*** economics the mercantalist era

Economics: The Mercantalist Era (15th-18th centuries)

Figure 1.--We of course do not have photograps of Europe during the Mercantilist era, although of course in Europe there are paintings. The Arab world is different. Photograpoh first reached Arab countries after the mid-19th century. And the images caught reveal a wotld that was little changed for centuries. In our intrnet convrsations with Arabs and many other Muslims we are told that the povery and and backwardness of the region is dure to European volonkialism. As far as we can tell this view is so ingrained that it has not occurred to many to even ask, why was the region virtually unchanged for centuries and why is the realtively brief European colonial era responsible when the region did not begin to emerge from the medieval era until AFTER the Europeans arrived? Here we see a scene of men and boys from Egypt, probably from the 1880s. At the time, railroads had reshaped American and European economies. The donkey was, however, still an important part of commerce and trade. This photigrapoh could have been taken in he 15y century. There is not evidene of modern technology or economic life.

Mercantilism was the governing economic policy pursued by European countries during the 15th-18th cenuries. This included the Renaissabnce, Reformation, and Enligtenment. It was an era of government (meaning royal) control of foreign trade. This led to frequent if limited wars. It was during the mercabtilist era that the economies of the East and West began to come together. Through most of the era the West had trouble finding trade goods the Indians and Chinese wanted in exchange for the silk, porcelin, and spices that the West coveted. Gold and silver from the Americas helped finance the trade. Perhaos this was one of the reasons that the evolving trade was western merchants ciming to the East and not the revrse. There was no great spokesman for mercantilism like Adam Smith for capitalism (The Wealth of Nations) and Karl Marx for Communism (Das Kapital). Mercantilism was esentially the attempt of pre-industrial European leaders to gain control over the increasingly complex ecomomies that emerged from the late-Medieval era. The primary goal of the European rulers was to acquire as much bullion (gold abd silver) as possible. This affected the policies pursued. Important topics include the voyages of discovery, American gold and slver, guilds, royal monompolies, the highland clearances, the potato, and slavery.


Mercantilism was the governing economic policy persued by Europem countries during the 17th and 18th cenuries. There was no great spokesman for mercantilism like Adam Smith fir capitalism (The Wealth of Nations) and Karl Marx for Comunism (Das Kapital). Mercantilism was esentially the attempt of pre-industrial European leaders to gain control over the increasingly complex ecomomies that emerged from the late-Medieval era. There were substantial variations in the Mercantalist policies persued in different countries. Mercantilist policies were developed as regulations to promote national prosperity. A central tenant of mercantilism was bullionism. This was the view that the economic health of a nation was based on the quantity of precious metals (gold and silver) which could be amass. Mercantilist theory focused on bullion as a country's principal source of prosperity, prestige, and power. Accumulating bullion mean a favorable ballance of trade. As a resulted Mercantilists promoted exports and discouraged imports. Many countries imposed high tariffs on imported manufactured goods, but low tariffs on imported raw material for country's manufacturing. Nations attempted to become self-sufficient, sometimes in areas in which they had no competitive advantage. Mercantilists put a great emphasis on sea power, needed to protect a merchant fleet. Colonies were sought to obtain raw materials and guaranteed markets. Mercantilism required a high degree of state involvement to regulate the economy and enforce the many policies. It was the state involvement that Adam Smith would criticse in his Wealth of Nations as a destructive force.

Arab World

The Arab Caliphate was saw the Goldenn Age of Islam and the Arabs. Europeans during the Reconquista in Spain and the Crusades in thvHolyland marveled at many of the cuktural achievements of Islam and the Caliphate. This begn to chang in he Second Milleniu,. Christian Europe began a cultural and economomic rvival known as the Renaissance, epecially th behinning of the modrn age. The Arabs and wider-Muslim worls, howver, moved in the opposite direction, ecomomic and cultural stagnation and an ecinomy and cultural life limited by the sttic world view of Islamic clerics and teachers. The major economic assett the Arabs had as the modern workd began was geography. The Arabs stood between Christian Europe and the East. This was a lucrative trading position as the Europens desired many of the luxury goods available in the East such as spices, silk, porcelin, ivory, and much much more. Thse were not products produced by the Arabs, but Arab traders conrolled European access to these goods. The Arabs added nothing of valie to this commerce, only a lucrtive conduit for goods. Th Arabs and Muslims of Central Asia controlled both the Silk Road and Spice Route. The Arab and Wider-Muslim world was a vast barrier to European trade, streaching from the Atlantic ocean east to Persia. And because the added they demanded high prices, this was a massive barrier to world trade and what we might now call globelization. Thre were other important aspects to the economics of the Arab world as Europe moved from the medieval to the modern world. The Arab economy as Europe began to urbanize was lrgely based on agriclture and pastorl live stock. The Hajj was of some evonomic imprtance. The Jizya was a tax imposed on non-Muslims, leading to widespred conversion. An important economic institution was the Waqf. Other aspects of the Arab economy was raiding, piracy, and the slave trade. The most notable fact of the Arab economy was the economy at the time that Eyope was enrering the Mercantist era and a period of phenomenal social and cultural change, the Arab world remained static and unchanges, producing little of ecinnomic value beyojund agricultural and livestock producrs. Notably, ealy photographs of the Arab world, show a society and ecinomy that was little changed from the 15th century, Incredibl, groups like ISIS and other Islamic fundamentalists want to reinvigorate the very policies and intitut=tiins thatbhave kep the Arabs both poor and backward.

Voyages of Discovery

The great European voyages of discovery of the 15th and 16th centuries were fundamenrally economic enterprises. They were conducted by the European countries of the Atlantic coasts to establish direct trade contacts with China and the Spice Islands (Indonesia) that was being blovked by Venice and the Arabs. At the time, trade in silk, porcelin, and spices from the East carried over the Silk Road had to pass through Turkish, Arab, Byzantine, and Italian middleman, making them enormously expensive. The crusaders failed to break the Islamic wall separating still primitive Europe from the riches of the East. Circumventing the land Silk Road and the sea Spice Route would have profound economic consequences for Europe and the world. The ballance of power would shift from Eastern to Western Europe and eventualkly to northern Europe. Two nations led the early explorarions in the 15th century--Spain and Portugal. These two countries pioneered the sea routes that would lead Europeans to Asia and the Americas, but the Dutch, English, and French were to follow in the 16th century.

American Gold and Silver

Spanish Conquistadores conquered the Aztec and Inca Empires in the first half of the 16th century. The result of the booty and the working of existing as well as new mines was a a huge influx of gold and silver bullion flowing into Europe. The impact on the European economy was immense altering the course of history that still affect us today. Columbus and other early expolrers encountered small quantities of gold in the Caribbean, but fantastic accounts of a Kingdom of Gold began to circulate in Europe--the legendary El Dorado. He was a king who was so wealthy that he covered himself with gold dust every day and dove into a lake. Political factors also drove the European conquest. German Emperor and Spanish King Charles V desperately needed gold bullion. Charles had taken out large loans to bribes the electors that made him Holy Roman Emperor (1519). He also faced a costly war with the Turks. The Ottomons moving north took Belgrade (1521). Next they conquered Hungary (1526). Soon they had reached Vienna, the center of Hapsburg rule (1526). Charles not only faced the Turks, but the Protestant Reformation in Germany. This forced Charles to seek even more loans. One way in which Charles paid his loans is by granted licenses to pursue treasure in the Americas. Thus conquistadors financed by European banks descended upon the New World, scouring every corner for the legendary El Dorado. Hernan Cortez defeated the Aztec ruler Montezuma in Mexico (1520) and sent the first large shioment of gold objects back to Spain. Charles V immediately smelted them down to bullion. Francisco Pizarro demanded a ransom for Inca ruler Atahuallpa and obtained a vast treasure of gold and silver objects (1532). The Spanish first simply seized good and siklver objects from the native Americans, in effect looted the artistic trasures of entire civilizations. Historians estimate that about $140 million work of gold and silver objects were obtained from Peru alone between 1531 and 1540. [Hoopes] Then they used the indeginous people as slaves to produce more bullion from existing and new mines. The American treasure, however, quickly passed through Charles' treasury. It served to enable him to take out even more loans. Charles by 1551 had borrowed 14.4 million ducats at interests rates approaching 50 percent. [Hoopes] Charles army did stop the Ottomans from moving further into Christian Europe, but it could not cintain the Protesrant Revolution. But the impact of the gold is much larger. The American gold helped finance Renaissance art. As much of went into the pockets of bankers, it played an important role in the expanding European economy in the countries that had financed Charles. The gold also financed the illfated Spanish Armada unleashed on England by Charles's son Phillip II (1588). Some of the gold flowed into other European treasuries as other maritime powers (England, France, and the Netherlands) began preying upon Spanish treasure ships. Some of the gold can be seen in gold leaf and trasures of the churches across Europe. But much of the rest of the gold is difficult to trace with precission. What is known is that the American gold significantly increased the gold stock of Europe, resulting in both inflation and an expansion of economic activity.

The Potato

Most histories of the Spanish and Portuguese conquest of the New World, after reporting on Columbus establishing contact, focus on Cortez and Pizarro and their conquest of the Aztecs and Incas. Chief among the accounts are those involving the Conquistadoes and gold. The new colonies brought emense quantities of gold and silver and helped make Spain the most powerful country in the world. In the long run, however, it may have been the humble potato that ws the most significant item brought back to Europe. Farmers could harvest much larger uantities of potatos per acre than any other crop. This meant that European countries could support much larger populations than eve before. The cultivation of the potato resulted in a population explosion.


The Native Americans were still in the stone age when the Europeans arrived, but they had developed two crops that would profoundly reshape European society. One was the potato. The other was corn. It was a crop developed in the Central Valley of Mexico sometime around 5,000 BC and spread thrrougout North and South America to be grown by most native American people. The Maya evebn called themselves the "Corn People". While the Spanish were after gold, these two crops have had an infintely greater economic impact. Corn became a staple in Western Europe and even more so in the United States. Americans have thought little about corn until the ethenol craze of the early 2000s, but in fact corn was the central crop of American agriculture. Not only were many foods made from corn, but corn was used as not only a feed stock for animal rearing, but a wide range of industrial products. One estimate suggest that American super markets stock about 45,000 different items and about 25 percent of those items contain corn in one form or another.


The spread of sugar is a textbook example of international commerce. Ironically for a product that brings such pleasure to humans, it has brough untold misery to miillions. The story of sugarv begins in Oceania. It was the Polynesians who are believed to have discovered sugarcane. Indian traders operating in Polynesia brought it back to India where processes for manufacturing refined sugar were first developed. When the Persian Emperor Darius invaded northwestern India (6th century BC), the Persians encountered sugar bringing it further west. The Arab Islamic outburst resulted in the creation of a vast empire--the Caliphate (7th century AD). The Arabs encountered sugar in Persia and spread it througout their empire as far west as Spain. The word for sugar in English nd other languages has Arab origins. It was during the Crusades, that European elites first became aware of sugar. The Arabs continued to control the sugar trade for several centuries after the First Crusade. Arab control meant that quantities were limited in Europe and hugely expensive. Only a few areas in Europe were suitble for growinging sugar cane. This changed with Columbus' discovery of the Americas and the colonization of huge areas in the tropical zone that were suitable for growing cane. This set in motion both a sugar boom and the Atlantic slave trade. The Spanish first colonized the Caribbean (Spanish Main), but then became more interested in the mainland, both Mexico and Peru attracted by gold and silver. This enabled other European countries to seize Caribbean islands. Large scale production began in Brazil (17th century), but soon spread to the Caribbean. The European sweet tooth made tiny Caribbean islabds some of the most valuable realestate in the world.

Highland Clearances

One of the most tragic episodes in Scottish history is the shocking evictions resulting from the Higland clearnces during the late 18th and 19th centuries. Thousands of men, women and children were evicted, in many cases brutaly. Landowners wanted the land for more protitable sheep raising--four legged clansmen bitter Higlanders complained. The clearances were evicted from the Highlands and islands, sometimes brutally, where their families had lived for centuries. The Scottish clearances had begun before Culloden, but were mostly carried out in the 100 years following the battle. It should be stressed that the clan chiefs were deeply involved in the calamity of the Highland Clearances. Some early accounts of evictions are noted before Culloden, such as an incident at Skye in 1939. The clearances began in a major way well after Culloden in the 1760s-90s as sheep were introduced to the Higlands. Sir John Lockhart-Ross in 1762 brought sheep to his estate at Balnagowan. He proceed to raise tenant rents, installed fences and broughtin Lowlander shepherds. Thomas Gillespie and Henry Gibson in 1782 leased a sheep-walk at Loch Quoich. They removed over 500 tenants, most emmigrated to Canada which had been added to the British Empire. lands. Donald Cameron of Lochiel in the 1780s began clearing his family lands, which extended from Loch Leven to Loch Arkaig. Sir John Sinclair of Ulbster brought the first Cheviot sheep to the Higlands. His Caithness estates were cleared fir them and the later became known as four-footed Clansmen. (Cheviot became a popular fabric for sailor suits and other boys' garments in the 19th century.) Similar clearances were conducted thoughout the Higlands. These clearances changed the very character of the Higlands. The population was removed so sheep could be raised on large estates. Landowners found that it was far more profitable to raise sheep for wool, which was much in demand, than rent the land to small scale teneant farmers. These farms had offered only a meager living to the tenants, but of greater concern to the landowners, only minimal income. It has supported, however, the poulation of the Highlands. As the Higlands were cleared, clansmen and their families had to leave the land where their families had lived for centuries. The clearances left the Highlands void of most, perhaps as much as 90 percent, of its population, trees and forests. Vast streaches are baren and deserted even today.

African Slave Trade

A new outlet for African slaves appeared in the 15th century. Portuguese explorers began voyages south along the Atlantic coast of Africa. The Portuguese were looking for a route to Asia, but as they moved south they began setting up trading posts. First the Portuguese established trading posts along the coast of West Africa, but gradually moved further south along the coast. Other European maritime powers followed suit. This was the beginning of the African slave trade. The Europeans differed from the Arabs in that they did not normally conduct raids themselves, but usually bougth slaves from Arab slave brokers and African chiefs. As the demand for slaves expanded, whole areas of Africa were depopulated. The European African slave trade began during the mercantalist era. It continued well into the industrial era. In fact because African slaves played a major role in the industrial revolution in Europe. The ememse profits from West Indian sugar islands helped to finance the industrial revolution. And the raw material for the first real modern industry, cotton textiles, was produced by slaves.


Hoopes, John. University of Kansas Lawrence campus.


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Created: February 9, 2003
Last updated: 4:12 PM 4/14/2015