Economic Trends

Miranda AbuyaghiCarson Wong

Sky Frost

Medieval Economic Trends • During the time of the Black Plague there was a huge labor shortage that caused a

dramatic increase in the price of labor. • The decline in the number of peasants after the Black Plague promoted the process

of converting labor services to rents. • The decline in population, depressed, or held stable the demand for agricultural

produce, resulting in stable or falling prices for output. • New labor services created new taxations • The One Hundred Years’ War had many negative effects on Europe, but one of the

major effects was the deterioration of the feudal system.• The decline of the feudal system led to the new scutage systems; where nobles

used money payments to pay for military service in lieu of protection.• Monarchs lost money from the war, so they asked Parliament to help and in return

Parliament asked for more money. • The Great Schism resulted in weakening the reputation, power, & wealth of the

church

Recovery & Rebirth in the Renaissance• Hanseatic League of Merchants: a commercial and military

association formed by many coastal North German towns. It established commercial bases in England and northern Europe and had a monopoly on Northern European trade in food stuffs and supplies. Bruges, its port city, began to enter a slow decline in the 15th century, and so did the League- unable to compete.

• House of Medici: Florence regained its reputation in banking thanks to this family. They expanded Italy’s industry from cloth to real estate, banking, and commerce. It was the greatest bank in Europe at the time, and the family had controlling interests in industrial enterprises. They were also the principal bankers for the papacy. But, the bank/family suffered a major decline in at the end of the century because of poor leadership and bad loans. The family was expelled from Florence- the Medici family edifice collapsed in 1494

Renaissance Cont.• The urban and upper-class were the ruling class during

the Renaissance, hence, it began in the well-funded Italian city-states.

• New industries (wools, metals, glassware)• Italians let their money work for them.• New class made up of shopkeepers, burghers, artisans. • The wealthy were willing to be patrons of some of the

most famous artists of the era. • Condottiere: leaders of bands of mercenary soldiers in

Renaissance Italy who sold their services to the highest bidder.

• Taille: an annual direct tax, usually on land or property.

Reformation• The selling of indulgences, or contracts that

guaranteed salvation, showed the obvious corruption in the papacy. The church wished to gain money and power, and shirked away from its role, made clear by the pluralism system.

• The Peasants’ War in the mid-1520’s stemmed from dissatisfaction from the lower classes. Many of the peasants had not been touched by the gradual economic improvement of the early 16th century. They began to be abused by powerful lords who created a new demand for taxes.

The New World• God, Gold, and Glory! = main motivations for expansion.• Explorers sought to explore trade routes to bring back spices,

gold, and precious commodities. • Encomienda: Conquistadors could force natives to work and pay

taxes, while supposed protection and pay rarely happened. • Slave trade: supplanted European agriculture which began in the

15th cent. 10 mill Africans transported by the end of the 19th cent.

• There was an economic price as the importation of cheap manufactured goods from Europe undermined local cottage industries, which forced countless families into poverty.

The New World Cont.• Triangle Trade Route: As the trade in slaves grew, it became

apart of the triangle trade route that characterized the Atlantic economy, involving the exchange of goods and slaves between the western coast of Europe, the slave depots on the African Coast, and the ports of North and South America. The middle passage was the middle

leg of the triangular trade and the journey of the slaves.

Expansion in Africa• The Dutch supplanted the Portuguese in Malacca, the

Moluccas and the rest of Indonesia 17th century. • Dutch East India Co: trading company established in

1602 under government sponsorship. It developed a settlement at the Cape of Good Hope, which was meant to serve as a base to provide food and other necessities to Dutch ships en route to the Spice Islands.

• Amsterdam: A Dutch city which had become the financial and commercial capital of Europe. It was also the chief port for the ships of the Dutch East India Co, which brought the spices of the East to Europe.

Dutch East Indies Trading Routes

India and Britain

• France had limited presence while England, the Netherlands, and Portugal were influential.

• British East India Co. achieved dominance in Calcutta after the Battle of Plassey in 1757. They had the right to tax and the government had no influence in India.

Commercial Revolution• The economy of Europe drastically changed in

the 16th century.• Because of the gold and silver Europeans

brought back, there was an increase in inflation and the price of goods increased.

• There was an increase in trade because of expansion, and governments were promoting it.

• There was an increase in population, so there was a bigger supply-demand.

• Broadened economy from the town to the nation, more goods between villages and ports.

Commercial Rev. cont.

• New types of entrepreneurs using money to support their business ventures.

• Fugger family began a banking empire and gave out loans to Charles V.

• The new industries spurred the new economy.• Putting out system: going to different places

for different products. Ex. Cottage industry

Joint-Stock Companies

• They raised money for expensive ventures because individuals bought shares in the company & received dividends on their investment.

• A board of directors would run the company & made the important business decisions.

• More people would participate because it limits risk. • Made it easier to raise large amounts of capital for

world trading ventures. • Ex: British/Dutch East India Co.

Mercantilism

• Economic System to accumulate as much money as possible.

• Came to dominate economic practices in the 17th century.

• Belief in the idea that total volume of trade was unchangeable and that there was only a finite amount of wealth.

• Because a fundamental part of mercantilism was that nations had to compete for wealth, and this idea prevented trade.

Mercantilism

Mercantilism Cont.• “Trade causes perpetual conflict, both in war and peace,

among the nations of Europe, as to who should carry off the greatest part. The Dutch, the English, and the French are the actors in this conflict”. – Jean-Baptiste Colbert, a French financier.

• Led to an improvement in transportation systems and high tariffs.

• Colonies were also deemed valuable as sources of raw materials and markets.

• “With the development of colonies and trading posts in the Americas and the East, Europeans embarked on an adventure in international commerce in the 17th century”. – Speilvogel

Price Revolution

• Europe-wide and used to stable prices.• Wages failed to keep up with the price

increases. • Pop. growth meant a growing need for food,

which led to increased cost of agricultural production.

• Governments’ debasing currency (especially that of Spain) also led to rising prices.

Search for Order in the 17th century• As a result of the Peace of Westphalia of 1648, Germany was

economically devastated including their farmland and population.• The mouth of the Rhine went to the Netherlands, which furthered

hampered Germany’s economy. • Wealth became a more important factor because through

absolutism, monarchs sold titles of nobility for money• Jean-Baptiste Colbert tried mercantilist policies, etc., but Louis XIV

had spent all the country’s money, explaining, “I loved war too much.”

• During the reign of Louis XIV, revenue was raised, as was economic growth, but peasants still carried weight of expenses.

Peace of Westphalia

Decline of Spain in the 17th Century

• The expulsion of Jews and Moriscos, or people of Moorish descent, meant less money

• An influx of gold & silver caused inflation; prices went up, so nobody wanted to buy Spanish goods; exports went up.

• Wars with France and the Dutch also led to an economic and population decline.

• After the Thirty Years War, the Holy Roman Empire had no revenues or power

The Enlightenment and changes in Economy

• The physiocrats, including Adam Smith, have been views as founders of the modern disciples of economics.

• Francois Quesnay: leader of the physiocrats; he claimed they would discover the natural economic laws that governed society.

• Land= only source of wealth• Physiciocrats rejected mercantilist on the emphasis on gold

& silver• Laissez-faire: doctrine that the physiocrats argued for- the

state should in no way interrupt the free play of natural economic forces.

Francois Quesnay

Physiocrats cont.• Adam Smith, a Scottish philophoser, wrote The Wealth

of Nations. In it, he condemned the use of tariffs to protect home industries, and the idea that land or gold and silver were the key to a nation’s wealth.

• He believed labor constituted the true wealth of a nation, and that the government had three main jobs: to protect society from invasion, defend their people from injustice/oppression, and keep up public works.

• Economic Liberalism: emphasizing the economic liberty of the individual.

Adam Smith

International Change• Rapid population growth, expansion in banking and

trade, an agricultural revolution, the stirrings of industrialization and an increase in world wide trade characterized the economic patterns of the 18th century

• Advances in agriculture and standard living, increases the average death rate: plentiful food, transportation, working, technology

• Agricultural Revolution: improvements in practice and methods of farming, increased yields per acre, healthier and more abundant livestock, and an improved climate

International Change

• Industrial Revolution Cont: cooperative farming in the villages was the demise which led to Parliament, dominated by the landed aristocracy enacted enclosure acts (agricultural lands to be legally enclosed)

• Bank of England: was receiving deposits and exchanging foreign currencies, issued paper currency/ “banknotes”

• Textiles: woolen cloth made up 5% percent of Britain's exports in the early century

• Water frame: powered by horse or water, which turned out yarn much faster than cottages spinning.

In the Americas• After Seven Years’ War, Great Britain had become the

world’s greatest colonial power. In North America, Britain controlled Canada and lands east of the Mississippi

• Britain sought to tax the Americas to pay for the British Armies

• American colonies gained their independence and eventually proposed a constitution that created a central government

• The National government was given the power to levy taxes, raise a national army, regulate domestic and foreign trade and create a national currency

Background of French Revolution

• The economic discontent of the Third Estate-their struggle for survival- led them to play an important role in the Revolution

• Social Status– Aristocrats were also engaging in capitalist activities

on their landed estates, such as mining, metallurgy and glassmaking, and investing in foreign trade

– Terms of economic function, many members of the bourgeoisie and nobility formed a single class

Background of French Revolution

• The elites of the bourgeois, long accustomed to a new socioeconomic reality based on wealth and economic achievement, were increasingly frustrated by a monarchical system resting on privileges and the social order based on estates

• Although there was overall growth, bad harvests in 1787 and 1788 manufactured depression resulted in food shortages, rising in food and other necessities and unemployment in cities

Financial Crisis• Immediate cause of the Revolution

was the near collapse of government finances

• The government was drastically short of money and yet expenditures continued to grow due to costly wars and royal extravagance

• Calonne tried to call high class citizens to a meeting to cooperate but that only brought further disaster

• Finally the government was forced to call the Estates-General and the nation was required to raise taxes

Great Fear• A growing resentment of the

entire feudal system, with its fees and obligations, greatly exacerbated by the economic and fiscal activities of the great estate holders, created the conditions for a popular uprising

• Peasants were angered with the constant attack from the government, but with rebellions they achieved affirm privileges to end exemptions from taxation for aristocrats and equal rights for all men

Committee of Public Safety

• Took control of Franceto create a new republic order

• Attempted to provide some economic controls, especially since members of more radical working class were advocating them

• Established a system of requisitioning food supplies for the cities enforced by the attacks of revolutionary armies into countryside

Napoleon• Civil Code: preserved most of the

revolutionary gains by recognizing the principle of the equality of all citizens before the law, the rights of individuals to choose their professions, religious toleration and the abolition of serfdom and feudalism

• Under Napoleon's administrative system, tax collection became systematic and efficient. Taxes were now collected by professional collectors employed by the state who dealt directly with each taxpayer

Industrial Revolution• New sources of energy and power: coal and steam replaced

wind and water to build and run machines that dramatically decreased the use of human and animal labor and increased productivity

• New ways of organizing human labor for new machines; factories replaced workshops and home workrooms

Great Britain's Industrial Revolution Continued

• Great Britain was the wealthiest country in the world

• Agricultural revolution: changes in methods of farming and stock breeding that characterized transformation led to a significant in crease in food production

• Capital: new industrial machines and factories that were needed to house them

• Profits from trade and cottage industry, Britain possessed an effective central bank and well-developed flexible credit facilities

Great Britain's Industrial Revolution Continued

• Britain had ample supplies of important mineral resources such as coal and iron ore, needed in the manufacturing process

• Large markets around the world increased the newly manufactured goods to be sold and answered the demands abroad

• The newly developed trains created a fast way to transport human labor and resources or machines

The Great Exhibition• A crystal palace that contained 100,000 of exhibits that

showed the wide variety of products created by the Industrial Revolution

• Displayed Britain’s Great wealth to the world, gigantic symbol of success

thanks mr. kim

The Spread of Industrialization

• Continental governments used tariffs to further industrialization others used high tariffs to protect their fledgling industries

• Join-stock investment banks: mobilized savings for thousands of small and large investors, creating a supply of capital that could then be plowed back into industry, many invested in large scale railroads, mining, and heavy industry

Primary Sources

• Atlantic Slave Trade, Diary of a Citizen (pg. 424)• Martin Luther, Against the Robby and Murdering

Hordes of Peasants (pg. 382)• The Commentaries of the Great Afonso de

Albuquerque (pg. 416)• West Meets East: An Exchange of Royal Letters

(pg. 428)– A Letter to the King of Tonkin from Louis XIV– Answer from the King of Tokin to Louis XIV