European Expansion Part 3

European Expansion Into The New World Pt 3: Economic Shifts and The

Commercial Revolution

​Terms & Names

Commercial Revolution

free-enterprise system

joint-stock companies

trading-post empires

​Commercial Revolution

Great increase in commerce (buying and selling) in Europe that began in the late Middle Ages. It received stimulus from the voyages of exploration undertaken by England, Spain, and other nations to Africa, Asia, and the New World.

The Commercial Revolution helped set the stage for the first Industrial Revolution in the middle and late 1700s.

​Joint-stock companies

Businesses, often backed by a government charter, that sold shares to individuals to raise money for trading enterprises and to spread the risks (and profits) among many investors.

​Trading Post Empires Form of imperial dominance based on control of trade rather than on control of subject peoples.

​Free enterprise system

A type of economy where products, prices, and services are determined by the market, not the government. Things that are free are unconstrained, and a business is an enterprise. So, free enterprise refers to an economy where businesses are free from government control.

​Desire for luxury goods and technology during the Crusades led to an increase in interregional trade. Trade continued to grow as European nations explored and expanded into new nations, creating overseas colonies.

●New economic facts that contributed to the success of the Commercial Revolution:

○The Church relaxed its ban on lending money and charging interest, and as a result, banking became more respectable for Christians.

○Insurance, credit, and limited liability became financial tools used by more businesses.

○The Commercial Revolution helped set the stage for the first Industrial Revolution in the middle and late 1700s

​Joint-stock companies were created to fund overseas businesses and to reduce the risk of individual investment.

●Private companies that went into business with the government but had smaller risk because they had multiple investors in the company.

●Made their own laws, approved ship cargoes, negotiated trade agreements with foreign rulers.

●Helped establish trading-post empires by building forts, maintaining soldiers or an army, establishing treaties with native people, and supporting the European nation’s economy they partnered with.

●Examples: British East India Company and Dutch East India Company.

Creation of European colonial empires (colonization) led to growth in overseas trade and resulted in the creation of new business throughout Europe.

New trade routes (e.g., the Transatlantic trade route) were introduced.

​Mercantilist philosophy (wealth = power) created competition between European countries to gain more colonies to establish a favorable balance of trade as well as consolidation of political power in these nation-states with centralized bureaucracies that supported central treasuries and banking systems to fund overseas capitalist ventures.

●Colonies discovered through exploration and expansion supplied European nations with raw materials and new sources for taxes.

●More government involvement and control of the economy.

​Trade became much more large-scale and global, using gold and silver.

● Silver was mined in Mexico and South America by Native Americans under brutal conditions using the mita system.

●The mita system was a labor system used by the Spanish in Peru. It forced natives to work on state projects in return for a small salary. It was based on a system originally used by the Incas. The system eventually declined because the Spanish royalty did not want a class of powerful nobles to arise in the colonies.

● Silver was sent to Spain and China using the Transatlantic trade route, but also was shipped across the Pacific Ocean to Manila, Philippines.

​Social effects of the Commercial Revolution:

●Numerous merchants became wealthy.

●A middle class grew. Money was a sign of wealth, not just land ownership; and this class had greater purchasing power for luxury goods.

●The rise of the middle class is pivotal to the study of the American and French Revolutions, along with industrialization.

​New investments with the Commercial Revolution, larger amounts of gold and silver in circulation, and the mercantilist philosophy aided European exploration and expansion and resulted in colonization of new lands.