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Commercial. Revolution. Age of Exploration. Europeans during the Middle Ages had a meager knowledge of geography, limited to Europe, northern Africa, and western Asia.
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Age of Exploration • Europeans during the Middle Ages had a meager knowledge of geography, limited to Europe, northern Africa, and western Asia. • Beginning in the 15th century, west European nations—first Portugal and Spain, then England, Holland, and France—undertook expeditions to explore the Americas as well as new regions in Africa and the Far East.
FACTORS ENCOURAGING OVERSEAS VOYAGES • The main factors that encouraged these voyages were: • 1. Trade with the East. • Substantial trade between Europe and the East began during the Crusades • This profitable business became the mo nopoly of • (a) Asian traders who brought Far Eastern goods by overland car avan to Constantinople, Alexandria, and other east Mediterranean ports and • (b) Italian merchants from Italian city-states—such as Venice, Genoa, and Pisa—who shipped the products from the eastern Mediterranean area to western Europe.
FACTORS ENCOURAGING OVERSEAS VOYAGES 2) European Curiosity About the Far East. • Europeans were interested in the Far East because of • (a) the reports of travelers to eastern Asia, particularly Marco Polo,a 13th-century Venetian who visited Cathay (China) and then wrote about his adventures and China's great riches, • (b) the Renaissance spirit of inquiry that sought information about the world's size, shape, and people and encouraged travel and exploration.
FACTORS ENCOURAGING OVERSEAS VOYAGES 3) Wealth and Ambitions of the New National States. • By the 16th century a number of west European nations possessed sufficient wealth to finance expensive voyages of exploration. • Their rising middle classes desired increased trade, and their absolute monarchs sought colonial empires. • These nations, therefore, were willing to risk capital and prestige in overseas voyages with the hope of reaping great rewards.
FACTORS ENCOURAGING OVERSEAS VOYAGES 4) Scientific Progress. Because of scientific progress, European mariners faced fewer hazards in ocean travel. These advances included (a) Renaissance geographical knowledge, especially the realization that the earth is round, not flat, (b) improved maps, (c) a better compass for determining direction, (d) the greater use of the astrolabe, an instrument for determining latitude.
New Nations get involved in the Commercial Revolution • In the 15th century the lucrative Eastern trade attracted the attention of two newly developed national states on the Atlantic coast, Portugal and Spain. • To smash the monopoly of the Asian traders and the Italian city-state merchants, Portugal and Spain financed expeditions seeking an all-water route to the Far East.
Portugal • Prince Henry the Navigator inspired Portugal to search for an all-water route around Africa to the East. Portuguese sea captains pushed southward along the Atlantic coast of Africa. • In 1488 Bartholomew Diaz reached the southern tip of Africa, the Cape of Good Hope. • In 1497-1498 Vasco da Gama rounded the Cape and sailed on to India. • Because he returned with a cargo worth 60 times the cost of the voyage, his trip excited western Europe.
Portugal • Spurred by these events, the leading west European nations sent explorers to the New World and the Far East to • (a) seek a "northwest passage" through or around North America to the Far East, • (b) secure gold, silver, gems, and other valuable goods, • (c) convert the natives to Christianity, • (d) establish claims to the new lands, and (e) start trading posts and settlements.
SPAIN FINANCES TWO SIGNIFICANT EXPEDITIONS • Columbus. • In 1492 Christopher Columbus, an Italian navigator, sailed from Spain. • Convinced that the earth is round, Columbus planned to reach the East by sailing westward across the Atlantic Ocean. • He failed because his ships were blocked by two continents hitherto unknown to Europe. • Although Columbus thought he had reached islands off the coast of Asia, he had actually come upon what Europeans later considered to be a New World. • Because this region was publicized by the Italian explorer Amerigo Vespucci, it was later named the Americas.
SPAIN FINANCES TWO SIGNIFICANT EXPEDITIONS • Magellan. • In 1519 Ferdinand Magellan, a Portuguese sea captain, led several ships from Spain. • He rounded the southern tip of South America and crossed the Pacific but was killed in the Philippine Islands. In 1522 one ship arrived back in Spain, thereby completing the first circumnavigation (sail around the world) of the world. This daring navigational exploit, covering about 44,000 miles (70,400 kilometers), proved definitely that the world is round.
EUROPEAN NATIONS COLONIAL EMPIRES (16TH TO 18TH CENTURIES) • 1. In Asia • Spain annexed the Philippine Islands. • Holland, by capturing the Portuguese trading posts in the East Indies and establishing its own, won control of the East Indies. • France established trading posts in India, such as Pondicherry. • England established trading posts in India, such as Bombay, Madras, and Calcutta, and in a major war against France, gained dominance over India (1763). England also settled Australia.
EUROPEAN NATIONS COLONIAL EMPIRES (16TH TO 18TH CENTURIES) • 2. In the New World • a. Portugal settled Brazil. • Spain settled the West Indies, Florida, Texas, California, Mexico, Central America, and South America (except for Brazil). • Holland founded the colony of New Netherland. It consisted of Manhattan Island (now part of New York City), eastern Long Island, the Hudson River Valley up to Albany, and part of New Jersey southward to Delaware Bay. Later the Dutch seized the Swedish colony of Delaware. • France settled Canada along the St. Lawrence River, founding Quebec and Montreal. France also settled the Great Lakes and Mississippi River regions, founding Detroit, St. Louis, and New Orleans. • England settled ten colonies and seized Delaware and New Netherland from the Dutch. New Netherland was divided into New Jersey and New York. These thirteen English colonies bordered the Atlantic seaboard from New Hampshire to Georgia. In a major war against France, England acquired Canada (1763).
COLONIAL RIVALRY CAUSES WARS (16TH TO 18TH CENTURIES) • The west European powers engaged in a number of wars, caused partly by colonial rivalry, in which England achieved victory. • (1) England raided Spanish colonies and destroyed the Spanish Armada (1588). • (2) England seized the Dutch New World colonies (1664). • (3) England fought France, its chief rival in four major wars.
GREAT BRITAIN DEFEATS FRANCE FOR WORLD EMPIRE • Within almost 100 years Britain and France fought four major wars for European dominance and colonial supremacy. • The final and decisive encounter was the Seven Years' War (1756-1763). • On battlegrounds in Europe, India, and North America, the British triumphed. • In India Robert Clive, a British empire builder, crushed the French in 1757 at the Battle of Plassey. • In North America—where the struggle was called the French and Indian War (1754 1763)—the British were also victorious. • In the Treaty of Paris (1763), Great Britain acquired French Canada and all French territory east of the Mississippi (except for the city of New Orleans ceded to Spain). • France also agreed not to impede British control of India. • By adding these lands to its other possessions, Britain in 1763 became the world's leading colonial power.
THE COMMERCIAL REVOLUTION: RESULTS OF EUROPEAN EXPANSION • The term Commercial Revolution summarizes the effects that overseas ex pansion had on both western Europe and the rest of the world. • 1. Effects on Europe • a. Increased Imports and World Trade • Western Europe imported many commodities from the New World and the Far East: potatoes, Indian corn (maize), tobacco, chocolate, cane sugar, tea, and quinine. Some of these items were new to western Europe. Others, though previously known, became cheaper and more plentiful. Their availability helped improve west European living standards. • To reduce the risk of loss to ships and goods from storm, fire, and piracy, west European merchants originated insurance. Each merchant contributed a specified sum, called a premium, to a common fund, from which a business-person who suffered a loss was compensated. A noted insurance company, founded in the 17th century, was Lloyd's of London. • Adopted Mercantilism. • Moved Toward the Economic System of Capitalism • Western Europe changed from the relatively static, localized, nonprofit economy typical of the Later Middle Ages to the beginnings of a dynamic, worldwide, profit-oriented system called capitalism • 2. Effects on the Rest of the World • Europeans bought slaves in Africa and transported them to the New World to provide labor for the plantations and mines. • Many Europeans migrated to overseas colonies, either to escape reli gious persecution or to improve their personal economic condition. • Trade and emigration spread European civilization throughout the world.
THE COMMERCIAL REVOLUTION: RESULTS OF EUROPEAN EXPANSION • b. Shifted Economic Power • Western Europe's major trade routes shifted from the Mediterranean and Baltic to the Atlantic. The Italian city-states and north German cities de clined in importance; the European nations, bordering the Atlantic, increased their commerce, wealth, and power. The nation-state became preeminent in world affairs. • Western Europe's population increased, in part due to the availability of additional food supplies. Western Europe's population also began to change residence from rural areas into urban centers. • Some lesser nobles and many peasants, both groups having difficulty surviving on the land, moved to the cities. • Western Europe's middle class—merchants, bankers, capitalists—grew in number and achieved greater economic power. • However, the middle class was not content. Considered inferior to the landowning nobles and ruled by absolute monarchs, the middle class lacked social status and political power.
THE COMMERCIAL REVOLUTION: RESULTS OF EUROPEAN EXPANSION • Cities during the Commercial Revolution • Cities offered opportunities for business owners (entrepreneurs). • In cities workers could find jobs in new industries such as printing and in expanded industries such as shipbuilding and armaments manufacture. • Cities also held promises of greater social mobility, richer cultural existences, and a wider variety of life-styles.
Mercantilism • Eager to secure more funds for royal treasuries, west European governments became interested in economic affairs. • To further the national prosperity, these governments applied the economic theories of mercantilism. • Mercantilists held that colonies exist for the benefit of the mother country. (Mother country is a term commonly applied to a nation that controlled territory in another area. It is historically important from about 1600 to the 1960's.)
Mercantilism • The mercantilists argued that a nation must • (1) attract the maximum amount of gold and silver, since wealth is measured in these metals; • (2) export more than it imports, thereby achieving a favorable balance of trade and receiving payment for the difference in gold and silver; • (3) increase exports by stimulating domestic industries with bounties (subsidies); • (4) discourage imports of foreign manufactures by levying tariffs; • (5) acquire colonies to assure markets for manufactured goods and to guarantee sources of raw materials; • (6) restrict colonial manufacturing; • (7) forbid colonies to trade with any country except the mother country.
Capitalism • With the coming of the Industrial Revolution, the new production methods required large amounts of capital—economic wealth usually thought of as money. • Capital was necessary to build factories, purchase machines, secure raw materials, and pay workers—all before any goods were sold. • Consequently the capitalist, who risked money by investing in a business, controlled the entire process of production. • This economic system, based on private capital, is known as capitalism.
Wealth of Nations • Book written by Adam Smith explaining capitalism • The Wealth of Nations was a precursor to the modern academic discipline of economics. • In this and other works, Smith expounded how rational self-interest and competition can lead to economic prosperity. • Smith was controversial in his own day and his general approach and writing style were often satirized by other writers of the time.
Principles of Capitalism (a) Private ownership. Individuals (persons and corporations) own the means of production and distribution of goods. (b)Free enterprise. Individuals are free to enter any business and run it as they wish. (c)Profit motive. Business leaders direct their affairs to avoid loss and make profit. Profit is income minus expenses. If it costs you $20 to make a product and you sell it for $50, there is a profit of $30. (d) Competition. To excel all rivals, each producer strives to improve the quality and lower the cost of goods. (e) Market economy. Supply and demand, operating under conditions of free competition in the marketplace, determine the price of goods. Supply is the amount of physical resources available. Demand is the desire and wants for these resources. When the demand for a resource is high and the supply of the resource is low, the price of the resource goes up. When the demand for a resource is low and the supply of the resource is high, the price of the resource goes price. This is called the law of supply and demand. (f) laissez-faire Opposed to restrictions on production and trade, capitalists wanted to manufacture and sell their goods free from government interference. They favored laissez-faire (leave business alone), a principle advocated by the economist Adam Smith in his book “The Wealth of Nations”
New Financial Features of the Commercial Revolution • 1) Business • Entrepreneurs (people who start and own businesses) engaged in business enterprises, taking risks and facing com petition, in the hope of making a profit. • They operated in a market economy in which the prices of goods and the wages of workers were determined largely by supply and demand. • Entrepreneurs sometimes founded joint-stock companies and secured charters from their governments granting monopolies over trade and colonization in specific overseas territories. • To raise capital, joint-stock companies sold stock to numerous investors who would share in the profits or losses of the business but who left its management to elected officials. • The joint-stock company, as a form of business organization, was the forerunner of the present‑day corporation.
New Financial Features of the Commercial Revolution • 2) Banks • Banks arose in western Europe to meet the needs of business enterprises for funds. The growth of banks was aided by • (a) the increased supply of currency resulting from the importation of New World gold and silver • (b) the relaxation of Roman Catholic Church prohibitions against usury—the lending of money for interest. • This relaxation came as people realized that capital played a vital and productive role in business enterprise. In the Age of Transition, • two famed banking families—both originating as merchants and evolving into bankers—were the Medici in Italy and the Fuggers in Germany.
New Financial Features of the Commercial Revolution • Banks (continued) • Aware of their role in the developing capitalist economy, bankers devised various new credit facilities: • A) bills of exchange for use in international trade enabled a merchant in one country to pay for goods purchased in another country, • B) checks for use by business people to pay for goods in local transactions, and bank notes, • C) paper money issued by the banks, for use as a convenient substitute for gold and silver. • These credit facilities have survived to the present time.
New Financial Features of the Commercial Revolution • (3) Limited by guild restrictions, European textile producers proved un able to meet the demand for goods both in Europe and overseas. • To increase output, manufacturers employed the domestic system—sending out raw materials to be worked on in the home—and later manufacturers adopted the factory system—speeding production by using machinery. • The Commercial Revolution thus helped pave the way for the Industrial Revolution