The Age of Exploration and the Commercial Revolution
V. The Commercial Revolution
- A. Causes
- 1. New ocean trade routes
- a. The trade in spices, sugar, and precious metals brought great wealth to the European trading nations.
- b. The wealth supported increased investment and a wide array of new economic ventures.
- 2. Growth of population
- a. The introduction of new foods played a key role in supporting population growth.
- b. The population of Europe increased from 70 million in 1500 to 90 million in 1600.
- c. The steady rise in population increased overall demand for goods and services.
- 3. Price revolution
- a. During the sixteenth century, the western European economy experienced a steady inflation in prices.
- b. The influx of gold and silver from the New World and the rising demand created by the growth of population contributed to the price revolution.
- 4. New nation-centered economic system
- a. Prior to 1500, the western European economy was organized around towns and guilds. Both relied upon strict regulations to ensure their survival. As a result, there was very little innovation.
- b. As commercial activity increased, a new nation-centered economic system began to replace the old town-and-guild framework.
- B. Key Features
- 1. New entrepreneurs
- a. The expansion of commercial activity created large geographic markets. The new trading areas opened new opportunities while also requiring a new kind of economic leadership.
- b. As the commercial revolution replaced the town-and-guild framework, merchants and bankers emerged as influential and successful entrepreneurs.
- c. The Italian Medici family and the German Fuggers were prominent examples of the new economic entrepreneurs.
- 2. New industries
- a. The printing press created a national and even international market for books.
- b. The new ocean trading routes sparked a rise in shipbuilding.
- c. The emergence of nation-states supported the large- scale manufacture of cannons and muskets.
- 3. New domestic or putting-out system
- a. Strict guild regulations stifled competition and restricted production.
- b. In order to avoid the restrictive guild system, . entrepreneurs provided cloth, looms, and other equipment to rural families.
- c. The putting-out or domestic system led to a significant increase in the production of cloth and other manufactured goods.
- 4. New joint-stock companies
- a. The new international trade required unprecedented amounts of capital. For example, merchants had to arm their ships, buy special privileges for local authorities, and build trading posts. Wars, storms, and rivals all threatened profits.
- b. English and Dutch merchants formed joint-stock companies to maximize profits and limit risks.
- c. Investors in a joint-stock company bought shares of ownership. If the company went bankrupt, its owners lost their investment. If the companies prospered, the investor's shares of ownership entitled them to collect a proportional share of the profits.
