Section 3.12

The Commercial Revolution

Questions to consider:

• What important economic changes in the early modern centuries does the term “Commercial Revolution” encompass?

• How extensive was the growth of the European population in the sixteenth century?

• What was the nature of this growth?

Questions to consider:

• What are the origins, nature, and effects of the “putting out” system? Of what importance were the needs of the military in the rise of capitalism? What change in attitudes could be noted toward the lending of money at interest?

• What was the general nature and purpose of mercantilism? What are some examples of mercantilist policies and regulations? What comparison may be made between mercantilism and New Monarchies?

What were the results of the voyages of discovery?

• Columbian Exchange• Population Rise (1600)

– England=5 mil– France=20 mil– Russia= 10 mil

• Price Revolution– Rise due to population

growth– More gold/debasing =

inflation– New land less fertile

What were the results of the voyages of discovery?

• New Economic Models (mercantilism)

• Commercial Revolution– Economic changes in Europe

marked by capitalism, transformation from town to nation-centered economy

– Particularly hard on the agricultural class, who were forced more and more to rely on one staple crop, such as the potato in Ireland

Changes in Commerce and Production• Medieval Economic Model

– Comprised of town and surrounding farmland (manors)

• Manors used as colony by towns– Towns controlled by Guild System

• Craftsmen=provincial production– Produced only upon order– Little risk, little profit, little

innovation– Instituted Protectionists

policies and large barriers of entry into trades

– Capital = his workbench, tools, workshop

Changes in Commerce and Production

• Medieval Economic Model– Craftsmen, consequently,

lacked ability to network in long distance trade, lacked capital to tie up in stocks of unsold wares, and lacked knowledge of distant customer needs

– A new type of economic ‘actor’ arrived on the scene:

• The Merchant

Changes in Commerce and Production• Commercial System

– Merchants• Act as middlemen between

manufacturers and consumers

• Usurp guilds– Bankers

• Jacob Fugger– Augsburg businessman– Got rich from fustian

(cotton/wool mix)– Expanded into spice, silk,

mining business– Financed Hapsburgs,

Popes, and Portuguese trade/merchants

Putting Out/Domestic SystemCottage Industry

Checkmates guildsEntrepreneur “puts out” manufacturing work to country peopleHe owns the capital, means of productionThey’re out of guild’s reach

Putting Out/Domestic SystemCottage Industry

• Checkmates guilds• Entrepreneurs “put out” manufacturing work to

country people• He owns the capital, means of production• Out of guild’s reach

Wool Industry

Farmer shearssheep

Wool taken to

Spinner

Thread taken to

Weaver

Fabric taken to Dyer

Dyed clothTaken to Tailor

Entrepreneur sellsFinished product

Capital and Labor• Cottage Industry

– Separates owner from worker– Allows mass production

• New Industries– Printing

• Large overhead• Rising literacy creates demand for

books– Shipbuilding, weapons

• New Monarchs– Need uniforms, muskets,

uniforms, food

•Banking was crucial for the advent of mercantilism, and the later phase of capitalism•Even Church began to allow “reasonable return”•What was previously deemed usury was now allowed•Banking initially centered in Amsterdam

Banking

Mercantilism• Economic theory in which a nation’s

power depended on keeping and increasing its gold supplies by maintaining a favorable balance of trade

• “Doctrine of Bullionism”- gold is wealth• Government should encourage

manufacturing• Favorable balance of trade- export more

than you import• Make country self-sufficient• Acquire colonies to supply raw materials

to mother-country• Achieved through national regulations!!!

– The Navigation Acts

How Mercantilism

Works

Raw materials manufactured into finished products.

England trades finished products

for slaves

Slaves are transported to

colonies

Slave labor is used to acquire raw materials

Raw materials taken back to

England

Finished product is traded for gold.

How did the New Monarchs increase regulations within mercantilism?

• Navigation Acts• Statue of Artificers (1563)

– Regulates artisans entering guilds• English Poor Law (1601)

– Puts indigents, poor to work– Government relief program

• Encouraged espionage– Turkish dyers (1582)

• Protective tariffs• Subsidized desirable goods

manufacturers• Encouraged joint-stock companies

– Granted monopolies