COMMERCIAL REVOLUTION
After a political state was achieved in the sixteenth and the seventeenth centuries i.e countries were formed- it was required to develop the economy , not of a specific town or city but of the entire country. Such application of theories both legal and economic on the now braoder framework of the country has been classified by historians as “THE MERCANTILE SYSTEM”. This was however not a system at all but a set of prevailing economic theories applied by the state in its efforts to obtain wealth and power. The governments of this period had to of necessity think of ways of economic renovation,since they were mostly broke- thus the solving of the riddle of what made countries rich- was imperative at this point.
Europe begins its ascent towards ‘established’ society around the beginning of the eleventh century. As stated by Cipolla, until the eleventh century the arabs regarded western Europe as a nonentity and a land if anything, of barbarians. It is from the year 1000, that the European economy appears to take off and gradually gains ground. By the thirteenth century venetian merchants began to prove their skills in trade as being competent and their business techniques evolved enough to vie with Byzantine merchants. Soon Italy began to dominate trade. BY the fifteenth century some byzantine writers admitted that the west was not a land of primitive barbarians as they had thought it to be. Gradually Italy and the west emerges as ‘developed’ society.
This period of growth( as is characteristic of such periods) was witness to a number of fluctuations in western Europe. Until mid fifteenth century we see long periods of economic stagnation. This is followed by a sudden rise in 1450. The reasons for economic recovery are often too subtle to discern
However Heaton points out that the European economic recovery had begun almost half a century before the voyages. He cites the causes as big innovation in Industry , such as cloth making as leading to the European recovery during this period. In Germany a new metallurgical methods increased the production of metals such as brass and bronze. In England a declining textile industry picked up again and the output increased fivefold. There is also the first use if heavy firearms as well as the development of the printing press. Many countries emerge from war to restore their economies- France from the hundred years war in 1453 and England from the war of roses in 1485.
Further growth is witnessed at the beginning of the fifteenth century with the voyages of discovery spurred on first by the portugese, propelled by the explorations of prince henry the navigator in the mid fifteenth century, then by diaz’s circumnavigation of the cape of good hope and then finally by vasco da gama’s landing at Calicut in search for Christians and spices. These voyages were fuelled by myths such as those of prester john formulated on the scarce remnants of crusading spirit that survived in spain and Portugal- the aim was to defeat the newly arisen ottoman turks.
Columbus discovered the west indies in 1492, moving in apparent search for prester john who would help the Spaniards vanquish the turks from Jerusalem. The initial attempts were met with skepticism, despite this the Spanish were later rewarded with the discovery of a land well stocked with bullion. The north atlantic regions of Greenland and Iceland too saw traffic. Denmark and Sweden both under the same king at this point, considered these regions to be their own. However the English from the Bristol region began to carry trade between the northern atlantic regions , Portugal and England.
The discovery of the new world brought greater quantities of known commodities and a large number of unknown commodities to the European markets.Moreover as Europeans began to settle in their colonies in these newly discovered lands, the demands of these colonies further contributed to growth. Trade and labour were offered new markets. Ship building and transport of goods also became important markets. However the most potent outcome of the discovery of the new world was the influx of Bullion from these regions.
The Americas yielded for the Spanish vast quantities of everthing they required- from familiar and strange goods,to migration,to profitable commerce and shipping and government jobs. The catalogue of resources included cocoa,corn, tobacco and potatoes, mahogany,drugs,diamonds, edible beats as well as gold and silver. The silver mines of Peru and Mexico yielded abundant quantities of silver and the Spanish accounts of this time mention a lavishness in the use of gold in the region.
Soon advanced metallurgical techniques helped increase the quanities extracted, the outpour reached its peak in 1600 and began petering out by 1630. A fifth of the treasure went to the crown and a large part of it was then used to pay merchants or was sent home by the colonists. The Spanish crown prevented piracy of the cargo by sending armed vessels accompanying the merchant ships- flotas. The treasure was usually headed for Seville. From here the part taken by the crown was spent on repaying its German debtors and some was spent on battles. Some part was paid to the representatives of the major banks of the time including the Fugger’s and the weslers or be shipped to Antwerp, now a great financial centre. But after 1560, the revolt of the low countries and the English piratical raids passing through the English channel diverted the flow of silver from Antwerp to genoa. Thus during the fifteenth century the amercian treasure was spread all over Europe. Between 1521 and 1660 abouot 18,000 tons of silver and 200 tons of gold entered spain through the official channels from America. This made a vast addition to sixteenth century europe’s stock of precious metal.
Spain was the richest and most powerful country of the sixteenth century .The men of the time looking to spain for the reasons for its economic success sighted the possession of bullion-gold and silver as the reasons. Believing in gold and silver as the true sources of money; most governments passed laws banning the private acquisition of gold and silver without the king’s license in order to keep within the country all the gold and silver the country already had.
As huberman states those countres that did not possess abundant sources bullion- a favourable balance of trade was suggested by the mercantilist thinkers of the time- the acquisition of wealth from another kingdom through the provision of wares to that kingdom and the reduced acquisition of wares from them— that is exports must be vastly greater than imports. Countries could increase bullion by engaging in foreign trade. The difference between exports and imports would have to be paid in metal.The trick was to export valuable goods- import only what you needed and get the balance in hard cash. This would enable a favourable balance in trade. This meant encouraging industry as industrial goods were more valuable than agricultural goods and thus would sell more to foreign markets- this helped in attaining favourable balance of trade and in making the country more self-sufficient.
Thus countries looked to make their industries prosper- in order to allow favourable balance of trade- so as to gain bullionThe methods employed by the mercantalists to propel industry include :Government bounties- bounties given by the government to producers of certain goods inevitably encourages production. Protective tariffs were provided to infant industries to ensure monopolies in their goods by imposing high tariffs on the same goods being imported over from other countries, skilled workmen who could introduce new trades or methods were being encouraged to settle in the country. Foreign craftsmen were lured with tax-exemption, free dwellings and loans or monopoly, occasionally these workmen were kidnapped and precautions taken against their escape as precautions were taken against the escape of native artisans ans idegenous trade tricks. Inventors of new processes were also aided by the government- prizes were set as bait for those who could help build the home industry, moreover the building of industry according to the mercantalists apart from encouraging export also helped to increase employment.
There was also encouragement in the production of food grains- in order to ensure a healthy population in times of war- thus corn produce was encourages in England. Mercantalists also encouraged the building of a merchant marine with competent sailors and ships as essential to ensure the favourable balance of trade. The governments interested thus in the export of industrial goods provided the same impetus to ship-building as was given to agriculture.
The expansion of the market saw the artisan and industrial guilds producing for a market much wider than the locality. Huberman argues that this necessitated the middleman who now acquired the raw material and helped selling the finished product. The middleman was opposed to traditional guild rules such as monopoly over the guild-these ideas and customs hampered production thus gradually the guild is overthrown. Innovations such as specialization in some part of the productive process were practiced.The gild system grew antiquated- the guild was replaced by the middleman with the putting out system. Soon the middleman began supplying raw materials to men and women and children in villages in order to keep up with demand. This spread of industry in the countryside allowed dispossessed farmers(by enclosure and rack renting) the opportunity to earn some money. Middlemen in the cloth industry were particularly eager to increase production and they soon grew rich by expanding production to the countryside.
The craftsmen and journeymen under them were wage earners- these men earned their living and owned their tools, hpwever they were no longer independent as the raw materials were supplied to them by the capitalist, the middlemen,the entrepreneurs. Thus the artisans were now merely manufacturers as theire trading function had been taken over by the capitalists.Under the putting out system capital became important as capitalwas required to acquire raw amterial and to distribute and sell goods- thus the man in charge of the putting out system was the man with the capital- the capitalist. The capitalist was essentialto meet the new increased demand for products- eg.in mining large sums of money were required to extract coal and metals- this mean investment of those large sums by the capitalist. Ofteb the huge outlay of industry was met by the formation of capitalist organizations where a number of capitalists met- JOINT STOCK COMPANIES in manufacture as there had been before for trading companies. Moreover with the discovery of new lands we see new industries emerging which require capital- governments often allowed monopoly in these new industries if capitalists were willing to invest.
Thus this period sees the propelling of industry. The guild system dies out to be replaced by the putting out system and then later by the factory system. This upthrust is not universal and an example of it is seen in England.By the sixteenth century English manufatres had started to diversify and now possessed a wide variety of items that were valuabe t the middle class or their utility rather thanas luxury items. This stayed the case till the seventeenth century.However with the eighteenth century we see the rise of more luxury based manufactures that were even supplied to the euroepan luxury trade market.
Amongst these rising industries was the textile industry. Medieval Europe produced both high and low grade woolens for home as well as foreign markets. The industry had spread to farms and villages where the cost of living was low and the numbers of female spinners plentiful. Industry grew through the sixteenth century however by the end of the sixteenth century it shrank due to strife and then diminished further due to the thirty years war of 1618. Recovery came in the market with peace and English woolens were known throughout Europe during this period. The industry was regarded in England as the primal national asset. Expots in wool were prevented and heavy duties imposed on foreign fabrics.However soon the textile markets get invaded by merchants acquiring a variety of textiles fom the levant as well as the east india company brining in cotton. This double invasion angered the wool producers. Soon the parliament banned the use of printed cottons in 1721. Fustians were however exempt from this ban and so Lancashire continued to build its new industry. Liverpool merchants financed it and sold its wares and paved the way for the production of all cotton cloth in the country after 1760.
Another important industry was the metal and mining industry. In the mid-sixteenth century the great attack on mineral deposits spread from central Europe to England. In most countries in the European continent we see that mines were put under state hegemony.. But in England all mines other than silver and gold were left open. Thus even private individuals such as landlords started to extract base metals and coal that might have been present in the mines. Foreign help was also sought. Moreover the balst furnance was introduced in the sixteenth century in England which yielded iron of a better quality. The charcoal for these furnaces was supplied by cutting down trees that were then regrown in order to allow the maintainence of the industry. Deforestation thus fixed the ceiling for English iron production at a level too low to meet all requirements. Thus some iron had to be imported from Sweden and Russia. Coal made the iron impure and it was only much later by 1650 that coke could be used safely in the balst furnace.Coal produce was restricted largely to England and known little outside England even in the seventeenth century. On the basis of coal and ofmany kinds of metal goods England became Europe’s chief producer of many kinds .
Cipolla also describes in detail English innovativeness that convereted most potential disasters into thriving successes. Examples of this include the defeat of the Spanish armada, creation of heavy cannons when they did not have access to traditional armament and similarly the use of coal to supplement energy requirements that were left unfulfilled by the depleting reserves of forests.
We see a contrast to such English ingenuity in CIpolla’s description of the Italian decline.
Italian economy though facing its first substantial competition in the fifteenth century was still well established. However as described ny heaton, between 1494 and 1538, the horsemen of apocalypse descended upon Italy. The country became the battlefield for international conflict which involved spain, france and germany. This eventually resulted in a decline of this once invincible economy. Peace finally returned in the middle of the century and the prediction that “poverty and ruin cannot be remedied in a short time proved wrong. Italy soon recovered. However it continued to work along old guild lines. In fact the guild organisation was strengthened but all guilds did was prevent competition and innovation. Italy became progressively less competitive on international markets. Italy slid imperceptibly from a central position to a marginal one. Soon Italian goods were ousted by Dutch, English and French goods in the international market. This was primarily because itaian goods maintained ther high quality while the dutch and English sold cheaper goods and thus ensured greater sales. Moreover excessive control over the guilds in Italy forced Italian manufacturers to continue with obsolete methods and also they continued to pay high wages to the guild workers unlike England and france where the industrial wages fluctuated with price.
England and france who Holland who focus on industrial production thus receive a push. WE also see the rise of new commercial organisations in these countries. Banks start to buergeon and play an important role in the economy of the period. In fact the acquisition of the crown of the holy roman empire for example was decided by a dimunitive german banker of the Fugger household. The fuggers initially wool merchants made their profits as beig bankers to major merchanst,pricnes and kings. They provided loans to these men and acquired large and valuableproperties as security when these loans were not paid. Even the pope owed money to the fuggers. Infact there was very little that happened during this period in Europe that did not have the fugger stamp across it. HUberman while describing the rise of commerce in this period titles the sixteenth century “the age of fuggers”. Other important german banking houses included wesler who helped charles v to the tune of 143,000 florins.Among the Italian financiers- the Frescobaldi,the gualterotti and the strozzi were becmong great. Later on we also see the rise pof the bank of England around 1564.
We also see the coming to the fore of stock exchanges during this period. Braudel finds that most major trading cities had their ouw stock exchanges-called by various names including the bourse. It was a common feature in europeof the sixteenth century and the lack of a Bourse in a major trading city was surprising. Braudel argues that the chronology of these exchange centres is vague and hazards that the first exchanges would have been set up by the fourteenth century. He describes the presence of exchanges by the late fourteenth century in Venice, Genoa, Pisa<Florence, Valencia and Barcelona and says that exchange activities would have started from much earlier. All exchanges were alike. The scene at an exchange was that of a packed throng moving through narrow passages, absorbed in noisy and tumultuous speculation. Braudel shows that it was imperative commercially and socially for an established merchant to enter the bourse every morning. Because a host of businessmen and intermediaries me tat the exchanges,all kinds of business right from currency exchange, share holdings,maritime insurance could be carried out. The exchange was a money market, a finance market and a stock market at the same time. Soon exclusive exchanges such as the corn exchange in Amsterdam began to be set up. The Amsterdam stock exchange was introduced at the beginning of the seventeenth century and soon speculation began to be carried out there in a totally modern fashion. The government shares and stocks were mostly the objects of this speculation.
This was not the first market of its kind,however it was the first to encompass such fluidity, publicity and freedomof speculation. Gambling for gambling’sake ensued and we see speculation such as that on tulip buds growing greatly. Betting on shares under expert hands could bring a comfortable income.Soon brokers began to play the exchanges adroitly and grow rich through sophisticated procedures. The amsterdamstock exchange in particular had reached high levels of development in speculatin. The brokers were divided into one group who pulled the prices up and another who pulled them down thus drawing investors to speculate either way.Speculation did not require ownership of the shares. The buyers could either buy or sell “blank” shares and then the payment was made either way depending on the net gain or loss.In fact since prices were on a long-term rise, speculation was restricted to the short term. It was on the look out for momentary fluctuation , easily provoked by some true or false report.Speculation however still had not reached its peak,which it did with the formation of the british east india company and the bank of England. T he reason for the volume of speculation in Amsterdam was the presence of small scale stock holders and not just big capitalists. This was done by taking advantage of he smallscale speculator. This was made possible because there did not exist at the time any official quotation of prices and the brokers addressed themselves to the smallscale speculators who felt they did not have access to the inner sanctum of the exchange. The dutch exchange was open to the world market as is obvious from the records of brokers and speculators and was influenced moreover by this market.
London,witnessing the success of the dutch stock exchange soon imitated it. The royal stock exchange was seeing its first transaction by 1695. Between 1698 and 1700 the stock market finding itself cramped for space moved to the famous Exchange or change alley which remained the centre for speculation until the formation of the stock exchange in 1773. Stock trading during this period was decided greatly on the basis of news of the numerous wars that were taking place. The news of these wars caused the ebbs and flows of the stock market and thus first hand knowledge of what had happene was invaluable to brokers. The exchanges in London and Amsterdam were similar. Stock as well as commodity brokers existed for both markets. These brokers were viewed with prejudice during the time as money swallowing insects.
The dutch also excel at this time in shipbuilding, which was one of the primary causative factors in their rapid rise. Their superiority was due to: Raw materials were bought in bulk with cash at very low rates. Moreovoer the contruction of vessels saw standardization of design and possibly even the beginnings of assembly line. Typical vessels were busses or fluitschips(flyboats). The builer was ableto borrow money at a much lower rate than his foreign rivals. Shipbuilding became the dutch export trade- it exported ships to in 1600 to the venetians, built the ships for the dutch east india trading company and supplied mercchantmen for the Spanish colonial fleet. Dutch shipbuilding drew the monarchs of Europe including peter the great and Colbert of france who tempted dutch shipbuilders into their wn countries. The dutch ships in addition to being easily built were also easily handled and needed a smaller crew- only half the sailors on an English or a French ship. Moreover the wide reach of dutch trade allowed supplies to be purchased where they were the cheapest and also ensured the startlingly economical dutch freight rates. The fourth step thus was the creation of sea-carrying traffic that ranged from Archangel in the arctic to Aleppo and Smyrna in the east Mediterranean. Holland’s position in the continent supplemented her centrality on the sea-routes- she was able to draw in by river or road the Belgian and german produce from the rhine valley. The dutch could maneuver their ships as far upstream as cologne and sold there or sent further up to Leipzig and Frankfort. Dutchmen often deducted commission on the freights they sold for foreign merchants. But they usually preferred imports,particularly imports that had to be polished before the final sale. Thus a large numer of goods went trhough Holland before they were finally sold.
The dutch also start to set up trading companies around their innumerable ships. In 1602 the dutch government formed a trading conglomerate consisting of these incipient trading companies called the dutch east india trading company. This company was given absolute freedomby the government to do whatever it wanted to including wage wars and found colonies. They conquered the colonieswith a mixture oftradeand war and then checked the simultaenoues English expansion and also took steps to destroy the portugese dominance in this region. By 1680 the dutch had made the trade reserves of the malay archipegallo their own preserve, they even held Ceylon,points on the coast of India,the Persian gulf and the red sea. The company exploited its monopoly in east india to the full and ensured the maintainence of ehigh European spice prices. The ships called at Mauritius and cape town – two way stations which had been settled to provide fresh food. The company solditsmonopolized items such as nutmeg,clove and cinnamon at high rates,ensuring they did not sell beyond their capacity and tipping excess freight into the sea if necessary.
The names of these companies show us their direction of trade. Seven east india companies(the most famous were the dutch and the English). Four west india companies (Holland,France,Sweden,Denmark). The“levant”(African) companies were also popular. Amongst the American the Plymouth and the Virginia company were particularly interesting. These companies fought for monopoly over the territory they were trading from. Trade profits were often secured by limiting the availability of the good-often by destroying it. Thus the sixteenth and the seventeenth centuries were not the centuries of kings and their wars but centuries of the merchants who were the funding powers behind each throne. As in the case of the dutch these companies fuelled colonial expansion- and this can be seen as the final phase of this revolution.
Such examples of expansion can be seen also in the british maritime conquests. By 1615 the main interests of the English east india company were concentrated on canton and india. The company however got little spport from the government of india and thus struggled to obtain a foothold. BY 1757 th company was left with the choice o either becoming a military power or going extinct in India as the French planned to invade. It captured Bengal that year and established itself as the ruler for 30,000,000 people. They traded gold with the people of india and it was not unitl 1800 that the britsh found anative market for their wares. The major imports were spices,cotton and tea. Despite attacks on its monopoly in India the company stood its ground.Lacking Spanish bullion and precious metals the English colonies in the americaas traded in a more motely and arbid set of goods. These included fish and fur. In 1670 we see a group of lords desiring adventure funded the Hidson bay company with a desire to outdistance the French. That desire was fulfilled when the bay proved to be the easiest passage to the fur forest. The company only made modest profits. Dunring the seventeenth century nne English colonies were developd along the atlantic coast of north America. These colonies were handled by various companies. The Virginia company formed in 1606 hoped that its extablished trading connections would enable it to achieve profit.The investors in this venture however were disappointed when the ships returned from these islands empty. It was understood that commerce would require colonisation and the presence of immigrants.DEpsite the transfer of immigrants and intial returns however,very few investors actually got back any of their investments. As spain grew weaker in the Americas,England acquired more islands which were developed by private proprietors. These islands resulted in the great expansion of plantation during the eighteenth century.moreover the settlers of the colonies provided a regular market for English manufactured wares. Occasionally manufacturers grew worried when they heard that the colonies were producing their own goods for sale and persuaded the parliament to check export of colonially made goods. The production of such groups continued , hardly affecting the import of mainland manufactured wares. The west Indian islands and the southern mainland proved the richest source for commodities unavailable in England. The colonies along the northern mainland was not as effective.
Apart from the early tobacco trade the English trade in the colonies was largely free from central control. English trade regulated certain enumerated products out of foreign control but the rest of the products were free to be shipped to any of the European countries for the sake of profit.