10.0 pre-modern economic innovation

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10.0 PRE-MODERN ECONOMIC INNOVATION

In this outcome we will…

•10.1 explain economic innovation from the paleolithic

era to the ancient era

•10.2 explain economic innovations from the pre-modern

and early modern eras.

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10.1 FUNDAMENTALS OF ECONOMICS • Many innovations relate to economics: the study of how to maximize

the use of resources to meet needs and wants.

• What are needs and wants?

• Needs – items required for survival (food, clothing, shelter)

• Wants – those things you would like to have but not necessary for

survival (cell phone, internet, quad)

• Given that resources are finite (have a limit), scarcity is a fact of life.

Usually people can only meet some of their needs and wants.

• However, by seeking ways to maximize the

use of resources, more of a person’s needs and wants can be satisfied.

• The idea of scarcity and meeting our needs and wants is addressed

through new innovations and trade.

10.1 PALEOLITHIC ECONOMIC INNOVATIONS• Paleolithic innovations included the construction and use of

primitive tools (e.g., knives, spears, bows and arrows),

keeping and creating fire, the development of spoken

language.

• How did these innovations make it easier for hominids to

meet their needs and transform their way of life?

• These innovations led to greater efficiencies and greater

effectiveness in resource gathering. This allowed groups to

be more successful (e.g., survive due to greater food

sources) and grow in population.

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10.1 NEOLITHIC ECONOMIC INNOVATIONS• With the development of farming approx. 10,000 ago, human ability to

acquire a stable food supply dramatically increased.

• The refinement of lithic tools (e.g., Adding shaft to a point to create a

spear or arrow) or in metal working (e.g., bronze to iron) provided

greater effectiveness, as better tools meant more food can be

produced.

• As we know, farming also meant that people settled down to live in

particular areas, resulting in the establishment of towns and cities.

• These settlements had greater populations (up to 50,000 people)

requiring more food, tools, building supplies, and luxury items

(e.g., Silk, spices, jewelry, etc.) due to specialization.

• Trade would be required to meet needs and wants.

10.1 NEOLITHIC ECONOMIC INNOVATIONSTrade – the exchange of goods and services.

How can trade help a group of people prosper?

• One group sells extra (surplus) goods and services they

can produce for profit, so they can trade for other goods

and services they need or want.

• This is often done through the following methods:

• Imports – goods bought from another group/country

• Exports – goods produced and sold to another

group/country

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10.1 ANCIENT ECONOMIC INNOVATIONS• Early civilizations met their needs by trading locally, but as not all of our need could be met locally,

people began to extend their trade connections.

• There is evidence to suggest that the civilizations of Sumer traded textiles and food in exchange for

copper, lumber, precious stones, cotton, and luxury goods from the Indus river valley. The growth

of trade is linked to the desire for luxury goods.

• As large towns appeared throughout Mesopotamia and Egypt during the Neolithic period, self-

sufficiency started to fade as marketplaces appeared.

• A farmer could now trade grain for meat, or milk for a pot, at the local market, which was

seldom too far away.

• Cities started to work the same way, realizing that they could acquire goods they didn’t have at

hand from other cities far away, where the climate and natural resources produced different things.

• This longer-distance trade was slow and often dangerous, but was lucrative for the middlemen

willing to make the journey.

•Historians believe the first long-distance

trade occurred between Mesopotamia

and the Indus valley in Pakistan around

3000 BC.

•This long-distance trade was limited

almost exclusively to luxury goods like

spices, textiles and precious metals.

These were not required for survival, but

made life more comfortable.

•Trade would come to be of two primary

types: land-based and sea-based.

10.1 ANCIENT ECONOMIC INNOVATIONS

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•The silk road was a land-

based trade route that

extended from the eastern

Mediterranean to Asia and

was one of the primary

methods whereby luxury

goods were exchanged.

•Merchants would trade

goods at different points

along the route.


•Sea-based trade routes

would be common in the

Mediterranean and

connected many parts of

eastern and western

Europe.

•The Phoenicians were

early beneficiaries of this

method of trade and

helped these people

spread their civilization.


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• Money (any item that has value to people as an item of exchange) had

developed in the ancient period and made trade easier as it could be

used in almost any transaction.

• Early examples of money included livestock (e.g., Cows and sheep) and

cowrie shells, but would expand to include paper money and coins.

• Two types of money would develop:

• Commodity money is an item that is used as money that has its

own value as an object (e.g., Gold, silver)

• Representative money is an item that is physically worth little, but

represents a greater value (e.g., Bonds, paper, cheques, etc.)

• Money was lighter and took up less space than many larger trade

goods. This meant merchants could carry more money than valuable

goods with them, increasing trade potential.

Roman coins often depicted

an emperor or other

influential figure. Besides

their value as currency, they

were often used to promote

the image of a powerful

person, thus they acted as

propaganda.


COMPONENTS OF TRADE NETWORKS

10.1 TRADE NETWORKS

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New cities would grow and develop along trade routes:

These grew rich providing services to merchants and acting as international

commercial centres

As trade networks developed, trading partners began to manufacture

goods specifically for sale in other places

They supplied merchant caravans and helped police trade routes

The trade routes were the communications highways of the ancient world

New inventions, ideas, religious beliefs, artistic styles, languages, and

social customs, as well as goods and raw materials, were transmitted by

people moving from one place to another to conduct business.

10.1 CONSEQUENCES OF TRADE NETWORKS

COMPLETE THE “10.1 -

TRADE IN ANCIENT ROME”

ACTIVITY.


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10.0 PRE-MODERN ECONOMIC INNOVATION

In this outcome we will…

•10.1 explain economic innovation from the paleolithic

era to the ancient era

•10.2 explain economic innovations from the pre-

modern and early modern eras.

•With the decline of the roman empire and the development of

early feudal Europe, trade had decreased:

• It was no longer as safe to trade as it had been under the

empire

• Roman provinces splintered to form smaller kingdoms that

were more isolated

• Roads and transportation networks were not as well

maintained as they had been during the roman empire

• The basis of the feudal economic system became the manor.

Coin minted by

Alfred The Great

(871-899 CE), King

of Wessex (England)

10.2 MEDIEVAL ECONOMY

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1. What does it mean to say the

medieval manor was self-

sufficient economically?

Explain.

2. How might the decline of

trade during the early middle

ages have contributed to the

self-sufficiency of the manor

system?

3. What benefits did the manor

provide to the following

groups: nobles, clergy, serfs?

• The manor was the lord’s estate that was large

enough to contain resources necessary to be

self-sufficient (crops, milk and cheese, fuel,

cloth, leather goods, and lumber).

• Manors were usually a few square miles in size

and supported 15-30 families.

• Serfs worked the lord’s land (called a demesne),

cared for his animals, and maintained the estate.

In return the lord provided housing, farmland

and protection from bandits.


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• Commerce refers to the activity of buying and selling on a large scale.

• Medieval manors, though self-sufficient, would still trade for materials that would improve local

production or quality of life (e.g., iron, mill stones, etc.).

TRADE GUILDS

• Trade would expand with the development of the first guilds. A guild was an organization of

individuals in the same business or occupation working to improve economic and social

conditions of its members.

• Merchant guilds were the first to form. This allowed them to work together to control the

number of goods traded in an area and to keep prices up, resulting in greater trade security.

• Craft of skilled artisans guilds (tailors, glassmakers, wheelwrights, winemakers, etc.) Would also

form to set standards of work production, wages, and working conditions.



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COMPLETE THE ACTIVITY

“10.2 MEDIEVAL ECONOMY”.


• The late middle ages saw an expansion of craftsmanship

(guilds), trade and finance, which we call the commercial

revolution.

TRADE FAIRS

• Peasants brought goods produced on manors to local towns

and cities on fair days (held several times a year). They could

buy food items, leather, ropes, knifes, tools, etc.. This created

greater variety for manor residents.

• Merchants would travel from place to place and set up stalls

wherever a great fair was held. This made foreign goods

available to people living on manors or in towns/cities.


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EXPANSION OF TRADE ROUTES

• Trade routes between major European cities were established during this time

allowing goods to flow freely across the continent.

• In addition, these routes were both land-based and sea-based connecting

Europe with Asia, north Africa, and eastern Mediterranean ports

• New inventions, religious beliefs, artistic styles, languages, and social

customs, as well as goods and raw materials, were transmitted by people

moving from one place to another to conduct business.


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As merchants travelled across Europe to buy and sell goods, what problems might they

encounter?

• Large amounts of cash needed to be transported from one place to another, which was awkward as

well as tempting for bandits.

• Each country used difference currencies that had different values.

BUSINESS AND BANKING

To address these newfound problems, some merchants developed new ways of doing business.

• Bills of exchange were documents that clearly indicated exchange rates between coinage systems.

• Letters of credit were official letters that could be issued in one country and shown in another that

allowed a merchant to withdraw cash or pay for items with credit without having to carry cash

around.


• Merchants required easy access to money in order to increase business and

profits, so borrowing money became necessary. Banks were established as

institutions to provide this service.

• The Medici were a wealthy family in Florence, Italy that ruled the city through

their wealth and influence. They were active in the 1400s.

• They established a family bank called the Medici bank with branch offices

throughout Italy and eventually in other major European cities.

• Cosimo de Medici, the wealthiest European of his time, ruled Florence by

influencing city councillors and other powerful people by giving them large

loans to achieve their goals. He was able to dictate much of what happened in

the city and was essentially dictator for 30 years.

• The establishment of bank branches and the increase in lending by the

medici bank contributed to increased business by merchants. Other banks

would be established across Europe.


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• By 1500, economic development would

continue to expand beyond local European

markets.

• We know from unit 1 that the renaissance

stimulated curiosity of the physical world.

This would lead the voyages of discovery

to seek out knowledge and sources of

valuable trade goods.

• The European states enjoyed a long history

of trade with places in the far east such as

India and china. This trade introduced

luxury goods such as cotton, silk, and

spices to the European economy.

10.2 JOINT-STOCK COMPANIES

Why sail west?

In the late 1400s and early 1500s there was a

tremendous increase in exploration to the west,

towards what we know now as the Americas. There were

two main reasons for this:

1. New innovations in maritime navigation and ship

construction allowed Europeans to travel further and

explore parts of the globe that were previously

unknown to them.

2. Europeans were trying to locate their own sources of

luxury goods, which were in high demand on their

own, thereby eliminating the need to trade with east

using the ancient trade routes.


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• The caravel was the ship of choice in the 15th

-17th

centuries and was

used during exploration. They were small and maneuverable, but did not

have much cargo space.

• The carrack was another common ship characterized by its larger size,

having 3 or 4 masts, and greater storage capacity.

• Both ship types were expensive to produce (estimates may be around

$250k+ in today’s money depending on the size of the ship).

• Even though ships were improved, the person who owned them took on

considerable risk. If you owned a ship that was lost at sea, you lost a

huge amount of wealth.

• A joint-stock company is a business venture where people combine their

wealth for a common purpose. This distributes the costs and risks of

trade and reduces the danger for individual investors.

A caravel

A carrack


• Joint-stock companies were supported by

government charter (a legal document issued by

government to outline rights and privileges):

• These charters outlined that only one company

would be able to use a particular trade route, or

trade in a specific good. This gave the joint-stock

company a monopoly and made people more

likely to invest in them.

• Historically, joint-stock companies typically sell

shares to raise money for trading enterprises and,

again, to spread the risks and profits of business

among many shareholders.

Anxious investors wait for news about

their joint-stock company.


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• The English were the first to use joint-stock companies, the earliest recognized company being

the Company Of Merchant Adventurers To New Lands, chartered in 1553 with 250 shareholders.

• A more well known, wealthy, and powerful joint-stock company was the English (later British)

east India company, granted a charter by Elizabeth I in 1600. The intention of this company was

to develop trade privileges in India and it was given a 15 year monopoly on all trade in the east

indies.

BENEFITS OF JOINT-STOCK COMPANIES

• Distributes and lessens investment risk

• Allows for raising of large sums of money

• Successful voyages reaped huge profits with trade in new items / markets

• A substantial middle class of merchants continued to develop, which in turn attracted more

investors (early form of stock market).


•Most of the voyages of

discovery (see map) in the

1500s were funded by joint-

stock companies.

• Joint-stock companies were

used to set up the first colonies

in North America.

• Once established, these

companies tended to not only

control trade in the colonies,

but took on governmental

roles.


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• As trade expanded across the globe, European

countries sought to gather as much wealth as they

could because they assumed wealth was finite:

there only a specific amount to go around.

•Mercantilism: an economic policy from 16th

-18th

centuries under which nations sought to increase

their wealth and power by becoming self-sufficient.

To do this they:

• Obtained large amounts of gold and silver

•Maintained a positive balance of trade

Balance of trade refers to the value of exports minus the

value of imports. A positive balance of trade means the

country exports (sells) more than it imports (buys).

10.2 MERCANTILISM

CONSEQUENCES OF MERCANTILISM

Mercantilism was based on countries acquiring as much wealth as possible. This resulted in:

Colonization - some countries acquired overseas territories for the purpose of securing

resources and creating markets for the sale of goods. This basically meant conquering

lands where newly discovered peoples lived. (Examples: newfoundland, Columbian

exchange)

Strict government intervention - governments controlled business activities through

charters that gave government owned companies exclusive rights to operate in a certain

region (example: British East India company)

Economic exploitation for of newly colonized territories by European countries. The

resources and wealth of one country was used to benefit another.

10.2 MERCANTILISM

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A part of mercantilism in Europe was the

use of triangular trade: this meant trade

was conducted between three regions, in

particular Europe, African territories and

north America.

This global transfer of plants, animals,

disease, slaves, and food is referred to as

the Columbian exchange.

Using the map, answer the following:

1. What was beneficial about the

Columbian exchange?

2. What was harmful?

3. Who benefitted the most?

European nations were the primary beneficiaries:

1. They received a variety of trade goods from Africa

and north America

2. They sold their manufactured goods to the colonies

10.2 MERCANTILISM

COMPLETE THE “10.2

- MERCANTILISM”

ACTIVITY.

10.2 MERCANTILISM

10.0 pre-modern economic innovation

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