New Patterns of Trade
• Objective: Discuss and analyze the creation of colonies in
the Americas and elsewhere and how this led to the
exchange of new types of goods, the establishment of new
patterns of trade, and new economic systems in Europe.
• Key Terms and People: Columbian Exchange, mercantilism,
balance of trade, subsidies, capitalism, joint-stock
companies
• Guiding Questions: 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?
Columbian Exchange
The Columbian Exchange
• Exploration and colonization led to global
changes. Contact between Native Americans and
Colonists led to the widespread exchange of
plants, animals, and diseases called the
Columbian Exchange.
• Before exploration, Europeans had never known
foods like potatoes, corn, sweet potatoes, or
turkeys. Peoples in the Americas had not known
coffee, oranges, rice, wheat, sheep, or cattle.
Columbian Exchange
• Over time, crops native to the Americas, such as corn and
potatoes, became staples in the diets of people in the
world. Even traditional cuisines changed because of the
Columbian Exchange. Imagine Italian food without
tomatoes?
• New foods were not the only benefit that resulted from the
Columbian Exchange. The introduction of beasts of burden,
to the Americas was a significant development. Before
European contact, the only domesticated beast of burden
in the Americas was the llama, which lived only in the
Andes. The introduction of the horse provided people in
the rest of the Americas with a new source of labor and
transportation.
• In addition to the dependence of foreign foods in the New
World, people were exposed to new types of diseases.
Native Americans had no natural resistance to European
diseases such as smallpox, measles, influenza, and malaria
which killed millions of Native Americans.
Mercantilism
Mercantilism
• The founding of colonies and introduction of new
good resulted in significant changes in Europe.
Europeans developed a new type of economic policy
called mercantilism. The basic principle of mercantilism
was that a nation’s strength depended on its wealth.
• A wealthy nation could build a strong military to
protect itself and expand its influence.
• Mercantilists believed that there was a fixed amount of
wealth in the world. As a result, mercantilism led to
intense competition between nations for wealth during
the 1500s and 1600s.
Balance of Trade
Balance of Trade
• Mercantilists believed that a nation could
build wealth in two ways. Extract gold and
silver from mines, or it could sell more goods
than it bought from other countries.
• From a mercantilists point of view, having
more exports than imports a country gains
powers and weakens the economy of
competing nations.
Subsidies
Balance of Trade
• In order to achieve a favorable balance of trade a
country could place high tariffs on goods from
other nations.
• Another approach to achieve a favorable balance
of trade was to encourage that exports could sell
at high prices. Manufactured item sold for higher
prices than raw materials.
• To encourage investment and manufacturing,
governments provided subsidies, or grants of
money, to help people start business or new
industry.
Colonies
• European powers wanted to establish colonies in
order to have control over raw materials and the
manufacturing of these materials.
• Mercantilists thought viewed colonies as a
resource that exists only to benefit the home
country.
• In order to ensure that colonies benefitted only
the home country, monarchs restricted activities
in the colonies. Raw materials from the colonies
could not be sold to any other nation. In addition,
goods could not be bought or sold from other
nations.
Impact on Society
• As business activities increased so did
European towns and cities.
• A wealthy class of merchants rose to power in
European cities.
• Although people gained wealth in urban
areas, most people and people in rural areas
remained poor.
Capitalism
Capitalism Emerges
• In capitalism, most economic activities are run by
private individuals and organizations. The sole
purpose of capitalism is to make as much profit
as possible.
• During the time of exploration, individuals as well
as companies, began to amass great wealth
through overseas trade.
• Merchants supplies colonists with goods from
Europe, and in return brought back products and
raw materials from the Americas.
Joint-stock company
A New Business Organization
• Often, overseas ventures were too expensive for individual
investors. Investors began to pool their money together
into a joint stock company.
• In a joint stock company investors bought shares of stock in
a company. If the company makes a profit, each
shareholder received their portion of the profit, based on
the number of shares owned. If the company loses money,
then the investors only lose their initial investment.
• The first joint stock company is the British East India
Company, founded to import spices from Asia. Often, joint
stock companies were created to split the large cost of
running a colony. The Virginia Company of London
established the British colony at Jamestown, Virginia.
Wrap Up
• 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?
Plantations
Triangular Trade
Middle Passage
Olaudah Equiano
African Diaspora