The Commercial Revolution and the Columbian Exchange

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					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                     Cons
•   Avoided guilds       • Inefficient
•   Helped farmers         – Workers spread out in
    supplement income        many places
                           – Labor wasn’t
•   Created                  coordinated and
    entrepreneurs            organized
•   Created new            – Lack of capital
    consumer goods
•   Work could be done
    at home
             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 Demand
 The “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                   Antithesis
          (New Thesis)


 ALL OF THIS
FUNCTIONS IN        Synthesis
THE REALM OF
                                            Antithesis
                    (New Thesis)
  IDEAS FOR
    HEGEL

         (Eventually)
                           ABSOLUTE IDEA
                           The Ultimate Synthesis
Master               Slave
                      FEUDALISM

         Nobility                 Peasants


 ALL OF THIS                 CAPITALIS M
FUNCTIONS IN
THE REALM OF
               Bourgeoisie             Proletariat
 ECONOMICS
  FOR MARX

      (Eventually)
                         COMMUNISM
                       The Ultimate Synthesis
         “Dialectical Materialism”
•    Marx framed this in economics
•    CLASS CONFLICT
•    Stages of history (these are scientific)
    1.   Primitive communism
    2.   Slavery
    3.   Feudalism
    4.   Capitalism
    5.   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.

				
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