One Desired Good For Another

Systems Trade: How Europe’s Baltic Trade Influenced Emerging European

Commerce

Louis Caiola

Illustrations:

Barraclough, Geoffrey. "The Hanseatic League (14th-15th Centuries CE)." Map. Historical Maps of Germany and Europe. N.p., 2012. Web. 3 Jan. 2013. <http://www.klitzfamily.com/Map_Germany.html>.

Knyff, Jacob. English and Dutch Ships Taking on Store at a Port. 1673. National Maritime Museum, London.

Labberton, Robert H. Europe in 1648 – Peace of Westphalia. 1884. University of Texas Libraries. June 21, 2011. “Historic Maps of Europe”.

<http://www.lib.utexas.edu/maps/historical/history_europe.html>.

2

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . 4

The Emergence of a New European System . . . . . .

. . . . . 8

The Merchant Class of Eastern and Western

Europe and Its Influence on a European System of

Trade . . . . . . . . . . . . 18

Eastern Europe’s Baltic System of Trade and Its

Integration in a European System of

Commerce . . . . . . . . . . . . . . . . . . . . . 31

3

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . 45

IntroductionThe origin of modern trade is a topic of endless debate among

historians. Most troubling for historians is not only defining what “modern” trade is, but also where they can find enough evidence to support a major intellectual shift in the human civilization’s ability to conduct commerce. Humans have traded since the dawn of time. One desired good for another. However, this type of trade did not last as the centerpiece of human trade.

Today, we have “systems trade”, which functions with highly complex economic concepts such as debt, paper money, and credit. Even those integral parts of our economic system have been taken for granted in our everyday lives. We have economic models, which can calculate risk, returns, limitations to resource constraints, price predictions, insurance, and asset appraisals. Even more fascinating is the integration of foreign markets within local economies. Today’s business incorporates the interests of companies and peoples across the globe. But the essential question remains: Where do we see the evolution of a more complex network of trade with analogous traits to our current global system of commerce?

In looking at Europe during roughly the 15th to 17th centuries, there was an emergence of a complex system of trade. In trying to understand this system, it is important to look at the cause and effect relationships closely

4

related to Marx or Wallerstein’s “system’s theory”. A system emerged where many of our modern day economic practices were just fledgling interparty trade agreements and market evaluations. However, human commercial activity had reached a significant level above the simple barter-type trade of the past. This period marked a crucial turning point in economic advancement. One major reason was the rise of a major “system” of commerce, which incorporated the business and the markets of multiple distant areas, often creating a favorable exchange of goods for one area.

The emergence of “systems” trade was an influential and beneficial development, which allowed for the massive expansion of the globe’s economies. Without a system of commerce, our current economy would cease to be so expansive and dependent on foreign groups. In looking at Europe’s trade in the 15th and 17th centuries and more specifically at the role of Eastern Europe’s economy and its Baltic system in conjunction with the Western Europe, the emergent properties arise, developing a “world system of commerce”.

In trying to understand an economic system of commerce, one must look at the integrative qualities of the pieces, which make the whole of the system. There is an attractor (an entry point of goods), the attractants (the preferred goods), and the route along which these goods are taken. However, various factors contribute to the emergence of the characteristics of a system. This analysis will focus on these circumstantial factors, which led to the rise of the European world economy.

Immanuel Wallerstein does an excellent job in describing the components of a “world-system”. In fact, this kind of analysis is largely attributed to Wallerstein as he uses it so pervasively, particularly in his work Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century.

This type of analysis has been used extensively in accordance with the rise of the early modern capitalist system in Europe. It is a sociological as well as an economic analysis of a “developing world” (Martínez-Vela, Carlos A.) Wallerstein states, “A world-system is a social system, one that has boundaries, structures, member groups, rules of legitimation, and coherence” (347). It is a social system, but it can also be applied to the economic circumstances of Europe of the time as well. The system is also a sum of its components making it appear to have similarities to an “organism” with a “life-span” in which some components change and others stay consistent (Wallerstein, Immanuel 347). Europe exhibited these kinds of characteristics in the 15th to 17th centuries. With the multiplicity of political entities and factions residing on the European continent, Europe becomes a fascinating subject of analysis in applying Wallerstein’s “World-Systems Theory”.

Due to a host of circumstantial factors some areas in Europe were able to develop much earlier than others. The most glaring example of this would be Western Europe in comparison to Eastern Europe. The west

5

developed a much more complex society in comparison to the East. The centralization of states and the division of social classes and labor were much more rigid in the west, stimulating the western economies. The societies of the east had an extremely powerful aristocratic class, creating a less stimulated economic zone.

In Wallerstein’s “World-Systems Theory”, he deems this phenomenon a perfect example of the relationship between a core and peripheral area. It is important to remember that when using these terms it is assumed that both areas are interacting with each other in a systematic way. Traditionally, the core state is the more powerful state with a much broader industry and commercial base in comparison to the other states involved in a system. These states often have a strong “state machinery [and] cultural homogenization” (Wallerstein, Immanuel 349). These characteristics allow for influential government groups to govern and maintain an economic market and enforce a favorable trade on weaker states (Wallerstein, Immanuel 347-357).

The semi-peripheral states take the role of the “middle-men” and are the conduits for the larger markets, which are heavily influenced by the core states. Then there are the peripheral zones, which are on the exterior. The lands of Eastern Europe were considered to be the peripheral zones. The east lacked labor diversification, any sliver of an egalitarian state bureaucracy, a manufactured product industry, and most importantly, a social or economic class that could rival the monetary and political power of the aristocracy. Because these areas lacked major state infrastructure, most of their resources were exploited by foreign presences with a much higher industrial sector output (Wallerstein, Immanuel 347-357).

It is also important to keep in mind the fluidity of these categorizations. What were once core states could become semi-peripheral states or even peripheral states, provided the circumstances are particularly staggering. One nation labeled as a “core state” leads to the detriment of another geo-political zone (Wallerstein, Immanuel 347-357).

The rise of Europe’s world-system of commerce was with the early modern capitalist era. Capitalism thrives on exploitation. Wallerstein admits this characteristic of capitalism when stating, “Capitalism is based on the constant absorption of economic loss by political entities…economic factors operate within an arena larger than that which any political entity can totally control” (Wallerstein, Immanuel 348). In order to see this kind of economic relationship one only needs to look at the rapid colonial expansion of Europe beginning in the 15th century (Wallerstein, Immanuel 347-357).

However, the relationship of the east, particularly the Baltic areas, to the west had an important role in the larger European world-system of trade. In fact, if it were not for the integration of the Baltic system into the Europe system of trade, the west’s ability to colonize and industrialize would be critically hampered. The Baltic system displayed a microcosm of the larger European system. The region’s economically dominant German Hanse class

6

ran the Baltic system of trade. In a macro-economic scope, Western Europe became economically dominant on the continent, which ultimately led to the dissolution of the Baltic system and its incorporation into a larger European system.

Before delving into the details, it is worth mentioning the context in which the economic system of Europe develops. The status quo of the various political structures, geographic positions, and social distinctions play essential roles in the differences and similarities between areas within a system. Europe was no exception. With the social stratification of the Western European states, religious disputes, and technological and scientific breakthroughs, Western Europe was a place of continuous change and turmoil, especially with the presence of large empires such as the Habsburgs. The Renaissance of the 14th century marked the beginning of the early modern period led to exploration in the 15th centuries and finally the emergence of global markets and states in the 16 th and 17th centuries. The role of religion played a major role in Europe because it extended to most facets of society including the economy, politics, and social structures (Damerow, Harold).

The church, as a transnational presence, was a unifying force for Europe, but in the 16th century, religious disputes became pervasive. Religious wars were sparked across the continent, reorganizing class strata, threatening political power, and introducing Protestantism as a major belief. In the context of economic development, a major phenomenon was developing. Religious identification had allowed for “relative homogeneity”, which was important in networking and forming relationships with exterior political entities (Wallerstein, Immanuel 353).

Perhaps most interesting was the effect the Counter-Reformation had on the social strata in relation to commerce. The Bourgeoisie, the middle class perennially pitted against the traditional landed aristocrats, used Protestantism as an outlet to fight back against conventional social ties. Protestantism, as a movement, was for the most part tolerant, which would be a major factor in the rise of economic zones such as Antwerp where Protestantism flourished in conjunction with trade.

The protestant sect of Calvinism was known to promote early capitalist ideologies. One of the conventional Catholic crimes was usury, which was the unjust practice of collecting interest on loans. Instead, Protestantism, and Calvinists especially, promoted the idea of investing your wealth and be active in an economic system. While this was just one small instance of the effects of religion on the economic circumstances, there were many more. Eastern Europe, for example, maintained a strong Catholic foundation, which the aristocrats of the east used in order to further control and exploit their working populations (Smitha, Frank E.).

The discoveries of many European explorers in search of foreign goods stimulated the development of a larger European world system. This thrust into the world characterized the nature of Europe during the 15th centuries. States such as Portugal and Spain began to search elsewhere for exploitable

7

land and markets. The Portuguese in particular started this phase of European expansion in the early fifteenth century. In competition with the other Western European states, Portugal looked to the seas as a way to compete.

While Immanuel Wallerstein references the lack of grain as one factor in their search for markets over seas, Portugal began to access new markets in the 15th century along with Spain in an attempt to combat neighboring state pressure. Christopher Colombus, had sailed the Atlantic in 1492 under commission of the Spanish monarchy, enmeshing the roles of state finance and economic expansion. This would further be taken over by the ambitious merchants of Europe and other private funders, a major part of the developing European system of commerce (Damerow, Harold).

Another essential part of understanding the European state of affairs within the 15th to 17th centuries is the political structures of Europe. Europe had undergone an immense amount of change in two centuries. Such wars as the Hundred Years War, Thirty Years War, War of Spanish Succession, and the French wars of religion, all had residual effects that underscore many of the developing aspects of a European system of commerce.

The east experienced frequent violence, but they were for the most part peasant rebellions such as the Dozsa Rebellion of the current territories of Hungary in 1514 or the Club War of the modern day territories of Finland in 1596 and 1597. There were also territorial wars such as the Livonian War and Russia proved to be an internal political disaster that threatened its economic stability in the Baltics ("Dozsa Rebellion" and "Club War").

State machineries in countries such as France, Spain, England and Italy came to rival each other but also participated in commercial exchange. The Habsburg Empire also deserves mention as an example of political ties that extended across state boundaries in such a way as to stimulate systematic economic development as well as hinder national commerce. For example, the empire’s claims to American resources from Spain had successfully introduced new gold and silver to the continent, stimulating trade networks.

However, in the case of the Dutch revolt in the late 16th century, the Dutch had broken free of rigid conventional state bureaucratic commerce and created state machinery that gave them an economic advantage. They developed a freer form of trade and as a result, the Dutch quickly became an economic centerpiece to the European world-system of the 17th century. Examples of this kind of effect due to state machinery and interstate economic competition can be found in numerous instances. The Baltic system of trade, which will be a large part of this analysis, had different economic circumstances for that geographic zone. This analysis will attempt to analyze both the western and the eastern zones and modes of trade as well as how the two interacted in a larger “world-system of commerce”. But this analysis will also try to uncover the cause and effect relationships of history within an economic context. Europe broke from its feudal economic past, predominantly in the west and partially in the east, and adopted many early systematic modern capitalist economic structures.

8

The Emergence of a New European System

In looking at the European system of trade, the foundation of a complex early modern capitalist system in the 16th and 17th century is best understood in a system’s context. The emergence of a European system of trade can be viewed in the context of social and economic structures. There were multiple components to the rise of this system of trade in Europe. With Western Europe embodying the core capitalist state structures, Eastern Europe was subjugated by the economic power of the west. Before understanding the emergence of these structures in both areas, one must look at the rise of Feudalism and Manorialism.

This “new” system did not just appear from a sudden mass urge to exchange goods. Rather, it evolved from a weakening feudal system in

9

Europe and a host of other circumstantial factors. The presence and deterioration of a feudal system in Europe depended on geography, especially in the case of Eastern Europe. Feudal social constructs were closely related to the manorial economic structures of the time. Eastern Europe retained most of these feudal structures into the 15 th to 17th

centuries while Western Europe had a more decisive split from these old social and economic ties.

Feudalism was an important system that was recognizable at one time or another in most parts of the world. This system in Europe emerged from a period of destabilization and decline after the Roman Empire. Therefore, it was a rigid social and economic structure. It aimed to provide a lasting and stable society. The foundation of a feudal system was based off of reciprocal obligations or social contracts between two parties. The common feudal contract maintained that the serf or peasant who required shelter, protection, and/or food went into contract with a lord or vassal. As stated by Cheyney in his “Feudal Contracts and obligations”, “You [the lord] should aid and succor me [the serf] as well with food as with clothing, according as I shall be able to serve you and deserve it. This contract usually meant that the lord or vassal received a percentage of crops in exchange for protecting a serf’s allotted land. The hierarchical structure delineated three primary social classes: the clergy, the noblemen, and the peasants (Edward P. Cheyney and James Harvey Robinson).

In most feudal societies, power is derived from the land. In this analysis, the emphasis will be on Europe but more specifically the west and then the east. In Feudalism, the land was the crucial component to the system. The land meant power, wealth, and structure. Put simply, if you owned any significant piece of land, you were incredibly wealthy. The peasants were the workers and tillers while the lords were the less involved overseers. In essence, the system was founded upon exploitation. As Marc Bloch states in volume two of Feudal Society, “The characteristic feature [feudalism] was some sort of exploitation. Whatever the sources of the nobles income – agricultural land or, as was much more rarely the case, shops or workshops – he always lived on the labour of other men” (Bloch, Marc 288). The landed aristocracy essentially exploited the work of peasants. The lord lived off the work of his serfs. That was how the lord maintained power and wealth. He depended on the unfair terms of his social contract to produce and only give little back to the serf population. It was in the economic and social interest of a lord to partition his land off to others will to pay a fee. If the people who received this allotted land decided to partition it again, he would be considered a vassal. A fief is a vassal’s domain where the peasants were subjugated to their will. In this way, a relatively stable and safe society is created. Therefore, there were multiple feudal contracts initiated between the lord and his vassals. Most typical is the exchange of protection for the right of military or administrative duties in addition to access to income through a tax called a “scutage”. There were many types of taxes and most were given as a way

10

around a term in the feudal contract. In the case of a “scutage”, it was tax that would paid instead of committing oneself to military service. (Stubbs, William and Bloch, Marc 283-293).

The feudal system existed because of the weakening of empires and rampant invasions. Feudalism was often the convergence of multiple phenomena. These phenomena include the dissolution of a larger political body, the attraction of tangible production and work, and in some cases a residual effect of consistent local raids. In any case, feudal society is often criticized as a regression in civilization. This is because there is little mobility in a feudal structure. Rents needed to be paid, production levels needed to be met, and a profitable margin of product liquidation had to have been experienced. The final argument is that feudal societal structure was “extremely primitive in nature” (Bloch, Marc 443). Bloch goes so far as to say that it was an “unequal society” (443). This all demonstrates the nature of what kind of system really enshrouded the European continent from the Middle Ages to the 19th century (Bloch, Marc 443- 446).

This feudalist system worked relatively well and therefore, even after its dissolution, had strong roots in European culture and society. In order to truly understand how the feudal structure began to dissolve into an early modern system, one has to look at these roots and determine what had to change in the previous system to give way to the new one. With the obvious limitations on long-distance trade in a feudalist society and more of a promotion of local subsistence trade, an early modern system must have ensued because of this void in distance trade. With only a small amount of traders employing a long distance tactic of commerce, many profited handsomely and soon others tried to follow suit. Nevertheless, it took centuries for the feudalist structure to weaken to the point of an early modern system of society where open competition for trade was the norm. Fernand Braudel sums it up well when he states, “The feudal superstructure was a living, resistant reality; and above all the peasant world was always ready to oppose innovation” (Braudel, Fernand 252). One may well ask why would peasants “oppose innovation”. A significant factor for this mentality is the idea that the future is not mysterious for a peasant laborer. While the peasants did have very low standards of life and were subject to consistent poverty, many were able to get by. Their goals or standards for the most part did not involve revolt or change. Interestingly enough, most were content with knowing that they had sufficient protection and work from their lord and master. Life under feudal constructs, although limiting, gave work and protection. Some peasants fled their masters in hopes of scraping a living from town to town without sustainable work. The life of a vagabond had no guarantees nor did revolution instantaneously give peasants the ability to become aristocrats or wealthy (Braudel, Fernand Vol. 2 249-262).

In fact, many peasants often had to learn different crafts in provide themselves with more revenue. Fernand Braudel’s, Wheels of Commerce, provides an example of this: “We are not surprised to find the peasants of Sweden or England also working as miners, quarrymen, or iron workers; or

11

the peasants of Skane becoming sailors and carrying on an active coasting trade in the Baltic or North Sea…(Braudel, Fernand Vol. 2 255)” This is an incredibly important revelation of Feudalism because it shows the beginnings of a diversification of labor. It also demonstrates that Feudalism is not as simple of a structure as one may initially perceive it to be. Furthermore, it raises the question of how Feudalism is different geographically. This is an important topic especially concerning the differences between Eastern and Western Europe. In fact, peasants were more mobile than many believe. Fernand Braudel believes that “Peasants were always moving into the towns, drawn by the high wages (Vol. 2 257)”. Here, we can see the developments of a changing society in the 15th and 16th

centuries. For instance, England was developing a cloth industry in urban centers, which required peasant labor from the fields. As time went on, feudalist structures slowly weakened allowing more mobility. Although this was generally the case in Western Europe, Eastern Europe experienced a lesser effect of this mobility by geographical, political and social circumstance. The east saw an increase in agricultural production rather than an urbanizing industry. The landowners maintained a vice-grip on their estate-run societies. (Braudel, Fernand Vol. 2 249-262).

While it seems as if Feudalism was an impregnable monolith of society for hundreds of years, the system begins to crumble from about the 15th to 17th century. The “cracks” as Braudel defines it become ever more present. While it is common to see the toils and mishaps of peasant life, the life of lords and to a certain extent vassals was not much better. Vassals were constantly entangled in feudal dues, feudal rents, and disputes in feudal oaths. In one particularly obscure case, Braudel uses the assertion of Jean Meyer to prove his point how Feudalism did not always yield a harrowing life just for the yeomen (peasants): “Nobles would have seen 10 to 15% of their income deducted annually” (Vol. 2 260). This loss of income came in the form of taxes from local princes or kings as well as the increasing expenses of luxury goods. These are hefty deductions for powerful landowners. It is also important to note that hefty dues paired with unfavorable crop yields and/or crises of any kind could easily spell disaster for the nobility. Furthermore, this example reveals the true limitations of a manorial system with the localization of the economy (Braudel, Fernand Vol. 2 249-262).

Therefore, what seemed to be such a lasting social construct became progressively flawed over time whether it be due internal flaws or chance as in epidemics, disease, or wars. In terms of possible internal flaws, inefficiency and corruption plagued the feudal system. A system based on the exploitation of the peasantry perhaps did not “exploit” as well as it could have. It just so happens that nearing the end of the feudal system nobles began to realize that the benefits of contractually forcing a person to work without the essential means to live was negligible compared to the employment of individuals who can sustain themselves without an employment contract. While of course not every feudal “node” or pocket in

12

Europe thought this way, it was becoming a budding question when flaws were so severe that the system began to shift (Braudel, Fernand Vol. 2 249-262)

This was especially the case when nobles realized that their “Dues fixed in money terms in the thirteenth century had become derisory” (Braudel, Fernand Vol. 2 260). This is a good example of how the system slowly evolved as a result of time. Of course, efforts were taken to look for new opportunities, especially to maintain one’s aristocratic reputation. This was where a need for a money savvy class came into play. The bourgeois “money-lenders” started to play an increasingly important role in the 16th

and 17th centuries in a system where class and entitlement proved to be everything. In fact, the Bourgeoisie was always looking to compete with the landed aristocracy. By buying up land, the bourgeois or wealthy middle class could climb the social ladder. This would be another branching of the feudal structure. With the eventual “freer” lives of the lower classes, more economic freedom would allow for greater profit opportunities locally, but more importantly abroad. With the strength of feudal structures dwindling by the 15th and 16th centuries, fiscal issues arose more often. One way to cope with these fiscal issues was to depend on this intermediary class for funds. Thus, this opens the window for a shift in social power and competition between both the middle class and the nobility. Wealth would become an ever-present issue for prestige, but Feudalism did not harness economic expansion and growth as well as a capitalist system would. To conclude, Feudalism restricted the long-distance exchange of goods, but also people. Everything was localized to a region and little communication was made between any major length of territory (Braudel, Fernand Vol. 2 249-262).

The “restriction” of the common folk is a relative term. European Feudalism had a spectrum of how free peasants really were. There was a trend, however. For the most part, if one were to travel from Western to Eastern Europe, one would find a progressively shackled peasantry. In the west, the yeomen often had the least restrictions and the most freedom in their respective lot of land. However, the east had a feudal structure that was barely a step above serfdom in most areas. Both Eastern and Western Europe were experiencing concessions to the peasantry and serfs at relatively the same rate. However, as a result of a growing economic recession in the 14th and 15th centuries, Eastern and Western Europe responded differently. Wallerstein explains this schism in feudal response in stating that, “The west…led to a crisis of the feudal system. In the east, it led to a ‘manorial reaction,’ which culminated in the sixteenth century with the ‘second serfdom’ and a new landlord class” (Wallerstein, Immanuel 95). This is a key concept in understanding the differences in both geographical areas. There was no issue of population increase or of frequent wars such as the Hundred Years’ War and the Thirty Years’ War in the east (Wallerstein, Immanuel 90-100).

13

Reasons as to why the east had escaped such devastating conflicts can be ascertained by looking at the circumstances in which these conflicts arose. The Hundred Years’ War sparked largely due to the presence of so many politically competitive regions of Western Europe trying to assert their power. The east maintained a stable and powerful aristocratic class, which was maintained by continuous exploitation of their estates. Furthermore, the Thirty Years’ War was a dispute, which not only included the political competition, but also the disputes within the church as can be determined by the Defenestration of Prague ("Defenestration of Prague"). With the rise of Protestantism in the west, violent conflict was inevitable. However, the east maintained a powerful catholic presence without major protestant sect rivals, allowing for less major multi-territory instability (Wallerstein, Immanuel 132-162)

This played a fundamental role in slowing but more importantly changing how Eastern Europe functioned as a feudal system. The peasants were tied to the lands and there were few other opportunities unless you lived near a coast or had luck on your side. For the most part, this distinction would produce a residual effect. With Western Europe undergoing the “growing pains” of a developing and diversifying society, it was only a matter of time before the west would overtake the less-developed Eastern Europe. This will become apparent by how Eastern Europe would be enmeshed in an advanced economic system dominated by a larger Western European merchant class. In any case, the freer role of the peasant would be a large factor in Western Europe’s ability to overtake Eastern Europe’s economic system (Wallerstein, Immanuel 90-162).

In the west, the predominant peasant worker was the tenant farmer. These farmers were in constant contract with their lord or vassal of a given fief (land). Often, these contracts included harsh conditions with relatively little pay and high rents. Most tenant farmers got by with barely more than enough food to feed themselves, but the tradeoff was two-fold: safety and shelter. In some advanced Western European areas, there was even the presence of wage labor, but that was a rare occurrence. Most common were tenant farmers and peasants under a more rigid system of “coerced cash-crop labor” (Wallerstein, Immanuel 91). Wallerstein’s uses system’s theory to show cause and effect. The eclectic mode of feudal labor across the continent was only one facet of his system’s analysis of history. Immanuel Wallerstein describes it as “A system of agricultural labor control wherein the peasants are required by some legal process enforced by the state to labor at least part of the time on a large domain producing some product for sale on the world market (Wallerstein, Immanuel 91). The “state” could even be a lord of a domain or land tract. This type of system was especially prevalent in the Eastern European areas. The reason for this is because of Eastern Europe’s abundance of raw material and surplus crop production. With so much land and smaller populations of people, a rigid structure of peasant farming arose. In order to maximize production of a larger plot of land with fewer serfs, the aristocrat must enforce harsh

14

punishments and structures to increase productivity and limit desertion (Wallerstein, Immanuel 80-100).

The means of production in one area can greatly affect the system of labor. There were essentially separate modes of production across the European continent. Wallerstein states quite simply that the reason for this diversity from geography is “Because each mode of labor control is best suited for particular types of production” (Wallerstein, Immanuel 87). For instance, in general, Western Europe’s feudal societies specialized in more technologically advanced production. The west implemented the newfound knowledge from the scientific and agricultural revolution more quickly and efficiently. This is partly because most of these technological breakthroughs occurred in the west. In any case, the disparity of knowledge lent itself to a more industrial “mode” of production in the west compared to the east (Wallerstein, Immanuel 67-129).

While Wallerstein views a system of super-controlled labor as “coerced cash-crop labor,” others such as Sergio Bagu and Luigi Bulferetti see this type of system as the beginnings of capitalism (Wallerstein, Immanuel 92). These authors believe that this was the beginning of capitalism because this new type of labor was clearly separate from feudal work contracts. Therefore, by its nature of being new, authors such as Bagu and Bulferetti view this shift as capitalist. It is also important to realize that although there are characterizations of such organizations of labor and social contracts, the presence of a type of living as “coerced cash-crop labor” is not something that was at the time “reconstituted” or “changed.” It was just a sliver of an evolution or change in comparison to other types of socio-economic circumstances of the time. Therefore, to label it as the first example of a capitalist organization or even calling it “feudal capitalism” is inherently wrong to a certain extent because of our perspective, which is out of that time period’s context. Most important to remember is that different areas had different circumstances (Wallerstein, Immanuel 90-95).

Another important aspect of understanding the feudal system is trying to comprehend the peasant-lord relationship. In studying the history of this complex history, certain revelations can be had concerning the growing schism between the east and west of Europe. Most important is Eastern Europe’s history of lord and vassal concessions to the peasants. An example of these concessions is the “transformation of feudal labor obligations into money obligations” (Wallerstein, Immanuel 94). In fact, this kind of concession was seen as far east as Russia. A large part of these concessions was the problem with extreme “economic expansion” and unstable “prosperity” (Wallerstein, Immanuel 95). Because Feudalism requires a certain level of economic prosperity to run smoothly, any major decline seriously affects the system, especially the relationships between the lords and peasants. This is because the profit margin in a feudal society is so low. This would become a major reason why a feudal system in the west would slowly deteriorate and turn into a more capitalist structure. However, in

15

the east, a major crisis, which could oust a feudal structure, was delayed by a “manorial reaction” (Wallerstein, Immanuel 95).

Eastern Europe had a unique circumstance compared to the west. In many of the territories in the east such as Bohemia and Poland, there was a heavy Germanic presence. In order to resist the German influence in these areas, the landed aristocracy had to compete with the German threat. They did so by developing their land and accessing their resources. However, the aristocracy could never utilize the resources on their land without the presence of the peasants on their land tracts. Hence, the relationship between the peasants and the lord was essential and potentially volatile. In the east, the risk of running away was a constant reality for lords, because of the little cushion that a low profit margin affords to both parties. Therefore, the peasants were constantly wary of making sure that their surplus production did not decrease. According to Wallerstein, this left the lords with a tough decision to either “Encourage their subjects to work more intensively (95)” and run the risk of desertion or instead, “By introducing the German or rather western custom whereby peasant dues were not only regulated but reduced” (Wallerstein, Immanuel 95). Along with an increasing pressure to produce enormous amount of grain for the west, the eastern feudal lords were compelled to crack down on the freedoms of the peasants. In some cases, they were even put back into serfdom. Russia was an example of where this serfdom was required for lords in order to keep a balanced production output.

A question to ask is why would the east deal with a problem in a seemingly opposite way than the west? For one, the essential question of the “mode of production” comes to mind. In the east, there were very little if any major industrial productions in operation. Thus, crop and raw material production pervaded Eastern Europe. This type of production in comparison to industrial production has one major distinction, which is responsible for how different the system looks from east to west. Industrial production requires a certain degree of skill, which crop production does not require. This very aspect of production is one major reason why the eastern lords were able to augment their production output by reducing labor rights. According to the Encyclopedia Britannica, “That was the best way to ensure labour services for grain-growing demesnes (peasant tilled land)” ("Manorialism"). At this point, certain “complementary parts” of a larger world system begin to appear. Due to geographical circumstance, one area of Europe developed a major agrarian economy while the other shifts towards a rapidly growing industrial economy. Wallerstein’s explanation of a core state, semi-periphery state, and a periphery state begin to make sense in characterizing how Europe operated. This would be a system “In which eastern Europe played the role of raw-materials producer for the industrializing west…” (Wallerstein, Immanuel 95).

In trying to understand the European world-system, it is interesting to see the role in which the east plays in conjunction to the west. As the west begins a trend of early industrialization paired with this new long distance

16

trade fervor of the century, natural resources in the west were diminishing at astonishing rates. Tree felling and mining were so rampant that resources were being depleted, but also sustainable crop farming. Mine production increased by a factor of five in central Europe (Perroy in Wallerstein). Wallerstein states that, “The supply was not keeping pace with the demand…” (41). As industry replaced many of the subsistence farming practices in the west, food was beginning to grow in demand as well. There was such a demand for food such as grain in some areas that trade and exploration was sometimes accredited to searching for new markets of grain trade. Nutritious food was a driving force of demand in Europe during the 15th and 16th centuries. It was to “fuel expansion into the Mediterranean and Atlantic islands, then to North and West Africa…” (42). In reviewing, the growing dimensions of a new European system dependent on “complementary parts” begin to become clear. Local resource depletions yielded an outsourcing of this labor to other areas. This is an interesting parallel to the modern day issue of outsourcing jobs to areas with less economic and industrial advancement. A growing search or “access” to a new market for goods that are in demand is a telling example of the shifting nature of Feudalism in this time period. Feudalism, as previously expounded upon, lacked a certain scalability of trade as shown by a relatively low profit margin. Obviously, there are other factors to this shift, but trade offers a particularly interesting point of access in understanding the shift (Wallerstein, Immanuel 40-50).

A particular area of interest in Eastern Europe’s trade is the Baltic trade system. This was a major system of trade. It was crucial in “feeding” the expanding Western Europe with raw material and food product. The Baltic system is often an overlooked area, but a significant component to the more archetypal study of the industrializing west. Wallerstein supports this point by stating, “The nature of Baltic trade…From the fifteenth century on… were primarily bulk goods (cereals, timber, and later on wool), although the older exports of fur and wax continued” (96). Consequently, as the east exported raw materials, it imported luxury goods, which were often available for exchange from the west. Such luxury goods include “salt, wines, and silks” (Wallerstein, Immanuel 96). But how big of an impact did these Baltic goods really have on the west? It had a tremendous impact. Wallerstein explains directly that, “Holland was dependent on Baltic grain” (96). But the impact does not cease with the Dutch. The English, who had invested heavily in the Baltic areas originally for furs, began to widen the scope of products they were importing from the area in order to “fuel” expansion both domestically and foreign (Wallerstein, Immanuel 90-100).

In the perspective of the west, there are significant factors, which foretold the rapid distinction in development in comparison to the east. But there were also trends that demonstrated that the west’s prosperity increased in the same fashion as the east declined. Once again, here is another example of an interesting phenomenon in which one needs to delve

17

into the complexities of the system further to understand. For one, the rapid development of the west and their use of Eastern European product directly hurt Eastern Europe. Compared to the increasingly sprawling urban centers of the west such as London, Lyon, Amsterdam, Seville, Cadìz, and Lisbon. The east suffered from towns that declined. A likely possibility for this was the rise in demand for Eastern European products, which in turn caused lords to cut corners to try and meet this demand. “Cutting corners” in Eastern Europe, as signified by the “Manorial reaction”, often meant the peasant or serf class suffered. Therefore, there was a focus on production on land tracts and demand for labor to meet the demand for product ensued. A demand for rural labor rapidly overtook any sort of urban employment in the east. Now, it is easier to see the decline of Eastern European towns as a natural result of rapid growth in the west. This also goes to show a major break in the long lasting feudal roots in Europe of the 16th century. In fact, Europe was beginning to lose its feudal identity in the west while the early modern period was delayed in the east (Wallerstein, Immanuel 67-129).

Before refining the focus on the Eastern European, there are still pieces of the “world system (of Europe)” needing to be explored further. With the west of Europe on the rise, it was essential for Eastern Europe to try and compete. Unfortunately, in order to compete they had to raise production, which left no other option than to further exploit the peasantry. If one were to compare the terrain of Western Europe and Eastern Europe at the time, there would be a significant difference. With the west developing and most western natural resources diminishing, the west would have looked crowded with an urban culture focus. However, in the east the quantity of unused land and a shortage of labor would provide a significant juxtaposition. Landlords in the east were required to become increasingly strict with their laborers. The peasantry was tethered to their plots of land similarly like slaves to their plantations in the western colonies. Unfortunately for the Eastern landlords, slavery was not a possibility. There was no race or group to exploit (Wallerstein, Immanuel 80-129).

In contrast, Hispanic America, where the Western European powers were tightening their grasp on the people and their resources, offers an interesting perspective on this world system in relation to Eastern Europe. Half way across the world, Latin America had a seemingly different yet similar situation to Eastern Europe in that they implemented a similar “coerced cash-crop labor” system. This system was called the “encomienda.” While this system was one that was extremely strict in nature, similar to that of Eastern Europe, its details are not as important as how similar of a role it played in the European World system than that of Eastern Europe. In the words of Immanuel Wallerstein, places like Hispanic America and Eastern Europe constituted the “periphery” of the “European world system.” This area is deemed the “periphery” because of its close but unequal ties with the core areas. The western European powers constitute the “core states” which have a high level of technological advancement and

18

industrial expansion. In having these advantages, they are able to extend their power and influence economically, politically, militarily, and socially in the semi-peripheral and peripheral areas. This can be demonstrated by the Western European colonization of the Americas as well as their economic dominance in the Eastern Europe (Wallerstein, Immanuel 97-103).

This dominance all stems from the major technological and industrial advancements of the west. Although Hispanic America and Eastern Europe are labeled as the “periphery,” they had differences in their economic focus. Wallerstein states, “There were two primary activities: mines, principally for bullion and agriculture, principally for certain foods. In the sixteenth century, Hispanic America provided primarily the former while Eastern Europe provided primarily the latter” (100). However this one major difference was eclipsed by the similarities in labor exploitation and disproportionate economic transactions. Needless to say, the core prospered and flourished tremendously from a skyrocketing profit margin from exploiting the economic disadvantages of the peripheral zones. As the peripheral zones were contracting in almost every sense, the core states were expanding. This phenomenon can be viewed through the important lens of labor specialization, which is the root in all civilizations of progression. Wallerstein supports this assertion by saying, “The trend in the core was toward variety and specialization while the trend in the periphery was toward monoculture” (102). Finally, trade was becoming more reminiscent of our current trade. While there were major changes in 16th century Europe, none were as expansive and lasting as the economy (Wallerstein, Immanuel 100-110).

As the west continued on its track towards early capitalism, a familiar negative correlation can be seen in Eastern Europe. In fact, the east experienced a true example of regression in almost every societal facet. This regression forced almost the entirety of this geographic zone to rely on agriculture and raw materials. Braudel affirms with saying “The peasant was being ever more firmly attached to the land; he was losing mobility, both in theory and in practice, losing his right to marry whom he pleased, and losing his right to free himself, by cash payment, from dues fixed in kind or compulsory labour” (Braudel, Fernand Vol. 2 267). The compulsory labor was in fact one of the more crippling factors. This aspect literally restricted any sort of specialization in any trade. An exact opposite example of what was occurring in the west at the time, which goes to show the importance of economic diversity. Braudel references several cases of increased compulsory days of work in several countries. These areas included Poland, Hungary, Transylvania, Livonia, and Silesia. All of these areas were similar in that the compulsory workdays were increased from about one to about five or six days a week. In some cases, the lord himself and his production quota determined regulation. Russia served as an extreme example of compulsory labor contracts, which would be legalized and deemed “voluntary enserfment” (Braudel, Fernand Vol. 2 267). In any case, while it is extremely hard to use statistics in providing support

19

because of the scarcity of evidence, the average determined for work days is realized at around six days a week in the east. Previously, the discussion of the almost insatiable appetite of the west explained the external reasons for the Eastern Europe situation, but now the discussion will focus on the internal factors of the area (Braudel, Fernand Vol. 2 264-272).

In addressing the internal issues, the strength of the nobility class immediately comes to mind. Although there was already a brief discussion of the immense power the landed aristocracy had in the east, little was discussed in conjunction with the peasant class. It is important to realize that this “regression” in Eastern Europe was not necessarily a regression back into Feudalism. In fact, German historians point out an interesting distinction. Instead of the “Grundherrschaft (landlordship)” of feudal times, historians have deemed this era of Eastern Europe history as “Gutsherrschaft (estate-owner-ship)” (Braudel, Fernand 269). Therefore, Eastern Europe experienced a somewhat different outcome of Feudalism in comparison to the west. Perhaps it was just an evolution of the same constructs, but with an important new outside pressure of outside capitalizing states. The combining of the seemingly ridiculous demand for raw product in the west along with the vice grip of the noble class in the east brought the peasant and serf classes of the east to absolute desperation. Peasant reactionary revolutions sparked nearly everywhere in Eastern Europe, but were quickly crushed by the overbearing landed classes, which was a once again another major difference from the western peasant violence. Some uprisings included the “Dosza uprising (1514) in Hungary” and the Club War uprising in Finland ("Club War" and Braudel, Fernand Vol. 2 269). Unlike the western peasant revolts, these uprisings were cleared out with relative ease, but more importantly many of these areas with peasant unrest instituted even harsher regulations on labor. Braudel provides a good example as a consequence of the Dosza uprising. He states, “The Werbocz Code proclaimed the perpetua rusticitas, that is the perpetual serfdom of the peasant” (Braudel, Fernand 269). It is obvious that this Eastern European system was one of complete dominance. Desertion provided, for some, a viable option. It was one of the only Eastern European phenomena that could not be legislated against effectively (Braudel, Fernand 264-272 ; "Club War").

Most economically stagnating was the appearance of separated and small economic units in Eastern Europe. As a result of the constriction on the east’s working class, the economy took a literal nose-dive. Instead of the centralizing and international integrating economies of the west, the economies of the east withdrew to individual estates, resulting in economic isolation. Business and working classes were filing out of the major urban centers, truly paradoxical after reviewing the western situation. It is important to once again realize that it was the scale and frequency of transaction in the urban centers of Eastern Europe, which were lacking. Therefore, it would be wrong to think that urban centers were places of non-existent business, because that was not the case. In fact, peasants,

20

when they did have the rare occasion to frequent urban towns, often spent their meager sums of money in the bars. Thus, before labeling Eastern Europe a zone void of any large transactions, it is important to realize that it was the full participation of the society in economic transactions that was lacking. Rather, there were in fact massive business transactions of raw products being shipped to the west. The only distinguishing factor was that it was as Braudel puts it, “Open to the rest of the world at the top end” (Braudel, Fernand Vol. 2 270). Braudel means that there was limited access to these transactions, except for the lords and nobles. It was “Manorialism” that overtook the Eastern European rural zone. The economy was dependent on manorial production and output. Nobles in Eastern Europe were living on a different wavelength than those of the west. They did only what was necessary for a decent profit margin to maintain their luxurious lifestyles. If it required unpaid work, it did not matter as long as production remained high (Braudel, Fernand Vol. 2 265-272).

This brings up another question of where was all this raw material production going? The rural map of Eastern Europe at the time looked like a scattering of economic pockets in the countryside centered on massive estates. Naturally, this production would move west to meet the demand. This was the case, but first the goods would be shipped to the trading centers of Europe. In fact, Eastern Europe’s Baltic trade zone would be the arena in which these goods would be exported and western luxury goods imported. When Braudel refers to the Polish noblemen and their ardent task of reaching a suitable profit margin, he says, “They sold it [harvested raw materials] in Danzig exchanging it automatically for manufactured products from the west, usually luxuries” (Braudel, Fernand Vol. 2 271). This is an important piece which connects this world system of commerce of the time. In essence, the complementary parts of the system have been put together yet there is more to it. The merchant class would be the oil in the machinations of this developing system of trade. They would be the ones responsible for the transport of goods, advancement of products, and the harbinger of the intricacies of a modern capitalist world system of commerce. Before turning our attention to the rise of the merchant class, it is important to solidify this newfound European world system of trade (Braudel, Fernand Vol. 2 265-272).

In review, Western Europe advanced tremendously in comparison to Eastern Europe. They had developed technology, competition, and influence due to geographic, social, political, and economic circumstance. While the Western European states were the first to crack the monolithic structures of Feudalism, but in doing so they slowly began to affect other parts of the world, largely due to long-distance trade. It is here that you see the inverse correlation of the west compared to the east. The western scenario inevitably affected the East. This gives promising evidence for the emergence of a world system of commerce. Through careful analysis, it becomes evident that the east played an integral part of the western expansion. They were able to “fuel” the expansion and the diversification of

21

labor and endeavors, therefore limiting the west’s reliance on subsistence farming. In essence, a developing capitalist Western Europe cast an exploitative shadow on the east. An interesting counter-capitalist structure was developed in the east, which was largely due to the greed and strength of the noble class. Braudel agrees by stating, “The great landowner was not a capitalist, but he was a tool and a collaborator in the service of capitalism in Amsterdam and elsewhere” (Vol. 2 271). How could an early modern capitalist system arise in the 15th, 16th and 17th century if one area seemed to regress? That is because it is a necessity. For one area to experience unrelenting growth, another area must be affected inversely in order to cope with the demand or influence of another state. This is evident in the contemporary capitalist structure. In order to have a developed nation, there must be a corresponding underdeveloped one (Braudel, Fernand Vol. 2 265- 272).

In Eastern Europe, this was largely the case because a small percentage of the population had the wealth and the power. Thus, when the Eastern European aristocrat decided to meet this Western demand, he unintentionally abandoned the feudal system. He was in effect joining or participating in a larger capitalist system, which would ironically exploit him in a system of exchange rather than the perennial exploitation of the Eastern noblemen’s peasants. But who would be the exploiter? Strangely enough, it would not be the aristocratic landowners nor would it be the powerful monarchs and political leaders of the west. In fact, it would be the vendor, the salesman, and the peddler who would be the one in position of monetary power. Their wealth would be created around exploitation and manipulation of not only people, but also, more importantly, prices. The merchant class would have an increasingly important role in the context of the world system of commerce, particularly in Eastern Europe. Without the diversification of labor and an economy “open to the top”, the merchant was a pivotal occupation in keeping the pieces of the Eastern and Western European world system together as complementary parts (Braudel, Fernand Vol. 2 269-272).

22

The Merchant Class of Eastern and Western Europe and Its Influence on a European

System of Trade

The merchant occupied a much-needed niche in European economy between the 15th and 17th centuries. The merchants provided the movement of goods and the interactions between separate systems of commerce. In a system’s approach, the merchant class linked the nodes of production and consumption. In a diverse geographic zone such as Europe the infrastructure and the way in which merchants conducted trade were often times different in according to area. In the east, one can see the less developed merchant system by the abundance of pedlars and less wealthy merchants and the rise of a Baltic system of trade. In the west, a different merchant structure arose with more wealth and power. More importantly, merchants played an essential role in maintaining a diversified economic system.

Essentially, the cooperation between merchant parties would allow for massive economic expansion. This cooperation can be found in the creation of markets, fairs, correspondences, early economic loans, interest rates, and guilds. These events and relationships would define the majority of early modern capitalist transactions beginning in the 15th centuries and progressing through the 16th and 17th centuries. Western Europe had a particularly well-developed system of trade and merchant interactions, whereas Eastern Europe had a merchant class structure dependent on local tradesmen and those of foreign origin. With the nobility and the peasants tethered to their rural spheres of raw economic production, there needed to be a middleman to exchange raw product for the luxury goods the aristocrats desired. Almost exclusively the merchant class ran the process.

The merchant class had modest origins. In the stratification of the commercial class there are multiple levels, such as the rich and wealthy long distance traders, shopkeepers, and finally “pedlars.” Within these classes, there was a wide spectrum of merchants. Some traders were very wealthy while others did not engage in very long distance trade, while

23

others just did not access a lucrative market at the right time. Some shopkeepers were very wealthy as a result of good location and proper financing while others suffered. But most important is that out of every facet of the merchant class the origin was the pedlar. The pedlar could be looked upon as the basic level trader. They spent their lives hauling goods across the countryside and trying to sell their usually small amounts of goods in small urban centers. They were the most mobile of the merchant delineations aside from the seafaring traders. In areas such as Eastern Europe where there was little centralization, pedlars thrived as the major mode of commodity transportation. According to Fernand Braudel, the pedlar “filled in the gaps in the regular channels of distributions, even in towns…”(Braudel, Fernand. Vol 2. 75). These were the essential groups of merchants because the early modern capitalist structure was incredibly fragmented and inefficient to say the least. Therefore, there were more “gaps” to fill than there were already structured areas for trade (Braudel, Fernand. Vol 2. 75-90).

Perhaps most important in this time period was the versatility of a pedlar merchant class. Their ability to complement nearly any economic market made them very good at exploiting the market as well as finding a niche in the economy. While most pedlars were poor, many were able to move up the social ladder by adapting to the economic circumstances of the area. Peddlers were so versatile that they could be employed as “chimney sweepers (Maragat) from the Cantabrian mountains” (Braudel, Fernand. Vol 2. 76) or even as knife-grinders in the case of the “Savoyard knife-grinders in Strasbourg” (Braudel, Fernand. Vol 2. 75). The pedlar’s role in the early modern capitalist economy was absolutely essential. At that time, the profession of a pedlar was so expansive it is hard to set boundaries for what their occupation entailed. Most important to understand was their ability to fill needed economic gaps in local economies as well as pioneers for links between major nodes of trade. They connected all the pockets of transactions from town to town and region to region. The role of the pedlars would dominate the Eastern European market system because of how the rural feudal economies would need a middleman to connect the estates (Braudel, Fernand. Vol 2. 67-81).

The essential question remains, where did these pedlars come from? Interestingly enough, if one were to look back to the Middle Ages the answer would be straightforward. Major crossroads for the transport of goods occurred through mountain passes. Some of the more notable mountain ranges with passes include the Pyrenees and the Alps. The “highland” areas were the areas with most trade activities in the past. The mountainous areas were for the most part uncultivated and had ample supplies of natural resources such as timber and animal husbandry. These resources were quickly used to fuel major industrial developments during the 15th and 16th centuries. Wool was harvested from animals that grazed in these mountainous areas and timber was harvested for shipbuilding. The pedlars that frequented these passes were a major means of connection

24

between consumption and production nodes in the developing European system. In Laurence Fontaine’s, History of Pedlars in Europe, he takes this position on the topic by saying, “The economic development of Europe…which could be seen in new fashions in clothes and food, rescued the mountain regions from their marginalized status” (Fontaine, Laurence 8). An example of the influence of an emerging economic system can be seen once again with the demand for raw material (Fontaine, Laurence 8-11).

This was the case in Western Europe and to an even greater extent in Eastern Europe. Pedlars provided the answer for how the raw materials would arrive in major towns from the “highlands”. With an Eastern European system without a centralized economy, the roles of the pedlars were even more important for the basic functions of an economy. Therefore, the origin of the pedlar as a meager peasant “backpacking” goods from one region to another can most clearly be noticed in the trade from mountainous areas to urban centers. But in Eastern Europe, the raw products produced in the countryside had limited access to the major urban centers where these products would be consumed. For example, Eastern European pedlars would haul their goods to major Baltic cities such as Gdansk and Riga in the north where there was a foreign demand for those goods. In essence, the urban centers began to appropriate untouched land, into the source of fuel for economic expansion from pedlar activity (Fontaine, Laurence 8-22).

It is also important to see the dependence the nobility had on a merchant class. The nobles were effectively sedentary because they had to operate and oversee their property. The limited mobility was a residual effect of a lingering feudal system in Eastern Europe. They did not want to toil with the problems of bringing the raw material production to market places. With their lavish lifestyles, the nobles were almost completely not self-sufficient. They desired luxury goods from far off distances such as “Italian silk, the laces of Brabant, furs from the north, perfumes of Araby, fruits from the Levant, and spices from India…” (Engels, Friedrich) Here, we can see the necessity of a network of middlemen who would supply this demand. The merchant class would occupy this essential role, but more importantly, the pedlars would be the class, which carried out the “haul” work. This haul work could entail pulling carts, using animals to carry goods, and physically carrying packs of goods themselves. This work would be the essential role of bringing products, which were saturated and under priced in one area, and transporting those goods to an area where there was a demand for them (Engels, Friedrich).

For instance, trying to sell the wheat and timber products of the rural country, especially in Eastern Europe, would be useless if sold in a rural area that produced the same materials. Therefore, the transport of these goods to an area with a demand for those goods such as a major port city like Gdánsk would be much more profitable. Not only would foreign merchants and local merchants want those products to sell to foreign places, but a much more favorable transaction for the pedlar would be

25

made. With the increase of distance trading, currency would become an essential part of the early modern capitalist system. The coin was one of the major reasons why feudal structures ruptured. Contracted work and accommodations become increasingly hard to maintain with the exchange of currency. A bartering system would always be a victim of a currency system where bulk goods do not need to be transported. When currency and coins began to proliferate in the 15th century European economy, the nobility had no choice but to participate in the system. As Friedrich Engels states, “He [the nobility] was faced with the necessity of calling on the urban money-lender” (Engels, Friedrich). In essence, the merchant class played an important direct role in bridging the eastern European economic “pockets” of the estates through transactions, but they also had a catalytic effect where the nobility needed to depend on outside “urban” moneylenders for financing(Engels, Friedrich).

The 15th to 17th century economic history shows a centralization of local economies into larger economic systems. In the first level of this centralization, the integration of the rural and urban consumers and producers was essential. Most merchants realized that to try and conduct trade on their own could often be risky, because of unpredictable local market prices and demand. The European “fair” became a very important aspect of early trade in Europe. In Eastern Europe, the fair was the beginning of a centralizing economic system. It consolidated local products of a given region into one location, creating an economic node of exchange. It developed demand for products to the merchants and gave merchants an advantage over the consumer. The advantage rose from the ability to cooperate with other local merchants in setting prices. However, the fair was not a new development. Fairs were prevalent in the Middle-Ages and Western Europe.

The fair became an incredibly important way to fill a supply void in certain regions. Their location and time of the year were equally as important in determining their success and usefulness to their local economies. In Eastern Europe in particular, fairs were less frequent and much larger. Large fairs such as the fair at Leipzig occurred within the urban center itself or right outside of it. Large fairs such as the Leipzig fair, occurred only few times a year if that. Fairs offered a meeting place for “craftsmen” of nearly any trade and attracted any sort of vendor in the nearby area. These market places brought a concentration of great wealth together with a diverse supply of goods, an important aspect for any budding capitalist system (Braudel, Fernand. Vol 2. 81-97).

The larger fairs were often able to have the most impact on a regional economy. Braudel highlights the need for large fairs by saying that large fairs, “Could mobilize the economy of a huge region: sometimes the entire business community of western Europe would meet at them, to take advantage of the liberties and franchises…caused by the numerous taxes and tolls” (Braudel, Fernand. Vol 2. 82). Fernand Braudel demonstrates the

26

idea that fairs were a major component to the integration of economies. He does bring up an important aspect of the appeal of the market: the evasion of taxes. Independent shop transactions often had an addition tax levied by local governments. Therefore, the fair attracted many by the absence of such fees. (Braudel, Fernand. Vol 2. 81-97).

The market place allowed for the transactions of goods without additional fees, an important attraction for all classes. But most important is the attention these fairs get from not only the regional people, but also from foreign and local merchants. Fairs brought foreign goods and local goods together in one area to maximize the supply of an area’s demand as well as contribute to future demand for those same products in the next fair (Braudel, Fernand. Vol 2. 81-97).

France among many states had an expansive network of fairs. Cities in every province held at least a couple of fairs a year. While some were minor and others were much larger, they all had major impact on the economic situation of the areas. For the purpose of this argument, the larger fairs would be more important to convey the sense of an expanding European world system of exchange. Two very important cities come to mind when discussing influential Western European fairs: Lyons and Paris. The Lyons fair was considered one of the “true fairs,” which meant, “The fair took everything over and became the town, or rather something more than the conquered town” (Braudel, Fernand. Vol 2. 83). These types of towns would lose their identities as distinct towns because of how large the fair would be. This was an interesting by-product of an early modern capitalist economic system, because it showed an increased demand for goods. While Lyons was an example of a town overrun by merchants and goods during the fairs, Paris was a different in that it was more or less able to contain its fairs (Braudel, Fernand. Vol 2. 81-97).

Most important about Paris, and to a certain extent Lyons, was their ability to concentrate national staple products in one area at multiple times a year. Braudel states that major fairs like these were “held on the first Tuesday of the month, twelve a year then” (Braudel, Fernand. Vol 2. 83). These kinds of fairs were held frequently because of the profit that they would bring to all participants in the transactions. This was largely due to the array of national goods but also rare foreign goods that appeared in these markets. Braudel continues to list a few of the items one may have found in these kind of fairs, “all sorts of animals are sold… animal skins, wholesale fabrics of all kinds from Languedoc, white and red cloth from Auvergne, hemp, thread, wool and pelts of every sort” (Braudel, Fernand. Vol 2. 83) Western Europe had a developed system of fairs especially in France, but this did not mean that Eastern Europe had little fair activity. In fact, Eastern Europe had many large fairs, but there was not a large presence of smaller regional fairs. This was a function of the lack of many independent local merchants. (Braudel, Fernand. Vol 2. 81-97).

Eastern Europe did not differ too much from Western European merchant class structure except there was a much larger presence of poor

27

pedlars. While Western Europe was rapidly developing its bourgeois class, Eastern Europe naturally lagged behind and maintained a high population of travelling vendors. It was a necessity for the eastern European system, and large fairs were where these pedlars could try and make a profit from selling their goods. The ultimate goal of many petty traders in Eastern Europe was to make it to the major port cities such as Gdánsk, Novgorod, Lübeck, and Riga, where there was almost always a steady demand for Eastern European rural goods. (Braudel, Fernand. Vol 2. 81-97).

Other pedlars whom were not directly involved in transporting goods to the Baltic cities would serve an alternate role. They would build the commodity base for fairs held in rural towns, and chances were that foreign merchants frequented these areas for great deals on local raw material. For instance, the cotton weaver in Poland had an interesting similarity to pedlar in that the “cottage-industry village of Andrychow, near Krakow, or at least those of them who went to sell the cloth produced in the village at Warsaw, Gdansk, Lwow, Tarnopol, at the Lublin and Dubno fairs…” (Braudel, Fernand. Vol 2. 76). Many tradesmen and craftsmen resorted to “peddling” their goods in Eastern Europe simply because they had no other choice. There was no real trade infrastructure within the rural countryside of Eastern Europe unless one happened to live near an affluent port city on the Baltic Sea. Others resorted to travelling long distances to find a reliable market for their goods or a local popular fair (Braudel, Fernand. Vol 2. 66-97).

Eastern Europe had a distinct difference form Western Europe because the pedlar had even more responsibility in keeping the backward economic system in rural Eastern Europe working. There was no industry production developing except on the Eastern European noble’s land. Therefore, the “gaps” to fill in Eastern Europe’s economy was the majority of commercial activity. Rural commerce in Eastern Europe was incredibly stagnant, except for the travelling merchant. There was no centralization, so without the pedlar, the scale of trade and production would have been incredibly low to non-existent in Eastern Europe. The pedlar whether “Rich or poor… stimulated and maintained trade, and spread it over a distance. But where they dominated, it can usually be shown that the region was in some respects economically backward” (Braudel, Fernand. Vol 2. 76). Eastern Europe fit this description very well. Poland was an area, which demonstrated this trend. With lands which were less populated and a less available labor force, Eastern European countries such as Poland just did not have the fundamental cornerstones of an advanced economic system. Therefore, the responsibilities of a larger work force was transferred to the Eastern European pedlar (Braudel, Fernand. Vol 2. 66-97; Wallerstein, Immanuel 97-100)

Eastern Europe had its share of important fairs. Most importantly, they were very large and attracted traditionally isolated regional economies into one larger one. Eastern Germany and Holland played a crucial role in the Eastern Europe’s economic trade zone. Although they were arguably on the

28

western margin of the “Eastern European economic zone” they nevertheless played a key role (Braudel, Fernand. Vol 2).

The Eastern German fairs tended to have a more agricultural focus, while the Dutch fairs of Antwerp served as a convergence of global goods. In the case of this analysis, Antwerp and most of Holland were the passageways and the connection between the Baltic Sea trade and the rest of the world’s markets. Therefore, Antwerp created a market, which every noble in Eastern Europe wished they had direct access to (Braudel, Fernand. Vol 2. 66-115).

All of the nobility’s luxury good demands could be satiated with their abundance of raw and agricultural products. However, the merchants ran this transference of markets. Braudel describes this “wholesale market” by remarking that it was a place where “dealer met dealer” to sell goods for other goods (predominantly raw product for luxury goods), but he does not fail to mention the “huge scale of popular participation” (Braudel, Fernand. Vol 2. 90). At this point, it is incredibly hard to continue describing merchant activity and fairs without bringing in the issue of what was being exchanged. Was it goods for goods or was it goods for money? Well, both are correct, but also only give a very two-dimensional explanation of the true nature of “transaction” of the period. Most interesting about this period is the rise of credit and correspondence networks in conjunction with conventional methods of exchange. These all begin in this period but are not uniform in that one method of exchange is universal. This also goes hand in hand with the idea that merchants were not solo-marketers. In fact, large trading companies and guilds would not only make this system more complex, but would also require the use of credit to develop an efficient system of commerce in 15th, 16th and 17th centuries (Braudel, Fernand. Vol 2. 85-120)

Fairs were a great example of this need for credit and a complex organization of correspondence. Most fairs, including those of Eastern Europe such as Leipzig and Linz, had “payment sessions, (Braudel, Fernand. Vol 2. 90)” which was a designated week for paying your expenses at the Fair. Perhaps most fascinating was the idea of that these credits could be passed on to another fair. For example, fairs such as Beaucaire, Pézenas or Montagnac had “bills of exchange” (Braudel, Fernand. Vol 2. 90) all the way from Paris and Lyons, which were the major fairs of the country. This was a basic necessity of an economic system, which sought to expand its territories. The idea of credit flow and settling debt would become a defining aspect of our current economic system. We can see the fledgling relationship of credit and debt very early in human history, but the fairs of the 15th and 17th centuries were a testament to the increasingly important role of credit in an early modern capitalist system (Braudel, Fernand. Vol 2. 66- 120).

It is essential then to look at the fairs with a new perspective. These were no longer places of basic transactions of one good for another. Instead, a web of credit and debt balance sheets were being assembled

29

early in this period, and most remarkably in Eastern Europe too. Large fairs such as those of Leipzig, Linz, Lublin, Thorun, Poznan, Gdansk and Brzeg incorporated these new models of exchange because of the presence of western traders. Thus by a process of osmosis, Eastern Europe had to adopt this system of commerce (Braudel, Fernand. Vol 2. 67-114).

An example of this is the complexity of the major fairs in Eastern Europe. Braudel describes the transactions in a “pyramid form”. He states, “If the fair is envisaged as a pyramid, the base consists of the many minor transactions in local goods, usually perishable and cheap, then one moves up towards luxury goods, expensive and transported from far away: at the very top came the active money market without which business could not be done at all – or any rate not at the same pace” (Braudel, Fernand. Vol 2. 91). It is worthwhile to notice that Braudel states that the “rate” of exchange increased tremendously due to not only the fair system but what it inherently required as an essential part of the economic system: credit and currency. (Braudel, Fernand. Vol 2. 66-114).

The integration of foreigners in what had been local economic transactions created a larger European system of commerce. In the case of Eastern Europe, they had major foreign presence because of the exploitation of their rural markets. Scotland became an interesting participant in this eastern trade complex. Long viewed by historians as a competitor to the Baltic system, the scots in fact had essential roles within the Baltic system itself. This took the form of the emigration of Scottish merchants, which was and still is a major factor of our current economic system. The idea that one should travel far distances to make profits is one that was truly born in 15th to 17th century time periods (Fontaine, Laurence 8-22).

In the case of the Scots, who were mostly pedlars, craftsmen, and tradesmen, Poland became their “trading” grounds. These tradesmen immigrated to most Baltic states with Norway and Poland having had the largest concentrations. It should be no surprise that their presence was largely felt in major commercial ports on the Baltic Sea such as Gdansk, Riga, and Oslo. Laurence Fontaine states that “In 1621 the Scottish emigrant population in Poland was estimated at 30,000” (Fontaine, Laurence 10). This is a sizable amount of traders in one area, especially for the time period. By looking at the Scottish presence, one can see the effects of an attractor site within a developing system of the economy. The increased concentration of such Scot traders suggested the wealth potential of an area. The wealth potential of an area would often form the foundation of a system of trade. However, the Scots were not the only merchants in the Eastern European zone. While some came from Europe, others came from even more distant areas. Jews and Armenian merchants had even arrived in Eastern Europe to set up their own system of trade. Not only do these numbers signify a major trade system in the Baltic zone, but they also allude to an essential component of any economic system: a network of correspondence (Fontaine, Laurence 8-22).

30

Due to the slow pace of trade and the distance of markets to be accessed, a reliable network of communication was a necessity for most traders. This correspondence usually came in the form of a company, a guild, a family network, or just a few merchants bonded together by a common goal of profit. At this point, the discussion of the merchant class has changed slightly. Instead of looking at the pedlar, who would be most often than not an independent trader, it’s important to look at the more dependent traders. In looking at this topic, there would be a “developing” early modern capitalist system. It is truly the participation of merchants, companies, firms and enterprises, which fostered a diversifying economic system utilizing credit, currency, debt, and warehouses.

It is also important to keep in mind that these networks had no true geographic boundary. In every major port city in Europe, correspondence networks were established between areas such as the Baltic and even the Italian peninsula. Thus, in looking at these correspondence networks, one can see the developing nature of a modernizing global economy.

Fontaine recognizes this aspect of the early modern capitalist period when mentioning the Strasbourg trade network in 1611, “Their [Bittot Brothers] business extended over dozens of towns located within the rectangle Venice-Lyon, Lyon-Haarlem, Haarlem-Gdánsk, Gdánsk-Venice” (Fontaine, Laurence 12). This organization of trade illustrates a few very important features of the network systems of trade in this time period. For one, it suggested the importance of family correspondence. It was evident that family networks were the most reliable and consistent. Family correspondence incorporated planned marriages, interfamily relationships, shared monetary power, and interregional networking. Families could control a major product in one city, which was dependent on a raw product from another. Therefore it would be in the favor of the family of the producing center to marry off their children to the family of the raw product producers of another city. The Medici’s of Italy, and most notably the Habsburg Empire, provide examples of extreme use of family correspondence for not only economic means but for political and militant means as well. The Fugger family also served as a predominant banking family in Germany (Fontaine, Laurence 8-22).

The Baltic trade had an impact on the Dutch markets, the French markets, and finally the Italian markets, which just further demonstrated the need for a reliable network of tradesmen. Lastly, each city had multiple foreign markets it was exchanging products for, which galvanized the need for stable merchants residing in one city. It also meant that an eclectic base of products was passing through each one of these cities further creating a complex trade system (Fontaine, Laurence 8-22).

From the Bittot family to the Giraud and Brentano families, networks of trade and correspondence were linked together. These families married their children off to other merchants in other geographic zones of economic interest. For example, “Gilles Bittot from Montagny in Tarentaise married the daughter of a Strasbourg merchant, Georg Hellbeck…through whose

31

intervention he was granted the droit de bourgeoisie in 1576” (Fontaine, Laurence 12). There were major incentives for marrying children of merchants to other merchant classes. This kind of contractual marriage was exceedingly common at the time in order to establish enduring profits. Also, certain marriages allowed for the acquisition of certain essential trading rights and privileges such as the “droit de bourgeoisie,” which “conferred the right to do business in the town” (Fontaine, Laurence 12). Similar to the perennial goal of “marrying into a higher class,” merchants married their children off to other merchant families for power, new wealth, and connection (Fontaine, Laurence 8-22).

What is interesting about this example is the acquisition of the “droit de bourgeoisie,” without which you cannot conduct trade in a town, an essential part of any aspiring merchant. Therefore, these interfamily marriages were similar to those of political families in that the political goal was to gain social status and boost power instead their goals were economic. More examples of these kinds of relations between family can be analyzed in the Giraud family from Dauphiné, France, which was a unifying force in the related families of the Bérard family, the Vieux family, the Delor family and the Horard family (Fontaine, Laurence 13). In the late 16 th

century, these marriages created “bridges” between major trade cities such as Lyons, Paris, and Grenoble. (Fontaine, Laurence 8-22).

This same type of correspondence had a parallel in Eastern Europe. This correspondence networking was prevalent everywhere in Europe. Perhaps even more so in the Baltic trade zone, which was originally a league of wealthy German trading families. They decided to populate major coastal towns along the Baltic Sea in order to efficiently regulate their profits from trade. Even before this, “the merchants Elsinore in Denmark married their daughters between themselves, as did those merchants who had settled in Sweden, in Gdánsk, in Königsberg, and in the North of Germany” (Fontaine, Laurence 14). This family connection can be seen in nearly every zone of European trade. Eastern Europe was distinct, because they had a much larger presence of foreign trading networks exploiting their resource markets. For the most part, there were very few if any large Eastern European families with enough influence to create a counter network to protect their interests in Western Europe (Fontaine, Laurence 8-22).

It is also important to realize that these networks eventually had to integrate with their local market with which they were affiliated, which was often a result of local legislation. This legislation, such as in the case of the “droit de Bourgeoisie” in France, had its own versions in other states as well. Therefore, merchants had to conform to local trade regulations, which often resulted in foreign families becoming part of the culture of another state (Fontaine, Laurence 8-22).

The Scottish demonstrated this idea of foreign network intervention in Eastern Europe. Fontaine explains this point: “Hans Macklier, who was born in Scotland and died in Gothenburg in 1666 had an uncle who was a

32

merchant in Stockholm, who maintained close relationships with those Scots who had set up business in Poland; Hans Spalding, who was born in Scotland and died in Gothenburg in 1667, had a brother Andrew who was established in Mecklenburg, and Hans brought his nephew Jakob to Gothenburg before setting him up in the town of Norrköping” (Fontaine, Laurence 14). Fontaine provides a great example of how enmeshed the family system of correspondence was in Eastern Europe. The sheer expansiveness of one family’s merchant claims was impressive, which was a theme of Eastern Europe’s trade system: a large area dominated by few (Fontaine, Laurence 8-22).

The progression from the simple pedlar to a network of family merchants engaging in foreign trade was not such an unreachable goal. In the case of the Scots, many originated as simple pedlars in the countryside peddling goods to major cities such as London. Many of these pedlars “envied” those who were able to embark on major trade expeditions to other states. Many in England decided to use credit and profit from selling local goods to invest in shares of trade vessels going to places such as Holland. If certain pedlars were lucky enough, they kept making profits from investing in trade vessel shares and eventually gained enough wealth and resources to try and finance their own expeditions to foreign lucrative markets of trade (Fontaine, Laurence 14-15).

It is no doubt that “commercial inter-marriage” (Fontaine, Laurence 15) was an emergent property of a complex early modern system of commerce. Once these networks were established, it was virtually impossible to stop the sophistication and the ambition to make the systems even better, often at the expense of increased complexity. Due to the issues with rapid communication of the 15th to 17th centuries, networks aimed to surmount these issues or at least try and mitigate their deleterious effects. Multiple measures were used in order to make this system of trade and communication more efficient (Fontaine, Laurence 8-22).

Warehouses were one example of a solution to economic risk and storage. They allowed for a secure place to store goods for future market circumstances or for long-term investments in a certain market. These networks also altered in accordance to the local legislation. Many areas required licenses for trade, but the interests of the merchant easily exploited some other areas. These areas became areas where merchants congregated in hopes of investing little in initial expenses and experiencing a favorable return on their initial investment. Easily exploitable areas such as Amsterdam were havens for merchants trying get an edge in order to get a larger revenue return. This often translated in areas with “low taxes” (Fontaine, Laurence 15).

Through the explosion of goods and population in the 16th and 17th

centuries, a means of storing goods became a pressing issue. Previously, fairs became a useful place for the storage and concentration of goods, but with the complexity of networks and massive competition for goods, warehouses became a necessity.

33

While warehouses appeared in multiple areas before this time period, at the end of the 16th and 17th century and especially the 18th century, warehouses played a crucial role in trade. They gave merchant companies such as the British East India Company the opportunity to flood a market with bulk goods as a quick liquidation strategy or even to sabotage a known trade route of an economic competitor. Nevertheless, the fundamental usefulness of a warehouse became increasingly apparent in an early modern capitalist economic system because of distance trade and uncertainty of exchange rates (Braudel, Fernand. Vol 2. 94-106).

They were placed strategically along trade routes allowing merchants to deposit goods in an area close to its desired market for sale. Braudel states that before major warehouse construction, wholesale trade developed because of the “spilling out beyond the channels offered by the fairs and becoming organized independently. This autonomous organization, through the use of depots, warehouses…was tending, with its regularity of supply comparable to that of shops, to replace the periodic bustle of the fairs” (Braudel, Fernand. Vol 2. 95). The use of warehouses was widespread and essential. It allowed for goods to be harbored indefinitely until favorable market prices rose and sale was for a profit margin. In addition to lowering the potential risk of a transaction in a far off place, it lightened the burden of travelling with bulk goods. Perhaps most important was its ability to stimulate the economy to levels previously impossible. With the creation of warehouses, immense amounts of product can be purchased and stored in quantity allowing for a much larger flow of goods from one market area to another (Braudel, Fernand. Vol 2. 94-106).

Amsterdam quickly comes to mind when thinking of massive volumes of goods and merchant congregation. Amsterdam played a significant role in the market of Europe because it was essentially the epicenter of all the European trade zones. The Dutch East India Company had claims to entire sections of the city for its merchandise. Massive warehouses holding exotic goods from foreign markets lined the port. These massive warehouses also served to hold immense amounts raw products from the Baltic zones. Therefore, it was an area of heavy commercial activity (Braudel, Fernand. Vol 2. 97-104).

It was a city flowing with money and people without any significant wealth could often make a profit through the advanced system of speculation. Braudel points this idea out saying that Amsterdam was “a place where people were not content simply to buy and sell shares, speculating on their possible rise or fall, but where one could, by means of various ingenious combinations, speculate without having any money or shares at all” (Braudel, Fernand. Vol 2. 101). Amsterdam was a place of mass transaction with speculators, creditors, and bankers. Any kind of currency or stock manipulation strategy was utilized in the Amsterdam trade system. Brokers would be a major source of merchant class transactions where they would engage in commodity price manipulation through massive group coordinated efforts. A great example of this would

34

be one of the first known economic “bubbles” where brokers bought Dutch tulips in mass quantities in hopes of driving up the price per unit. The brokers successfully did so in 1634, however, the price inflation led to a crash in price, resulting in the “bursting of the economic bubble”. Amsterdam was truly a place of early exchange and proved to be an example of an early modern capitalist city (Braudel, Fernand. Vol 2. 100-106).

As the focus shifts to the Baltic system of trade, it is imperative to look at the merchant classes, which operated there. Eastern Europe was an interesting zone of economics because it was not only subjugated to the trade influences of Western Europe, but also the trade conquest of the Armenians and Jews from the East. In fact, the Jews and Armenians accessed the lucrative trade of the western European states through the Baltic trade. They carried out many of the “middleman” roles that Eastern Europe required for its economic system. While the Armenians largely played a migratory trading role, the Jews were not only migratory traders “pedlars”, but also settled traders. The ethnicity of these merchants would play a crucial role in determining trading routes and networks of correspondence (Braudel, Fernand. Vol 2. 154-160).

The Armenians were traders by nature. With their roots in the Middle East just south of the Caucasus Mountains, the Armenians were preconditioned as traders just by geographical location. They had settled along the famous Silk Road and integrated themselves in transcontinental trade. They were probably the most itinerant of traders of the period with the exception of the Muslim traders. Fernand Braudel reinforces this idea when stating, “It was from their base in Julfa, the vast and busy suburb of Isfahan where Shah Abbas the Great had confined them [Armenians], that they set out to conquer the world” (Braudel, Fernand. Vol 2. 154). Records of Armenian merchant presence were found spanning across the globe from India, to as far north as Archangel in Russia, and as far west as Portugal, and as far south as Goa. They also conducted trade in Indonesia and China as well. Armenian traders were “familiar” (155) to every continent and their savvy trade skills were recognized by most of the world (Braudel, Fernand. Vol 2. 154-160).

They had an impressive network of trading routes even extending into deepest Russia. But they also rivaled the interests of other traders such as the Jews, creating economic competition wherever they appeared. They filled an important niche in the context of Eastern Europe, because they fulfilled the role of bringing the precious foreign goods to the noble class. The nobility everywhere, including Eastern Europe, desired luxury goods in exchange for products produced on their estates. While the local pedlars were often responsible for transporting these raw products to local markets or fairs, this role had to be reciprocated. The reciprocation of this role was the foreign pedlar or merchant company, which brought the foreign luxury goods. There is strong evidence that the Armenians filled a crucial niche as a pedlar of foreign luxury goods. In their expansive trade networks, “The

35

Armenians had reached Muscovy, where they were well placed to develop companies handling raw silk from Iran, which changed hands many times as it crossed the length and breadth of Russia” (Braudel, Fernand. Vol 2. 155). This quote exemplifies multiple key roles the Armenians had in the machinations of an Eastern European Baltic system of trade. They provided the far-eastern luxury goods that the Eastern European nobles desired in exchange for their raw products. Braudel also indicates that this exchange passed through “hands many times,” which insinuates that a larger system was at play in these areas. There was a major exchange system that was bringing these goods to their desired locations, which would become a Baltic system of trade starting with the Hanseatic League (Braudel, Fernand. Vol 2. 154-160).

The Armenians, although itinerant, often found benefit in settling in important crossroads of trade. This was exactly what had happened in Russia. They had founded an essential route of trade where their products had great demand and settled along these routes and created networks of correspondence. There were two avenues of trade originating from Armenia and Julfa. The first avenue of trade passed through the Caucasus Mountains to the north into Muscovy. As a result of their massive trade network, “Armenians settled permanently in Muscovy and travelled its interminable roads as far as Sweden, which they had also reached with their merchandise by way of Amsterdam” (Braudel, Fernand. Vol 2. 155). The Armenians had a significant impact on the Baltic system of trade. Their network of trade was truly expansive. Along their trade route, the first major destination was Astrakhan. As a major port town near the Caspian Sea coast, Astrakhan served as an important town, which connected the eastern European markets to the Middle East. As the Armenians continued along their Muscovy trade route, they followed the Volga River to Nijni-Novgorod. Moscow was the next major center of trade, which held the rest of the Armenian trade routes. Some branched straight to the southern Baltic shoreline, some settled in Novgorod, and others even went as far north as Archangel. This web of a trade network allowed the Armenians to a have a firm grasp on multiple economic markets, including the Baltic system (Braudel, Fernand. Vol 2. 154-160).

The Armenians were very prevalent in the Baltic States. They had infiltrated the areas of Poland, The Holy Roman Empire, and the Netherlands. They participated in local fairs, and “were prominent at the Leipzig fairs” (Braudel, Fernand. Vol 2. 156). They were also looked at pejoratively by city officials regulating trade and other competing merchants as a result of their tactful trading skills. While they took advantage of many of the opportunities that Eastern Europe presented without much of a resistance, Western Europe was riddled with complaints about these merchants. Governments and letters responded to the Armenian trade threat by saying that the Armenians were, “A threat to the city’s trade, ‘since there is’, said the consuls, ‘no nation in the world as greedy [as this]; although they have plenty of opportunity to sell these silks

36

in great markets…” (Braudel, Fernand. Vol 2. 156). As with many of the itinerant pedlars who infested the cities and country sides of both Eastern and Western Europe, the Armenians shared similar characteristics. The Armenian ambition was to make more money and manipulate the economic circumstances to fit their desired profits (Braudel, Fernand. Vol 2. 154-160)

One particular example of the Armenian presence in Eastern Europe was in Lwow, Poland. This town was one of many nodes of trade, which culminated in the Armenian Eastern European network. There was such a concentration of Armenians in this town that the local population called them “The ‘Persians’” (Braudel, Fernand. Vol 2. 157). While a fascinating discovery was made about the Armenian traders through a “trading manual” written by Lucas Venantesti, historians have begun to understand the foundation of the Armenian network. Although the accounts lack book-keeping or transaction records, the manual revealed much about the Armenian trade and their motives. In Lwow, the Armenians had built “trading connections” (157) with the Ottoman Empire. This trade was most popularly conducted by “wagon-trains the caravan bacha, [which] was always [conducted by] an Armenian” (Braudel, Fernand. Vol 2. 157). The use of caravan trade has given historians a better idea of how the Armenians were able to spread their commercial influence such great distances. It was the mode of transportation that made the Armenians so successful at trade, especially in areas such as Eastern Europe. The Armenian transport trade was filling Eastern Europe’s inland and rural economic gaps. The Armenians also had to compete with local and itinerant traders as well. The other common traders in Eastern Europe were the Jews (Braudel, Fernand. Vol 2. 154-160).

The Jews had similarities and differences in comparison to the Armenians. For one, they did not have a “base” or origin such as Julfa. Instead, they “lived dispersed and uprooted” (Braudel, Fernand. Vol 2. 157). This however did not upset a potential network of trade. Quite the contrary, the Jews did create their own networks of trade, although different land ties separated them. Some Jews originated from Muslim Spain, others from North Africa, and others from farther east. Most importantly, many entered the European economic arena from different points, but all united by religion. This separation allowed the Jews to corner the market zones and have natural favorable economic circumstances through correspondence. There were Jews originating from the Iberian Peninsula, Italy, and the Levant (Braudel, Fernand. Vol 2. 154-160).

They were incredibly business savvy and their ability to amass wealth was impressive. Braudel suggests this, especially in the Levant, when stating, “Jewish merchants were to make huge fortunes from the sixteenth century in Turkey… as business men or tax-farmers” (157). It was often the case that when these merchants would accumulate massive wealth from the frontiers of trade they would integrate themselves into a more urban setting. This phenomenon benefitted them in multiple ways. For one, there were always a larger market for goods in a bustling urban center and the

37

dazzling eclectic market attracted anyone with considerable money for investment. Furthermore, the attraction of social power through wealth became realized in urban centers where traders could most easily flaunt their luxury goods and wealth (Braudel, Fernand. Vol 2. 154-160).

With Amsterdam rising as an international pinnacle of trade and commerce in the sixteenth century, it was no surprise that the Jews, among other up-and-coming merchants, flocked to the urban center. In particular, in the wake of the Thirty Years War, Jewish traders quickly integrated themselves in the cities of the Holy Roman Empire, an area void of major trade due to war and conflict. The Jews began to conduct distance trade with other known Jewish communities in areas such as the Iberian Peninsula, the Italian peninsula, and the Levant. With a strong hold on major western centers for commercial activity, especially the Iberian Peninsula, the Jews maintained high merchant status. They had the business acumen and enough dispersion to conduct a fledgling system of trade. With the abundance of natural resources reaching Iberian cities such as Cadiz, Lisbon, Seville and Madrid, the Jews had a seemingly unstoppable flow of profit when coordinating trade ventures. With the outbreak of the Thirty Years’ War in 1618, many of the major commercial players in central to Eastern Europe had relinquished their positions of trade power. As a result, there was a noticeable influx of Jewish traders into these areas, creating a strong Jewish trade presence in Central and Eastern Europe (Braudel, Fernand. Vol 2. 154-160).

The Jewish trade population in Central and Eastern Europe had a distinct difference than those of other areas. It should be no surprise that this major difference was one of commercial mobility. The era of revitalized trade in these areas by the Jews would be the origins of the “age of the Ashkenazim” (Braudel, Fernand. Vol 2. 159). This was a time of heightened Jewish presence and prosperity in Central to Eastern Europe, which would culminate in the 19th century with the Rothschild family. In any case, Jewish presence amounted to important influences on eastern trade. They had an increased presence in fairs, especially the fairs at Leipzig, among many other places in Eastern Europe (Braudel, Fernand. Vol 2. 154-160).

The Jews had actually arrived in Eastern Europe as early as the 10th and 11th centuries because of trade. Some came from the Eastern Steppes (Khazar state) and others from the west. One notable Jewish merchant, Ibrahim ibn Jacob, had arrived in Poland from as far as Toledo, Spain. While the major reason for the diaspora of Jews to Eastern Europe was a result of religious persecution, many arrived because of the economic opportunity (Rosenzweig, Mike).

Eastern Europe and especially Poland has a history of being lenient towards Jewish citizens, in stark contrast to Western Europe. Under the many Polish rulers, particularly Mieszko III, Jews had many privileges as citizens. Although this was two centuries before the 15th century, important precedents were set, which allowed for the integration of Jews in Eastern Europe’s economy. One privilege among many was the “Kalisz Statute”.

38

This privilege gave “Jews exemption from municipal and castellan jurisdiction and were subject only to princely courts. The same statute granted Jews free trade and the right to conduct moneylending operations, which were, however, limited only to loans made on security of ‘immovable property’” (Rosenzweig, Mike). This was crucial because Jews tended to stay in higher concentrations in Eastern Europe all the way into the 15th, 16th and 17th century. They had developed an important grasp on the eastern European economic system early on. Legislation in Eastern Europe had in fact helped the economic ambitions of the Jews in Eastern Europe in the centuries leading up to the fifteenth and sixteenth centuries. More importantly, other areas of Eastern Europe such as Austria, Hungary and Bohemia had adopted or already had used the very same statutes and legislation (Rosenzweig, Mike).

A major reason why these states would promote the integration of foreign Jewish merchants and local merchants in their economic system was to stimulate the economy. The local legislators and rulers of areas wanted to compete with their western rivals for a developed economic system so they encouraged the increased trade and productivity. This was the case with the reign of Casimir the Great in 1334 because he was “interested in the development of a commodity money economy, [which] encouraged Jewish immigration” (Rosenzweig, Mike). The Jewish merchants played a pivotal role in the economic transactions of Eastern Europe. This role of conducting trade and bridging the rural economic gaps in Eastern Europe was an essential part of the system developing there. It was also incredibly important for the landed aristocracy looking to find avenues of trade for foreign luxuries (Rosenzweig, Mike).

By the 15th century, the Jewish merchants had settled in Eastern Europe as the trader. In Poland, they were the foreign and regional traders. Most important in terms of this analysis is the fact that they “Performed the role of middlemen in trade between Poland and Hungary, Turkey, and the Italian colonies on the Black Sea” (Rosenzweig, Mike). They were in effect the crux of a rising Eastern European system of trade. Their presence was felt in all areas of Eastern Europe similarly to the Armenians. They also had a significant role in the rise of the Eastern European Baltic system of commerce (Rosenzweig, Mike).

The merchant class and an early modern capitalist transaction structure in the early fifteenth to seventeenth centuries had a major role in a “developing” larger world economy. The system that was arising was in fact a very complex one, utilizing economic tenets from credit and speculation to complex trade and correspondence networks. As the aristocracy demanded luxury goods, their power and influence waned while the merchants of Europe and the east took advantage of supply and demand. It is evident that there was a major shift occurring during this time period. Europe had noticeably changed from the late Feudal period. Perhaps most different was the interconnectedness of European regions due to the quintessential role of the pedlars and traders, especially in Eastern Europe.

39

Europe accommodated and supported this structure of increased merchant activity. This was the case with the systems of fairs, warehouses, merchant companies, correspondences, speculation, bills of exchange, currency, loans, and trading licenses. Although these economic phenomena were not new, they coalesced to a degree where the creation of a world system became efficient and common. There was also an important feature of the Eastern European merchant structure in comparison to the Western European structure. The Eastern European rural areas demonstrated a segmentation of the economy. In analyzing the merchant and trade presence in those areas, the separation of economic spheres due to estate-ownership had pre-conditioned Eastern Europe for the increased presence of itinerant merchants.

This was not so much the case in Western Europe due to its history of increased infrastructure and centralization, which had occurred during and before this period. Therefore, a focus on a higher level of merchant activity could be observed during the time. This heightened merchant activity created the trade companies such as the British, French, Spanish and Dutch India Companies. Eastern Europe did lag behind, which was the reason why it had a different and, for the most part, simpler economic structure.

Eastern Europe had another very important Baltic zone, which functioned in conjunction with its rural inland economies. The Baltic Sea trade bridged the supply and demand gap between Eastern and Western Europe from the fifteenth to seventeenth centuries. It was this system of trade that would compete and collaborate with the other European zones of trade to form a larger European world system.

Most important to come away with at this point is the fact that there would be no system of trade between these areas without the itinerant merchants hauling their goods, or the advent of currency, which allowed for loans, speculation and bills of exchange. Essentially, the European system of commerce would have never reached its level of complexity in the fifteenth to seventeenth centuries without the local merchant and his ambition to find a market for his goods.

40

Eastern Europe’s Baltic System of Trade and its Integration in a Europe’s System of

Commerce

When discussing the origins of a European early modern world system of commerce, one tends to pinpoint the rapid expansion of the colonial era of Europe or the Mediterranean trade as the real players in a larger system. However, it would be wrong to discount the importance of a Baltic system of trade in the Northern and Eastern European states. This system originated in the Baltic Sea, because of the economic interests of the cities within that geographic zone. This zone had an important role in conjunction with Western Europe and the rest of Europe’s system of commerce.

With the rise of a developing system of commerce, trade had radically changed throughout much of Europe’s 15th to 17th century history especially in Western Europe, and then eventually in Eastern Europe. Major commercial advancements made large trade ventures possible between important zones of trade. Through a process of technological and economic diffusion, the Baltic trade had adopted many western economic practices, but also retained its own interesting and pertinent aspects as a semi-autonomous economic system. The major differences in the Baltic system of trade would be a product of the difference in the rural economic system of the areas involved with trade. For one, they had incredibly strong aristocratic estate economies, which made up most of the Baltic economy. The Baltic system, taking form as early as the 13th century, had developed separately from the internal economies of the Baltic and Eastern European areas, but at the same time integrated loose economic systems into a strong market for Eastern and Northern European goods.

It is important to analyze the features of the European economy at the stage of the Baltic development. Because the Baltic system had in fact originated much before major Western European economic advances were made, the Baltic system had progressed quite differently from its origin as far back as the 13th century. The Baltic system of trade, in relation to a larger European world economy, had the essential components of an early capitalist European economic system.

The creation of these larger systems of trade required an increasing knowledge of economics. Braudel, in the Wheels of Commerce, discusses these fundamental features of any economic growth, which take the form of the “cogs”. The creation of the Bourse and similar exchanges in Amsterdam, Paris, and London formed centers of advanced economic exchange using credit, paper money, and commodity speculation. According to Braudel the real importance of these exchanges was the “possibility of a victory – a slowly-won victory – of paper money, and of all paper currencies” (Braudel, Fernand Vol. 2 112). It was in fact the rise of

41

these speculation centers that would catapult an archaic form of economy such as mercantilism in a much more recognizable system of capitalism (Braudel, Fernand Vol. 2 100-114).

The accumulation of currency or “bullion” in many parts of Europe was another centerpiece of the economic system of the time. This economic mentality lasted from the early 16th century all the way to the 18th century, which encompassed a large portion of the time period in this analysis. It would only be in the 18th century that Adam Smith’s early modern capitalist arguments would become widely accepted. Therefore, the 15th and 17th

centuries only served as the era of emergence for such capitalist economic structures. Mercantilism maintained its prevalence. It did so by consolidating the previously segmented economic aspect of feudalism, especially in Western Europe. Unsurprisingly, it was a system driven by the need for gold and currency, which was a major factor in the dissolution of a feudal economy. Instead of using money in further investment, bullion often remained in a country as a way of demonstrating monarchial power. The hoarding of the bullion was highlighted in order to have a favorable balance of import and export trade. But more importantly, the mercantile system favored the merchants of Europe (LaHaye, Laura).

This mercantile system was essentially a system utilized by western powers such as France, England and Spain, but was for the most part only present in Eastern Europe as a foreign exploitative system of commerce. This was the case because “The mercantile system served the interests of merchants and producers such as the British East India Company, whose activities were protected or encouraged by the state” (LaHaye, Laura). Mercantilism encouraged initial venture investments into unknown territory. The idea of travelling to other nations and trading local goods for foreign goods formulated common trading zones such as the Mediterranean zone, the America trade, the Caribbean trade, and most importantly, the Baltic sea trade. With state support for merchant activity, most noticeably in Holland, trade was quickly stimulated all over the world, forming world systems of trade. As a result of association, colonies and territories were incorporated in a larger system of trade. The inter-state economic competition created even more rivalry for foreign goods, which were all factors in the rise of the European world system of economy (LaHaye, Laura).

Similarly to capitalism, all transactions using “paper” must have a true currency base. Therefore, the acquisition of gold (assuming the base currency is gold) was absolutely necessary in any economic system. The major advantage of this paper money was its ability to be “reflected and valued,” (Braudel, Fernand Vol. 2 112) which made carrying metal money obsolete, a true advantage for merchants travelling distances. But what does this mean in the context of Eastern Europe? Well for one, it allowed for massive participation in merchant ventures and transactions, which mobilized mass funding for business from transport vessels from England to China or even the Baltic zone. Most importantly, it demonstrated the true

42

disadvantage Eastern Europe had in comparison to Western Europe on an economic level. There would be little to no chance of an Eastern European merchant or guild to gather a wide base of funding for a potentially profit margin breaking venture to places where their goods were in demand such as Western Europe. Speculation exchanges, bonds, shares, and buying debt all allowed for a fast paced economy and quick investments which truly gave the Western European merchants an advantage over the Eastern European economic system.

Eastern Europe’s underdeveloped economic system led to the rampant infestation of pedlars and poor traders. The lack of structure lent itself to a system overrun with tricksters and witty tradesmen, often scraping a living through fooling others. In fact, these pedlars were more adept at taking advantage of local economic units and moving rapidly than they were at conducting long term and relationship based transactions. This kind of pedlar behavior became so pervasive in Eastern Europe at the time that reputable merchants had to depend on local legislation to protect them and their business.

Furthermore, it halted any major economic advance or competition with the west. This kind of legislation was introduced in areas now known as Germany and Switzerland. For instance, “the Diet of Zurich in 1516 (German Switzerland) denounced ‘those persons who travel around the region, hawking their cheap goods from village to village, from farm to farm and from house to house, up hill and down dale…local spice merchants took every opportunity of denouncing Italian and Jewish organizations…rulings in Mainz, just as in Cologne and elsewhere, railed against the practice of only employing one’s compatriot because it brought the ruin of the native traders…” (Fontaine, Laurence 20). It was apparent that the lack of structure created major problems economically for all states from Germany to the East. The lack of unity allowed for the west to infiltrate these areas, which lacked the essential economic structure and to exploit these areas for goods. This is how so many “markets” were accessed by western merchant companies and effective monopolies were installed. The exploited areas failed to cultivate an advanced system of commerce (Fontaine, Laurence 11-22).

The rest of Northern Europe and Eastern Europe felt the very same issues with the economic system there as well. It was for the most part disconnected in the rural areas. This kind of economic system in Eastern Europe led to a quite rigid merchant class system with the close-knit top fending off the bottom, a loose amalgamation of poor traders. The wealthier merchants in Eastern Europe quickly chose wealth over nationality and intermarried with wealthy foreign merchant families (Fontaine 11-22).

This was especially the case with the Scots. Fontaine mentions the Scandinavian Gothenburg example in stressing the importance of “Scottish merchants who dealt in the export of wood and iron and the import of fabrics, wine, salt and herrings” (20 Fontaine). In fact, these areas of heavy trade became so intertwined with foreign trade families that Scottish

43

apprentices to trade were populating Eastern European cities to learn the intricacies of foreign trade and Baltic commerce. Local rulers also tried to prevent this foreign influence such as in the case of “Denmark in the fifteenth and sixteenth centuries,” (20 Fontaine) who would restrict Scot commis (apprentices) from mingling in Danish markets but to no avail (Fontaine 11-22).

Establishing an effective trade or business in a city was no easy task, especially in Eastern Europe. Along with establishing a network usually through family, a merchant had to deal with local legislation and consumer population. Once these initial obstacles were dealt with, the importance of joining a guild or merchant company became a necessity. The independent cities of the Germanic provinces such as Frankfurt and Mainz exemplified this intercity merchant competition for establishment. They also show how mercurial in attitude local trade legislation was in different cities. Fontaine explains that after the Thirty Years War, which devastated the German provinces: “[The German provinces] attracted both Savoyards and Italians who settled there and established huge warehouses. When Frankfurt closed its doors to the migrants they set up in the rival city of Mainz” (Fontaine, Laurence 25). This example also demonstrated the tendency of merchants to “flock” to economic areas easy to exploit. More importantly, it showed the importance of ease in settling into an economic zone. The entity, which determined this “ease,” was more often than not the guild. The guild determined the distribution of the droits de Bourgeoisie, essentially a permit allowing a pedlar to conduct trade in a city or town. It was a natural occurrence for these guilds to oppose the pedlars because they often were able to undercut the major transactions of the guilds (Fontaine, Laurence 22-28).

At this point, in order to formulate the emergence of a true trade zone, some ideas must be tied together. For one, the transport of goods from one area to another must be conducted through multiple merchants in distant areas. Correspondence was essential in the case of a familial connection. Next, warehouses and the establishment of merchant companies and guilds must be present to conduct the bulk trade of goods in one area. Whether it was guilds, family, or companies, it required cooperation among traders, an essential aspect of an early modern capitalist economy (Braudel, Fernand Vol. 2 138-184).

Braudel reinforces this idea: “Any commercial network brought together a certain number of individuals or agents, whether belonging to the same firm or not, located at different points on a circuit or a group of circuits. Trade thrived on these communications” (Braudel, Fernand Vol. 2 149). The Baltic zone of trade utilized this communication network through the use of companies, guilds, and family connections. Most influential were the family and guild relationships. The Scottish were an excellent example of the familial connection, but the German Hanse merchant class would be the true benefactors of the early Baltic system of the Hanseatic League (Braudel, Fernand Vol. 2 138-184).

44

Furthermore, the Western European involvement in trade created a true system of trade through various economic methods. In Amsterdam for instance, “[merchants] worked on commission for other merchants, who did the same for them. They took a small percentage on deals negotiated for other people…” (Braudel, Fernand Vol. 2 150). This kind of commission based transactions enmeshed with credit, bills of exchange, and debt all would become the vast web of an economic system we utilize in current times. The rise of the Hanse in Germany was arguably the start of the Baltic Sea trade. This early network or league would set the foundation for the Baltic trade zone of the 15th to 17th century (Braudel, Fernand Vol. 2 138-184).

The Hanseatic League embodied many of the essential components of an early modern economic system. Its origins began with the long-distance wealthy merchant class of the German Hanse. The word “Hanse” has its roots in “union or guild” a quite fitting name, because it coincides with the rest of the analysis thus far (Prevot, Debra L). The origins of the league began in Northern Germany along the North Sea and Baltic coasts. It was mutually advantageous for merchants, not only in the Baltic, to unify and form these networks of trade for multiple reasons. For one it allowed them increased protection against threats at sea, a potential correspondence network, and most importantly more business. In the Baltic Sea trade system, the cooperation among the merchant cities on the coast was what enabled the vast Nordic trade network. The network was so successful that it lasted from the 12th through the mid-17th century.

The success of this system of trade can be attributed to the relatively easy access to water. With the vast convergence of river systems in many Central European regions such as the provinces from the Holy Roman Empire, transport of goods by water made most sense economically. More importantly, the Baltic Sea is a major body of water, which connected all of these regional miniature waterways from Central to Eastern Europe. As with any trade on a body of water, port cities were established. These major cities include Lübeck, a northern Germany city, as the “starting point.” It was through mutual agreements that this system of trade within the larger world system of trade arose. Because each city had products the other wanted, merchants decided that the best way to utilize the supply and demand across distances was through creating a network of interstate and intercity trade (Prevot, Debra L. and "Baltic Sea Trade.").

This was in fact a major reason why the Baltic trade originated. The German cities of Hamburg and Lübeck had products, which the other desired. While Hamburg had salt, Lübeck had a fishing industry. Food was a major commodity in the Baltic Sea trade, but a major issue of the time was food preservation. Obviously, meat or fish would quickly rot without proper refrigeration. Therefore, the advent of “salting” meat became a major commodity trade, especially to parts of the west where food production was being neglected for technological and shipbuilding industries. So in essence, Hamburg had an abundance of a commodity in which they could

45

not possibly satiate themselves, and Lübeck had an issue with their fishing industry of food spoilage. It was, therefore, “mutually advantageous for these two cities to enter a mutual agreement. As other cities and merchant guilds formed similar trade agreements or became members of existing ones, the economic power of the Hanseatic League strengthened.” (Prevot, Debra L). The relationship between these two cities was truly an example of how any trade system originates and served as an initial spark in connecting economic pockets of trade into a larger Baltic system (Prevot, Debra L).

This was essentially how the European world system of commerce began with one area harboring a good that was desired in a distant place. Other destinations naturally aligned themselves with this flow of exchange soon adding new dimensions to the originally linear trade route. Furthermore, speculation on goods, shares, credit, guilds, pedlars, and bills of exchange all contributed in diversifying and expanding standing economic systems. Most importantly they allowed for the rapid trade of foreign goods and the globalization of markets (Prevot, Debra L).

This trade system effectively opened the Prussian, Russian and Finnish trade to their neighboring European states and eventually Western Europe. Novgorod and Riga were some of the most eastern ports along the Baltic Sea trade. Bremen and Hamburg were the Baltic Zone’s westernmost cities. Another major center, which has been discussed was Gdànsk. It was essential in that it was a centerpiece to the system within the Baltic system ("Baltic Sea Trade."). Danzig (Gdànsk) and other major port cities along the Wendish coast or the southern Baltic shore played their own important role in the Baltic system. These cities were predominantly obtaining goods from the their respective state’s rural interior. For example Prussia and Poland dominated the southern shore of the Baltic. It should be no surprise that the raw agricultural products found a node through which they could be traded: Gdànsk, Königsberg, Elbing. These cities “were the main outlets of Prussian grain and timber, which lay at the root of their trade on the Swedish and Finnish coast” ("Baltic Sea Trade."). A question to ask is why would this system arise? Where were the goods in each area going? The usefulness of this trade system was its ability to access new markets for every participant. It is this fundamental fact of the early modern capitalist period that defined the Baltic trade system. Not only was it a feeding market for the west, but it was also an essential asset to the Eastern European states. It allowed for immense control of trade flow and maximized profit reaped from transactions. It was a system developed originally by Germanic traders, but benefited any merchant involved in the trade. Nevertheless, the major flow of goods within the Baltic system was east to west with luxury goods flowing east and raw products flowing west ("Baltic Sea Trade.").

The agricultural producers of the east benefited a great deal from this trade market, because its foundations were created by the western demand for raw product. This raw product came in various forms ranging from food

46

to shipbuilding products. In fact, these “farmers exploited the vast Livonian, Russian, and Scandinavian forests for tar, pitch destined for the shipbuilding industries and potash for glass-making. Bar iron and copper produced in the mines in Sweden and south of Krakow” ("Baltic Sea Trade."). These products are just a few of the commodities which frequented the trade routes of the Baltic zone, but in this analysis, it is more important to try and piece together the different cities involved in this area of prolific trade.

Lübeck formed the original major port city of the Baltic trade because it was here where the major merchant correspondents would meet. It had a strategic location because it was located near the end of the Baltic trade system itself along the northern German coast, which would make a prime destination for the original Hanse merchants to congregate. With Lübeck as the originating capital of this Baltic System, it had a responsibility as a merchant center for the rest of the system. All trading cities were considered “Kontors,” which were basically administration centers of the Hanseatic League (Prevot, Debra L). These Kontors were essential to the cohesion of the trade because it formed an established network of correspondence. These Kontors “Consisted of a counting house (accounting/inventory), administration office, warehouses and often employee housing along with League owned docks” (Prevot, Debra L). Every city involved in the Baltic Sea trade had a Kontor, but only a few were prominent due to either location or goods provided to the system. Some major Kontors of the Baltic Sea trade were Bergen, Norway, Visby, Gotland (a Baltic island), Novgorod, Russia, Bruges, Flanders, London, England (Prevot, Debra L).

The Eastern European Baltic trade contained, at least at its beginnings, a close relationship with the politics of each town. It was not surprising that this was the case because the Hanse was originally a powerful political as well as economic class of Germany. The Hanse brought with them a court system and kept close political ties between cities in the interest of protecting their trade, similar to the mercantilist doctrines, except earlier. These close ties between cities allowed for more political protection against competitors “boycotting their trade fairs and not importing or exporting their goods and services” (Prevot, Debra L). They then realized that this system of trade functioned smoothly as a result of their common economic interests, but there were also a plethora of reasons for its relatively smooth operation as a large economic pocket as well as many obstacles it faced (Braudel, Fernand Vol. 3 89-116).

Most of the information analyzed so far gives us a good understanding of the initial components of the Baltic trade system, but to say that the system ran smoothly without much adversity would be a false statement. The cities involved with the Baltic city trade were not united by one state, which made efficient trade difficult. The Baltic system was made up of multiple state entities interacting through a trade network established by merchants. This system had inherent clashes with political authorities in

47

each state. The presence of Kontors or merchant outposts at these cities had allowed for the coherence among the trade cities in the Baltic by creating semi-independent trading districts in each region on the Baltic.

For one, Lübeck, which had attained a massive amount of attention as a leader of the rest of the Baltic cities resulted in not only intercity rivalry but also state competition. The Hanse was not a consolidated entity of a state, but rather a conglomeration of like-minded merchants, which is fascinating to think about how a network of merchants had created an organization that incorporated multiple nationalities. Nevertheless, the system “consisted simply of many towns, proud and jealous of their prerogatives, sometimes competing with each other from the protection of their stout walls, each with its merchants, its patricians, its guilds, fleet, warehouses and accumulated wealth” (Braudel, Fernand Vol. 3 103). In fact, these cities were truly segmented; each had their own coat of arms, but their relative unity was a phenomenon truly worthy of analysis. The power of the cooperation for a common goal was a major reason for this unity. They all wanted to participate in a profit yielding economic system, which each city cannot do without other cities (Braudel, Fernand Vol. 3 89-116).

Another reason for the system’s unity was its common language, largely a result of the founding Hanse merchants who had established a “substratum of Low German…enriched according to need by borrowings from Latin, Estonian (Reval), Polish (Lublin), from Italian, Czech, Ukrainian and possibly Lithuanian” (Braudel, Fernand Vol. 3 103). This more or less common language allowed for transactions to take place with relative ease in different cities, a necessity when conducting foreign trade. Trade languages were incredibly important as they allowed for people of radically different cultural backgrounds to communicate in order to exchange. Trade languages developed in the Mediterranean as well as on the African coast such as Lingua Franca or Swahili, respectively. It was not surprising that this form of language was mostly heard from the “power elite” or prosperous merchants. Each Baltic city contained its own slight variation to the Low German language according to their area, but most important was the fact that these areas were all able to communicate with ease (Braudel, Fernand Vol. 3 89-116).

If one were to look at other trade systems between the 13 th and 15th

centuries, one would realize the relative independence of the trading cities compared to the Baltic system. While there are many reasons for this such as each city’s history a more satisfying reason would lie in the commodity trade difference. While areas such as the Mediterranean focused on high profit and luxury such as dyes, and silks from the areas such as the Levant, the Baltic commodities were mostly raw product. It was unfortunate for the Baltic systems to rely on raw product as their main commodity, because it yielded relative risk but low return economic transactions. This can be mainly attributed to the bulk of the commodities such as timber, which

48

required tremendous area for its unit value (Braudel, Fernand Vol. 3 89-116).

Historians such as Braudel suggest that profit margins on economic transactions of the Baltic system were as low as 5% (Braudel, Fernand Vol. 3 103). This should draw the response of what would be the purpose of looking at an economic system with such a low profit margin? For one, an economic system, which could maintain a relative high average of 5% profit rate on market transactions, must be doing something correctly. If this were not the case, how could a system like this sustain itself? The risk would outweigh the return. The nature of the commodity in an economic system largely dictated its functions as a system. The Baltic trade system was so interdependent because it had to be. Otherwise, there would be no trade and when there is a demand and a supply, the other factors of the system accommodate those necessities. The Kontor system in the Baltic system did exactly this. It relayed the essential information for merchants to recognize when trading such low profit merchandise. It provided the essential correspondence network between Baltic systems (Braudel, Fernand Vol. 3 89-116).

The dependence between the towns of the Baltic was so great that the boycotting of goods in one area would absolutely devastate economy of that area. While the example of Norway took place quite a while before the 15th

century, it nevertheless proves an important point of the interdependency of the Baltic region. Bergen was in fact a major Kontor in the Baltic trade system. It was the northern-most Kontor in the system and played an important role of supplying Norwegian goods (timber and metals) to the west via the Baltic system. Here again, the importance of commodity in one area dictated its negotiation powers and its economic system (Braudel, Fernand Vol. 3 89-116).

Bergen had a surplus of building material and fish, but a lack of agricultural product such as grain or flour. Therefore, their major import was agricultural product, which was easily done through their integration in a Baltic system where half the cities specialized in agricultural export. This agricultural production originated in areas around Gdànsk and Livonia (Brandenburg and Pomerania) and were shipped to Bergen via Lübeck. The issue began when the Norwegians felt that their grasp on their economic goals were slipping away due to increased Hanse trade activity and the exclusion of Norwegian traders who were not part of the Kontor or League. When the Norwegians decided to retaliate, they had made a huge mistake. In reducing the Hansa “priveleges” in Bergen, the Norwegians had quickly gained enmity with the entirety of the Hanse trade network. The Hanse responded with a swift and crippling response: a grain blockade in the second half of the 13th century (Braudel, Fernand Vol. 3 104). This example demonstrated the power and influence of the Hanse in the Baltic regions, but also demonstrated the cooperation needed by the trade cities. Furthermore, this example showed the tremendous power and dominion an economic system could have on an individual state, a true example of a

49

globalizing economic system (Braudel, Fernand Vol. 3 89-116 and Bär, Frau Sophie).

In a system with such a diverse make up of states cooperating in trade, it was necessary for the “Kontor” system to develop in order to maintain equality within the trade league. In the 15th to 17th centuries, foreigners were most often treated as secondary citizens. Thus, the establishment of Hanse offices in major city ports such as Gdànsk, Novgorod, Bruges, and London were essential to maintaining trade in the Baltic zone. The Kontor system pulled the traders or “foreigners” out from under local jurisdiction. They had in fact operated rather segregated from local citizens in the area. The representatives of the Hanseatic League in a Kontor or the elders would take positions of power in a Kontor forming an independent societal structure (Denicke, H).

Even with an attempt to normalize or stabilize all the areas with Hanse trade influence, each port city had its own conditions and relative relationship with the Hanse traders working there. Although the Hanse merchants responsible for maintaining their Kontor in a city such as London had trade responsibilities, they also had to keep at least a neutral relationship with the English government. Each Hanse trading town had a Hanse trading league “representative,” and they were “compelled to become an English citizen and the entire bureau thus became naturalized, as it were” (Denicke, H). These Kontors were almost always a collection of “warerooms” run by Hanse league merchant living among the native traders. This was definitely a peculiar phenomenon in comparison to other systems of trade of the period. For example, the west was developing a centralized bureaucracy of the state and a trade system overlooked by these large state entities. However, in the Northern and Eastern European Baltic areas, a group or “league” of merchants were able to subjugate much of the Baltic areas or at least survive mutually within a larger state.

Once again, this was result of a much larger story of the internal affairs of the Baltic States. The governments of these states could never gain legitimate power due to the will of the aristocratic influence in these areas and the power of the estate. Therefore, the will of the Hanseatic League often went uncontested or if contested, as in the case of Bergen, Norway, the contender often succumbed to the trading power of the Hanse. There are exceptions to this gross generalization. For example, Russia had an interesting but incredibly unstable relationship with the Baltic trade system, which was largely due to Russia’s political instability. In the sixteenth century, Ivan the Terrible had taken power as Russia’s first Tsar. Unfortunately, Ivan had devastated the areas of Russian trade in the Baltic trade, among many other domestic issues. With the suspicion of a potential secession from Russia proper due to ties with local Baltic trading states in 1570, “Ivan and his men attacked the city of Novgorod, which the Tsar believed was planning to ally with Lithuania” (Wilde, Robert). Many were killed as a result and needless to say, the Hanse had to be cautious of such political interference by local governments (Wilde, Robert).

50

Undoubtedly, the Hanseatic League had developed a widespread monopoly over Baltic goods and trade, however the organization of such a trade monopoly had to be incredibly precise. With a plethora of foreign issues due to different Baltic state affairs, organization would be a key factor in keeping this merchant league cohesive within itself and within a larger world system of commerce. While it is known now that the Hanse had created a surprisingly coherent trade using the “Kontor System,” comprised of localized representatives, warehouses, bureaus, markets, and docks, the way in which these Kontors interacted with each other in a system of trade was nothing short of a true economic accomplishment in the early modern period. The interconnection within the Baltic system was found in the trade posts and the arrangement of their offices. A “schutting” could be found in every Kontor, “a spacious, windowless room which depended for light and air upon a hole in the roof….it was in this room that the agents of the Hanse merchants assembled to debate on judicial or mercantile affairs” (Denicke, H). This type of “Aelterleute (seniors of a Kontor or “grange”)” meeting to discuss Hanse affairs was essential, especially when dealing with shipment, payment, and blockade affairs. When major interests of the entirety of the Hanse trade were called into question, grand meetings would be held in major Kontor cities such as Lübeck. Lübeck had the most important and influential meetings. These meetings were called the “Council of Eighteen” (Denicke, H). The Lübeck meetings would often decide on issues pertaining to major commodity transactions or foreign intervention in their trade ambitions (Denicke, H).

The trade of the Baltic had peaked at approximately the end of the 16 th

century. It had expanded to include massive long distance transport from east to west. In 1590 it was estimated that “5038 vessels passed through [The Denmark Sound] annually” ("Baltic Sea Trade."). This was a major increase in comparison to past years, but would also mark the start of the decline of the Hanseatic League’s control over its trade possessions in the Baltic area. From the 17th century, the Baltic system began to rapidly lose its trade privileges, and foreign powers intervened. Hanseatic traders could not compete with Western European trade monopolies outside of the Baltic Sea, which meant that it was only a matter of time before the large merchant companies of Great Britain and France would be operating much of Baltic trade. The last major Lübeck meeting in 1699 “confirmed the League’s status as a quasi impotent power in the Baltic” ("Baltic Sea Trade.").

This schism of long lasting estate ownership and aristocratic influence in Eastern and Northern Europe, compared to Western Europe’s rise of the Bourgeoisie and working classes, left lasting differences between both areas in the way that trade was conducted. However, most importantly, this did not inhibit either system in interacting with each other in a larger world system setting. In fact, perhaps, the difference made the interlocking of systems even easier for foreign traders to access these markets. The Dutch had shared a similar trait with the Baltic system in that they had developed

51

a system of government based solely on the interests of the merchants. It was the Dutch advancement in trade and technology that drove Western European competition for trade rights and goods, which quickly outpaced the Baltic system of trade. The decline of the Baltic system or rather its increased integration within a larger world system of commerce can be attributed to foreign intervention.

The Baltic system itself set the stage for foreign intervention. The trade became appropriated by the larger and more advanced western economy because of the inferiority of the Baltic trade. Braudel suggests that the reason for the integration of this system into a larger system was a question of political and economic dominancy of the west in comparison to the east. He says, “[Baltic] decline seems rather to have followed from the meeting between their somewhat under-developed economy and the already quite advanced economy of the West” (Braudel, Fernand Vol. 3 105). The rapidly developed west quickly outpaced the eastern traders by the 17th and 18th

centuries. Once major trading cities such as Lübeck lost their status in competition with massive commercial centers of Bruges and Venice. Braudel even states that a large part of the foreign intervention was the lack of capitalist economic knowledge and application. For instance, the Baltic system clasped onto an “elementary kind of capitalism” (Braudel, Fernand Vol. 3 105). The Baltic system maintained a conflicting barter and currency system as well as forced restrictions on the types of currency such as silver coins. Also, the system itself did not have much of a credit base, and most of the credit being used was as a result of western influence (Braudel, Fernand Vol. 3 89-116)

With a system involving massive aristocratic influence and a small but powerful merchant class, Eastern Europe quickly buckled under the immense pressure of the strengthening working class, middle class (bourgeoisie), and most importantly, centralized states of the west. The major economic disadvantages of the east were attributed to the semi-credit and barter system of the Baltic. It would be the West that would integrate essential credit, currency, and shares into the Baltic system of trade. The Baltic integration to the rest of the European world system of commerce would begin with the Dutch.

The Dutch played an essential role in forcing Europe to adopt advanced methods of trade. The dominance of the Dutch in the economy of Europe in the sixteenth and seventeenth centuries was a result of a political structure similar to that of the Baltic area, except concentrated in a small pocket of geography. After the Dutch revolt from Spanish rule, they had constructed a government focused on economic expansion. They had bypassed the centralized “administrative apparatus” of the other western state powers and instead had created a Dutch Republic made up of a “loose confederation” of merchants (Wallerstein, Immanuel 209). The Dutch were able to create for themselves a state that was centralized enough to conduct efficient trade, but one that was loose enough to stimulate domestic and,

52

most importantly, foreign economic expansion (Wallerstein, Immanuel 164-221).

With the Dutch on the outskirts of a productive and lucrative Baltic trade, they had in fact been strategically placed to partake in the overlap trade between the Baltic and Atlantic trade systems. Dutch presence in the Baltic system was almost uncontested due to their superior fleets and trade acumen. As early as the sixteenth century, the Dutch had “controlled about 70% of the [Baltic] trade” (Wallerstein, Immanuel 211). The tolerant Dutch religious faith attracted traders from diverse backgrounds. The Jews were particularly important, as they had brought to Amsterdam in particular, their trade connections and ability to conduct commerce efficiently.

The Dutch progressed from originally having a strong hold on the Baltic trade system to quickly becoming a world power. They had superior shipbuilding and connections to nearly all markets in Europe as well as foreign markets. Interestingly, the Dutch had regarded the Baltic trade as the “mother trade,” because of the demand for eastern grains and essential shipbuilding supplies to monopolize the world with their fleet (Wallerstein, Immanuel 211).

Perhaps most impressive and important in the Dutch trade dominance was their ability to integrate so many aspects of an early-modern capitalist system. The Baltic trade system was the crux of the Dutch ability to do so. Holland had access to naval necessities and food from the Baltic. They monopolized an important market of timber. Wallerstein explains the significance of the Dutch position in the World system of commerce in the late 16th century by mentioning that, “Amsterdam became a threefold center of the European economy: commodity market, shipping center, and capital market” (Wallerstein, Immanuel 212). The integration of all these economic aspects became essential in the Dutch dominance of the economy. However, there was again another reason for the Dutch dominance (Wallerstein, Immanuel 164-221).

The Dutch had adopted an economic system of free trade when becoming the world’s premier state of trade. This evolution of economic policy was an interesting progression as it shed light on the modernizing aspect of trade. The states of England and France continued to rely on mercantilism, as a means of imposing their economic will on others. Wallerstein states that the major difference in the outcome of these two policies was that the “mercantilism of other states,” was important for long term economic goals while the free trade route “maximized short-run profit” (Wallerstein, Immanuel 213).

Thus, a world system emerged from multi-state participation in markets of goods and the competition, which ensued thereafter. Due to climactic and conditions war in areas with agricultural surplus, Baltic grain and other agricultural goods were always in high demand, to the advantage of the Dutch. Competition became apparent in accessing the Baltic system of trade, which offered a consistent supply of essential raw products ("Baltic Sea Trade.").

53

While other major Western European states became involved with Baltic trade through the Dutch monopoly, England had a larger role than any except for the Dutch and perhaps the Scots. England imported an eclectic base of commodities from the Baltic zone. The most important commodities for the English were products from the Scandinavian countries and Russia. They had a demand for timber, as did the Dutch, but also furs. The British East India Company was engaged in the Russian fur trade via Archangel among other commodities. With all the western states of Europe competing with the Dutch for naval superiority, access to timber and iron resources were essential in order to effectively rival Holland ("Baltic Sea Trade.").

However, even with the presence of many other European states, the Dutch maintained a massive influence in the Baltic zone. They created the most expansive network of trade and they contributed much of their prowess to the Baltic trade. The presence of the Dutch in the Baltic system was essential in forming the European world system of commerce. Wallerstein supports this idea and states, “Antwerp [was] in the sixteenth century, an ‘international’ market center, which linked the Mediterranean and Baltic trades…into the European world-economy” (Wallerstein, Immanuel 175).

Furthermore, the Dutch market incorporated “short-term credit,” a much-desired trait that many rulers of sovereign states desired. For example, the emperor Charles V utilized the money-lending services offered by Antwerp. These services often came under the jurisdiction of family bankers. In this case, the dependence on the Fugger banking house amassed enormous amounts of credit, “cards built upon cards” (Wallerstein, Immanuel 176). Thus, not only did the Dutch envelop themselves in the economy of the Baltic, Atlantic and transcontinental German trade, but also they had accumulated credit for Spanish stock from the Americas. Although the Dutch defected from Habsburg rule later in the sixteenth century under Philipp II, economic ties between the two continued to linger (Trueman, Chris).

As the Spanish dominance over naval affairs diminished as a result of its economic empire spreading too thin, the Dutch began to fill the niche of the Spanish. The interconnectedness of the two, however, showed a growing cohesion of the European market in the 15th and 16th centuries. With the absorption of several zones of commerce, some commodities became obsolete for production. This was the case with the absorption of the Baltic system within the Dutch economy and the rest of the European economy.

The necessity of having large estates in Western Europe focused on agricultural production disappeared in comparison to the industrial sector in nations like England. Wallerstein notes the major shift in England’s exports starting in the 16th century. He says, “She [Britain] started out as a supplier of raw materials—cereals, wool, and to a lesser extent metals and leather…the export of these items had declined relatively, and in the case of cereals absolutely, and cloth had become the major export of England”

54

(Wallerstein, Immanuel 227). This passage demonstrates the changing nature of the European economy between the 15th and 17th centuries (Wallerstein, Immanuel 225-297).

It should be no surprise that the loss of raw production exports in England coincided with the introduction of the Baltic trade into the European world system of commerce. The staple Baltic commodities were raw products with an emphasis on agricultural goods such as cereals, metals, and hides. The disappearance of these as English exports demonstrated not only that the demand for those goods were being met, but that England was shifting from an agricultural based economy to an industrial one (Wallerstein, Immanuel 225-297).

The industrializing capacity of Western Europe was a function of the integration of European markets. With the ability to satiate a state’s food and raw product needs with foreign goods by means of market integration or colonialism, Western Europe had the opportunity to progress into an industrial period far before areas such as Eastern Europe. The advantage can largely be attributed to the technological advancements of the west in comparison to the east among a plethora of potential factors (Wallerstein, Immanuel 225-297).

As wheat and other agricultural products flooded the Dutch and English economies, the price naturally dropped to extremely low levels. This led “England to move toward the breakup of the demesnes, a factor usually explained by demographic decline, fall in the price level (especially cereals), and high cost of living” (Wallerstein, Immanuel 227). While this phenomenon led to the increased discrepancy between the East and West economies, it stimulated the Eastern economies nonetheless. Because the agricultural cultivating facilities were diminishing in the west as in England, it was only a matter of time before nations such as England and Holland became dependent on foreign cereals and agricultural goods (Wallerstein, Immanuel 225-297).

Thus, the Baltic system of trade locked itself within the larger European system of commerce while encouraging other nations to find alternative export commodities to balance their import balance sheets. The integration of markets became an extremely beneficial activity for state economies as they found new societies to flood with their export goods. The beginnings of major networks of trade between European markets became a lucrative endeavor (Wallerstein, Immanuel 301-325).

With goods shipped from the Mediterranean to Russia, the developing system of commerce became essential in the economic health of many European states. A particularly interesting example in which we may have a good idea of this European world system of commerce was Russia. Although looking at Russia may seem contradictory in trying to piece together a world system of commerce in Europe, it can offer an interesting perspective on Europe from its peripheral vantage point. Wallerstein hesitates to include Russia at all in a European economy, but Russia did at least play a small role. However, Russia was involved in the Baltic trade

55

and many goods from the interior of Russia had made it to the Baltic coast despite the political instability, which kept Russia from fully engaging in a European economy (Wallerstein, Immanuel 301-325 and Braudel, Fernand Vol. 3 441-467).

The Russians suffered a similar fate as a victim of foreign economic intervention as in the Baltic. With the wealth of furs in Russian markets, the English had boldly spearheaded the “English Muscovy Company to push open a door in Archangel [which] meant directly accepting European intrusion” (Braudel, Fernand Vol. 3 441-442). While Wallerstein suggests that Russia was never truly involved in the European economy for any length of time in the 15th and early 16th centuries, it did however have European interaction, especially later under the rule of Peter the Great in the late 17th century. Russia marked the easternmost peripheral zone of the European system of commerce, but it did have an interesting role between the European continent and the Asian continent of commerce (Braudel, Fernand Vol. 3 441-467).

Russia served as somewhat of a buffer zone between continental Asia and Europe. However, Russia did have limited contact with European early modern capitalism. Braudel explains that Russia, “avoided the unenviable fate of nearby Poland, whose economic structures were shaped by European demand, where fortune had singled out Gdànsk…” (Braudel, Fernand Vol. 3 444). Russia conducted trade to the East and West creating a much different economic structure than the other eastern and Northern European states. Wallerstein asserts that Russia’s ability to expand eastward and trade eastward created a unique scenario. They were not completely locked into the Western European economy. Instead, they were able to export furs and wheat into the Baltic system and receive manufactured European goods without full immersion into a European economy. However, in the case of Russia’s neighbor Poland, its economy had fully integrated itself within the larger European economy by a means of its highly regulated cereal economy under the supervision of a tyrannical aristocratic class (Braudel, Fernand Vol. 3 441-467 ; Wallerstein, Immanuel 301-325).

The Polish economy was inhibited in its ability to modernize because the economy was based on massive wheat demesnes structured for western exportation. Because the cultivation of cereal crop was an easily manipulated industry, social and economic power remained at the top of the social ladder. The Polish nobility welcomed foreign trade, because they desired the manufactured goods of the wealth. Wallerstein states, “Their [Polish nobility and western merchants] combined efforts maintained Poland as an open economy… ‘cereal export via the Baltic ports had rapidly taken on proportions such that it dominated the entire economic structure’” (Wallerstein, Immanuel 304). By observing Poland, we can see the intervention of the foreign traders, but also the cooperation of the nobility in the Baltic zone in allowing foreign traders within their borders. This was done in an effort to create a manufactured-good market, which the eastern

56

nobility sought in exchange for their raw products (Wallerstein, Immanuel 301-325).

While Russia was engaged in western trade, it did not have the same integrative degree as the trade did in other Baltic states. They did, however, trade very similar staple raw products of the Baltic with the English in exchange for manufactured goods. By incorporating Russian trade into English imports and exports, foreign goods began to proliferate within the European continents and profitable trade routes and networks were created in order to maximize economic profit (Wallerstein, Immanuel 301-325).

The integration of European markets required the complex networks of merchant correspondence. Thus, the key role of corresponding merchants became a distinct emerging property of the European world system. While it may initially seem simple to buy goods in a foreign market, transport it, and sell in another distant market for a massive profit, the transactions became much more involved when taking into account state circumstances, and supply. For example, the economist Condillac states that, “the golden rule of long-distance trade was to establish communication between a market where a given merchandise was plentiful and another where the same merchandise was rare” (Braudel, Fernand Vol. 2 169). In doing so, a merchant can eliminate the unexpected factor of a famine, drought, a recent commodity flooding the market or plunging prices with the integration of markets like the Baltic system into the European system, the economic correspondence networks in Europe become increasingly profitable and advanced (Braudel, Fernand Vol. 2 168-231).

The European system became so enmeshed in correspondent networks that it would not have been unheard of to send letters to Amsterdam, Paris, Rouen, Cadiz, Seville or others to estimate expenses and profits for voyages. Fernand Braudel illustrates the complexity of the European world market in looking at the Mediterranean and Baltic trade and locating the circulation of goods from one point to the other. In one series of correspondences, a shopkeeper in Livorno (Tuscany), Italy, created a correspondence network “throughout the whole of Europe, at least as far as Amsterdam” (Braudel, Fernand Vol. 2 170). Furthermore, this shopkeeper had contacts with an Italian trader who had settled in Amsterdam as a means of facilitating trade from the Dutch and Baltic areas to the Mediterranean. In fact, his “trading firm” (Braudel, Fernand Vol. 2 170) had all the necessary details to quote prices from Russia and the Baltic zones (Braudel, Fernand Vol. 2 168-172).

An important detail that the shopkeeper in Livorno uncovered from his correspondent in Amsterdam in the late 17th century was the activities of the Dutch East India Company. Knowing the activities of a such a large and influential trade company allowed the shopkeeper in Livorno to target certain commodities worth trading in conjunction with the trade activities of the larger state based company, thus limiting transaction and price risk. Both the correspondent in Amsterdam and Italy decided on “One product worth bringing from Amsterdam to Leghorn (Livorno) – vacchette, that is

57

Russian hides which would soon be flooding the Italian market” (Braudel, Fernand Vol. 2 170). The correspondent and the original shopkeeper would share the profits of the venture and would integrate both the Dutch and Italian markets in the 1681 and 1682 exchange. Perhaps most important from this explanation of the sequence of trade correspondence was the integration of the Baltic system of trade by commodity extension from the Dutch market (Braudel, Fernand Vol. 2 168-172).

In looking at the Baltic system from the 15th to 17th centuries, it becomes clear that it did not function as a system isolated from the rest of the world. Although there could be an argument made for Russia’s ability to have one foot in Western European affairs and one foot in Eastern affairs, the majority of the Baltic system had become victim to an intrusive Western European market. One way to look at the synthesis of the Baltic market into a larger European market would be to look at the aristocratic class of the east. They could be blamed for arranging their local pockets of the economy (the estates) in relationship to a western capitalistic demand. Braudel is correct in asserting that “The great [Eastern European] landowner was not a capitalist, but he was a tool and collaborator in the service of capitalism…” (Braudel, Fernand Vol. 2 271). In any case, early capitalism had effectively absorbed the Baltic zone by a means of Western European osmosis and a general materialistic desire for luxury foreign goods (Braudel, Fernand Vol 2. 262-272).

It was essentially the commodities traded within the Baltic zone that made the Baltic system’s integration into the larger world system of commerce feasible as well as lucrative and useful. Western Europe had developed a strong base for a manufacturing economy and society with a well developed working class and a degree of labor that was far ahead of the Eastern European states. Therefore, not only did the west become an area in which the majority of their exports were manufactured commodities, but they also outsourced the need for cultivating crops to other countries who had less developed industrial sectors.

The Baltic system fit the bill quite well, allowing the western states to rapidly expand their industrial sectors without the worry of not being able to supply themselves with agricultural and raw products. Early capitalism in Europe brought two markedly different markets together, allowing for a complementary system. The economic era leading up to the 17th century can be distinguished from others in regards to the culmination of market economies such as the Baltic. While many focus on the rapid European global expansion and the integration of those markets from Europe all the way to India, China and the Americas, the Baltic system of the 15th to 17th

centuries in Eastern and Northern Europe is often overlooked. In fact, the Baltic served an equally important role as an essential market in fueling such global economic endeavors by the western powers through market commodity integration in a European world system of commerce.

58

Conclusion

The evolution of European commerce is a topic that has the potential to uncover the foundation of the more complex structures of our global trade. The current world is largely defined by previous economic interstate

59

competition. With a large portion of the world, particularly the African continent, still experiencing residual effects of a global system of trade extending from Europe it is important to analyze the origins of the European economic system as a means of understanding our past. In observing the relationship between Western and Eastern Europe in roughly the fifteenth to the seventeenth centuries, we are able to realize the defining trends of a capitalist system of trade.

The Baltic system was a necessary sub-system within the larger European system because of the importance of its commodity market. Its convenient geographic location allowed for not only the integration of the otherwise landlocked rural economies of Eastern Europe into the whole of the European system, but also provided a market of exchange of rural and manufactured goods. Aside from basic geographic explanations within the system of trade, there were social, political and religious reasons for the Baltic system’s productivity.

The various details of the Baltic system are discussed in the third essay of this work. The importance of the German Hanse as a unifying economic political group harnessed the productive capability of the Baltic zone of trade and its subsidiary Eastern Europe parts. The Hanseatic League set the foundation for a lucrative network of commerce in the 13th century that would enmesh itself within the larger European system with the rise of the Dutch in the sixteenth century. The exchange of goods within the Baltic system can be seen as a microcosm of the larger European system because of basic commodity requirements of nearby states. The example of the Norwegian and Livonia trade relationship exemplified much of the basic supply and demand models of the early system of commerce.

Norway, particularly the Kontor of Bergen, generated much trade because of the resources that the geographic zone offered. These resources included metal ores, timber and furs, which were important imports for states with a developing industrial sector. Although Livonia did not have much of a developed industrial sector, it had much of the agricultural products that the Norwegian economy needed such as wheat and other cereals. This kind of relationship formed the basis for massive systems of trade that not only developed around the Baltic and North Sea but also in the entirety of Europe. The complex network of Hanseatic districts within each of the major cities on the Baltic demonstrated the prosperity and power of an organized and business savvy class of merchants. However, the dominance of the Hanseatic League within the Baltic did not last long. With the unified Dutch on their doorstep, the multi-state Baltic economic system proved too fragile to resist major foreign intervention.

The early 17th decline of the Baltic system of trade demonstrated the emergence of a larger capitalist European system based on exploitation. This phenomenon echoes the characteristics of a mercantile economy where one nation leeches much of the wealth from one area by importing raw materials and selling back manufactured goods. This was exactly what the Western European states did during colonial expansion into the Americas.

60

The Western European explorers opened new areas for developing economic markets to benefit their industry at home. A very similar phenomenon occurred in within the Baltic system. Foreign powers such as England and the Netherlands utilized their centralized state economies, industries and most notably labor delineations and merchant classes to subjugate the lesser Baltic economy.

Although the Baltic system was well organized and efficient, it could not compete with the advanced economics of the west, especially those of the Dutch. The Baltic system lacked a centralized structure. The structure that remained from the German Hanse was outdated and the rural interior of the Baltic States remained in a realm of neo-feudalism.

An interesting argument to be explored in this period is the delayed nationalist presence in the East. If anything, this Eastern European economic era should serve to show the disadvantages of having a practically nonexistent state structure in conjunction with the economy. Eastern Europe and the Baltic regions exhibited the power of a single ruling class and the submission of all other classes under the jurisdiction of a certain region. This was discussed not only in the context of the religious differences between west and east, but also in the social and labor distinctions. Wallerstein does an excellent job in exposing these differences, especially the issues of labor division in both parts of the European world-system.

The power of the corrupt and unrivalled aristocracy in the east hindered the economic development there. As many economists agree, the participation of a fuller and more diverse population in society is essential in a flourishing economy. Varied social class participation stimulates monetary circulation, a crucial aspect of any developing economy. Eastern Europe in particular lacked profound social class engagement in all areas of the economic sector. As explained in the first essay, the east was formed into “economic pockets” of transactions due to massive estate economies run by the wealthy aristocracy. This economic set up compromised the scalability as well as the economic advancement of the east in comparison to the west. The interests of the aristocracy undermined much of what would be the overall “national” goals of a geographic area. Instead, the landed elite of Eastern Europe was largely responsible for the foreign intervention and the incorporation of much of Eastern Europe into a larger system of commerce.

This naturally led to the importance of the merchants and pedlars of Europe discussed in the second essay. For without these classes, trading would be virtually nonexistent. The necessity of fairs, among other important economic advancements, displayed the developing nature of this early modern capitalist system of exchange. With the limitations of transportation, fairs were a major development in conducting trade without expending unnecessary amounts of wealth on physically “hauling” goods.

As the complexity of the European system of economy progressed the need for more efficient modes of transportation, the organization of

61

transportation of goods was required. It was long-distance trade ventures using sea-going vessels that often brought the most revenue. This period of European economic history was defined by increased dependency on long distance trade and seeking new markets. Major exchanges were set up in Amsterdam and London to facilitate these major voyages. Thus, the beginning of shares and joint stock in sea vessel voyages became a game of gambling and potential fortune.

These all serve as examples of the changing nature of European economics between the 15th and 17th centuries. The shift towards an economy dependent on exploration and technological advancement forced a requirement for the importation of what previously had been domestic raw materials. But with the rapid expansion of the industrial sector in most Western European states, this demand was satiated by, optimally, nearby and less-developed foreign markets. The Western European merchants played a crucial role in delivering these essential raw products from areas such as the Baltic region.

The west exhibited a well-established and powerful merchant class, which was a by-product of a more sophisticated social structure. However, the east lacked a powerful commercial class, creating the east’s first dependency on foreign money handling. This inevitably led to the initial foreign influence in Eastern Europe’s markets, which would develop into a capitalistic system, which exploited the economic resources of the east.

The east had a myriad of local traders and pedlars, but, as explicated in the second essay, the abundance of these low level traders was a double-edged blade. They effectively connected the “pockets” of estate-economies, but they ultimately inhibited the possibility of an organized and efficient system of commerce in the east. The presence of foreign groups in Eastern Europe such as the Scots, the Jews, and the Armenians provided ample examples of the role of foreigners in a developing system of commerce and the inability of Eastern Europe to develop their own independent economic system.

The idea that the east was engulfed into a western system of trade coincides with much of Wallerstein’s “system theory”. The east had in fact embodied precisely what Wallerstein would determine as a peripheral zone. The Western European states such as the Netherlands and France, Italy and Spain formed the core state pillars of this system of trade. The major cities of Paris, London, Amsterdam, Cadiz, Seville, and Livorno had developed networks of correspondence that extended well beyond what were domestic boundaries. As shown in the Livorno-Amsterdam trade network anecdote from Braudel’s text, correspondence and the role of foreign markets were held across Western Europe. The Baltic region economic system was absorbed into these exchanges of wealth and economic strategies.

The culmination of the developing early modern European system can be seen in three parts. The first is the dissolution of feudal economic ties. This first theme was explained predominantly in the first essay. This demonstrated the marked shift the west took in relation to the east after

62

14th century. The west experienced rapid political, social and economic expansion largely due to the resurgence of the Renaissance. At the same time, Eastern Europe changed very little. With the retention of a two dimensional social hierarchy, a powerful catholic church, and most importantly the focus on estate economies, the east had remained, for the most part, attached to its feudal past.

The second part is the rise of a merchant class, which, as a result of western advancement, was an economic benefit for the west in a European system of commerce. The east remained locked in a two class social structure of the powerful aristocracy and the poor workers, leaving little room for a commercial class to develop an independent Eastern European economy.

The last essay brings together the overall developing capitalist system by focusing on Eastern Europe’s Baltic system, which provided an efficient sea route for foreign intervention and commodity exchange from east to west. The Baltic system was accessed by the Western European states as a means of fueling their economic and political expansion. This Eastern European system played a significant large role in the development of the Western European economies and essentially the entire developing early modern European system of commerce.

The 15th to 17th centuries were a period of rapid change in Europe. The economic systems in place in the early part of this era had advanced to an unprecedented level by the late 17th century. The Baltic and Eastern European system was a remarkably modern economic exchange to the credit of Western European interests. The rise of the first stock exchanges, use of credit, joint merchant ventures, organized merchant companies and the first multi-national enterprises such as the British East India Company all occur in this period. In the same era, the beginnings of a globalizing economic base with numerous market connections are formed across multiple continents.

The similarities in 15th to 17th century economic system relationships were analogous to those between current first world countries and third world countries. With many under-developed countries experiencing some of the very issues that Eastern Europe and the Baltic system dealt with in the 15th to 17th centuries like a limited economic middle-class, a powerful wealthy elite, unorganized state infrastructure, and limited labor diversification, the principal relationships between the “core zones” and “peripheral zones” remain even to present day. The Baltic and Eastern Europe’s position in a larger European world system of commerce demonstrated many key elements of an early modern capitalist complex that incorporated homologous economic structures to our current global economy.

Works Cited

63

"Baltic Sea Trade." Baltic Connections. Ed. Lennart Bes, Hanno Brand, and Edda Frankot. Nationaal Archief of the Netherlands, Aug. 2007. Web. 3 Jan. 2013. <http://www.balticconnections.net/index.cfm?article=The+Hanseatic+Era>.

Bär, Frau Sophie. "Hanseatic City Bergen." Hanseatic City Bergen. Städtebund Die Hanse, n.d. Web. 04 Jan. 2013. <http://www.hanse.org/en/hanseatic-cities/bergen.php>.

Bloch, Marc. (Translated by L.A. Manyon). Feudal Society. Vol 2. Chicago: The University of Chicago Press, 1961. Print.

Braudel, Fernand. (Translated by Siân Reynolds). Civilization & Capitalism 15th-18th Century. The Wheels of Commerce. Vol 2. Berkeley and Los Angeles: University of California Press, 1992. Print.

Braudel, Fernand. (Translated by Siân Reynolds). Civilization & Capitalism 15th-18th Century. The Perspective of the World. Vol 3. Berkeley and Los Angeles: University of California Press, 1992. Print.

"Club War". Encyclopædia Britannica. Encyclopædia Britannica Online.Encyclopædia Britannica Inc., 2012. Web. 09 Dec. 2012<http://www.britannica.com/EBchecked/topic/122533/Club-War>.

Damerow, Harold. "16th Century." 16th Century. Union County College, 2 Sept. 2009. Web. 09 Dec. 2012. <http://faculty.ucc.edu/egh-damerow/16th_century.htm>.

"Defenestration of Prague". Encyclopædia Britannica. Encyclopædia Britannica Online.Encyclopædia Britannica Inc., 2012. Web. 09 Dec. 2012<http://www.britannica.com/EBchecked/topic/473764/Defenestration-of-Prague>.

Denicke, H. "Hanseatic League." World History International: Main Contents Page. Trans. Joseph Sohn. History World International, n.d. Web. 03 Jan. 2013. <http://history-world.org/Rise%20Of%20The%20Hanseatic%20League.htm>.

"Dozsa Rebellion". Encyclopædia Britannica. Encyclopædia Britannica Online.Encyclopædia Britannica Inc., 2013. Web. 02 Jan. 2013<http://www.britannica.com/EBchecked/topic/170596/Dozsa-Rebellion>.

64

Edward P. Cheyney, ed., “Documents Illustrative of Feudalism,” in Translations and Reprints from the Original Sources of European History, vol. IX, no. 3, Department of History of the University of Pennsylvania, ed. (Philadelphia: University of Pennsylvania Press, 1898), pp. 3, 5, 23-24.

Engels, Friedrich. "The Decline of Feudalism and the Rise of the Bourgeoisie." The Decline of Feudalism and the Rise of the Bourgeoisie. Ed. Steve Palmer and John K. Dickinson. Marx-Engels Archive, n.d. Web. 10 Dec. 2012. <http://www.marxists.org/archive/marx/works/1884/decline/index.htm>.

Fontaine, Laurence. Translated by Vicki Whittaker. History of Pedlars in Europe. Durham: Duke University Press, 1996. Print.

James Harvey Robinson, ed., Readings in European History, vol. I (Boston: Ginn, 1904). P. 274.

LaHaye, Laura. "Mercantilism." : The Concise Encyclopedia of Economics. Library of Economics and Liberty, 2008. Web. 03 Jan. 2013. <http://www.econlib.org/library/Enc/Mercantilism.html>.

"Manorialism". Encyclopædia Britannica. Encyclopædia Britannica Online.Encyclopædia Britannica Inc., 2012. Web. 09 Dec. 2012<http://www.britannica.com/EBchecked/topic/362699/manorialism>.

Martínez-Vela, Carlos A. "Manorialism (European History)." Diss. MIT, 2011. Abstract.World Systems Theory. MIT, Fall 2001. Web. 09 Dec. 2012. <http://web.mit.edu/esd.83/www/notebook/WorldSystem.pdf>.

Prevot, Debra L. "Hanseatic League History." Hanseatic League History. The Hanseatic League Historical Re-enactors, 2011. Web. 03 Jan. 2013. <http://bergen.hanseatic-league.com/history.html>.

Rosenzweig, Mike. "History of the Jews in Poland." History of the Jews in Poland. Jewish Literacy Foundation, 4 June 1998. Web. 11 Dec. 2012. <http://www.info.kalisz.pl/statut/history.htm>

Smitha, Frank E. "The Protestant Reformation." The Protestant Reformation. Macrohistory and World History, 2011. Web. 09 Dec. 2012. http://www.fsmitha.com/h3/h18-eu.html.

Stubbs, William. "Feudal System, An Overview of Feudalism." Feudal System, An Overview of Feudalism. History World International, 2007. Web. 09 Dec. 2012.

65

<http://history-world.org/feudalism.htm >.

Trueman, Chris. "The Revolt of the Spanish Netherlands." The Revolt of the Spanish Netherlands. History Learning Site, 2012. Web. 04 Jan. 2013. <http://www.historylearningsite.co.uk/revolt_of_spanish_netherlands.htm>.

Wallerstein, Immanuel. The Modern World System I. Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. Berkeley and Los Angeles: University of California Press, 2011. Print.

Wilde, Robert. "The Oprichnina of Ivan IV - Oprichnina in Russia 2." The Oprichnina of Ivan IV - Oprichnina in Russia 2. About.com, 2001. Web. 07 Jan. 2013.

66