Economics Review. The Commercial Revolution and the Columbian Exchange (Sixteenth Century)

Economics Review

The Commercial Revolution and the Columbian Exchange

(Sixteenth Century)

What is the Commercial Revolution?

• “The shift from a town-centered economy to a nation-centered economy.”

• The emergence of commercial capitalism

Causes

• Population increase– Europe in 1600: 90 million people

• 20 million of those added in the 16th Century

• Inflation– Devaluing of currency– Prices go up, wages go down

• Actually helped emerging entrepreneurs

Emerging Capitalism

• “Putting out” system• New Monarchies• New banking systems

– “commercial capitalism”

• Capital and labor• Mercantilism

– “favorable balance of trade”– “bullionism”– Self-sufficiency– Role of the government

The “Price Revolution”

• Population growth + rise in inflation

• Spain and the New World

• The Columbian Exchange– From the New World– To the New World– Results for Europeans– Results for Native Americans

The Cottage Industry(a.k.a. “putting out system”)

Pros• Avoided guilds• Helped farmers

supplement income• Created

entrepreneurs• Created new

consumer goods• Work could be done

at home

Cons• Inefficient

– Workers spread out in many places

– Labor wasn’t coordinated and organized

– Lack of capital

The Physiocrats

• Francois Quesnay (1694-1774)

• Pierre Dupont de Nemours (1739-1817)

• Anti-mercantilism

• Anti-regulation

• Concerned with agriculture

• Government’s role: protect property and enforce laws

The Economics of the Industrial Revolution

“Classical Economics”

Adam Smith

• Laissez-faire capitalism– Competition– Self-interest– Division of Labor

Supply and DemandThe “Free Market”

Thomas Malthus (1766-1834)

• An Essay on the Principle of Population (1798)

• Population will outgrow the food supply

• Advocated a laissez-faire approach– Don’t help the poor

David Ricardo (1772-1823)

• The “Iron Law of Wages”

• Wages will always be at a subsistence level

The “Utopian Socialists”

Robert Owen (1771-1858)

• “Paternalistic Capitalism”

• New Harmony, Indiana

Count de Saint Simon (1760-1825)

• Founder of French Socialism

• Public ownership of industrial capital

• Goal of society: improve conditions of the poor

Charles Fourier (1772-1837)

• Poverty is the cause of all social problems

• Social communities– “Phalanxes”

The Utilitarians

• John Stuart Mill

• Jeremy Bentham

• “The Greatest Good for the Greatest Number”

Louis Blanc (1811-1882)

• “Social Workshops”– Goal: out-compete

private industries

• Played a role in the 1848 Revolution

“Scientific” Socialism

Karl Marx (1818-1883) and Friedrich Engels (1820-1893)

The Communist Manifesto (1848)Das Kapital (1867)

Main Ideas

• Class conflict

• Impact of Industrialization– Alienation– Labor Theory of Value

• Dialectical Materialism– Hegel’s dialectic “turned on its head”– An inevitable historical process (hence

“scientific socialism”)

Thesis Antithesis

Synthesis

(New Thesis)Antithesis

Synthesis

(New Thesis)Antithesis

ABSOLUTE IDEA

The Ultimate Synthesis(Eventually)

ALL OF THIS FUNCTIONS IN THE REALM OF

IDEAS FOR HEGEL

Master Slave

Nobility Peasants

Bourgeoisie Proletariat

COMMUNISM

The Ultimate Synthesis(Eventually)

ALL OF THIS FUNCTIONS IN THE REALM OF

ECONOMICS FOR MARX

F E U D A L I S M

C A P I T A L I S M

“Dialectical Materialism”

• Marx framed this in economics• CLASS CONFLICT• Stages of history (these are scientific)

1. Primitive communism2. Slavery3. Feudalism4. Capitalism5. Communism

• “It is not the consciousness of humans which determines their being. It is their social being which determines their consciousness.”

Socialism After 1870• The First International (1864-1876)• Trade Unions

– Legal in Britain, 1871– Legal in France, 1884– Most powerful in Germany

• “Revisionist” Socialism– Jean Jaures (France, 1859-1914)– Eduard Bernstein (Germany, 1850-1932)– The Erfurt Program (Germany, 1891)

• Improve lives of workers, not work for revolution– The Fabian Society (England, 1884)– The Labor Party (England, 1906)

• The Second International (1889-1916)– Denounced “opportunism”

• Bolshevism and Leninism – Changes to Marxism

Sample Essay Questions

Describe and compare the differences among Utopian socialists, Karl Marx, and Revisionist Socialists in their critiques of 19th century European economy and society.

“In the 15th century, European society was still centered on the Mediterranean region, but by the end of the 17th century, the focus of Europe had shifted north”

Identify and analyze the economic developments between 1450 and 1700 that helped bring about this shift.

How and in what ways were economic and political factors responsible for intensifying European imperialist activity in Africa from the mid-19th century to the beginning of the First World War?

Analyze changes in the European economy from 1450 to 1700 brought about by the voyages of exploration and by colonization. Give specific examples.

Describe and analyze the issues and ideas in the debate in Europe between 1750 and 1846 over the proper role of government in the economy. Give specific examples.

Analyze the common political and economic problems facing Western European nations in the period 1945-1960 and discuss their responses to these problems.

Analyze the influence of the theory of mercantilism on the domestic and foreign policies of France, 1600-1715.

Analyze the key developments that characterized the European economy in the second half of the nineteenth century.

Both Jean-Baptiste Colbert (1619-1683) and Adam Smith (1723-1790) sought to increase the wealth of their respective countries. How did their recommendations differ?

Explain the reasons for the rise of the Netherlands as a leading commercial power in the period 1550-1650.

Discuss the economic policies and institutions that characterized mercantilist systems from 1600-1800.

How and to what extent did the Commercial Revolution transform the European economy and diplomatic balance of power in the period 1650-1763?

Describe and analyze economic policies in Eastern and Western Europe after 1945.

Compare and contrast the social and economic roles of the state in seventeenth and eighteenth century Europe (before 1789) to the social and economic roles of the state in Europe after the Second World War.