The Economics of the Commercial Revolution

Essential Questions

1. How was mercantilism an essential part of European trade and profit?

2. How did trading practices change due to expansion and establishment of colonies?

3. What foundations of capitalism were established by European trading practices?

What do you remember…What do you remember…The trafficking of humans was not new. However, which of the The trafficking of humans was not new. However, which of the

following of the event in the 1490s would effectually change the following of the event in the 1490s would effectually change the history of slavery?history of slavery?

Trade routes were made available.Trade routes were made available.

King Julian from Madagascar assassinated.King Julian from Madagascar assassinated.

Discovery of the Americas and the planting of sugarcane.Discovery of the Americas and the planting of sugarcane.

The Catholic church ideas were challenged.The Catholic church ideas were challenged.

What is this map depicting?

What is a colony?

Look on page 440 of your book (13.2) and write down the essential elements of a colony.

From Dictionary.com:A group of people who leave their native country to form in a

new land a settlement subject to, or connected with, the parent nation.

Europeans started to colonize the Americas.Europeans started to colonize the Americas.

Mercantilism

Based on the idea that a nation’s power was determined by its wealth (bullion or gold and silver).

The accumulation of The accumulation of wealth was equal to a wealth was equal to a ruler’s power.ruler’s power.

This appeared in the This appeared in the luxury of their court luxury of their court and size of military. and size of military.

The Palace of Versailles in France is a great example

Balance of Trade

Option #2

Exports: 2 million worth

Imports: 1 million worth

1 million difference

In order to bring in gold and silver payments, nations needed to have a favorable balance of trade.

Which is the favorable balance?

Option #1

Exports: 2 million worth

Imports: 3 million worth

1 million difference

Trade with colonies

Colonies supposed to supply wealth in either gold and silver or raw materials.

Colonies made to buy products from home country, no competition.Why so bad?Why so bad?

-Often more expensiveOften more expensive

-Reason U.S. left-Reason U.S. left

Changing Trade Practices

Ships and journeys are expensive. Great loss if they never made it. Sold stock in trading company to lessen risk to one person, paid profits. Example: Dutch East India Company and today’s corporations.

Strengthening Middle Class:Make your money earn more money, don’t just save it. Hard work ethic, drove a hard bargain to maximize profits.

Joint Stock Companies:

Changing Trade Practices

Caused rivalries at sea Caused rivalries at sea between countries who between countries who established trade established trade monopolies with colonies.monopolies with colonies.

Pirates plunder the Pirates plunder the Caribbean, especially Caribbean, especially Spanish ships with Aztec Spanish ships with Aztec gold and silver.gold and silver.

Problems created in Europe’s Economy

Middle class has more money Middle class has more money and buys more food and and buys more food and goods. Greed takes a goods. Greed takes a hold.hold.

Higher population means less Higher population means less food and goods which food and goods which causes inflation!causes inflation!

The Foundations of Capitalism

Trade creates world capitalist economy.

Economic system based on private ownership and use of capital (ships, land, etc.). Three major features:

1. Private ownership: Capital belongs to individuals who can do what they want with it = “free-enterprise system.”

What is capitalism?

The Foundations of Capitalism

2. Profit Motive: The desire to make a profit. Law of supply and demand. The less of something there is the higher the price.

3. Market Economy: All forms of capital can be assigned a price and bought or sold. Value = supply and demand. Traded in free market = “market economy.”