Preview Main Idea / Reading Focus The Columbian Exchange Quick Facts: The Columbian Exchange Mercantilism Quick Facts: Basic Principles of Mercantilism The Rise of Capitalism New Patterns of Trade
New Patterns of Trade Main Idea The creation of colonies in the Americas and elsewhere led to the exchange of new types of goods, the establishment of new patterns of trade, and new economic systems in Europe. • Reading Focus • How did exploration result in a new exchange of plants and animals? • What was mercantilism, and how did it push the drive to establish colonies? • How did global trade lead to the rise of capitalism in Europe?
The Exchange of Goods Sharing Discoveries • Plants, animals developed in very different ways in hemispheres • Europeans—no potatoes, corn, sweet potatoes, turkeys • People in Americas—no coffee, oranges, rice, wheat, sheep, cattle • Arrival of Europeans in Americas changed all this • Previously unknown foods taken back to Europe • Familiar foods brought to Americas by colonists The Columbian Exchange • Voyages launched large-scale contact between Europe and Americas. • Interaction with Native Americans led to sweeping cultural changes. • Contact between the two groups led to the widespread exchange of plants, animals, and disease—the Columbian Exchange. The introduction of beasts of burden to the Americas was a significant development from the Columbian Exchange. The introduction of the horse provided people in the Americas with a new source of labor and transportation.
Effects of the Columbian Exchange • Different Foods • Exchange of foods, animals had dramatic impact on later societies • Over time crops native to Americas became staples in diets of Europeans • Foods provided substantial nutrition, helped people live longer • Economics and Gastronomics • Activities like Texas cattle ranching, Brazilian coffee growing not possible without Columbian Exchange; cows, coffee native to Old World • Traditional cuisines changed because of Columbian Exchange • Italian Food Without Tomatoes? • Until contact with Americas, Europeans had never tried tomatoes • Most Europeans thought tomatoes poisonous • By late 1600s, tomatoes had begun to be included in Italian cookbooks
Effects of Columbian Exchange felt not only in Europe, Americas China Arrival of easy-to-grow, nutritious corn helped population grow tremendously Also a main consumer of silver mined in Americas Africa Two native crops of Americas—corn, peanuts—still among most widely grown Scholars estimate one-third of all food crops grown in world are of American origin Effects Widespread
The Introduction of New Diseases • Native Americans had no natural resistance to European diseases • Smallpox, measles, influenza, malaria killed millions • Population of central Mexico may have decreased by more than 30 percent in the 10 years following first contact with Europeans • Devastating Impact • Native American population continued to decline for centuries • Inca Empire decreased from 13 million in 1492 to 2 million in 1600 • North American population fell from 2 million in 1492 to 500,000 in 1900—but disease not only factor in decrease of population • Intermittent warfare, other violence also contributed
Find the Main Idea What were two lasting effects of the Columbian Exchange? Answer(s): possible answers—changes in cuisine, changes in crops grown around the world, epidemics
Intense Competition New Economic Policy • Wealth measured by amount of gold, silver possessed by nation • Mercantilists believed there was fixed amount of wealth in world • For one nation to become wealthier, more powerful—had to take wealth, power away from another nation • Mercantilism led to intense competition between nations • Founding of colonies, new goods in Europe led to significant changes • 1500s, Europeans developed new economic policy, mercantilism • Nation’s strength depended on its wealth • Wealthy nation had power for military and expanded influence Mercantilism
Imports Exports • To achieve favorable balance of trade, could reduce amount of imports by placing tariffs on goods • Importer paid tariff, added cost to price of good • Imported goods more expensive, discouraged people from buying • Encourage exports that could sell for higher prices than raw materials • Countries encouraged manufacturing and export of manufactured goods • Governments provided subsidies to help start new industries Balance of Trade • Mercantilists built wealth two ways—extract gold, silver from mines at home, in colonies; sell more goods than it bought from foreign countries, creating favorable balance of trade • With favorable balance of trade, country received more gold, silver from other nations than it paid to them • Increased its power; weakened foreign competitors
Third approach for favorable balance of trade, controlling sources Nation that controlled own sources would not need to import from competing nations Why important Country did not need to spend own money to obtain raw materials Foreign countries considered rivals, might become active enemy, cut off supply of raw materials European nations worked to become more self-sufficient Nations began to establish colonies Controlling Sources
Colonies Strict Laws • European powers wanted to establish colonies • To control sources of raw materials • To provide new markets for manufactured goods • To mercantilist, colonies existed only to benefit home country • Monarchs restricted economic activities in colonies • Colonists could not sell raw materials to other countries • Could not buy manufactured goods from other nations • Strict laws forbade colonies from manufacturing goods • Forced to buy only from home country Colonies Building colonial empires essential to mercantilist system
Rural Life Many Changes • Impact of colonization not felt throughout society • Rural life continued as it had for centuries • Generations would pass before many began to grow new foods from Americas • Most people remained poor • Changes taking place because of colonization • Had impact on European societies • Towns cities grew as business activity increased • New class of wealthier merchants emerged, began to wield more power in their towns Impact on Society
Summarize What were the main principles of mercantilism? Answer(s): nation's strength depended upon its wealth; needed a favorable balance of trade
Capitalism Emerges Overseas Trade Increased Business Activity • During this time, capitalism expanded • In capitalism, most economic activity carried on by private individuals, organizations in order to seek profit • Individuals amassed great trade fortunes • Merchants supplied colonists with European goods • Returned products, raw materials • Overseas trade made many merchants rich • Wealth enabled them to invest in more business ventures • Business activity in Europe increased greatly The Rise of Capitalism Increasing trade between Europe and colonies created new business and trade practices during the 1500s and 1600s. These practices would have a great impact on the economies of European nations.
Rising Prices • Investors took risks of investing in overseas trade because of inflation • Inflation, steady increase in prices • Demand for goods increased due to growing population, scarcity of goods; rising demand drove prices higher • Money Supply • Increase of money supply another factor in higher prices • Shiploads of gold, silver flowed into Europe from Americas to be made into new coins • Over time, increase of money in circulation pushed prices for goods still higher
A New Business Organization • New Ventures • Overseas business ventures often too expensive for individual investors • Investors began pooling money in joint-stock companies • Joint-Stock Companies • Investors bought shares of stock in company • If company made profit, each shareholder received portion • Shares • Profit, loss based on number of shares owned • If company failed, investors lost only amount invested • Financing Colonies • British East India Company, one of first joint-stock companies • 1600, imported spices from Asia • Others formed to bear cost of establishing colonies
Identify Cause and Effect Why did new business practices develop in Europe? Answer(s): because of increasing trade between Europe and its colonies