THE WORLD ECONOMY

1
THE WORLD ECONOMY

• EXCHANGES, CAPTIALISM, COLONIALISM, AND EMPIRE
  BUILDING

2
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

3
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

4
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

5
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

6
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

7
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