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Commerce in a Global Age WHAP/Napp “Two European innovations enabled private investors to fund the rapid growth of the Atlantic economy. One was the ability to manage large financial resources through mechanisms that modern historians have labeled capitalism. The essence of early modern capitalism was a system of large financial institutions – banks, stock exchanges, and chartered trading companies – that enabled wealthy investors to reduce risks and increase profits. Banks were a central capitalist institution. By the early seventeenth century Dutch banks had developed such a reputation for security that individuals and governments from all over Western Europe entrusted them with large sums of money. To make a profit, the banks invested these funds in real estate, local industries, loans to governments, and overseas trade. Individuals seeking returns higher than the low rate of interest paid by banks could purchase shares in a joint-stock company, a sixteenth-century forerunner of the modern corporation. Shares were bought and sold in specialized financial markets called stock exchanges. The Amsterdam Exchange, founded in 1530, became the greatest stock market in the seventeenth and eighteenth centuries. To reduce risks in overseas trading, merchants and trading companies bought insurance on their ships and cargoes. The capitalism of these centuries was buttressed by mercantilism, policies adopted by European states to promote their citizens’ overseas trade and accumulate capital in the form of precious metals, especially gold and silver. Mercantilist policies strongly discouraged citizens from trading with foreign merchants and used armed force when necessary to secure exclusive relations. Chartered companies were one of the first examples of mercantilist capitalism. A charter issued by the government of the Netherlands in 1602 gave the Dutch East India Company a legal monopoly over all Dutch trade in the Indian Ocean. This privilege encouraged private investors to buy shares in the company. They were amply rewarded when Dutch East India Company captured control of longdistance trade routes in the Indian Ocean from the Portuguese. Such successes inspired other governments to set up their own chartered companies. In 1672 a royal charter placed all English trade with West Africa in the hands of a new Royal African Company, which established its headquarters at Cape Coast Castle, just east of Elmina on the Gold Coast. The French government also played an active role in chartering companies and promoting overseas trade and colonization. Jean Baptiste Colbert, King Louis XIV’s minister of finance from 1661 to 1683, chartered French East India and French West India Companies.” ~ The Earth and Its Peoples 1. Mercantilism refers to 2. In order to facilitate colonization, (A) A collection of economic philosophies settlement, and exploration, the British, prevalent in the nineteenth century. French, and Dutch (B) An economic philosophy favoring (A) Chartered companies and created minimalist government. commercial monopolies in given regions. (C) An economic philosophy that (B) Hired mercenaries to conquer. encouraged colonialism. (C) Negotiated peacefully. (D) A set of government policies intended to (D) Relied on missionaries to establish keep population growth rates low. markets and colonies. Key Words/ I. Motivation for Global Trade Questions A. Deliberate century-long Portuguese effort to explore a sea route to Asia, by sailing down West African coast around South Africa to India B. Immediate motivation: spices – cinnamon, nutmeg, mace, cloves, pepper C. Western Europe: recovered from plague, monarchies taxing more effectively, gunpowder weapons, growth of cities D. Capitalist economy: markets, private ownership, and capital to invest E. Search for all-water route to Asia: to avoid Muslim and Venetians F. Rumor of a Christian monarch, Prester John, in Asia or Africa II. Complexities A. Few products of less developed Europe were attractive in Asian markets B. Europeans were required to pay in gold or silver for Asian goods C. Persistent trade deficit contributed to intense desire for precious metals D. Portuguese voyages along West African coast: seeking access to gold E. Enormously rich silver deposits of Mexico and Bolivia F. Yet Portuguese learned Indian Ocean ships were not heavily armed G. Portuguese: “trading post empire” to control commerce with arms H. By 1600: other European countries contested Portugal’s monopoly I. Spain was the first to challenge Portugal’s position J. Spaniards established themselves on “Philippine Islands”…named after Philip II – Discovered on Ferdinand Magellan’s “round world” K. Far more important than Spanish were the Dutch and English (1600s): Indian Ocean ventures through private trading companies III. British and Dutch A. British East India Company and Dutch East India Company: government charters, trading monopolies, power to make war, etc. B. British East India Company in India and Dutch in Indonesia C. Dutch controlled production of cloves, cinnamon, nutmeg, and mace D. British traded with permission of Mughals or local rulers or bribes E. Slowly evolved into a more conventional form of colonial domination F. Yet Tokugawa expelled Christian missionaries and isolated Japan IV. Silver Trade A. More than spice, silver trade gave birth to a global network of exchange B. Mid-16th discovery of rich silver deposits in Bolivia, and simultaneously in Japan, suddenly provided a vastly increased supply C. 1570s, Ming authorities consolidated a variety of taxes into a single tax (Single Whip), which China’s population had to pay in silver D. This sudden new demand for silver caused its value to skyrocket E. Foreigners with silver could now purchase far more of China’s goods F. At the world’s largest silver mine [Bolivia] in the city of Potosí, some families held funeral services for men drafted to work the mines G. Infusion of silver in Spain generated inflation of prices not growth H. Shoguns used profits from silver to developed a market-based economy and invested heavily in agricultural and industrial enterprises Reflections: 1. Which New World commodity was of the greatest value to the Spanish monarchy? (A) Potato (B) Tomato (C) Silver (D) Sugar (E) Quinine 2. What was the long-term impact of the massive influx of silver into the Spanish economy that resulted from its domination of the New World? I. Inflation and unwise government spending II. A permanent economic advantage over other European powers III. Development of the most sophisticated banking system in the world (A) I only (B) II only (C) III only (D) I and II (E) I and III 3. The initiative for Western exploration and conquest came from the kingdom of (A) Spain (B) Sicily (C) France (D) Portugal (E) Tunisia 4. Which of the following changes best justifies the claim that the late 1400s mark the beginning of a new period in world history? (A) The rise of the Aztec and Inca empires (B) The economic recovery in Afro-Eurasia after the Black Death (C) The incorporation of the Americas into a broader global network of exchange (D) The emergence of new religious movements in various parts of the world 5. Which statement most accurately describes Japanese participation in the global trade network? (A) The Japanese warmly accepted Western commercial interests and became part of the dependent zones of the global trade network. (B) The Japanese did display some openness to Christian missionaries and they were also fascinated by Western advances in gunnery and shipping. (C) After 1600 all Europeans were banned from Japan, but Japanese traders continued to travel and trade abroad. (D) Japan, like China, showed no interest in any aspect of Western trade. 6. In which of the Asian manufacturing zones were paper, porcelain, and silks major products? (A) Chinese (B) Arab (C) Indian (D) African 7. What was the economic policy that encouraged the Portuguese to use force in entering the Asian trade network? (A) Mercantilism (B) Socialism (C) Feudalism (D) Capitalism 8. What happened to the English attempts to enter the spice trade? (A) The English were able to establish themselves on the island of Java. (B) The English were able to exert a monopoly over the shipment of spices from Dutch possessions in the Spice Islands. C) The English were forced to fall back on the cotton textile trade of India. (D) The English decided to abandon efforts to be involved in the spice trade and focus instead on triangular trade in the Atlantic. “The Portuguese lacked the manpower and ships necessary for enforcement. Many Portuguese ignored their government and traded independently, while rampant corruption among officials and losses of ships further hampered policies. The Dutch challenged the weakened Portuguese in the seventeenth century. The Dutch captured Malacca and built a fort at Batavia in Java in 1620. They decided to concentrate on the monopoly control of some spices. The Dutch trading empire resembled the Portuguese, but they had ships that were better armed and they controlled their monopoly with ruthless efficiency. The Dutch discovered that large profits came from peacefully exploiting the established system. For example, when the spice trade declined, they relied on fees charged for transporting products from one Asian place to another.” ~ World Civilizations Change over Time Thesis Practice: Analyze changes and continuities in interregional trade from 600 C.E. to 1750 C.E. Thesis: ______________________________________________________________________________ ______________________________________________________________________________ Terms, People, Events: The following terms, people, and events are important to your understanding of world history. Define each term. Asian sea-trading network Caravels Goa Caravel Dutch trading empire Mercantilists Toyotomo Hideyoshi Tokugawa Ieyasu Edo Vasco da Gama Sanskrit Friars Yuan era Middle Kingdom Emperor Yongle Neo-Confucianism British East India Company Forbidden City Ferdinand Magellan Matteo Ricci Joint-Stock Company Single Whip Tax Dutch East India Company Potosí Silver Trade Vasco da Gama Prester John Philippines Tokugawa Shogunate Mughals Trading Post Empire All-Water Route Indian Ocean