THE WORLD ECONOMY

1
THE WORLD ECONOMY

• EXCHANGES, CAPTIALISM, COLONIALISM, AND EMPIRE
  BUILDING

2
CHINESE RECONNAISSANCE

• Ming China
• Expel Mongols, reestablish traditional Chinese
  institutions
• Reestablish Chinese tributary system reestablish
  East Asian trade
• Resurrects Chinese fleet
• 2nd Ming Emperor seizes control from nephew
• Nephew flees abroad
• Emperor sends fleet to find nephew, reestablish
  Chinese influence, trade, tribute
• The Chinese reconnaissance of the Indian Ocean
  basin
• Zheng He's expeditions
• Ming emperor permitted foreigners to trade at
  Quanzhou and Guangzhou
• Refurbished the navy and sent seven large
  expeditions to the Indian Ocean basin
• Purposes to control foreign trade and impress
  foreign peoples
• Admiral Zheng He's ships were the largest marine
  crafts in the world
• Visited southeast Asia, India, Ceylon, Arabia,
  and east Africa
• Chinese naval power
• Zheng He's voyages diplomatic exchanged gifts,
  envoys
• Used force to impress foreign powers, for
  example, against coastal pirates
• Expeditions enhanced Chinese reputation in the
  Indian Ocean basin
• End of the voyages, 1433

3
EUROPEAN EXPLORATION

• European exploration in the Atlantic and Indian
  Oceans
• Portuguese exploration
• European goals to expand Christianity and
  commercial opportunities
• Portuguese mariners emerged as the early leaders
• Prince Henry of Portugal determined to increase
  Portuguese influence
• Seized Moroccan city of Ceuta in 1415
• Colonization of the Atlantic Islands
• Portuguese ventured into the Atlantic, colonized
  Madeiras, Azores, other islands
• Italian investors, Portuguese landowners
  cultivated sugarcane on the islands
• Slave trade expanded fifteenth century
• Portuguese traders ventured down west coast of
  Africa
• Traded guns, textiles for gold and slaves
• Thousands of slaves delivered to Atlantic island
  plantations
• Indian Ocean trade
• Portuguese searched for sea route to Asian
  markets without Muslim intermediaries
• Portuguese mariners dominated trade between
  Europe and Asia, sixteenth century
• Portuguese ships with cannons launched European
  imperialism in Asia
• Christopher Columbus hoped to reach Asia by
  sailing west
• Plan rejected by Portuguese king but sponsored by
  king and queen of Spain

4
MOTIVES FOR EXPLORATION

• Portugal searched for fresh resources
• Resource poor country block from expanding on
  land
• 13th to 15th century they ventured out onto
  Atlantic
• Established sugar plantations in Azores, Madiera
• Direct trade without Muslim intermediaries
• Bypass Italian trade monopolies with Ottomans
• Asian spice trade
• African gold, ivory, and slaves
• Missionary efforts of European Christians
• Christians urged to spread the faith throughout
  the world
• Crusades and holy wars against Muslims in early
  centuries
• Reconquista of Spain inspired Iberian crusaders
• Motives
• Gold, glory, God
• Combined and reinforced each other

5
INFLUENCE OF TECHNOLOGY

• New technologies help Europeans travel offshore
• Sternpost rudder
• Two types of sails
• New types of ships
• Advance, sail against wind
• Navigational instruments
• Magnetic compass
• Astrolabe (and cross and back staffs)
• Knowledge of winds and currents
• Enabled Europeans to travel reliably
• Trade winds north and south of the equator
• Regular monsoons in Indian Ocean basin
• The volta do mar

6
VOYAGES OF EXPLORATION

• Henrique, King of Portugal
• Encouraged exploration of west Africa
• Portuguese conquered Ceuta in north Africa in
  1415
• Established trading posts at Sao Jorge da Mina,
  west Africa
• Dias rounded the Cape of Good Hope, entered
  Indian Ocean, 1488
• Vasco da Gama of Portugal
• Crossed Indian Ocean reached India, 1497
• Brought back huge profit
• Portuguese merchants built a trading post at
  Calicut, 1500
• Christopher Columbus, Genoese mariner
• Proposed sailing to Asian markets by a western
  route
• Sponsored by Catholic kings of Spain sailed to
  Bahamas in 1492
• Columbus's voyage inspired others
• England, France, Holland begin to explore
• Spain, Portugal sent out more expeditions,
  conquistadors

7
OTHER VOYAGES

• Ferdinand Magellan, Portuguese navigator, in
  service of Spain
• Crossed both the Atlantic and Pacific Oceans
  1519-1522
• One ship out of five completed the
  circumnavigation of the world
• Magellan died in conflict in a Philippine island
  on the way home
• Exploration of the Pacific took three centuries
  to complete
• Trade route between the Philippines and Mexico,
  by Spanish merchants
• Other European mariners searched for a northwest
  passage from Europe to Asia
• The English, French, Dutch
• France Explored Northern North America, Settled
  Canada, exploited furs
• English
• Atlantic seaboard of North America, Hudson Bay
  area
• English East India Company opened Indian Ocean to
  English trade
• Dutch
• Tended to prey on Spanish, Portuguese existing
  holdings
• Won independence from Spain, seized control on
  much of Indian Ocean
• Dutch East India company established to exploit
  Indian possessions
• By 18TH century, Europeans had accurate knowledge
  of the world

8
GLOBAL EXCHANGES

• Biological exchanges between Old and New Worlds
• Columbian Exchange
• Global diffusion of plants, food crops, animals,
  human populations, diseases
• Columbus's voyages began and explorations
  furthered exchange
• All continents effected
• Permanently altered the earth's environment
• Epidemic diseases
• Smallpox, measles, diphtheria, whooping cough,
  and influenza
• Led to staggering population losses
• Smallpox reduced Aztec population by 95 percent
  in one century
• Contagious diseases had same horrifying effects
  in the Pacific islands
• Between 1500/1800, 100 million people died of
  imported diseases
• New foods and domestic animals
• Wheat, horses, cattle, sheep, goats, and chickens
  went to Americas
• American crops included maize, potatoes, beans,
  tomatoes, peppers, peanuts
• Growth of world population from 425 million in
  1500 to 900 million in 1800
• Migration of human populations
• Enslaved Africans were largest group of migrants
  from 1500 to 1800
• Sizable migration from Europe to the Americas

9
ORIGINS OF EUROPEAN TRADE

• European intermediaries
• Comparative Advantage
• Country can do many things but it will excel in
  some over others
• Countries develop trade based on comparative
  advantage
• Advantage is based on where the nation has
  greatest advantage
• Concentrate economic resources in that area
• European advantage was to act as middle men and
  shipping for others
• Absolute Advantage
• One country has natural advantage in producing
  certain goods, services
• Absolute advantage is often a natural monopoly
• Asians produced spices, goods, which Europeans
  could not
• Europeans began by trading with silver, gold
• European establish monopolies
• Europeans establish chock points at areas where
  all trade had to pass
• Seized lands where spices grown, destroy
  competition, create monopoly
• Transoceanic trade
• European merchants created global trading system
• Based on supply and demand linked ports of the
  world
• Manila galleons

10
WORLD TRADE

• Terms of Trade
• Agreements on what will be exchanged
• Agreements on payments, amounts to be exchanged
• Bilateral is when two nations negotiate equally
• Europeans had to negotiate with China, Japan,
  Muslims, Russia (too powerful)
• Only allowed to trade though one port
• Canton (Guangzou) in China
• Nagasaki in Japan
• Unilateral is when one nation dictates terms of
  trade
• Composition of Trade
• Europe and Trade
• Europeans traded finished goods, especially
  manufactured( Guns, cloths)
• Europeans purchased unfinished goods to trade
  (Silver, sugar)
• Europeans sought luxuries, spices, slaves, gems,
  silks, porcelain
• World and Trade
• Low-cost goods gold, silver sugar, spice,
  tobacco, cotton slaves
• Africa, Latin America became one commodity
  exporters
• E. Europe sold commodities through W. Europe
  (grains, timber, tar, fish)
• E. Asia, S. Asia, S.E. Asia, S.W. Asia balanced
  agreements of trade

11
INTERNATIONAL INEQUALITIES

• International Inequality
• Center or Core of world trade was Western Europe
• Most of world in an unequal relationship to
  Europe
• Most countries did not control own economies
• Local trading elites often grew rich trading
• Worked with Western Europeans on seas, coasts
• Controlled their own interior economies
• Most of locals not involved in world economy
• Population existed at subsistence level
• Contacts limited to coasts, ports
• Coercive Labor
• Most of world labor was unfree
• Slavery differed little from serfdom, caste
  slavery, peasants
• Profits often depended on keeping labor cheap
• Europeans often established plantations with
  cheap labor

12
WAS THERE A WORLD ECONOMY, c. 1600?

• Yes
• Western Europe
• European Atlantic Seaboard
• Colonial possessions in North America, South
  America
• Poland and Russia
• Coasts of West, East Africa
• Coasts of India, S.E. Asia, E. Asia
• Muslim S.W. Asia
• No
• European areas of Ottoman Empire
• Interior of Africa
• Interior (steppes, deserts) of Eurasia
• Interior of South Asia
• Indochina
• Australia and New Zealand
• Interior of North and South America
• Pacific islands of Micronesia, Polynesia,
  Melanesia

13
EAST ASIA

• Benefited from global trade
• Allowed Limited Contacts
• Strong government disincentives to trade
• Used Chinese navy to keep pirates, Europeans out
• Tended towards official isolation
• Japan, Korea equally apprehensive
• Chinese manufacturing better than Europeans
• Tended towards luxury goods
• Chinese demanded silver in payment
• Not active participants on scale of Europe
• China failed to appreciate European threat
• Neo-Confucianism clouded understanding
• Technology considered beneath Chinese
• Profits, trade considered inferior occupations
• Japan understood impact of Europeans
• Most troubled by European firearms as un-samurai
• Eventually limited trade to one yearly ship at
  Nagasaki
• Officially closed Japan until 1854

14
OTHER PARTS OF WORLD

• Muslim World Mughal India, Ottomans, Safavids
• Interested in trade, cooperated to a degree
• Allowed small port colonies to arise
• External trade often handled by ethnic minorities
  
• Exchanged goods for silver, luxuries, processed
  goods
• Eventually became dependent on European
  manufactured goods
• Internal expansion, development over external
  trade
• Russia
• Agricultural economy
• More concerned with steppe nomads, internal
  problems
• Not involved until 18th century
• Africa
• Except for coasts, Cape Colony generally outside
  world economy
• Diseases, climate kept Europeans out of Africa
• Contacts limited to coastal states

15
COLONIAL EXPANSION

• The Americas
• Spain Began with control of Caribbean, Invaded
  Mexico 1521, Peru 1531
• Portugal Cabral visit coast of Brazil Treaty of
  Tordesillas granted Brazil
• Colonies developed
• By small band land hungry conquistadors, colonial
  rulers exploit Indians
• Only later did formal Iberian rule replace
  corrupt conquistators
• Direct Rule
• Colonial administrators sent out from Spain,
  Portugal
• Established agricultural (ranching or plantation)
  colonies
• Colonial societies with Europeans at top created
  rarely had European majorities
• Missionaries sent out to covert Indians
• English, French, Dutch create smaller empires on
  fringes
• Caribbean holdings more profitable than North
  American colonies
• Caribbean islands and Southern American colonies
• Export sugar, rice, tobacco, cotton, indigo rice
• Dominated by slaves, plantations relied on
  importation of Africans for labor
• Atlantic Seaboard settler colonies for Europeans
  (called Neo-Europes)
• Land grants made to encourage colonization
• European populations surpassed native Indians

16
TRADING POST EMPIRES

• No attempt to create empires but control trade,
  wealth
• Portuguese built 50 posts between west Africa
  and east Asia
• Alfonso d'Albuquerque
• 16TH century Portuguese commander in Indian Ocean
  
• Seized Hormuz in 1508, Goa in 1510, and Melaka in
  1511
• Forced all merchant ships to purchase
  safe-conduct passes
• Portuguese hegemony grew weak by the late
  sixteenth century
• English, Dutch established trading posts in Asian
  coasts
• English in India, the Dutch at Cape Town and
  Indonesia
• Created efficient commercial organization
• Joint-stock company
• Shares could be bought by anyone with money
• of shares correspond to percentage of profit
  due
• Allowed for larger, richer entities to operate
• Limited risk of any one participant to cost of
  the stock purchased
• Privileges, terms often guaranteed by government,
  which often also owned stock
• Insurance
• Companies arose which insured ventures
• Lloyds of London is the oldest in world

17
EUROPEANS IN INDIAN OCEAN

• Posts were commercial ventures not areas of
  colonization
• Portuguese controlled area initially
• Established ports in India, dominated trade to,
  from India
• Goa was capital for Indian Ocean Portuguese
  Empire
• Conquered Sri Lanka, several other ports with
  permission of Mughals
• Introduced Catholic missionaries to Indian Ocean
• Seized port of Malacca on Malay peninsula to do
  same as in India
• Traded with locals for spice
• Later conquered parts of Spice Islands
• Spanish conquest of the Philippines
• Manila, bustling port city, became Spanish
  capital Spanish tended to live in cities
• Islands divided into plantations to grow sugar
• Spanish, Filipinos massacred Chinese merchants
• Christianity spread by Dominicans throughout
  archipelago
• Muslim resistance on southern island of Mindanao
• Conquest of Java by the Dutch
• Began with VOC trading city of Batavia in 1619
• Drove Portuguese out, seized their possessions
• Policy secure VOC monopoly over spice
  production, trade

18
COMMERICAL RIVALRIES

• Global competition and conflict
• Dutch forces expelled most Portuguese merchants
  from southeast Asia
• Conflict between English and French merchants
  over control of India
• Began as rivalry with Portuguese
• Each side made alliances with local rulers to
  establish trading rights
• Cotton and tea from Ceylon, early eighteenth
  century
• Competition in the Americas among English,
  French, and Spanish forces
• Anglo-Dutch Wars (1640s to 1670s)
• English and Dutch fight three wars for control of
  seas
• English win and take New Netherlands (New York)
  Dutch reduced in world role
• War of Spanish Succession (1704-1714)
• Hapsburg family has no heirs to Spanish throne
• France set to inherit empire England, Dutch,
  Austrians oppose
• The Seven Years' War (1756-1763)
• In Europe British and Prussia against France,
  Austria, and Russia
• In India fighting between British and French
  forces, each with local allies
• In the Caribbean Spanish and French united to
  limit British expansion
• In North America fights between British and
  French forces
• Outcome of All British hegemony

19
EARLY CAPITALISM

• First arose in Italian city-states, Dutch
  controlled Netherlands
• Early capitalism and proto-industrialization
• Capitalism is use of capital, money, investments
  to create industry, profit
• Relies on freedom to invest capital in most
  profitable venture
• Relies on minimal government regulation and right
  of investors to make a profit
• The nature of capitalism
• Private parties sought to take advantage of free
  market conditions
• Economic decisions by private parties, not by
  governments or nobility
• Forces of supply and demand determined price
• Supply and demand
• Merchants built efficient transportation and
  communication networks
• New institutions and services banks, insurance,
  stock exchanges
• Joint-stock companies like EEIC and VOC organized
  commerce on a new scale
• Capitalism actively supported by governments,
  especially England, Netherlands
• Protected rights of private property, upheld
  contracts, settled disputes
• Chartered joint-stock companies authorized to
  explore, conquer, and colonize distant lands
• The putting-out system of seventeenth and
  eighteenth centuries
• Entrepreneurs bypassed guilds, moved production
  to countryside
• Rural labor cheap, cloth production highly
  profitable

20
EARLY CAPITALIST SOCIETIES

• Mindset about capitalism
• Profits and ethics
• Medieval theologians saw profit making as selfish
  and sinful
• Renaissance altered concepts of wealth, profit
• Reformation
• Protestants saw success as vindication of Gods
  favor
• Many Protestants in upper middle class,
  Protestant states supported capitalism
• Population growth and urbanization
• Population growth
• American food crops improved Europeans' nutrition
  and diets
• Increased resistance to epidemic diseases after
  the mid-seventeenth century
• European population increased from 81 million in
  1500 to 180 million in 1800
• Urbanization
• Rapid growth of major cities (Paris from 130,000
  in 1550 to 500,000 in 1650)
• Cities increasingly important as administrative
  and commercial centers
• Social change in early modern Europe
• Early capitalism altered rural society
• Societies became monetary based and not barter
• Improved material standards if grains sold for
  high profits

21
EUROPEAN IMPACTS

• Western Europe
• Commercial impacts
• Beginning of Commercial Revolution, Capital
  Revolution, Price Revolution
• Incredible wealth generated
• Wealth funds European internal development
• New products, foods imported
• Diplomatic impacts
• European trans-Atlantic empires created
• Colonial rivalries
• War for colonies
• Social Impact
• Rise of groups with wealth based on money not
  land
• Rise of cities, urban groups
• Commercialization made new products available
• Dependence on agriculture reduced
• Intellectual Impact
• European ideas, religions, philosophies began to
  spread abroad
• Europeans began to borrow foreign ideas if it
  suited their needs
• Contacts with the world challenged traditional
  European beliefs

22
NEW WORLD ORDER

• All continents eventually connected by trade
• American silver, foodstuffs spread throughout
  world
• Terms of trade tend to favor Western Europeans
  for first time
• Commerce generateS wealth which only agriculture
  had in past
• Europeans began to dominate world trade
• Increase of unfree labor systems to support
  commercialization
• Rise of Atlantic Slave trade
• Spread of serfdom in Russia
• Changes in non-European social classes
• Non-European landowners in Asia make money from
  trade, too
• Muslim merchants largely replaced by European
  merchants
• Rise of African slave trading states, kings who
  made great wealth