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THE WORLD ECONOMY

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  1. THE WORLD ECONOMY EXCHANGES, CAPTIALISM, COLONIALISM, AND EMPIRE BUILDING

  2. CHINESE RECONNAISSANCE • Ming China • Expel Mongols, reestablish traditional Chinese institutions • Reestablish Chinese tributary system; reestablish East Asian trade • Resurrects Chinese fleet • 2nd Ming Emperor seizes control from nephew • Nephew flees abroad • Emperor sends fleet to find nephew, reestablish Chinese influence, trade, tribute • The Chinese reconnaissance of the Indian Ocean basin • Zheng He's expeditions • Ming emperor permitted foreigners to trade at Quanzhou and Guangzhou • Refurbished the navy and sent seven large expeditions to the Indian Ocean basin • Purposes: to control foreign trade and impress foreign peoples • Admiral Zheng He's ships were the largest marine crafts in the world • Visited southeast Asia, India, Ceylon, Arabia, and east Africa • Chinese naval power • Zheng He's voyages diplomatic: exchanged gifts, envoys • Used force to impress foreign powers, for example, against coastal pirates • Expeditions enhanced Chinese reputation in the Indian Ocean basin • End of the voyages, 1433 • Confucian ministers mistrusted foreign alliances • Resources redirected to agriculture and defense of northern borders • Technology of building large ships was forgotten, nautical charts destroyed

  3. EUROPEAN EXPLORATION • European exploration in the Atlantic and Indian Oceans • Portuguese exploration • European goals: to expand Christianity and commercial opportunities • Portuguese mariners emerged as the early leaders • Prince Henry of Portugal determined to increase Portuguese influence • Seized Moroccan city of Ceuta in 1415 • Colonization of the Atlantic Islands • Portuguese ventured into the Atlantic, colonized Madeiras, Azores, other islands • Italian investors, Portuguese landowners cultivated sugarcane on the islands • Slave trade expanded fifteenth century • Portuguese traders ventured down west coast of Africa • Traded guns, textiles for gold and slaves • Thousands of slaves delivered to Atlantic island plantations • Indian Ocean trade • Portuguese searched for sea route to Asian markets without Muslim intermediaries • Portuguese mariners dominated trade between Europe and Asia, sixteenth century • Portuguese ships with cannons launched European imperialism in Asia • Christopher Columbus hoped to reach Asia by sailing west • Plan rejected by Portuguese king but sponsored by king and queen of Spain • 1492, led three ships to the Caribbean Sea, believed he was near Japan • Other mariners soon followed Columbus and explored American continents

  4. MOTIVES FOR EXPLORATION • Portugal searched for fresh resources • Resource poor country block from expanding on land • 13th to 15th century they ventured out onto Atlantic • Established sugar plantations in Azores, Madiera • Direct trade without Muslim intermediaries • Bypass Italian trade monopolies with Ottomans • Asian spice trade • African gold, ivory, and slaves • Missionary efforts of European Christians • Christians urged to spread the faith throughout the world • Crusades and holy wars against Muslims in early centuries • Reconquista of Spain inspired Iberian crusaders • Motives • Gold, glory, God • Combined and reinforced each other

  5. INFLUENCE OF TECHNOLOGY • New technologies help Europeans travel offshore • Sternpost rudder • Two types of sails • New types of ships • Advance, sail against wind • Navigational instruments • Magnetic compass • Astrolabe (and cross and back staffs) • Knowledge of winds and currents • Enabled Europeans to travel reliably • Trade winds north and south of the equator • Regular monsoons in Indian Ocean basin • The volta do mar

  6. VOYAGES OF EXPLORATION • Henrique, King of Portugal • Encouraged exploration of west Africa • Portuguese conquered Ceuta in north Africa in 1415 • Established trading posts at Sao Jorge da Mina, west Africa • Dias rounded the Cape of Good Hope, entered Indian Ocean, 1488 • Vasco da Gama of Portugal • Crossed Indian Ocean; reached India, 1497 • Brought back huge profit • Portuguese merchants built a trading post at Calicut, 1500 • Christopher Columbus, Genoese mariner • Proposed sailing to Asian markets by a western route • Sponsored by Catholic kings of Spain; sailed to Bahamas in 1492 • Columbus's voyage inspired others • England, France, Holland begin to explore • Spain, Portugal sent out more expeditions, conquistadors

  7. OTHER VOYAGES • Ferdinand Magellan, Portuguese navigator, in service of Spain • Crossed both the Atlantic and Pacific Oceans 1519-1522 • One ship out of five completed the circumnavigation of the world • Magellan died in conflict in a Philippine island on the way home • Exploration of the Pacific took three centuries to complete • Trade route between the Philippines and Mexico, by Spanish merchants • Other European mariners searched for a northwest passage from Europe to Asia • The English, French, Dutch • France: Explored Northern North America, Settled Canada, exploited furs • English • Atlantic seaboard of North America, Hudson Bay area • English East India Company opened Indian Ocean to English trade • Dutch • Tended to prey on Spanish, Portuguese existing holdings • Won independence from Spain, seized control on much of Indian Ocean • Dutch East India company established to exploit Indian possessions • By 18TH century, Europeans had accurate knowledge of the world

  8. GLOBAL EXCHANGES • Biological exchanges between Old and New Worlds • Columbian Exchange • Global diffusion of plants, food crops, animals, human populations, diseases • Columbus's voyages began and explorations furthered exchange • All continents effected • Permanently altered the earth's environment • Epidemic diseases • Smallpox, measles, diphtheria, whooping cough, and influenza • Led to staggering population losses • Smallpox reduced Aztec population by 95 percent in one century • Contagious diseases had same horrifying effects in the Pacific islands • Between 1500/1800, 100 million people died of imported diseases • New foods and domestic animals • Wheat, horses, cattle, sheep, goats, and chickens went to Americas • American crops included maize, potatoes, beans, tomatoes, peppers, peanuts • Growth of world population: from 425 million in 1500 to 900 million in 1800 • Migration of human populations • Enslaved Africans were largest group of migrants from 1500 to 1800 • Sizable migration from Europe to the Americas

  9. ORIGINS OF EUROPEAN TRADE • European intermediaries • Comparative Advantage • Country can do many things but it will excel in some over others • Countries develop trade based on comparative advantage • Advantage is based on where the nation has greatest advantage • Concentrate economic resources in that area • European advantage was to act as middle men and shipping for others • Absolute Advantage • One country has natural advantage in producing certain goods, services • Absolute advantage is often a natural monopoly • Asians produced spices, goods, which Europeans could not • Europeans began by trading with silver, gold • European establish monopolies • Europeans establish chock points at areas where all trade had to pass • Seized lands where spices grown, destroy competition, create monopoly • Transoceanic trade • European merchants created global trading system • Based on supply and demand; linked ports of the world • Manila galleons • Heavily armed ships sailed between Manila, Mexico • Asian luxury goods to Mexico; Silver from Mexico to China • East Asia became dependent on American silver

  10. WORLD TRADE • Terms of Trade • Agreements on what will be exchanged • Agreements on payments, amounts to be exchanged • Bilateral is when two nations negotiate equally • Europeans had to negotiate with China, Japan, Muslims, Russia (too powerful) • Only allowed to trade though one port • Canton (Guangzou) in China • Nagasaki in Japan • Unilateral is when one nation dictates terms of trade • Composition of Trade • Europe and Trade • Europeans traded finished goods, especially manufactured( Guns, cloths) • Europeans purchased unfinished goods to trade (Silver, sugar) • Europeans sought luxuries, spices, slaves, gems, silks, porcelain • World and Trade • Low-cost goods: gold, silver; sugar, spice, tobacco, cotton; slaves • Africa, Latin America became one commodity exporters • E. Europe sold commodities through W. Europe (grains, timber, tar, fish) • E. Asia, S. Asia, S.E. Asia, S.W. Asia: balanced agreements of trade • Balance of Trade • Amount to the profit or loss involved in trade • Europeans had an enormous surplus or positive balance of trade

  11. INTERNATIONAL INEQUALITIES • International Inequality • Center or Core of world trade was Western Europe • Most of world in an unequal relationship to Europe • Most countries did not control own economies • Local trading elites often grew rich trading • Worked with Western Europeans on seas, coasts • Controlled their own interior economies • Most of locals not involved in world economy • Population existed at subsistence level • Contacts limited to coasts, ports • Coercive Labor • Most of world labor was unfree • Slavery differed little from serfdom, caste slavery, peasants • Profits often depended on keeping labor cheap • Europeans often established plantations with cheap labor

  12. WAS THERE A WORLD ECONOMY, c. 1600? • Yes • Western Europe • European Atlantic Seaboard • Colonial possessions in North America, South America • Poland and Russia • Coasts of West, East Africa • Coasts of India, S.E. Asia, E. Asia • Muslim S.W. Asia • No • European areas of Ottoman Empire • Interior of Africa • Interior (steppes, deserts) of Eurasia • Interior of South Asia • Indochina • Australia and New Zealand • Interior of North and South America • Pacific islands of Micronesia, Polynesia, Melanesia

  13. EAST ASIA • Benefited from global trade • Allowed Limited Contacts • Strong government disincentives to trade • Used Chinese navy to keep pirates, Europeans out • Tended towards official isolation • Japan, Korea equally apprehensive • Chinese manufacturing better than Europeans • Tended towards luxury goods • Chinese demanded silver in payment • Not active participants on scale of Europe • China failed to appreciate European threat • Neo-Confucianism clouded understanding • Technology considered beneath Chinese • Profits, trade considered inferior occupations • Japan understood impact of Europeans • Most troubled by European firearms as un-samurai • Eventually limited trade to one yearly ship at Nagasaki • Officially closed Japan until 1854

  14. OTHER PARTS OF WORLD • Muslim World: Mughal India, Ottomans, Safavids • Interested in trade, cooperated to a degree • Allowed small port colonies to arise • External trade often handled by ethnic minorities • Exchanged goods for silver, luxuries, processed goods • Eventually became dependent on European manufactured goods • Internal expansion, development over external trade • Russia • Agricultural economy • More concerned with steppe nomads, internal problems • Not involved until 18th century • Africa • Except for coasts, Cape Colony generally outside world economy • Diseases, climate kept Europeans out of Africa • Contacts limited to coastal states

  15. COLONIAL EXPANSION • The Americas • Spain: Began with control of Caribbean, Invaded Mexico 1521, Peru 1531 • Portugal: Cabral visit coast of Brazil; Treaty of Tordesillas granted Brazil • Colonies developed • By small band land hungry conquistadors, colonial rulers exploit Indians • Only later did formal Iberian rule replace corrupt conquistators • Direct Rule • Colonial administrators sent out from Spain, Portugal • Established agricultural (ranching or plantation) colonies • Colonial societies with Europeans at top created rarely had European majorities • Missionaries sent out to covert Indians • English, French, Dutch create smaller empires on fringes • Caribbean holdings more profitable than North American colonies • Caribbean islands and Southern American colonies • Export sugar, rice, tobacco, cotton, indigo rice • Dominated by slaves, plantations; relied on importation of Africans for labor • Atlantic Seaboard: settler colonies for Europeans (called Neo-Europes) • Land grants made to encourage colonization • European populations surpassed native Indians • European society, economic systems reestablished; mini copies of Western European • Europeans displaced, drove off most Indians and converted land to agriculture

  16. TRADING POST EMPIRES • No attempt to create empires but control trade, wealth • Portuguese built 50+ posts between west Africa and east Asia • Alfonso d'Albuquerque • 16TH century Portuguese commander in Indian Ocean • Seized Hormuz in 1508, Goa in 1510, and Melaka in 1511 • Forced all merchant ships to purchase safe-conduct passes • Portuguese hegemony grew weak by the late sixteenth century • English, Dutch established trading posts in Asian coasts • English in India, the Dutch at Cape Town and Indonesia • Created efficient commercial organization • Joint-stock company • Shares could be bought by anyone with money • % of shares correspond to percentage of profit due • Allowed for larger, richer entities to operate • Limited risk of any one participant to cost of the stock purchased • Privileges, terms often guaranteed by government, which often also owned stock • Insurance • Companies arose which insured ventures • Lloyds of London is the oldest in world • Formation of powerful, profitable joint-stock companies • English East India Company, founded in 1600 • United East India Company (VOC), Dutch, founded in 1602 • Private enterprises, enjoyed government support, little oversight

  17. EUROPEANS IN INDIAN OCEAN • Posts were commercial ventures not areas of colonization • Portuguese controlled area initially • Established ports in India, dominated trade to, from India • Goa was capital for Indian Ocean Portuguese Empire • Conquered Sri Lanka, several other ports with permission of Mughals • Introduced Catholic missionaries to Indian Ocean • Seized port of Malacca on Malay peninsula to do same as in India • Traded with locals for spice • Later conquered parts of Spice Islands • Spanish conquest of the Philippines • Manila, bustling port city, became Spanish capital; Spanish tended to live in cities • Islands divided into plantations to grow sugar • Spanish, Filipinos massacred Chinese merchants • Christianity spread by Dominicans throughout archipelago • Muslim resistance on southern island of Mindanao • Conquest of Java by the Dutch • Began with VOC trading city of Batavia in 1619 • Drove Portuguese out, seized their possessions • Policy: secure VOC monopoly over spice production, trade • Enormous monopoly profit led to prosperity of Netherlands • Forced locals to grow rich, coffee in place of regular crops • English arrive 17th century to attack Portugal, later displaced Dutch • Establish British East India Company • Relied heavily on Royal backing, Royal navy, and acquisition of Indian lands

  18. COMMERICAL RIVALRIES • Global competition and conflict • Dutch forces expelled most Portuguese merchants from southeast Asia • Conflict between English and French merchants over control of India • Began as rivalry with Portuguese • Each side made alliances with local rulers to establish trading rights • Cotton and tea from Ceylon, early eighteenth century • Competition in the Americas among English, French, and Spanish forces • Anglo-Dutch Wars (1640s to 1670s) • English and Dutch fight three wars for control of seas • English win and take New Netherlands (New York); Dutch reduced in world role • War of Spanish Succession (1704-1714) • Hapsburg family has no heirs to Spanish throne • France set to inherit empire; England, Dutch, Austrians oppose • The Seven Years' War (1756-1763) • In Europe: British and Prussia against France, Austria, and Russia • In India: fighting between British and French forces, each with local allies • In the Caribbean: Spanish and French united to limit British expansion • In North America: fights between British and French forces • Outcome of All: British hegemony • British gained control of India, Canada, Florida • Dutch allowed to retain Ceylon, South Africa, Indonesia as English allies • In Europe, Prussian armies held off massive armies of the enemies • War paved the way for the British empire in the nineteenth century • British influence paramount in Latin America

  19. EARLY CAPITALISM • First arose in Italian city-states, Dutch controlled Netherlands • Early capitalism and proto-industrialization • Capitalism is use of capital, money, investments to create industry, profit • Relies on freedom to invest capital in most profitable venture • Relies on minimal government regulation and right of investors to make a profit • The nature of capitalism • Private parties sought to take advantage of free market conditions • Economic decisions by private parties, not by governments or nobility • Forces of supply and demand determined price • Supply and demand • Merchants built efficient transportation and communication networks • New institutions and services: banks, insurance, stock exchanges • Joint-stock companies like EEIC and VOC organized commerce on a new scale • Capitalism actively supported by governments, especially England, Netherlands • Protected rights of private property, upheld contracts, settled disputes • Chartered joint-stock companies authorized to explore, conquer, and colonize distant lands • The putting-out system of seventeenth and eighteenth centuries • Entrepreneurs bypassed guilds, moved production to countryside • Rural labor cheap, cloth production highly profitable • Mercantilism is government supported national capitalism • Nations should not important products from outside its own empire • Goods should be shipped only on national ships • National tariffs, taxes discourage importation, stimulate local production • Economic health reflected in positive balance of trade • Wealth measured in positive amounts of gold, silver earned • All currencies backed by gold, silver

  20. EARLY CAPITALIST SOCIETIES • Mindset about capitalism • Profits and ethics • Medieval theologians saw profit making as selfish and sinful • Renaissance altered concepts of wealth, profit • Reformation • Protestants saw success as vindication of God’s favor • Many Protestants in upper middle class, Protestant states supported capitalism • Population growth and urbanization • Population growth • American food crops improved Europeans' nutrition and diets • Increased resistance to epidemic diseases after the mid-seventeenth century • European population increased from 81 million in 1500 to 180 million in 1800 • Urbanization • Rapid growth of major cities (Paris from 130,000 in 1550 to 500,000 in 1650) • Cities increasingly important as administrative and commercial centers • Social change in early modern Europe • Early capitalism altered rural society • Societies became monetary based and not barter • Improved material standards if grains sold for high profits • Increased financial independence of rural workers • Society would prosper as individuals pursued their own interests • New propertied classes, especially urban middle classes began to appear • Capitalism created problems • Generated deep social strains • Aristocrats, peasants on fixed incomes, payment of wealth in kind hurt • Crime associated with wealth, poverty arose • Massive importation of gold, silver led to massive inflation • The nuclear family strengthened by capitalism • Families more independent economically, socially, and emotionally • Love between men and women, parents and children became more important

  21. EUROPEAN IMPACTS • Western Europe • Commercial impacts • Beginning of Commercial Revolution, Capital Revolution, Price Revolution • Incredible wealth generated • Wealth funds European internal development • New products, foods imported • Diplomatic impacts • European trans-Atlantic empires created • Colonial rivalries • War for colonies • Social Impact • Rise of groups with wealth based on money not land • Rise of cities, urban groups • Commercialization made new products available • Dependence on agriculture reduced • Intellectual Impact • European ideas, religions, philosophies began to spread abroad • Europeans began to borrow foreign ideas if it suited their needs • Contacts with the world challenged traditional European beliefs

  22. NEW WORLD ORDER • All continents eventually connected by trade • American silver, foodstuffs spread throughout world • Terms of trade tend to favor Western Europeans for first time • Commerce generateS wealth which only agriculture had in past • Europeans began to dominate world trade • Increase of unfree labor systems to support commercialization • Rise of Atlantic Slave trade • Spread of serfdom in Russia • Changes in non-European social classes • Non-European landowners in Asia make money from trade, too • Muslim merchants largely replaced by European merchants • Rise of African slave trading states, kings who made great wealth