians because they wanted to keep the old trade routes). Portuguese were trained in long wars against the Moors, so no atrocities were too horrible to commit. Cities were devastated, ships were burned, prisoners were butchered (dismembered hands, noses, and ears were sent back as trophies). This was India's introduction to the West
• Portuguese built permanent fortified stations that Goa, Aden, Hormuz, and East Africa
• 1509: Portuguese reached Malacca and went north to China and East to Amboina (Heart of the Spice Islands)
• starting in 1504 (5 years after De Gama's first return), an average of 12 ships per year left Lisbon for the East
• Portuguese created the world's first commercial-colonial empire maintained by superior firearms, seapower with trade, and war + plunder
• 1504: spices in Lisbon bought for a fifth of the price in Venice → desperate Venetians talked of digging a Suez canal as they were hopelessly undersold and their trade was confined to Middle East products

Spain and its conquests

• sponsored Columbus to navigate a route to China/East from crossing Atlantic, hoping to beat Portugal (in reality he had discovered the Americas in 1492)
• because of Columbus's discovery, the new lands were part of composite dominions of the Spanish Crown
• on Columbus's 2nd journey, Spain gave him 17 ships filled with 1500 workman + artisans
• Spanish churchman regarded the new lands as field for crusading and conversion, Spanish Crown saw it as a source of gold and silver, and footloose gentry with warlike habits turned to it for fortunes
• Cortés conquered the Aztecs in Mexico, Pizarro conquered the Incas in Peru: both disposed native empires, created mines for precious metals, and put Indians into forced labor (many died)
• as a result of the rapidly declining native population + church trying to protect their converts, Spanish Crown set restrictions on their exploitation (encomienda) and the importation of African slaves
• 1520: Magellan found a southwestern passage from the Atlantic to Pacific, crossed the Pacific, discovered the Philippines and fought through hostile Portuguese across the Indian Ocean
• with the Treaty of Tordesillas, the Spanish got all the Americas and the Philippines
• Spanish Colonial Rule: empire existed primarily for the benefit of mother country, Indians placed in servitude: worked in mines or agriculture and died in large numbers from European infections, encomienda, black African slavery was less important
• mid 16 century, Spanish America had 2 viceroyalties: Mexico and Peru

Potosí Mines

• 1545: rich silver deposits were discovered at here in Peru (now Bolivia)
• better methods of extracting silver from ore by mercury were developed and the American production of precious metals shot up
• after mid-century, for years, 500,000 lb of silver and 100,000 lb of gold flowed annually from America to Spain
• riches from this funded European projects of the King of Spain
• 1565: Spanish established lucrative trade route between colonies and Mexico and the Philippines, large ships called "Manila Galleons" carried cargos of silver from Acupulco to Manila, silver traded off for Chinese luxury goods and then transported back to Mexico, then Europe
• perhaps 1/3 of all silver extracted from Spain's American colonies went to Asia
• helped create the first modern global network for commercial exchange
• sustained the whole Asian-American-European trading system and enabled Spain to control much of the global market for Chinese products

The Colombian Exchange

• an exchange of goods, ideas, and diseases
• Europeans got potatoes, tobacco, sugar, silver, and gold from Americas
• Europeans gave livestock (meat), wheat, citrus fruits

The Commercial Revolution / The Price Revolution

• A rise in capitalism with middle class merchants taking advantage of urban growth and maritime trade opportunities
• slow and steady rise in prices
• slow and steady modernization of business and banking practices
• state wanted to increase national economy and their economic power

Mercantilism

• exports over imports
• believed there was a fixed wealth worldwide (so each country could get a bit more)
• state was the center of the economy
• placed tariffs on imports
• did not allow manufacturing in colonies → forcing them to buy home country's goods (Benjamin Franklin complained to Parliament)
• prioritized state over individual
• caused the wane of private banks and rise of state banks

"Cottage System"

• also known as the "Putting out" system
• where someone takes a machine and puts in a cottage in the countryside (outside city walls) to avoid guilds

Rise of Capitalism

• Inflation hurt people with fixed income but also provided incentive for enterprising people to make a profit (capitalists)
• people invested funds in business activities in order to make money (capital); opportunities: growing World Trade
• allowed for fluctuations in demand for goods; EX: the tulip bubble
• joint stock companies created for people with moderate means who also wanted to participate in the promising financial ventures
• individual (private) profit

New capitalistic and banking methods

• medieval ideas such as no interest in royal treasuries locked up in chests in royal bedrooms became obsolete
• people needed easier access to money → refined banking techniques from late Middle Ages and Italian Renaissance
• medieval bankers (bills of exchange and complex account books) VS 15th century bankers (checks, bank drafts, double-entry bookkeeping → commercial ventures easier)
• mercantilism led to state banks: controlled profits going to individuals
• however, new banking policies could not ensure that mercantilist governments would grow rich

The Dangers of Overspending, as shown by Spain

• Europeans believed wealth coming in from the New World was primarily payoff from explorations
• Spain capitalized on the wealth from the new world: treasure ships offering unlimited prosperity and power to monarchs
• vast influx of gold was deceiving and the Spanish king wasted it on wars that dominated the 16th and 17th century → Spanish Crown had to declare bankruptcy multiple times over the 16th and 17th century
  • Spain's financial troubles hurt German and Italian merchants but the real burden was placed on Spanish taxpayers (swamped in debt)
• domination of the new world passed on to other countries (Holland and England) who were more efficient
• much of the gold and silver that motivated the expansionist countries did not even end up in Europe, as a large percent flowed East for the purchase of luxury items
• Spain discovered that precious metals were not enough to keep profligate governments in power

Impact of the Age of Exploration For Europeans

• enriched by East Asian economy
• conquistadors went to Arabia (Spanish and Portuguese conquered most of South America)
• explorers travel the seas
• Columbus lied to the Spanish Crown about the Americas
• Spain was unhappy with Portugal getting more land in the Treaty of Tordesillas (1494)

Impact of the Age of Exploration on Politics/Nation

• rise of empires: more economic opportunities, increased Spanish power with Potosí mines (made 1 million coins a year)
• more wars from money because of money from Potosí mines
• rush for empires: more the merrier, more trade, more taxes, more customers, more money!

Impact of the Age of Exploration for Non-Europeans

• Europeans brought smallpox that killed Native Americans (biological warfare → gave natives infected blankets)
• Europeans taxed their crops, goods, metal
• Africans placed in the slave trade
• Cortéz angered natives (Aztecs thought Cortéz was the God Quetzalcoatl and he went to war with them → Aztecs lost economic, social, political power)
• pirates got goods from killing Spanish
• encomienda system to relieve Native Americans of work (they only had to work a certain number of days and had their own land to work)
• cultural collision: North America thought land was shared while the Europeans had a sense of private property

Impact of the Commercial Revolution

• inflation: population steadily rose (recovered from Black Death) → goods became scarce → demand intensified → prices went up (cereal went up fivefold and manufactured goods tripled)
• the tulip bubble: ever-changing free market economy, capitalism
• wage control (to keep citizen from buying expensive imports, mercantilism)
• slow and steady modernization of business and banking practices
• state wanted to increase national economy and their economic power
• Spain ruined by inflation (because of silver from Potosí mines)

The Tulip Bubble

• a capitalistic example of the fluctuation in demand for goods
• in the 16th century, tulips imported were imported into the Netherlands from Turkey
• a Dutch botanist discovered how to grow varied color of tulips
• by 1634, buyers from all over Europe wanted the rare colorful tulips
• 1 tulip bulb sold for 1,000 lb of cheese, 4 ox, 8 pigs, 12 sheep, a bed, and a suit of clothes
• investors rushed to take advantage of the market and supply of bulbs
• and just 3 years later, increased supply drove the price down
• however, when this failed, the Netherlands government stepped in

Impact of the New Economy on Social Classes

• rise in the middle class: joint stock companies allowed investment for all, but were still not given elite privilege
• women lost their jobs
• new social classes in colonies emerged based on race: Castilles (whites born in Spain), Creoles (whites born in Americas), and Mestizos (mixed white and Indian descent)

Impact of the New Economy on New Business Practices

• warehouses were used to store goods (in Amsterdam) and control supply
• banking advancements: checks, bank drafts, double-entry bookkeeping, interest (which was previously illegal because it was seen as unchristian)
• capitalism: investing to make money
• state banks controlled money given to individuals
• joint-stock companies allowed people with moderate means to invest

Joint-stock companies

• allowed ordinary investors to buy shares and commercial ventures by boards of directors to raise capital for trading ventures around the world
• English and Dutch merchants created efficient ones which help them dominate trade in Asia
• EEIC or BEIC (English/British East India Company): created in 1600, had government support but was owned by private investors, had charters giving them power to buy, sell, and wage war
• Dutch United East India Company (VOC): created in 1602, had government support but was owned by private investors, had charters giving them power to buy, sell, and wage war, had a 30% rate of return in the first decade
• these immediately generated huge profit and contributed to the formation of the global trade network