INT 200: Global Capitalism and its Discontents Early Modern Europe and Mercantile Capitalism

Early Modern Europe From the Middle Ages or Medieval Period and the beginning of the Industrial Revolution – 15 th to the 19 th centuries – Religious conflicts, the rise of capitalism, the creation of the modern nation state, colonization of the Americas, development of science as a formalized practice, rapid technological progress, political and social philosophy, the Enlightenment. – Mercantalism: decline and eventual disappearance of feudalism and serfdom The earliest phase of globalization

Early Modern Europe Italian city-republics – Genoa, Venice, Milan, and Florence – Merchants’ leading role, the innovations in accounting and commercial practices, legal rules and commercial institutions, and the emergence of a new mentality – limited liability joint stock companies, bills of exchange, secondary markets for a wide variety of debt, equity and mortgage instruments, bankruptcy laws, double-entry accounting methods, business education, deposit banking, reliable medium of exchange Why? – Trade and fleets – Roman law – Enclosure, islands – Banking & usury – Arabic ideas

Early Modern Europe Cities of the Low Countries – Regions of modern day Netherlands and Belgium – abundance of navigable waterways & diverse local resource endowments stimulated competition and regional specialization – Low threshold to urbanization because of easy shipping – Property rights led to market-oriented farming and land markets – from the 13 th century onwards the importance of wage-labor – cities had merchants, retailers, artisans (bakers, carpenters, smiths) – substantial legal and fiscal autonomy allowed cities legal infrastructure to support private contracting offering protection to itinerant and resident merchants creating market spaces establishing fairs building ports setting up exchange banks, etc

Early Modern Europe Cities of the Low Countries – Financial Innovations property mortgages Savings and loan banks for the middle class groups paper money mutual insurance schemes various forms of investment and new corporate forms: the limited liability company resource endowments, infrastructure, and political fragmentation

Early Modern Europe The New World – 18,000 tons of silver and 200 tons of gold – sugarcane for rum, molasses, and sugar, trade in African slaves – immense fortunes; wealth and enrichment; the Bourgeoisie – The strength of these merchant and banking bourgeoisie rested on three pillars chartered trading companies, their financial institutions, and the merchant fleet Charted Trading Companies  The British East India Company (1600) and the Dutch East India Company (1602)  first multinational corporations in the world and the first companies to issue stock

Early Modern Europe England – collapse of the manorial system: wage-labor, cities, merchants – Centralized state: London central market for the entire country and large internal market – Enclosure and Agrarian capitalism: polarizing agrarian population into larger landowners who lived on rents, capitalist tenants living on profits, and propertyless laborers living on wages – Long-distance trade re-emerged

Early Modern Europe Summary – switch from tributary modes of production to voluntary market exchange of goods, labor, land, and capital, radiated out from northern Italy, the Low Countries, and Britain – chartered joint-stock companies created by the state – colonial and expansionary powers by states, powerful nation-states sought that to accumulate precious metals, and so military conflicts – merchants, who had previously traded on their own, invested capital in the East India Companies and other colonies, seeking a return on investment