The First Global Economic Systems
Preview
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Main Idea / Reading
Focus
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The Columbian Exchange
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Basic Principles of
Mercantilism
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The Rise of Capitalism
New Patterns of Trade
Main Idea
The creation of colonies in the Americas and elsewhere
led to the exchange of new types of goods, the
establishment of new patterns of trade, and new
economic systems in Europe.
Colony:
A country or area under the full or partial political
control of another country, typically a distant one.
New Colonial Rivals
Colonial Land Claims by 1914
Reading Focus
• How did exploration result in a new exchange of plants and
animals?
• What was mercantilism, and how did it push the drive to
establish colonies?
• How did global trade lead to the rise of capitalism in Europe?
The Columbian Exchange
• Voyages launched large-scale contact between Europe and
Americas.
• Interaction with Native Americans led to sweeping cultural
changes.
• Contact between the two groups led to the widespread
exchange of plants, animals, and disease—the Columbian
Exchange.
The Exchange of Goods
• Plants, animals developed in very different ways in
hemispheres
• Europeans—no potatoes, corn, sweet potatoes, turkeys
• People in Americas—no coffee, oranges, rice, wheat, sheep,
cattle
Beasts of Burden
•The introduction of beasts of burden to the Americas was a
significant development from the Columbian Exchange.
•The introduction of the horse provided people in the Americas
with a new source of labor and transportation.
Effects of the Columbian Exchange
Different Foods
• Exchange of foods, animals had dramatic impact on later societies
• Over time crops native to Americas became staples in diets of Europeans
• Foods provided substantial nutrition, helped people live longer
Economics and Gastronomics
• Activities like Texas cattle ranching, Brazilian coffee growing not possible without
Columbian Exchange; cows, coffee native to Old World
• Traditional cuisines changed because of Columbian Exchange
Italian Food Without Tomatoes?
• Until contact with Americas, Europeans had never tried tomatoes
• Most Europeans thought tomatoes poisonous
• By late 1600s, tomatoes had begun to be included in Italian cookbooks
Effects Widespread
Effects of Columbian Exchange felt not only in
Europe, Americas
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China
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Arrival of easy-to-grow, nutritious corn helped population grow
tremendously
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Also a main consumer of silver mined in Americas
Africa
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Two native crops of Americas—corn, peanuts—still among most
widely grown
Scholars estimate one-third of all food crops grown in world
are of American origin
The Introduction of New Diseases
• Native Americans had no natural resistance to European diseases
• Smallpox, measles, influenza, malaria killed millions
• Population of central Mexico may have decreased by more than 30 percent
in the 10 years following first contact with Europeans
Devastating Impact
• Native American population continued to decline for centuries
• Inca Empire decreased from 13 million in 1492 to 2 million in 1600
• North American population fell from 2 million in 1492 to 500,000 in 1900—
but disease not only factor in decrease of population
• Intermittent warfare, other violence also contributed
Find the Main Idea
Write a paragraph describing the effects of the
Columbian Exchange.
Answer(s): possible answers—changes in cuisine, changes in crops grown around the
world, epidemics
Mercantilism
Bellringer
New Economic Policy
Founding of colonies, new goods in Europe led to
significant changes
1500s, Europeans developed new economic policy,
mercantilism
Balance of trade
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Mercantilists believed there was fixed amount of
wealth in world
Mercantilists believed that the prosperity of a nation
depends on a large supply of gold and silver.
To bring in gold and silver payments, nations tried to
have a favorable balance of trade.
Balance of Trade
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Balance of trade: difference in value between
what a nation imports and what it exports over
time.
When the balance is favorable, the exported
goods are of greater value than the imported
goods.
Intense Competition
•
For one nation to become wealthier, more
powerful—had to take wealth, power away from
another nation
•
Mercantilism led to intense competition between
nations
Does the US have a favorable
balance of trade with China?
Colonies
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Why did European colonization provide a favorable
balance of trade?
Raw materials imported from colonies: not
expensive
Manufactured goods exported: expensive!
VALUE ADDED AT HOME
Summarize
What were the main principles of mercantilism?
Answer(s): nation's strength depended upon its wealth; needed a favorable balance of
trade
The Rise of Capitalism
Increasing trade between Europe and colonies created new business and trade
practices during the 1500s and 1600s. These practices would have a great
impact on the economies of European nations.
Capitalism Emerges
Overseas Trade
Increased Business
Activity
• During this time,
capitalism expanded
• Individuals amassed
great trade fortunes
• Overseas trade made
many merchants rich
• In capitalism, most
economic activity
carried on by private
individuals,
organizations in order
to seek profit
• Merchants supplied
colonists with European
goods
• Wealth enabled them to
invest in more business
ventures
• Returned products, raw
materials
• Business activity in
Europe increased
greatly
Rising Prices
• Investors took risks of investing in overseas trade because of inflation
• Inflation, steady increase in prices
• Demand for goods increased due to growing population, scarcity of goods;
rising demand drove prices higher
Money Supply
• Increase of money supply another factor in higher prices
• Shiploads of gold, silver flowed into Europe from Americas to be made into
new coins
• Over time, increase of money in circulation pushed prices for goods still
higher
A New Business Organization
New Ventures
Joint-Stock Companies
• Overseas business ventures often too
expensive for individual investors
• Investors bought shares of stock in
company
• Investors began pooling money in
joint-stock companies
• If company made profit, each
shareholder received portion
Shares
Financing Colonies
• Profit, loss based on number of
shares owned
• British East India Company, one of
first joint-stock companies
• If company failed, investors lost only
amount invested
• 1600, imported spices from Asia
• Others formed to bear cost of
establishing colonies
Identify Cause and Effect
Why did new business practices develop in
Europe?
Answer(s): because of increasing trade between Europe and its colonies