"Farewell to alms" Ch.1
Wednesday 25 March 2015
The Malthusian Trap Conditions of leaving in 1800 were even worse, under several aspect, than the one of an average person in 100,000 BC, or the hunt-gathers .
And hunter-gatherer societies are egalitarian. Material consumption varies little across the members. In contrast, inequality was pervasive in the agrarian economies that dominated the world in 1800.

The Industrial Revolution deeply changed this trend, Income per person began to undergo sustained growth in a favored group of countries. The richest modern economy are now ten to twenty times wealthier than the 1800 average.
For Clarks the biggest beneficiary of this revolution has been the unskilled workers, the poorest.
Just as the Industrial Revolution reduced in come inequalities within societies, it has increased them between societies, in a process recently labeled the Great Divergence.1
For example African countries, in certain case, would have been better never discover the industrial revolution, because they remained trap in the Malthusian Era creating an higher divergence between population, and driving down standards to subsistence. * Why did the Malthusian Trap persist for so long? * Why did the initial escape from that trap in the Industrial Revolution occur on one tiny island, England, in 1800? * Why was there the consequent Great Divergence? "Thus I make no apologies for focusing on income. Over the long run in come is more powerful than any ideology or religion in shaping lives. No God has commanded worshippers to their pious duties more forcefully than income as it subtly directs the fabric of our lives " The Malthusian Trap: Life to 1800
The crucial factor was the rate of technological advance. As long as technology improved slowly, material conditions could not permanently improve, even while there was cumulative significant gain in technologies. The rate of technological advance in Malthusian economies can be inferred from population growth.
In the Malthusian economy before 1800 economic policy was turned on its head: vice now was virtue, and virtue vice. Those scourges of failed modern states -war, violence, disorder, harvest failures ,collapsed public infrastructures, bad sanitation_ were the friends of mankind before 1800.
They reduced population pressures and increased material leaving standards.
In contrary policy of today _ peace, stability, order, public health, transfer to the poor-were the enemies of prosperity.
All preindustrial societies for which we have sufficient records to reveal fertility levels experienced some limitation on fertility, though the mechanisms varied widely .
Most societies before 1800 consequently lived well above the bare of subsistence limit.
Mortality condition also mattered, European here were "lucky" , the poor hygiene, combined with high urbanization rates with their attendant health issues, meant incomes had to be high to maintain the population in XVIII century.
Since the economic laws governing human society were those that govern all animals societies, mankind was subject to natural selection throughout the Malthusian era, even after the arrival of settled agrarian societies with the Neolithic revolution of 8000BC, which transformed hunters into settled agriculturalists.
"For England we will see compelling evidence of differential survival of types in the years 1250–1800. In particular, economic success translated powerfully into reproductive success. The richest men had twice as many surviving children at death as the poorest. […]. Preindustrial England was thus a world of constant downward mobility. Given the static nature of the Malthusian economy, the superabundant children of the rich had to, on average, move down the social hierarchy in order to find work. Craftsmen’s sons became laborers, merchants’ sons petty traders, large landowners’ sons smallholders. The attributes that would ensure later economic dynamism— patience, hard work, ingenuity, innovativeness, education—were thus spreading biologically throughout the population. "
In England, the emergence of this capital intensive economic system created a society that rewarded middle-class value with reproductive success, generation after generation . This selection process was accompanied by change in the characteristics of the preindustrial economy, due to largely to the population's adoptions of more middle-class preferences. Interest rates fell, murder rates declined, work hours increased, the taste for violence declined, and numeracy and literacy spread even to the lower class of society.
Industrial Revolution "Farewell to alms" Ch.1
2 relevant events between 1760-1900: 1. Industrial Revolution the appearance for the first time of rapid economic growth fueled by increasing production efficiency made possible by advances in knowledge. 2. Demographic transition allowed the efficiency advance of industrial revolution to translate not into an endless supply of impoverished people but into the astonishing rise of income per person that we have seen since 1800 * Why was technological advance so slow in all preindustrial societies? * Why did the rate of advance increase so greatly after 1800? * Why was one by-product of this technological advance a decline in fertility? * Why have all societies not been able to share in the ample fruits of the Industrial Revolution? 1. Industrial revolution events outside the economic system, such changes in political institutions, in particular the introduction of modern democracies. 2. The preindustrial society was caught in a stable, but stagnant , economic equilibrium. Some shock set forces in motion that moved society to an new dynamic equilibrium. 3. Industrial revolution was the product of a gradual evolution of social conditions in the Malthusian era: growth was endogenous.
1 & 2 --> Industrial Revolution according to those might never have occurred, or could have
3 --> industrial revolution was inevitable
In the crucial ways the classical Industrial Revolution in England in 1760-1860 was a blip, and accident, superimposed on a longer-running upward sweep in the rate of knowledge accumulation.
Institution play at best a minor direct role in the story of IR , and in account of economic performance since then: by 1200 societies such England already had all the institutional pre-requisites for economic growth emphasized by the World Bank and International Monetary Fund.
This institution did create the condition for growth, but only slowly and indirectly over centuries and perhaps even millennia.
"Why an Industrial Revolution in England? Why not China, India, or Japan?6 The answer hazarded here is that England’s advantages were not coal, not colonies, not the Protestant Reformation, not the Enlightenment, but the accidents of institutional stability and demography: in particular the extraordinary stability of England back to at least 1200, the slow growth of English population between 1300 and 1760, and the extraordinary fecundity of the rich and economically successful. The embedding of bourgeois values into the culture, and perhaps even the genetics, was for these reasons the most advanced in England. "
"David Landes is correct in observing that the Europeans had a culture more conducive to economic growth[…]there was not the same cascade of children from the educated classes down the social scale" (why didn't it happen in Japan or in china)
"As a result of two forces—the nature of technological advance and the demographic transition—growth in capitalist economies since the Industrial Revolution strongly promoted greater equality. Despite fears that machines would swallow up men, the greatest beneficiaries of the Industrial Revolution so far have been unskilled workers. Thus, while in preindustrial agrarian societies half or more of the na tional income typically went to the owners of land and capital, in modern in dustrialized societies their share is normally less than a quarter."
The Great Divergence
Why the Industrial Revolution, while tending to equalize incomes within successful economies, has at the same time led to a Great Divergence in nation economic fortunes?
The technological, organizational and political changes spawned by the Industrial Revolution in the XIX century all seemed to predict tat it would soon transform most of the world in the way it was changing England, the US, and the northwestern Europe. Yet the growth in a favored few nation s was allowed haltingly in others, leading to an ever widening income gap between societies.
EX. Cotton industry : workers in poorly performing economies simply supply vary little actual labor input on the job(ex in India the people actually work for 15 minutes of each hour they are paid for).The one thing that could not be replicated so easily and so widely was the social environment that underpinned the cooperation of people in production in those countries where technologies were first developed.
The selection mechanism discussed previously can help to explain initial advantages in establishing settled agrarian societies in EU, China and Japan, was translated in to a persistent cultural advantage in later economic competition. Societies without such a long experience of settled, pacific agrarian society cannot instantly adopt the institutions and technologies of the more advances economies because they have not yet culturally adapted.
Modern production technologies developed in rich countries, are designed for labor forces that ae disciplined, conscientious, and engaged.
Products flow through many sets of hands, each one capable of destroying most of the value of final output. Errors rates by individual workers must be kept low to allow such processes to succeed.(great attention to worker discipline).

The rise of Wealth and the Decline of Economics
"Economics as a discipline arose in the dying decades of the Malthusian era. Classical economics was a brilliantly successful description of this world. But the torrent of goods unleashed by the Industrial Revolution not only created extremes of wealth and poverty across nations, it also undermined the ability of economic theory to explain these differences."
"The final great surprise that economic history offers—which was revealed only within the past thirty years—is that material affluence, the decline in child mortality, the extension of adult life spans, and reduced inequality have not made us any happier than our hunter-gatherer forebears. High incomes profoundly shape lifestyles in the modern developed world. But wealth has not brought happiness. Another foundational assumption of economics is incorrect. "
"Money does buy happiness, but that happiness is transferred from someone else, not added to the common pool. "

Pre-modern growth
Wednesday 25 March 2015
11:10
Ch.5: "Europe's Second Logistic"
Middle of XV century, Europe's population began to grow once more, by the begging of XVI century this was a generalized trend. In the XVII century this lusty growth encountered the usual checks of famine, plague, and war, especially for the 30 years war, which decimates the population of central Europe.
(middle)XV-(mid.)XVII century delimit Europe's second logistic. The most obvious difference between those two points in history, was the greatly expanded geographical horizons.
The period of demographic increase corresponded almost exactly with the great age of maritime exploration and discovery that resulted in the establishment of all-water routes between Europe and Asia and even more momentous for world history, the conquest and settlement of Western Hemishere by Europeans. These events, in turn, provided Europe with a greatly expanded supply of resources, both actual and potential, and provoked significant institutional changes in the European economy, especially with respect to the role of government in the economy.
Shift in the location of the principal centers of economics activity within Europe. In XV century the cities of northern Italy retained the leadership in economic affairs they had exercised throughout the middle ages. The Portuguese discoveries, however, deprived them of their monopoly of the spice trade. A series of wars involving the invasion and occupation of Italy by foreign armies further disrupted commerce and finance.
By the end of the middle of XVII century Italy had fallen into the backwaters of the European economy, from which it did not fully emerge until the XX century.
The aria that gained most from economic change associated with the great discoveries was the region bordering on the North Sea and the English Channel: the Low Countries, England, and northern France.
England at the time of the great discoveries was the region bordering on the northern France. Opening on the Atlantic and lying midway between northern and southern Europe, this region prospered greatly in the new era of world wide oceanic commerce.
England at the time of the great discoveries was just emerging from the status of a backward, raw materials-producing area into something of a manufacturing country. Its agriculture was also becoming more market-oriented.The wars of the two roses decimates the ranks of the great nobility but left the urban middle classes and peasants almost untouched. The decline of the great nobility enhanced the importance of the lesser aristocracy, the gentry. The new Tudor dynasty , which came to the throne in 1485,deoended heavily on the gentry support and granted it favors in return. Henry VIII against Roman church--> main beneficiaries the gentry.
--> improved also the operation of the land market and encouraging the market orientation of agriculture.
First half XVI century Antwerp became the most important port and market city in Europe.
In 1568, however, the Netherlands revolted against Spanish domination. Spain suppressed the revolt in the southern provinces (modern Belgium) , but the seven northern provinces won their independence as the United Netherlands, or Dutch republic.
-->Amsterdam took the place of Antwerp
Technological changes in the arts of navigation and shipbuilding were vital to the success of exploration and discovery. The introduction of gunpowder and its application by Europeans to firearms were similarly vital to success of European conquests overseas. There were concurrent improvements in the arts of metallurgy some other industrial processes.
Population and Levels of Living
In the middle of the XV century the population of Europe as a whole was on the order of 45 or 50 millions. By the middle of the XVII century, authorities agree, the population was in the vicinity of 100 million.
What caused this growth and the renewed stagnation and decline?
The renewal of population growth presents itself. The incidence of the plague and other epidemic illnesses apparently diminished gradually, possibly as a result of increasing natural immunization or of ecological changes affecting the carriers. The climate may have ameliorated slightly. Higher real wages in the XV century, the consequence of the favorable shift in the population/land ratio as a result of the earlier decline in population, may have encouraged earlier marriages and thus a higher birth rate.
The growth in population in the XVI century, although general, was by no means uniform. Beginning with unequal densities and growing at different rates, the populations of the various regions of Europe varied considerably in density at the end of the XVI century. Italy and Netherlands had the greatest densities. Density is also closely related to the productivity of agriculture.
For Europe as a whole, however, overseas migration in the XVI and XVII centuries was almost negligible, most migrations were domestic, even local.
One consequence of those migrations was that the urban population grew more rapidly than the total. Although the percentage rise in the urban population was also general, it was more pronounced in northern Europe that in the Mediterranean lands, which were already more urbanized at the beginning of the period. In some instances an increase in the urban population can be regarded as a favorable indicator of economic development, but this was not necessarily so in the XVI century. At that time towns functioned primarily as commercial and administrative rather than industrial centers. Many manufacturing activities, as in the textile and metallurgical industries, took place in the countryside. The handicrafts practiced in the towns were usually organized in guilds, with long apprenticeship requirements and other restrictions on entry. The rural migrants rarely had the skills or aptitudes necessary for urban occupation. In the towns they formed a lumpen proletariat, a pool of casual, unskilled labor, frequently unemployed, who supplemented their meager earnings by begging and petty thievery. Their crowded, dirty, and squalid living conditions endangered the whole community by making it more susceptible to epidemic disease.
The plight of both the urban and rural poor was aggravated by a prolonged fall in real wages. Because the population grew more rapidly than agricultural output, the price of foodstuffs, bread grains in particular, rose more rapidly than money wages, a situation that was exacerbated by the phenomenon of the "price revolution". By the end of the XVI century the pressure of population on resources was extreme , and in the first half of the XVII century a series of bad harvests new outbreaks of the bubonic plague and other epidemic diseases, and increased incidence and ferocity of warfare, especially the Thirty Years War, brought the population expansion to a halt.
Exploration the Discovery
There is no reason to suppose that there was any intimate causal relationship between the demographic phenomena in Europe and the maritime discoveries that led to the establishment of direct commerce between Europe and Asia and the conquest and settlement of the New World by Europeans.
Notable technological progress in ship design, shipbuilding and navigational instrument occurred in the later middle ages.
The Portuguese, in particular, seized the initiative in all aspects of the sailor's art: ship design, navigation, and exploration. The vision and energy of one man, prince Henry, called the Navigator, were chiefly responsible for the great progress in geographical knowledge and discovery made by Europeans in the XV century.
Henry (1393-1460) devoted himself to encouraging the exploration of the African coast with the ultimate object of reaching the Indian Ocean.--> on his patronage, after his death the exploration continued and in 1488
Bartholomew Diaz who rounded the Cape of Good Hope; through the Mediterranean and overland to the read sea went Pedro de Covilhao, who reconnoitered the western edges of Indian ocean from Mozambique in Africa to the Malabar coast of India. Vasco de Gama from 1497 to 1499 around Africa to Calicut in India, when he got back he had a cargo of spices sufficed to pay the cost of his voyage many times over.
Seeing such profits, the Portuguese lost no time in capitalizing on their advantages. Within a dozen of years they had swept the Arabs off the Indian Ocean and established fortified trading posts from Mozambique and the Persian gulf to the fabled spice islands.
In 1483/84 Christopher Colombo , the Genoese, asked the Portuguese king to finance a voyage across the Atlantic to reach the East by sailing west. John's thought it was a bit to risky Colombo's plan and rejected his proposal.
Columbus persevered: he appealed to Spanish monarchs, Ferdinand and Isabella , who were engaged at the time in a war against the Moorish Kingdom of Granada, and had no money to finance such an unluckily scheme. In 1492 Ferdinand and Isabella conquered the Moors and as a sort of victory celebration Isabella agreed to underwrite an expedition. Columbus set sail on August 3,1492 and on October 12 sighted the islands later known as the West Indies.
Immediately following the return of the first expedition, Ferdinand and Isabella applied the Pope for a "line of demarcation" to confirm Spanish title to the newly discovered land. (western half Spanish eastern part Portuguese).
1519 Ferdinand Magellan, a Portuguese who had sailed in the Indian Ocean persuaded the king of Spain to let him lead an expedition of five ships to the Spice Islands by way of the south sea. Magellan had no thought of circumnavigating the globe, for he expected to find Asia few days sailing beyond panama, within the Spanish orbit as determined by the Tordesillas Treaty(1494 moved the line 210 miles farther west in the way to comprehend also brazil). His main problem as he saw it, was to find a passage trough or around South America. This he did and the stormy, treacherous strait he discovered still bear his name. The "Peaceful sea" into which he emerged yielded not riches but long months. At length one Magellan's lieutenants took the one surviving ship and its skeletons crew trough the Indian ocean and home to Spain after three years, becoming the first men to sail entirely around the earth.
Overseas Expansion and the feedback to Europe
Although at first it looked less promising the Spanish Empire eventually proved to be even more profitable than that Portugal. The Spanish started to look for gold and silver. Theire continued efforts to find a passage to India soon revealed the existence of wealthy civilizations on the mainland of Mexico and northern South America. Between 1519-21 Hernando Cortez effected the conquest of the Aztec Empire in Mexico. Francisco Pizarro conquered the Inca Empire in Peru in 1530s. They introduced European mining methods to the rich silver mines of Mexico and the Andes.
The Spanish, undertook from the beginning to colonize and settle the areas they conquered. They brought European techniques ,equipment and institution(religion), which they imposed by force on Indian population. They introduced also natural products, plants and fruits, but also things such as firearms, alcohol, and European diseases, that drastically decrease the native population .To remedy the shortage of labor the Spanish introduced African slaves in Western Hemisphere as early as 1501.
Expansion also produced feedback. European culture itself underwent substantial modifications as a result. On economic side expansion resulted in a great increase in the volume and variety of goods traded. In the XVI century spices from the east and gold and silver bullion from the West accounted for an overwhelming proportion of imports from the colonial world.
Coffee from Africa, Cocoa from America, and tea from Asia became staple European beverages. Cotton and sugar started to be produced in larger scales. Tobacco from America.
From America came potatoes, tomatoes, string beans, squash, red peppers, pumpkins, and corn. Rice from Asia.
The price revolution
The flow of gold and especially silver from Spanish colonies greatly increased Europe's supplies of monetary metals, at least tripling them in curse of the XVI century.
The most immediate and obvious result was a spectacular and prolonged (but irregular) rise int prices. By the end of the XVI century prices were , in general, about three or four times higher than they had been at the beginning. In general the rise in money wages lagged far behind the rise in commodity prices resulting in a severe decline in real wages.
The price revolution, like any inflation, redistributed income and wealth of both individuals and social groups. Those whose incomes were price-elastic, merchants, manufacturers, landowners, peasants, benefited at the expense of wage earners and those whose income was either fixed or changed slowly.
But the root cause of the decline in real wages was not just a monetary problem; rather it was the result of interrelations between demographic behavior and agricultural productivity.
Agricultural Technology and Productivity
The simple explanation for the cessation of population growth at the middle of XVII century is that population had outgrown its capacity to feed itself adequately. The failure of agricultural technology to advance significantly, with a consequent stagnation or probably even a decline in average agricultural productivity. In the first place, for Europe as a whole and for every major geographical subdivision, agriculture was still the principal economic activity by far, occupying 2/3 or more of the active population in the Dutch Netherlands and up to 90 or 95 percent in eastern and northern Europe. Second, from a human and human and social point of view manual labor was by far the most important factor of production. Soil, seeds, and moisture were essential, of course; draft animals and their livestock were almost ubiquitous, if not strictly essential, and fertilizer was highly desirable. But human labor was the most essential input.
A final generalization is a less certain and clearly subject to more regional exceptions. For Europe as a whole the average agricultural productivity in the XVI century was probably not higher than in the XII century and it apparently declined somewhat in the XVII century. The evidence of the ratios of harvest yield to seed at least suggest this.
Although the direct empirical evidence for a decline in the productivity of both land and labor is tenuous, at best, there are good to theoretical reasons for supposing that it occurred. First, instead of using less labor per bushel of seeds or per acre of land, more labor was probably applied to to the land because of the increase in population.
Although this might result in modest increases in total output, it probably meant a lower average output to per man-year. Second, there is positive evidence that more land was brought under the plow both by cultivating former wasteland and by converting pastures to arable farmland. In the case of the wastelands normally less fertile then those already under the plow, a lower average yield would natural be expected- that is, a decrease in the productivity of land. In some cases, the yield on converted pastures might be higher temporarily because the animal droppings would increase the fertility of the soil. But the reduction of pastureland the brought so with it other, less favorable consequences namely, a reduction in the livestock, especially cattle. There is both direct and indirect evidence of a decline in the meat consumption in the 16th century, with adverse consequences for nutrition and the health of the population.
Northern Europe
In the northern and Western periphery of Europe - Finland, most of Sweden , Norway, Scotland, Wales Cornwall and much of Ireland- subsistence agriculture predominated. the lands were thinly populated especially the northern parts, which had huge tracts of virgin forest. Primitive slash and burn techniques were still applied, Although in the more settled regions a slightly less wasteful method, the infield-outfield system was practiced. Stock raising of a primitive sort was important, especially in the mountainous areas.
East Europe
In Europe east of the Elbe and north of the Danube, by contrast, personal bondage of serfdom was the characteristic feature of social relationship at the beginning of the period and increased more or less continuously during it, as powerful lords steadily encroached on the lands and freedom of few remaining independents peasants, by both legal and illegal means. This was the region of Gutsherrschaft, that is, the system of direct exploitation of large estates for the benefit of the territorial Lords. The peasants status, a already parlous in the 15th century, was steadily reduced in the Russia and part of Poland to one not very different from slavery.
Italy
Agricultural technology was relatively primitive, employing either two or three field system.
The Mediterranean area, in spite of a relatively uniform climate and similarities of soil type was so diverse: in Italy alone land tenures ranged from small progressive farms of peasant proprietors and independent tenant farmers in Piedmont and extreme north to the large estates cultivated by poverty-stricken sharecroppers and hired laborers in Sicily and the south. In between were great variety of tenures , with mezzadria (sharecropping) being prominent. Italy likewise had the most diversified agriculture of Europe.
Spain
Spanish agriculture, similar to the Italian for soil, received a rich inheritance from its Muslim predecessors. The Arab and Moorish peoples who had inhabited Valencia and the Andalusia were excellent horticulturists, and brought the art of irrigation to a high level. Unfortunately, the Spanish monarchs, fired by religious fanaticism, squandered this inheritance. The Moriscos , the Arab converted to Catholicism stayed in those region until 1609 when they were expelled, and the Christian who replace them were unable to maintain the intricate irrigation system and other features of the highly productivity.
Throughout Spain in the XVI century the land was gathered into huge estates owned by the aristocracy and the church, the largest landholder of all. But this were absent landlord, who, by means of steward or other intermediaries, let the land in small parcels to sharecroppers or tenants on short leases, who lacked both the capital and the incentive to maintain the Moorish system. Many peasants fell into debt , peonage a status not far from serfdom.
Western Europe
Else where in Western Europe the sys of open fields , an inheritance from the manorial sys of the Middle Ages, prevailed. Exceptions must be made for hilly and mountainous areas and for large region of western France in which small enclosed fields were intermixed with open fields.
In England, the transferability of land ownership became more common, and small peasant proprietors as well as independent tenant farmers increase.
About the 10% of land of England was enclosed in the 16th century, mainly for ship of pastures.
Small holdings and independent tenant farmers were more numerous in the vicinity of cities, where their produce was vital to the supply of urban population.
Dutch
The most progressive agricultural area in Europe were the low countries, especially the northern Netherlands, with its core the province of Holland. The end of the XVI Century Dutch and Flemish agriculture was already more productive than the European average thanks to the opportunity of supplying neighboring cities and workers in the cloth industry. In the course of the 16th and 17th century Dutch culture underwent a streaking transformation then to merits its description as the first "modern" agricultural economy. The modernization of agriculture was intimately associated with the equality striking the rise of Dutch commercial superiority; without one, the order could not have occurred. The key to success of the transformation of that agriculture was specialization, a specialization that was made possible in the first instance by the buoyant demand of the prosperous and the rapidly growing Dutch cities, but in the time enabled Dutch cheeses, for example, to be sold in the markets of Spain and Italy. Instead of trying to produce as much as possible of the goods as well as capital and intermediate goods.
For the most part a however Dutch Farmer specialized in the relatively high value product livestock and diary produce in particular. Dutch farmers did not specialize exclusively in dairying and livestock. Horticulture many of them especially in the intermediate vicinity of cities. The profitability of Dutch agriculture is attested by the continuing and continues effort to create the new land by reclaiming it from the sea, by draining lakes and marshes and by planting peat bogs after the peat had been removed for fuel.
Industrial technology and Productivity
In industry as in agriculture, no sharp break occurred between the middle ages and the earlier modern period. Unlike the case of agriculture, however, innovation took place more or less continuously, Although at a very slow pace. Most of the innovations in the 16th and 17th centuries involve relatively minor improvements in already established techniques. The greatest invention of the 15th century printing with that movable type, increased the productivity in the book trade enormously, yet its immediate economic impact in terms of value of output or number employed was minuscule.
The market orientation of European economy, greater in industry that in agriculture, encouraged entrepreneurs who could reduce production costs and responds quickly to changes in consumer demand. But there were formidable obstacle to innovation as well: one of the must ubiquitous was the opposition of authorities, who feared unemployment as result of labor-saving innovation and of monopolistic fields and companies cool theater competition Dr. None of their innovation and monopolistic guilds and companies who feared competition. The organization of the textile industry did not change appreciably from the later Middle ages. The characteristic entrepreneur was the merchant-manufacturer who purchased raw material put them out to spinners, weavers and order artisans working in their homes; and market final product.
Dutch had a merchant fleet 3 times larger than the English one, due to the relatively short life of wooden sailing ships, this translate into a large demand in the shipbuilding industry, a demand to which Dutch shipbuilders responded by rationalizing their shipyards and introducing elementary mass production technique. They used mechanical saws and hoists actuated by windmills and kept store of interchangeable parts. Because of their efficiency, they supplied not only their own country's fleet, but those of its rivals as well. Since the Netherlands possessed few forests, virtually all the timber for the shipyards had be imported, principally from Baltic area.

Trade, Trade Routes and Commercial Organization
Of all sectors of the European economy, commerce was undoubtedly the most dynamic between the 15th and the 18th century. The 16th century is also sometimes described as an era of "commercial revolution: in fact, a substantial increase occurred in the volume of long-distance or international trade. Extra European trade that contributed to the increase and and also stimulated some of the increase within Europe; but trade with Asia and America was but a small fraction of the total. it should be remembered that by far the greatest part of commercial exchange both by volume and by value was local. Towns and cities received the bulk of their food supplies from there to immediate hinterlands and in exchange supplied them with manufactured goods and services. It was many small-scale commerce and varied little either overtime or from place to place. More interesting, and more significant for the history economy development, were the changes that occurred in distance trade.
" The prodigious increase of the Netherlands" began modestly enough in the XV century, as Dutch fishing fleets in the North Sea began to undercut Hanseatic dominance of herring trade.
Meanwhile Dutch developed other trades: Portugal salt, wine; Baltic grain and timber, but also naval stores, flax and hemp.
Virtually all of the trade between northern Europe and France ,Portugal, Spain and the Mediterranean, and much of the trade between England and the continent was in the hand of the Dutch.
The Dutch were equally aggressive in overseas trade. Their war for independence interrupted their trade with Spain, and from 1580 also the port of Lisbon was interdict to Dutch fleet.
In less than for year, they menage to build a fleet that could round-trip between Netherland and the Indies. In 1602 the government of United province, the city of Amsterdam, and several private trading companies formed the Dutch East India Company, which legally monopolized the trade between Netherlands and Indies.
In 1600 the English East India Company.
Dutch controlled over Spice Islands of Indonesia, Ceylon.
Seaborne commerce was the most important for international trade, but inland trade, especially river traffic, was not negligible. Local commerce used it extensively, and most commodities even in international trade began their voyages to market overland by cart or on pack animal and downriver by barge. Metals and some luxury cloth could stand the expenses of long land journeys. Few other commodities could, unless they were self-propelled, as was the case with cattle. While most of Europe's arable land was increasingly devoted to field crops to feed its growing population, Denmark, Hungary, and Scotland had a large open grassland on which to pasture herds of cattle. The character of commodities involved in distant trade changed somewhat in the 16th and 17th centuries. In the early Middle Ages these had been luxury goods for the well-to-do. Later, with the growth of towns, more mundane articles entered the lists. By the 16th century a large proportion of the volumes of goods moving international trade consisted of such staples as grain, timber, fish, wine, salt, metals, textile raw materials and cloth. At the end of the 17th century half of the English imports, by volume, were coal, although cloth export was far more valuable. The trade in bulky staples was made possible principally by the improvements in ship design and construction, which lowered cost of transportation. Europe's exports to the colonies consisted of manufactured goods, for the most part, this were not bulky, but the remaining space available was filled partly by emigrants. The situation in the Eastern trade was quite different. From the beginning of direct European contact, Europeans had difficulty in finding merchandise to exchange for spice and other desirable wares. So they asked mainly for gold and silver in exchange, on balance Asia was a sink for European monetary metals, only after the conquest of India by England in the XVIII century this trend was reversed.
One very special branch of commerce dealt in human beings: slave trade. Although the Spanish colonies were among the largest purchaser of slaves, the Spanish themselves did not engage in the trade to any great extent but granted it by a contract, or asiento, to the traders of other nations. The trade was dominated et first by the Portuguese, then the in turn by the Dutch, the French and the English. Usually the trade was triangular in nature. A European ship caring firearms, knives, other metalwares, beads and similar cheap trinkets, gaily colored cloth, and liquor would sail for the west African Coast, when it exchanged its cargo with local African chieftains for slaves, either war captives or the chief's own people. When the slave trader had loaded has many chained and manacled Africans as his ship worked carry, he sailed for west Indies or mainland of north or south America. There he exchanged his human cargo for one of sugar, tobacco, or other products of the Western Hemisphere, with which he returned to Europe.
The greatest business dynasty of the XVI century was the Fugger family, with headquarters in Augsburg in South Germany.
The first Fugger known to history was a weaver. Some of his descendants became putters-out in the woolen industry, eventually getting into wholesale trade in silk and spices with a warehouse in Venice. By the end of the XV century they were actively engaged in financing the Holy Roman emperors, as a result of which they obtained control over the output of the Tyrolean silver and copper mines of Hungary. From Lisbon and Antwerp they largely controlled the distribution of spices in central Europe, for which they exchanged the silver needed to purchase the spices in India. They also accepted deposits, dealt extensively in bills of exchange, and were heavily involved in financing the monarch of Spain and Portugal- a business that eventually led to their downfall.
In the middle ages the trade in raw wool, by far the most important export, was handled by Merchants of the Staple, a regulated company that functioned something like a guild. There was no joint stock; each merchant traded for his own account, but they had a common headquarters and warehouse and obeyed a common set of rules.
In the latter half of the 16th century the English set up a number of other companies with monopolistic trading charters: The East India Company(1600) and other…Some of these companies adopted the regulated form, but others became joint-stock companies; that is , they pooled the capital contributions of the members and place them under a common management. This was done in the distant trends, in which the risks and capital required to outfit a single voyage exceeded the amounts that one or a few individuals were willing to assume or furnish.
The existence of a single great entrepot in northwestern Europe is doubly significant. 1. Their mere existence, in contrast, to the periodic fare of the Middle Ages, is evidence of growth in the size of the markets and of the market-oriented production, but one of this entrpot rise another decline and this shows the limits to development. The reasons are related to the limited extent of markets and the "public good" nature of information in commercial or financial turnover is relatively small, it is cheaper to concentrate them in a single location. 2. The first requirement is a burse, or marketplace. As a rule the goods displayed were not actually exchanged on the spot; they were merely samples that could be inspected for quality. After orders were placed the goods would be shipped from warehouse. The use of credit was widespread, with most payments being made with financial instrument such as the bill of exchange, or by assignment in banks, instead of with hard cash. The banks were mostly private affairs, including many merchant firms such as the Fuggers, who carried on banking business famous Bank of Amsterdam, was founded in 1609. this was a public bank in that it was founded under the auspices of the city itself. It was also an exchange bank, rather than a bank of issues and discount. Funds could be deposited here and transferred from one account to another on the books; but the bank did not issue banknotes or make loans to merchants by discounting commercial paper. The trade between Spain and its colonies was similar. Technically trade with the colonies was a monopoly of the Crown of Castile. For practical purposes the government turned it over to the Casa de contraction, a guild like organization in Seville that operated under the watchful eyes of government inspectors. All shipping between Spain and the colonies went out in convoys that, as eventually organized, departed from Seville in two contingents in the spring and late summer, winter in the colonies and return as one fleet at the following spring.

Ch.6: Economic Nationalism and Imperialism
Friday 27 March 2015
07:13
The economic policies of nation-state in the period of Europe's second logistic had a dual purpose: tu build up economic power to strengthen the state and to use the power of the state to promote economic growth and enrich the nation.
"profit and power ought jointly to be considered" - Sir Josiah Child.
In the medieval times municipalities and other local government units haven't processed extensive powers of economic control and a regulation. Local guilds of merchants and artisan fixed wages and prices. The policies of economic nationalism represented a transfer of news function from local to national level, where the central government attempted to unify the states it economically and as well as politically. the rulers of Europe were aggressively competing with one another for extension of territory and control of oversea possessions and trade.
Mercantilism
Adam Smith a Scottish philosopher of the Enlightenment and the founder of modern science of economics, characterized the economic policies of his day under a single rubric the mercantile system.
In his view they were perverse because they interfered with the " natural liberty" of individuals and resulted in what modern economists call a misallocation of resources. Although he condemned the policies as unwise and unjust, he attempted to systemize them- hence the term mercantile system- partly, at least, to highlight their absurdities.
He declared that the policies were devised by merchants and foisted on rulers and statesmen who were ignorant of economic affairs. Just us merchants are enriched to the degree of their income exceeds their expenditures, nations, they argued would enrich themselves to the extent that they sold more to foreigners than they purchased abroad, taking the difference, or the "balance of trade" in gold and silver. Hence, they favored policies that would stimulate exports and the penalize imports to create a "favorable balance of trade" for the nation as a whole.
For more than a century after Smith published his epochal Inquiry into their nature and causes of the wealth of the nation in 1776 the term Mercantile system had a pejorative connotation.
Scholars attempt to harmonize different opinion around this term: mercantilism as "the theory" or "the system" of economic policy characteristic of early modern Europe .
Since the nationalism of the early nation-state rested on a class, not a mass, basis, the key to national differences in economic policy should be sought in the differing composition and interests of the ruling classes.
In France and other absolute monarchies the wishes of the sovereign were paramount. Although few absolute monarchs had understanding or appreciation of economic matters, they were accustomed to having their orders obeyed. The day-tot-day administration of affairs was carried out by ministers and lesser officials who were hardly more familiar with problems of industrial technology and commercial enterprise, and reflected the values and attitudes of master. Elaborate regulation for the conduct of industry and trade added to the cost and frustration of doing business, and encouraged evasion.
The united Netherlands, governed by and for the wealthy merchants who controlled the principal cities, followed a more informed economic policy. Living principally by trade, they could not afford the restrictive, protectionist policies of their larger neighbors. They established free trade at home, welcoming to their ports and markets the merchants of all nations. On the other hand, in the Dutch Empire the monopoly of Dutch traders was absolute.
England lay somewhere near the center of the spectrum. The landed aristocracy intermarried with wealthy merchant families and mercantile-connected lawyers and officials, and great merchants had long taken a prominent part in government and politics.
The common elements
In the middle Ages most feudal lords, especially sovereigns, owned "war chests" that were literally that: huge armored chests in which they accumulated coins and bullion to finance both anticipated and unexpected hostilities. By XVI century the methods of government finance were somewhat more sophisticated, but the preoccupation with plentiful stocks of gold and silver persisted. This gave rise to a crude form of economic policy known as "bullionism"-the attempt to accumulate as much golf and silver within a country as possible and to prohibit their export by fiat, with the death penalty for violators.
Since few European countries had mines producing gold and silver, the acquisition of colonies that possessed them was a major goal of exploration and colonization.
It was in this connection, as Adam Smith pointed out, that merchants were able to influence the councils of state, and it was they who devised the argument for a favorable balance of trade. Ideally, according to this theory, a country should only sell and should purchase nothing abroad. Practically, this was manifestly impossible , and the question arose: What should be exported and what imported? Be cause of high incidence of poor harvest and periodic famines, governments sought plentiful domestic supplies of grain and other foodstuffs, and generally prohibited their export. At the same time they encouraged manufactures not only to have something to sell abroad but also to further self-sufficiency by broadening the range of their own production.
To encourage domestic production, foreign manufactures were excluded or forced to pay high protective tariffs, although the tariffs were also a source of revenue. Domestic manufactures were also encouraged by grants of monopoly and by subsidies for exports. If raw materials were not available domestically, they might be imported without import taxes, in contradiction of the general policy of discouraging imports. Sumptuary laws attempted to restrict the consumption of foreign merchandise and to promote that of domestic products.
Large merchant navies were valued because they earned money from foreigners by providing them with shipping services and encouraged domestic exports by providing cheap transport-at least in theory.
Moreover, when the chief difference between a merchant ship and a warship was the number of guns it carried, a large merchant fleet could be converted to a navy in case of war. Most nations had "navigation laws" which attempted to restrict the carriage of imports and exports to native ships and in other ways promoted the merchant marine.
Theorists of all nations stressed the importance of colonial possessions as an element of national wealth and power. Even if colonies did not have gold and silver mines, they might produce goods not available in the mother country that could be used at home or sold abroad. The spices of the Indies, the sugar and the rum of brazil and the west indies and the tobacco in Virginia served such purposes.
These were some of the notions concerning economic policy current in the XVI and XVII centuries. Usually they were not this clearly and simply spelled out, and they never commanded universal adherence, much less constituted a "theory" or "system" to guide the actions of rules.
Spain and Spanish America
--> Most spectacularly, gold and silver for its New World empire began to flow to Spain in large quantities in the 1530s and steadily increased to their peak levels in the last decade of the century, before they gradually subsided in XVII century.
--> the crown obtained an unexpected source of revenue with the discovery of gold and silver in its American Empire
--> to make the matters total revenue rarely equaled the vast government expenditures. This forced the monarchs to resort to yet a new source of finance, borrowing.
Financial mismanagement was not the only way the government hobbled the economy although many of its intervention were occasioned by its fiscal needs.
Royal favoritism in behalf of Mesta, the sheepowners guild. This favoritism culminated in 1501 that reserved in perpetuity for sheep pastures all land on which sheep had ever grazed, regardless of the wishes of the owners.
In a similar measure, Ferdinand and Isabella in 1494 created the Consulado of Burgos, a merchant guild, and conferred on it a monopoly of the export trade in raw wool. Burgos, although a flourishing market town, was more than one hundred miles from the nearest port. All wool destined for export, from whatever part of Spain, had first to be transported to Burgos and thence, by mule trains, to Bilbao on the Viscayan coast for shipment to northern consumers. The Consulado of Burgos also served as a model for the Casa de Contractacion, set up in Seville less than a decade later to control the trade with American. Throughout their reign Ferdinand and Isabella favored the extension of guild control, and thus of monopoly, to increase tax revenues. Their successors, no less financially straitened, did nothing to lessen that control.
The monopolistic and restrictive policies proved so unworkable that the government soon had to back down. In 1524 it allowed foreign merchants to trade with, but not settle in, America. But many of the Castilian firms that participated in the trade through the Casa de Contractation were actually mere fronts for foreign, especially Genoese, financiers.
Portugal
One of the most remarkable feats of Europe's age of expansion was the achievement by Portugal, a small, relatively poor country, of dominion over a vast seaborne empire in Asia, Africa and America.
Exports: primary products
Imports: wheat, cloth, metalwares.
Good Fortune: at the time Portugal made its breakthrough into the Indian Ocean the polities in that area were unusually weak and divided, for reasons independent of developments in Europe.
The spice trade was the most famous, but it was only one of many branches of commerce that the Portuguese kings tried to monopolize for fiscal reasons. Even before the opening of the Cape route the Portuguese crown monopolized trade with Africa, whose most valuable exports were gold, slaves and ivory. Whit the discovery of the Americas the demand for slaves increased enormously, and the Portuguese kings were the first to benefit; the actual slave traders were private contractors who operated under license from the crown, paying it a share of the profits. In XVII century the discovery of gold and diamonds in Brazil presented the crown with a new Eldorado. As before, it tried to monopolize the commerce and prohibit the export of gold from Portugal.
Central, Eastern, and Northern Europe
The whole of central Europe, from northern Italy to the Baltic, was nominally united in the Holy Roman Empire. In fact, the territory was organized into hundreds of independent of quasi-independent principalities, both lay and ecclesiastical, ranging in size from the estate of a single imperial knight to Habsburg crown lands of Austria , Bohemia and Hungary. After the protestant reformation, in particular, during which many secular and even some ecclesiastical lords adopted the new religion to gain control of church property, the authority of the emperor was sharply curtailed.
The struggle between local particularism and centralizing tendencies of the more powerful monarchs and princes occupies a large part of the history of early modern Europe , especially in central and eastern Europe; and in that struggle economic factors sometimes played a crucial role.
Writers in this tradition are usually referred to as cameralists, from the Latin world camera, which in the camera, which in the German usage of that time meant the treasure chest or treasury of the territorial state. Most of those writers were active or former civil servants-that is, servants of the territorial princes who were striving for both political and economic autonomy.
Colbertisme in France
The archetypical example of economic nationalism was the France of Luis XIV. Luis provided the symbol-and the power-but responsibility for policymaking and implementation devolved on his principal minister for more than twenty years Jean-Baptiste Colbert. Colbert's influence was such that the French coined the term colbertisme, more or less synonymous with mercantilism as the word is used in other languages. Colbert attempted to systematize and rationalize the apparatus of state of controls over the economy that he inherited from his predecessors, but he never fully succeeded, even to his own satisfaction. The main reason for this failure was his inability to extract enough revenue from the economy to finance Louis' wars and extravagant court.
In principle, under the medieval theory of kingship, the king was supposed to be supported by the produce of his own domains, although his subjects, acting through representative assemblies, could grant him "extraordinary" tax revenues in time of emergency, such as war. By the end of the Hundred Years War several such "extraordinary" taxes had become permanent parts of the Royal Revenues.
By XVI century, as a result of increased taxes, the inflation, and the real growth of the economy, royal tax revenue had increased sevenfold in the course of the century and tenfold since the end of the Hundred Years War in 1453.
French king had borrowed in the Middle Ages, especially during the Hundred Years War, but from the reign of Francis I did a royal debt become a permanent feature of fiscal sys.
The sale of offices was not unknown in other lands, but in France it became standard practice.
Colbert wished to reform the system, especially by abolishing the internal tariffs and tolls, but the crown's need for revenue was to great, and he could not. In the latter part of the XVIII century, under the influence of the Enlightenment and the Physiocrats, some of Colbert's successors, notably the economist Jacques Turgot, actually attempted to reform the system and create internal free trade; but the opposition of the vested interests, including officials, tax farmers, and the aristocracy, forced him out of office. In the end it was the failure of the fiscal system to produce sufficient revenue that led to the assembly of the Estates-general of 1789 the beginning of the end of the Old regime.
In addition to their attempts to reform and increase the proceeds of the tax system, Colbert, his predecessors, and his successors tried to increase the efficiency and productivity of the French economy in much the same way that a drill sergeant tries to enhance the performance. They issued numerous orders and decrees with respect to the technical characteristics of manufactured items and the conduct of merchants. They fostered the multiplication of guilds with the avowed intention of improving quality controls, even when their real objective was to obtain more revenue. To secure a "favorable" balanced of trade, they created a system of prohibitions and high protective tariffs.
The man who, even more than Colbert, should be regarded as the founder of the French Tradition of étatisme in economic affairs was the Duke de Sully, principal minister of Henry IV. Sully is generally regarded as an energic, efficient administrator who both increased revenues and held down expenses, but his ambiguous legacy is best symbolized by two measures taken in 1598 soon after Henry had consolidated his power as king.
The prodigious Increase of the Netherlands
Differences from the other nation-states: 1. The structure of government of the Dutch republic was quite unlike that of the absolute monarchies of continental Europe. 2. The Dutch economy depended on international commerce to a much greater degree than that of any of the Netherlands' larger neighbors. The Union of Utrecht of 1579, the agreement among the seven northern provinces that eventually became the United Netherlands or Dutch Republic, was more in the nature of a defensive alliance against Spain than the constitution of a nation-state. The States-General, the legislative body of the Republic , concerned itself exclusively with foreign policy, leaving domestic matters in the hands of the provincial states and town councils. All decisions had to be reached by a unanimous vote in which each province had one voice failure to agree require that the delegates return to their provincial state for consolidation and instruction. The provincial State, for their part, were dominated by the chief towns. The towns were governed by self-perpetuating town councils of from 20 to 40 members who were that effective rulers of the Dutch Republic. Originally the members of this oligarchy had been selected from among that wealthier merchants of the towns. There was a general tendency, pronounced by the middle of the 17th century, for the members of this ruling group, known as "regents", to be drawn from rentier class of landowners and bondholders, rather than active merchants. Nevertheless, the regents were usually descended from merchant families, intermarried with them, and were conscious of and responsive to their needs and desires.
The Dutch established in their mercantile preeminence by their beginning of the 17th century and it continued to grow until at least the middle of the century. The bases of that's a commercial superiority were the so called "mother trades", those that connected the Dutch ports with others of the North Sea the Baltic, the Bay of Biscay, and the Mediterranean. Within that region Dutch shipping accounted for as much as three quarters of the total. From the Baltic they brought grain, timber, and naval stores to be distributed throughout western and southern Europe in exchange for wine and salt from Portugal and the Bay of Biscay, for their own manufactured goods, mainly textiles, and for herring. The herrings fishery occupied at unique place in the Dutch economy, with as much as one quarter of the population depending on it either directly or indirectly.
The Dutch specialized in carrying the goods of others, along with their herring exports, but they also exported some other products of their own. Dutch agriculture, although it occupied far smaller proportion of their labor force than elsewhere, was in the most productive in Europe and specialized in high-value produce such as butter, cheese and industrial crops. The shipbuilding Industry, developed to have a high level of technical perfection, depended on timber from the Baltic, but it supplied not only the Dutch fishing, merchant, naval fleets, but those of other countries as well. The Northern
Netherland, especially Holland, benefited in great measure from free immigration from other parts of Europe. In the immediate aftermath of the Dutch Revolt large numbers of Flemings, Brabanters and Walloons, of whom a disproportionate number were merchants and skilled artisans, flooded into the northern cities.
The Dutch concern for freedom was real, particularly with respect to freedom of the seas. As small maritime nations surrounded by vastly more populous, powerful neighbors. The Netherlands resisted the pretension of Spain to control the Western Atlantic and then Pacific Oceans, of Portugal to the South Atlantic and Indian oceans, and of Britain to the "British seas". The Dutch jurist Hugo the Groot, wrote his famous treaties Mare liberum, destined leading to become one off the foundation of international low, as a brief in the negotiation leading to a truce with Spain in 1609. The Dutch insisted on their arrive as an no trials to carry merchandise to all combatants and the war prepare make for themselves to protect to those rights.
The Dutch commitment to freedom in matters of commercial and industrial policy was slightly more equivocal. Generally speaking, the cities followed free trade policies. No tariffs encumbered export or import of raw materials or semi finished goods, which were to be processed and re-exported, tariffs and taxes on consumer goods were for revenue, not protection of domestic industries. The trade in precious metals, in particular, was entirely free, in striking contrast to the policies of other nations. Amsterdam with its bank, bourse, and favorable balance of payments, quickly became the world emporium for gold and silver; it has been estimated that between 1/4 and 1/2 of the annual imports of silver from Spanish Empire eventually would up in Amsterdam, even during the Dutch War of Independence.
Freedom was also the rule in industry. Although guilds existed, they were neither as widespread nor as a powerful as in other countries; most major industries operated entirely outside the guild system.
Parliamentary colbertism
Economic policies in England differed from those of both Netherlands and the continentals absolute monarchies. Moreover, whereas the general character of economic policies in other European nations remained more or less constant from the beginning of the XVI century to the end of XVIII century, those of England and Britain underwent a gradual evolution corresponding to the evolution of constitutional government.
In 1688 the establishment of a constitutional monarchy.
In England the fiscal demands the crown brought it into repeated conflicts with Parliament until the latter finally triumphed.
After the installation of William and Mary in 1689 as constitutional monarchs Parliament took direct control of the government's finances and in 1693 formally instituted a "national" debt distinct from the personal debts of the sovereign.
The so-called Glorious Revolution of 1688-89 constitutes a major point not only in political and constitutional history, nut in economic history as well. In the matter of public finance alone, in 1690s saw, in addition to the establishment of a founded debt, the creation of the Bank of England, a recoinage of nation's money and the emergence of an organized market for public as well private securities. The success of the new financial system was not immediate, it was wracked in the early years by a number of crises, culminating in the famous South Sea Bubble in 1720.
By the middle decades of the XVIII century, however, when Britain was engaged in a series of both European and colonial wars with France, its government could borrow money at only a fraction of the cost of his rival. Moreover, the ease, cheapness, and stability of credit for public finance reacted favorably on private capital markets, making funds available for investment in agriculture, commerce, and industry.
An Earlier historian referred to this period as "Parliamentary Colbertism"(as usual isn't a precise definition:1) ignore the role of parliament in policy making before 1688,2)the insinuation that the Parliament ever aspired to the degree of intervention in the economy that Colbert did), it underline the fact that economic policy making wasn't a prerogative of the monarch, but responded to the varied and sometimes conflict interests of titled aristocracy, landed gentry, wealthy merchants, professionals, courtiers, and other, who were effectively represented in Parliament.
The statutes of Artificers(1563)main concern social stability:
Its principal provision required all able-bodied persons to engage in productive labor, within the first priority being agriculture, the second the cloth industry and then certain other crafts and industries deemed to be of national importance.
It establish a nor of 7 years apprenticeship for all arts and crafts, including farming, and specified the social ranks from which apprentices should be selected.
1624 the government opened the cloth trade to all.
Navigation Acts(1651) the Long Parliament of commonwealth government passed a law that was intended not only to protect the English merchant marine but also to deprive the Dutch of their near-monopoly of both shipping and fishing in English waters. All good imported into Great Britain had to be carried in either British ships or ships of the country from which the goods originated. Moreover, even British ships were required to bring goods directly from the country of origin, rather than from intermediate port, trade to British colonies also had to be carried in British bottoms. In addition, all colonial imports of manufactured goods from foreign countries had to be landed first in Great Britain.
The Down of Modern History
Friday 27 March 2015
05:51
The beginning of the 18th century several regions of Europe, mainly in the western Europe, has acquired sizable concentration of industry, Mostly but not exclusively in textile trades. The process of expense and an occasional transformation of this industries: proto-industrialization.
The Lord cares semi units of husband wife and children usually cultivated to small plots of the ground as well, although they also buy additional supplies in the markets.
Essential features of a proto-industrial economy I dispersed, usually rural workers organized by urban entrepreneurs , who supply the workers with raw materials and dispose of their output in distant markets. The workers must post a picture is at least the thought of their means of subsistence. This system was called: the cottage industry, domestic industry and the putting out system.
Proto-industrialization refer primary to consumer goods industries, especially textiles.
Characteristic of modern Industry.
One of the most of his differences between preindustrial and that modern industrial societies is the greatly diminished relative role of agriculture in the latter. Counterpart of its diminished importance he Is great increased productivity of modern agriculture, oh enables it to feed a large nonagricultural population. A related difference is the high proportion of the modern labor force engaged in the tertiary, or service, sector.
During the period of industrialization proper, extending roughly from the beginning of the 18th century to the first of the 20th Century, the characteristics feature of the structural transformation of the economy was the rise of secondary sector, observable in that proportion of both the labor force employed and the output.
The transformation was first noted In England, Scotland and Great Britain this has been described as " the first industrial nations".
In the course of this transformation, designed as " the rise of modern Industries", certain characteristics gradually emerged that distinguished modern from pre-modern industry: 1. The extensive use of mechanically powered machinery 2. The introduction of new, inanimate source of power, especially fossil fuels 3. The widespread use of materials that do not normally occur in nature. A related feature is the larger scale of enterprise in most industries.
The most significant improvements in technology involved the use of machinery and mechanical power to perform tasks that had been done far more slowly and laboriously by human and animal power, or that had not been done at all.
But the most important developments in the application of energy in the early stages of industrialization involved the substitution of coal for wood and charcoal as fuel and the introduction of the steam engine for use in mining, manufacturing and transportation.
The use of coke and coal in the smelting process greatly reduced the cost of metals and multiplied their uses, whereas the application of chemical science created a host of new "artificial" or synthetic materials.
The industrial revolution: A misnomer
The term industrial revolution has been used to denote that period in British history that witnesses teh application of mechanically powered machinery in the textile industries, the introduction of James Watt's engine, and triumph of the factory system of production.
Early description of the phenomenon emphasized the "great inventions" and the dramatic nature of the changes, what were assumed to be the deleterious consequences of the new mode of production . Although increases in productivity as a result of the use of mechanical power and machinery were acknowledged, most accounts stressed the use of child labor, the displacement of traditional skills to machinery, and the unwholesome condition of the new factory towns.
Prerequisites and Concomitants of Industrialization
The changes were not merely industrial , but social and intellectual as well; but also commercial, financial, agricultural and even political.
Already from the Middle Ages individuals had begun to contemplate the practical possibilities of harnessing the forces of nature.
In England the influence of Francis Bacon one of whose aphorism was " Knowledge is power" led to funding in 1660 of the Royal Society " for Improving Natural Knowledge".
But it was not until the second half of XIX century, with the flowering of chemical and electrical sciences, that scientific theories provided the foundations for new processes and new industries.
One of the most remarkable features of technical advance in the XVII and early XIX centuries was the large proportion of major innovations made by ingenious tinkerers, self-taught mechanics and engineers and other autodidacts(with a process of trial-and-error). A willingness to experiment and to innovate penetrated all strata of society, including even the agricultural population.
Just as England was the first nation to industrialize on large scale, it was one of the first to increase its agricultural productivity. England increase its agricultural productivity owed much to trial-and-error experimentation with new crops and rotations. Probably the most important agricultural innovation before scientific agriculture was introduced in the XIX century was the development of so-called convertible husbandry, involving the alternation of field crops with temporary pastures in place permanent arable land and pastures( restore fertility of the soil through improved rotation, and carrying a larger number of livestock, many landowners and farmers also experimented with selective breeding of livestock.
An important condition for both the improved rotations and selective breeding was enclosure and consolidation of the fields.
--> this process brought to the tendency toward larger farms emerged.
The new techniques increased the demand for labor till at least the second half of the XIX century.
The increasing productivity of English agriculture enabled it to feed a burgeoning population at steadily rising standards of nutrition.
The relatively prosperous rural population, more specialized and commercially oriented than most continental peasants, also provided a ready market for manufactured goods.
Commercialization of agriculture reflected a general process of commercialization of the entire nation.
Already by the XVI century London had begun to function as a "growth pole" for the English economy. Its advantage were both geographic and political(most important port in England).
Commercialization interacted with developing financial organization of the nation. The origins of English banking are obscure, but in the years after the Restoration of 1660 a number of prominent goldsmiths in London began to function as bankers. They issued deposits receipts that circulated as banknotes, and granted loans to creditworthy entrepreneurs. The founding of the Bank of England in 1694 with its legal monopoly of joint-stock banking, forced the private bankers to give up their issues of banknotes, but they continued to function as bank deposit. Meanwhile the provinces outside London remained without formal banking facilities, although some figures performed some of elementary banking functions such as discounting bills of exchange and remitting funds to London.
The bank of England established no branches and its banknotes did not circulates outside London. Royal Mint extremely inefficient; the domination of its gold coins was too large to be useful in paying wages or retail trading, and it minted very few silver or copper coins.
To fill the gap industrialists merchants and even publicans issued scrip and tokens that served the needs of local monetary circulation. From the 1750 formation of the "country banks".
The euphoria engendered by the glorious revolution resulted in the creation of number of joint-stock companies in 1690s some of them like the bank of England with royal charters and grants of monopoly.
After the successful conclusion of the War of Spanish succession and it culminated in the speculative financial boom known as the South Sea Bubble. The bubble burst in 1720, when the parliament passed the Bubble Act. The act prohibited the formation of joint-stock without the express consensus of Parliament. As a result England entered its "industrial revolution" with a legal barrier to joint-stock (corporate) form of business organization, condemning most its industrial and other enterprises to partnership or simple proprietorship. The bubble act was eventually repealed in 1825.
Another major consequences of the Glorious Revolution was to place the public finances of the kingdom firmly in the hands of Parliament, reduced the cost of public borrowing and thereby freed capital for private investment. Although the system of taxation was highly regressive(tax poorer more that richer ppl), that, too , permitted the accumulation of capital for investment.
The movement of large quantities of bulky, low-value goods, such as grain from the fields to growing urban market, timber for building, and coal and ores from mine smelters and foundaries, required cheap, dependable transportation.
Before the railway era water routes provided the most economical and efficient arteries of transport. Britain owned much of its early prosperity for the Island position, that brought costless protection and cheap transportation. The long coastline excellent natural harbors and many navigable streams eliminated much of the need for overland transportation, which hindered the growth of commerce and industry in the continent.
Even with Britain's natural advantages the demand for improved transportation increased apace.
Britain's network of canals and navigable rivers was extremely efficient for the time but still not satisfy the demand for inland transportation.
Beginning of the 1690s Parliament created, by private acts, turnpike trusts that undertook to build and maintain stretches of good roads on which users, whether traveling by wagon, by carriage, on horseback, or by foot, were charged tools. Such trusts were not commercial companies, but were instigated and supervised by trustees, usually local landowners, farmers, merchants…
Industrial technology and Innovation
Historians impressed with revolutionary nature of industrial change point to the rapid mechanization and growth of the cotton industry. Almost a century earlier, however, and within only few years of one another, two other innovations were made whose impact might be regarded as even more fundamental to industrialization: 1. Process of smelting iron ore with coke, which freed the iron industry from exclusive reliance on charcoal (1709 Abram Darby, processed coal fuel in much the same way that other ironmaster made charcoal out of timber--> Henry Cort's puddling and rolling process of 1783-84 finally freed iron production altogether from reliance on charcoal fuel. Ironmaster achieved economies of scale by integrating all of these operations in one location, usually at or near the site of coal production and both total iron output and proportion made with coal fuel accelerated dramatically) 2. the intervention of the atmospheric steam engine, a new and powerful prime mover that supplemented and eventually replaced wind-watermills as inanimate sources of energy. (Steam engine was first employed in mining industries. As demand for coal and metals expanded, so the efforts to obtain them from ever deeper mines intensified. Thomas Newcomen, in 1712 succeed in erecting his first atmospheric steam pump for a coal mine in Staffordshire [It was effective, but not thermally efficient].those were mostly employed mainly in coal mines, where fuel was cheap, but also in other mines. In 1760 James Watt a "mathematical instrument maker" , was asked to repair a small working model of a Newcomen engine used for demonstration purposes in the course of natural philosophy. Watt began to experiment with the engine; in 1769he took out a patent for separate condenser, which eliminated the need for alternate heating and cooling of the cylinder. In the interim Watt formed a partnership with Matthew Boulton, a successful hardware manufacturer, who provided Watt with the time and facilities for further experimentation. In 1775 watt began commercial production of steam engines. Those were used for pumping mines, but watt made a number of other improvements, to regulate the speed of the engine and a device to convert the reciprocating motion of the piston to rotary motion. This open a host applications for the steam engine such as flour milling and cotton spinning.
Development of cotton industry over the wool and silk ones:
Less subject than other industries to restrictive legislation and guilds rules and to traditional practices that obstructed technical change: * John Kay(1733) invented the flying shuttle which enabled a single weaver to do the work of two (increasing the demand for yarn) * James Hargreaves' spinning jenny invented in 1764(1770 patented), the jenny was a relatively simple machine, it was little more than a spinning wheel with a battery of several spindles instead of one. Allowed one person to do the work of several. * 1769, Water frame by Richard Arkwright * Samuel Crompton's mule (1774) so called because it combined elements of the jenny and the frame. The mule could spin finer, stronger yarn than any other machine or hand spinner. In 1790 was adapt for steam power. Like the water frame it allowed the large scale employment of woman and children, but unlike the frame it favored the construction of huge factories in cities where coal was cheaper and labor plentiful.
--> pressure on weaving, technical change: * 1785 Edmund Cartwright took out a patent for power loom * In 1820 engineerings of Sharp and Roberts in Manchester built an improved power loom, that machinery began to replace the handloom weavers in large numbers.
--> rapid increase in the demand for cotton, problem high costs of separating seeds by hand from the short-staple: * In 1793 Eli Whitney invented the mechanical "gin". This machine answered the need so well that the southern United States quickly became the leading supplier of raw material to what soon became Britain's leading industry.
--> the technical changes involving cotton textiles, the iron industry, and the introduction of steam power constitute the nucleus of early industrialization in Britain, but they were not the only industries affected. Nor did all the changes require the use of mechanical power.
Adam smith wrote in the Wealth of Nations of the great increases in productivity obtained in a pin factory simply by specialization and division of labor.
The chemical industry also underwent significant expansion and diversification.
The coal mines were responsible for the first railways in Britain.
The steam locomotive was the product of a complex evolutionary process. The principal ancestor was , of course, the steam engine, as improved by James Watt. 1. Richard Trevithick deserves credit for building the first working locomotive in 1801, he used a high pressure engine and designed his locomotive to work on ordinary roads.[problem: the road could not bear the weight] 2. George Stephenson was the most successful in the creation of the locomotive, he built a stationary steam engine with cables for hauling empty coal cars back to the mine from the loading wharves. In 1822 he persuaded the promoters of the projected Stockton and Darlington railways, to use steam rather than horse traction, and in 1825 he personally drove an engine of his own design. The Liverpool-Manchester generally regarded as the first common carrier railways opened in 1830, and all locomotives were design and built by Stephenson.
Social Aspects of Early Industrialization
Rapid rise in the population during the early stages of industrialization.[industrialization was at least a permissive factor in continued growth of population].
Birth rate rose--> earlier marriage( the growth of both cottage and factory industries allowed young couple to set up households without waiting for a farmstead or a complete apprenticeship.
Death rate declined--> the practice of inoculation against small pox, and vaccination from 1798, improvements in medical knowledge, new hospitals, higher standards of living(improving nutrition), great awareness in personal hygiene.
Immigration and emigration also affected the total population.
Internal migration greatly altered the geographical location of population. Most of this relatively short distances, from the countryside to the growing industrial areas: 1. Shift from the Southeast to the Northwest 2. Increasing in urbanization
The growth of cities was not unmixed blessing. Thy contained huge ramshackle tenements and long rows of miserable cottages in which families of the working class crowded four and even more person per room. Sanitary facilities were generally nonexistent, and refuse of all kinds were disposed of being thrown into the street, making easier for epidemic diseases and cholera to spread.
The factory workers received higher wages than either agricultural laborers or workers in domestic industry, this was applicable not only for male labor force but of women and children, too.
The inequality of distribution of income and wealth which was already great in proportion in the preindustrial economy, became even greater in the early stages of industrialization.
Economic Development in the basic XIX century: Basic Determinants
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05:52
From their beginnings in Britain, the forms of modern industry spread across the Continent(Belgium, France, Germany and other nations of Europe, as well across the Atlantic to US).
Population
The population of Europe began to grow from the 1740. In XIX century population growth accelerated and kept accelerating trough the XX century.
There is not clear relation between industrialization and population growth, but probably the agricultural production enormous increase, helped. (Amount of land under cultivation was extended; agricultural productivity increased because of the introduction of new, more scientific techniques. Agricultural machineries, fertilizer…)
Cheap transportation facilitated the migration of the population of two type: * Internal(toward cities: The introduction of steam power and factory system, the transition from charcoal to coke as fuel for the iron industry, and the improvements in transportation and communications changed the situation. The rise of the factory system necessitated a concentration of work force ) * external(was mainly justified by economic pressure at home and opportunities for better life abroad).
Resources
Industrial Europe did not experience any magical increase in the quantity or quality of its natural resources, as a result of technological change and the pressure of increased demand, resources that were formerly unknown or of little value suddenly acquired enormous even critical, importance. Systematic search for previously unknown sources, and scientific and technological research to enhance their exploitation. The search of supplies overseas.
The development and diffusion of technology
In analyzing the process of technological change in any period of history, it is wise to bear in mind the distinction between three closely related but conceptually different terms: invention, innovation and diffusion of new technology. Invention refers to a patentable novelty of a mechanical, chemical or electrical nature --> Invention became innovation when it is inserted into an economic process. --> spreading of an innovation, within a given industries, between industries, and internationally among nations, this process is diffusion.
Prime Movers and Power Production
Early phenomena had been observed early times, but as late as the XVII century electricity was regarded as simple curiosity. Toward the end of that century the researcher Benjamin Franklin and Luigi Galvani and Alessando Volta, who invented the voltaic pile or battery, raised it from the status of a parlor trick to a laboratory pursuit. In 1807 Sir Humphry Davy discovered elecrolysis.
Hans Oersted in 1820 observed that an electric current produce a magnetic field, which brought André Ampère to formulate a quantitative relationship between electricity and magnetism, Michel Faraday (1820-31) discovered the phenomenon electromagnetic induction and invented a primitive, hand-operated generator. On this discoveries Morse developed the electric telegraph between 1831 and 1844. electricity had been used in the new electroplating industry and in the telegraphy since 1840s. Lighthouse began use electric arc lamps in 1850s and by the 1870s arc lamps were used in a number of factories, stores, theatres, and public buildings. The perfection of the incandescent electric lamp almost simultaneously between 1878 and 1780, by J.Swan and T.Edison, made arc lighting obsolete and inaugurated a boom in electrical industry.
Petroleum is another major energy source that came into prominence in the second half of XIX century. By 1900 a variety of engine alimented with gasoline, and diesel oil(the most volatile part of petroleum) were available. By far the most important use for the internal combustion engine was in light transportation facilities such as automobiles, motor trucks, and buses.
Cheap steel
The most dramatic technological innovations affecting the iron industry, occurring in the second half of the XIX century, concerned the manufacture of steel. Steel is a special variety of iron.
Its hard and durable, but also brittle.
In 1856 Henry Bessemer an English inventor, patented a new method for producing steel directly from molten iron, eliminating the puddling process and yielding in a superior product. Others further innovations lower the price and improved the quality of steel, increasing exponentially the production(used fro railways, shipbuilding…).
Transport and communication
The stem locomotive and iron(steel) railways, more than any other technological innovation of the XIX century epitomized the process of economic development. The railways and in less extent the steamship changed the states of affairs. Railways offered cheaper, faster, more dependable transportation.
In Britain the construction of railways trails was granted charters to private-stock companies.
The Railways transportation became diffuse rapidly:
Belgium, France, Germany, and United State managed to builds railways as fast possible.
In the rest of Europe after the mid-century Spain and Switzerland in 1840s, Italy did not began till 1850s.
In the second half of XIX century was the great age of railways construction .
In 1888 the first travel of the Orient Express from London and Paris to Constantinople.
The steamship, played a less vital role in expansion of commerce and industry until the late century. Robert Fulton in 1807 did the first successful travel on steamboat on the Hudson.
Trans-Atlantic service did not start till 1838, when there has been the first travel from England to New York. With the opening of the Suez canal in 1869 started the true age of Ocean steamer.
Paper making machine in 1800, the cylindrical printing press, first used by London Times in 1812, greatly reduced the price of books and newspapers. The development of photography after 1827. 1832 telegraph of Morse. By 1866 telegraph cable were laying under the North Atlantic Ocean, providing nearly instantaneous communication between Europe and North America. The telephone, patented by Alexandre Graham Bell In 1876, made distant communication even more personal.
Guglielmo Marconi 1895 wireless telegraphy (or Radio).
The Institutional framework
The institutional setting for economic activity in the XIX century Europe, which produced the first industrial civilization gave wide scope to individual initiative and enterprise, permitted freedom of occupational choice and geographical and social mobility, relied on private property and the rule of law, and emphasized the use of rationality and science in the pursuit of material ends.
Legal Foundations
Great Britain:
"Common Law" * Evolutionary character * Its reliance on custom and precedent as set forth in written legal decisions * its flexibility
It provided protection of private property and interests against the depredation of the state and the same time protected the public interest from private exactions.
On the Continent: * France: French Revolution by shattering the Old regime opened new vistas and new opportunities for enterprise and ambition. Instituted a more rational Legal system.
The charter of the new order is to be ground in the Declaration of Rights and Man(that borrowed heavily from the Declaration of Independence which in turn had borrowed from the writing of French philosophes)."Men are born free and equal in their rights", rights specified as liberty , property "inviolable and sacred", security, and resistance to oppression.
Naturally, the French carried their revolutionary reforms to the lands they conquered in the course of the Revolutionary and Napoleonic wars.
French institution received their definitive stamps not from the revolution itself but from napoleon.
The Napoleonic synthesis is perhaps best seen in the great work of legal codification begun during the revolution but completed under the empire. A classical compromise between the received Roman law, as adopted to local needs and customs, and the new revolutionary legislation, the codes nevertheless preserved the fundamental principles of the revolution: equality before the law, a secular state, freedom of conscience, and economic freedom. The Code Civile, promulgated in 1804 its he most fundamental and important. It treated property as absolute, sacred and inviolable rights.
The Code de Commerce promulgated in 1807 distinction between 3 type of business organizations: 1. Simple partnership in which the partners were individually and collectively liable for all debts of the business 2. Sociétés en commandite, limited partnership in which the active partner or partners assumend unlimited liability for the affairs of the concern, whereas the silent or limited partners risked only the amount they actually subscribed 3. Sociétés anonymes, corporation in the American sense, with limited liability for all owners.
Economic thought and policy
The Adam Smith The wealth of nation become the declaration of individual economic independence. Smith's major concern was to show that the abolition of vexatious and "unreasonable" restrictions and restraints on individual enterprise would promote competition within the economy, and this, in turn will maximize the "wealth of nation".
But just after his death and the help of Malthus and Ricardo, that smith's ideas start to be implemented in legislation.
In addition to free trade , the tenets of economic liberalism called for a reduction of the role of government in the economy.
According to Smith and his "system of natural liberty" the government had only 3 functions to perform: * The duty of protecting society from the violence and invasion of other independent societies * The duty of protecting as far as possible every member of the society from the injustice or oppression of every member of it(or the duty of establishment an exact administration of justice) * The duty to erecting and maintaining certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain.
General welfare legislation of the Parliament: * Factory Acts * Health and Sanitary laws * Reform of local government
Most western nations have passed at least 3 phases in their official attitude towards trade unions: 1. Outright prohibition or suppression( le chapelier Law of 1791, Combination Acts of 1770-1800…) 2. Repeal of the Combination Acts in 1824-25 government granted limited toleration to trade unions 3. XX century full legal rights to working men and woman to organize and engage in collective activities
In Britain in the 1830s the trade union movement became involved in a broader political movement known as Chartism, whose purpose was to achieve suffrage and other political rights for the disenfranchised.
Education and literacy
Another feature of economic development was the growth of literacy and education.
The French revolution introduced the principle of free publicly supported education, and this widespread in Germany, US and Scandinavian countries.
In 1802 the Factory Act required owners of textile mills to provide elementary instruction for their apprentices, but the law was poorly enforced, 1833 a law required instruction for all child workers. the French revolution create also schools for science and engineering. Established at university level, but outside the university system, these institutions not only provided advance instruction but also engaged in research.
International relation
At the congress of Vienna in 1814-15 Napoleon's victors tried to reestablish the Old Regime, but their efforts provided vain.
Evolution where not predominantly economic manifestations, but they did have significant economic consequences, mainly as a results of the realignment of political forces. In France that solution off 1830 replaced a resolutely backward-looking government with one more amenable to commercial and industrial interests, where as in that 1848 the urban working class made a determined bid for political power before they were crushed by the forces of repression. The revolution of 1830 in Southern Netherlands resulted in the creation of a new nation Belgium, which soon showed itself to be one of the most economically progressive on the Continent.
The Revolutions of 1848 in central Europe finally brought about the extinction of that remnants of the feudal regime.
In all of these revolution nationalism was a potent force. The Growth of the world Economy
Friday 27 March 2015
07:15
Although long distance trade has existed from at least the beginnings of civilization, its importance increased enormously and rapidly in the XIX century.
Foreign trade per capita in 1913 was more than 25 times greater than it had been in 1800.
The international movement of people and capital also accelerated rapidly. By the beginning of the XX century it was possible to speak meaningfully of a world economy.
Europe was the dynamic center that stimulated the whole.
Britain Opts for Free trade
Practical consideration forced governments to reconsider their prohibitions high tariffs; smuggling was a lucrative occupation in the XVIII century, and reduced both government revenue and legitimate entrepreneurial profits. The British government had began to alter protectionist stance in the late XVIII century, but the outbreak of the French revolution and the Napoleonic Wars deferred its efforts.
Adam Smith's case for free international trade derived from his analysis of the gains from specialization and division of labor among nation as well as individuals. David Ricardo, in his Principles of Political Economy, he stated that Portugal had an advantage in the production of wine respect to England and it should specialize in it and purchase cloth from England, which has an advantage respect to Portugal. This was the principle of competitive advantage, the foundation of modern international trade theory.
In 1820 a consistent group of merchants petitioned Parliament to permit free trade, the petition had not immediate effect, but mostly at the same time a group of young men intent on modernizing and simplifying the archaic procedures of government rose the positions of influence in governing the Tory party. Robert Peel, William Huskinsson, who, as president of the Board of Trade, greatly simplified and reduced the maze of restrictions and taxes that hampered the development of international commerce.
The centerpiece and symbol of the protectionism in England the Corn Laws: in 1839 Richard Cobden formed the Anti-Corn Law League and 1841 the Wings government propose reductions in the tariffs on both wheat and sugar, when this measure when down in defeat they called a new general election.
In the electoral campaign the Wings, proposed a reduction of the Corn Laws, whereas the Tories advocates the status quo. The Tories won, but the new Prime Minister Sir Robert Peel, had already decided on extensive revision in the fiscal system, including the abolition of export taxes, elimination or reduction of many import taxes…
In 1845 the disastrous potato blight struck Ireland, reducing large numbers of the Irish population to starvation. Prodded by this catastrophe, Peel introduce a bill to repeal the Corn Laws which with the support of most Wings, passed in January 1846,over the opposition of the majority of his own party.
W.E Gladstone one of the small group of Tories who voted for the repeal of Corn Laws, joined the Wings, becoming chancellor of the exchequer and eventually prime minister. The Wings, subsequently known as Liberals, became the party of free trade and manufactures, whereas the Tories, also known as Conservatives, remained the party of landed interest and, eventually, of imperialism.
Navigation Acts were repealed in 1849.
The Free trade Era
The next major development in the movements toward free trade was a notable trade treaty, the Cobden-Chevalier, or Anglo-French, treaty of 1860. France had traditionally followed a policy of protection; this was especially true in the first half of the century when the French government strove to protect the cotton textile industry from British competition.
The government of Napoleon III, which came to power in a coup d'ètat in 1851 desired to follow a policy of friendship with Great Britain. A treaty negotiated by Cobden(English) and Chevalier(French) late in 1859 was ratified in January 1860. The treaty provided that Britain would remove all tariffs on imports of French goods with the exception of wine and brandy. France from his part remove prohibitions on the importation of British textiles and reduced tariffs on a wide range of British goods to a maximum of 30%, at the end the average tariff was 15% ad valorem. A major feature of the treaty was the inclusion of a most-favored-nation clause. This meant that if one party negotiated a treaty with a third country the other party to the treaty would automatically benefit from any lower tariffs granted to the third country. In early 1860s France negotiated treaties with Belgium, the Zollverein, Italy, Switzerland, Scandinavian countries.
All this treaties contain the most-favored- nation clause. As a result, whenever a new treaty went into effect a general reduction of tariffs took place.
The increase in competion promoted both technical efficiency and increased productivity.
The "great depression" and the return to protectionism.
Another consequence of the integration of international economy was synchronization of price movements across national borders. With increasing industrialization and international commerce the fluctuations were more often related to the "state of trade", became cyclical in nature and were transmitted from country too country trough commercial channels.
Fluctuations in production usually accompanied the price fluctuations. Price in virtually all counties in Europe reached a peak early in the century, near the end of the Napoleonic wars. The causes were both real (war time shortages) and monetary (that exigencies of war finance). Thereafter until midcentury the secular trend was downward. The causes again were real(technical innovation, improvements in efficiency), and monetary (repayment of war debts by governments). Price bounded upward in the 1850s primarily as a result of gold discoveries in California and Australia.
In 1873 after a boom lasting several years, financial panics occurred in both Vienna and NY and quickly spread to most other industrial nations. The ensuing fall in prices lasted until the mid-or late 1890s and was known in Great Britain as the " Great Depression". Industrialist incorrectly blamed it on intensified international competition as a result of the trade treaties, and more insistent for renewed protection resulted , agriculturists joined the demand for protection.
The International gold standard
According to some authorities the high degree of integration achieved the world economy in the late XIX century depended critically on general adherence to the international gold standard. According to others, that integration depended primarily on the central role of Great Britain and of London, its financial as well as its political capital, in the world economy. Since Great Britain adhered to the gold standard for the century, it is necessary to scrutinize the gold standard in some detail.
The function of a monetary standards is to define the unit of account of a money system, the unit into which all other forms of money are convertible. Thus, in medieval England the "pound sterling" was legally defined as a pound weight of sterling silver. In XVIII century England was in bimetallic standard, but in fact gold was overvalued by the Mint, so that the gold coins largely replaced silver coins in actual use. During the Napoleonic Wars the Bank Of England, with government sanction, "suspended payment" and strictly speaking, the country had no monetary standard at all, it had fiat money, or "forced circulation".
After the wars the government decided to return to a metallic standard, but chose gold, the de facto standard of the XVIII century. Under the terms of the Act of Parliament creating the gold standard three conditions had to be observed: 1. The royal mint was obliged to buy and sell unlimited quantities of gold at a fixed price 2. Bank of England was obliged to exchange its monetary liabilities into gold on demand 3. No restrictions could be imposed on the import or export on gold.
This meant that gold served as the ultimate base or reserve of the entire monetary supply of the country. The amount of gold the Bank of England held in its coffers determined the amount of credit they could extend. Thus, the movements of gold into and out of the country caused fluctuations in the total money supply, which in turn caused fluctuations in the movement of prices. When the international gold flows were slight, or when inflows balanced outflows as they usually did, prices tented to be stable, but large inflows of gold could cause inflation, and sudden withdrawals, brought on monetary panics.
For a short time in the 1860s and 1870s France attempted to create an alternative to the international gold standard in the form of Latin Monetary Union. Although France was nominally on a bimetallic standard, the gold discoveries in California and Australia caused a rise in general price level and a decline in the price of gold relative to silver. The France then changed to a de facto silver standard, and persuaded Belgium, Switzerland, and Italy to join it in 1865.
The objective was to maintain price stability. Each country defined its currency in terms of a fixed weight of silver . But within few years as a result of the discovery of new silver deposits, this brought those country to returning to a pure gold standard.
Meanwhile in Germany was adopted the Gold standard. And Bismarck after the victory over France in the Franco-Prussian war, adopted a new money of account the gold mark, and established the Reichsbank as its central bank and sole issuing agency.
US was on gold standard from 1879 also if legally he adopt it in 1900.
Russia on Gold standard from 1897 and Japan also adopt it.
International Migration and Investment
In addition to the freer movement of commodities symbolized by the free trade era a great increase in international movement of people and capital, the factors of production other than land, also occurred in XIX century. Some international migration took place within Europe but the most significant movement involved overseas migration. The overwhelming majority went to countries with abundant land(The US, Latin America).
Some of the emigrants eventually returned to their natives countries, but the vast majority remained overseas.
This vast migration had beneficial effects, it relieved population pressures in the countries supplying the emigrants, thus lessening downward pressure on real wages, and it provided the resource-rich, labor-short countries to which they went with a supply of willing workers at wage higher than they could have obtained in their native lands. It promoted the integration of international economy.
In general the resources available for investment abroad resulted from tremendous increase in wealth and income generated by the application of new technologies. But unlike domestic investment, foreign investment requires special source of funds generated by foreign trade and payments. Broadly speaking there are two main categories of fund(gold or foreign exchange) that can be used for international investments: those arising from export balance of commodity trade and those arising from "invisible" exports as shipping services, earnings from international banking and insurance, emigrant remittance, and the interests and dividends on previous foreign investments. The main motive for foreign investment is the expectation on the part of the investor of a higher rate of return abroad than at home.
The mechanism for foreign investment consist of host of institutional arrangements for transferring funds from one country to another: markets for foreign exchange, stock and bond markets, central banks, private and joint-stock investment banks, brokers, and many others.

Great Britain largest foreign investor before 1914. This situation existed even though for most of the century Britain had so-called unfavorable balance of trade, that is, it imported goods of a greter value than it exported. Thus, for Britain, the sources of its foreign investments consisted almost entirely of invisible exports.
France was the second largest foreign investor.

The revival of western capitalism
The vast continent of Asia and Africa participated only minimally in the commercial expansion of the XIX century until forced to do so by the military might of the West. Although parts of Asia, notably India and Indonesia, had been open to European influence and conquest since the beginning of the XVI century much the continent remained in isolation.
Africa
Cape colony, at the southern tip of Africa , had been settled by Dutch.in the mid of XVII century but British captured it during the Napoleonic Wars. British policies as abolition of slavery and efforts to ensure more humane treatment for natives, angered the Boers or Afrikaaners.
At first both Boer and British settlement were primarily agrarian, but in 1867 the discovery of diamonds led to a great influx of treasure seekers from all over the world. In 1886 gold was discovered in Transvaal. These event completely altered the economic bases of the colonies and intensified political rivalries.
French conquered and annexed a huge , thinly populated territory which they christened French west Africa. 1881 they establish a protectorate in Tunesia and over the larger part of Marocco.
The opening of the Suez canal by a French company in 1869 revolutionized world commerce. Great Britain did not partecipated in building the canal and actually opposed to it. But once it was opened it became a cardinal tenet of British foreign policy to seek control over both it and its approaches in order to prevent them from falling into the hands of an unfriendly foreign power.
This purpose was fortuitously favored by the financial difficulties of the Khedive of Egypt. This financial stringency enabled Benjamin Disraeli, the British prime minister, to purchase on behalf of the British government the khendive's shares in the canal company at the end of 1875.
At Fashoda in 1898 rival French and British forces faced one another with sabers drawn, but hasty negotiations in London and Paris prevented hostilities. French withdrew opening the way for British rule in what became known as the Anglo-Egyptian Sudan.(Egypt occupation 1882).
Asia
The weakened of the Manchu dynasty, which had ruled over China since the middle of the 17th century. That gave Westerns the opportunity to force their way into the Empire from which they had for so long being excluded. British commercial interest is provided to the initial location for intervention. Chinese tea and silk and silks found a ready market in Europe, but the British traders could offer little in exchange until they discovered that the Chinese had a market taste for opium. The Chinese government forbade its importation, but the trade flourished by means of smugglers and corrupt customs officials. When one honest official at Canton seized and burned a large shipment of Opium in 1839, the British traders demanded retaliation. Those didn't came and then Opium War started in 1838 and ended in 1842 with the dictated Treaty of Nanking . Under it China gave Britain the island of Hong Kong, agreed to open five more ports to trade under consular supervision, establish a uniform 5 percent import tariff, and paid a substantial indemnity. The Opium trade continued.
The ease with which the British prevailed over Chinese encouraged other nations to seek equally favorable treaties, which were accordingly granted. Such a show of weakness by Chinese government provoked demonstration that were both antigovernment and antiforeign and led to the Taiping rebellion(1850-64). Government forces eventually defeated the rebels, but in the meantime the general lawlessness gave western powers another excuse for interventions. In 1857-58 a joint Anglo -French force occupied several principal cities and forced more concessions, in which UD and Russia also participated. Continued humiliation resulted in a final desperate outburst of antiforeign violence known as the Boxer Rebellion (1900-01)"Boxer" was the popular name given to the members of the secret society of harmonious Fists, whose aim was to drive all foreigners from China. The first attempt of British to took Peking failed the second attempt took the capital and exacted further indemnities and concessions.
Explanation of Imperialism * Economic:
“The Highest Stage of Capitalism” (Lenin)
Colonies seen as:
– markets for surplus manufactures? – outlets for growing population?
– outlets for surplus capital
– sources of raw materials * Political
– nationalism
– social Darwinism and the “White man’s burden”
– European statehood and institution-building
– the new religion of science and knowledge, technical progress