The Commercial Revolution

The Birth of Capitalism: The Commercial Revolution

Commercial Revolution (c. 1500-1700)

• A significant period marking the shift in economic practices and social structures.

What was the Commercial Revolution?

• Definition: A gradual economic transition from feudalism to industrial capitalism, representing a fundamental change in how economies functioned.

What Caused the Commercial Revolution?

Causes

1. The Crusades: Expansions in trade around the Mediterranean Sea led to the rise of powerful Italian city-states as mercantile forces.

2. The Black Death: Resulted in mass mortality in Europe, causing a labor shortage that allowed surviving peasants to negotiate higher wages and gain more personal freedoms.

Additional Causes

3. Colonialism: The establishment of new empires by the English, French, Spanish, and Portuguese in the Americas resulted in an influx of raw materials that enriched Europe.

4. Mercantilism: This economic theory focused on maximizing profits through exports and was pivotal in structuring capitalistic practices.

5. The Printing Press: Increased the accuracy and detail of record-keeping, facilitating better business practices and economic management.

What were the Results?

Economic Impact

• The prices of goods became directly linked to supply and demand, shifting business focus solely toward profit.

Social Changes

• End of Feudalism: The feudal system, based on land and loyalty, was supplanted by a capital-dominated structure emphasizing monetary wealth.

• Urbanization: Many individuals migrated to cities for job opportunities in manufactories, although agriculture remained the primary employment for much of the global population.

Investment and Business Development

• Emergence of joint-stock companies allowed investors to pool resources, minimizing risk.

  • Examples:

    • 1600: English East India Company

    • 1602: Dutch East India Company

    • 1664: French East India Company

• Rise of manufacturing paired with private investment led to larger businesses and set the stage for the Industrial Revolution.

The Commercial Revolution: Key Changes

• Increased Demand for Labor:

  • Movement of serfs to towns marked a labor shift where workers were compensated for their work.

• Boost in Trade:

  • Expansion of cash transactions, banking, and lending facilitated more business growth.

• Wealth Accumulation:

  • Merchants gained wealth and power, strengthening their influence.

  • Increased taxes from merchants augmented the king's power and wealth.

What is Capitalism?

• Definition: Capitalism is characterized as an economic and political system where private owners control trade and industry for profit, contrasting with a state-controlled mercantilist system.

  • Example: The United States exemplifies a modern capitalist economy.

Effects of the Commercial Revolution

• Noteworthy profits emerged in sectors like mining, shipbuilding, textiles, and food.

• Enhanced accessibility to various services.

• Transition of many individuals in Western Europe out of serfdom, though it placed a burden of increased rents and higher taxes to sustain the capital-based system.

• The rise of significant and visible economic inequality contributed to numerous revolutions throughout the 1800s and 1900s.