The Psychology of Limited Wealth

1. The Psychology of Limited Wealth By: Mr. Moore using contributions by Susan Pojer High School of Economics & Finance NYC, NY

2. Why Did Europe Follow The Psychology of Limited Wealth? Changes in population Practices in agriculture and industry The rise of Dutch commercial capitalism The rise of property and privilege Women and the rise of witch hunts The Price Revolution Mercantilism as the economic philosophy of nation-states

3. Stagnation in Europe’s Population • Rise in population till 1590s • Drop in population due to famine and plague • England and Netherlands experienced growth • Population rose again after 1715 • Productive capacity for food increased • A brown rat replaced the black rat – disease was not spread as easily A plague hospital in Vienna – congregating the sick and buried the dead here

4. Practices in Agriculture and Industry: Limited Thinking = Limited Growth • Varying agricultural practices – success in England, France, and the Netherlands; not in Spain • Industry showed regional differentiation - use of the putting out system, with use of semiskilled hand labor • Limited industrial production of heavy industries • Travel hindered by poor roads

5. The Dutch Economy

6. Economic Prosperity Through Trade The Bourse - Jewish refugees helped found it in 1602

7. How Society Defined Limited Wealth and the Social Impact on Europe • A psychological division between “haves” and “have nots” • Wealth meant being able to live extravagantly • Wage laborers seen as much of a drain on economy as paupers • Different definitions for “liberty” and “freedom” than today • “Unprivileged” meant not being able to claim any rights • Repressive laws kept the unprivileged in their place • In this mindset, approximately more than 1.5 million Africans were shipped as slaves to the Americas in the sixteenth and seventeenth centuries

8. The Price Revolution Puts Pressure on Governments Which Follow the Psychology of Limited Wealth • Definition – an inflationary increase in prices on goods while real wages lagged behind • Effects: • Strained government budgets & massive debt • Some governments successfully adapted (i.e. England and the Netherlands), while others suffered (i.e. Spain and France)

9. Mercantilism

10. Characteristics of Mercantilism • “Bullionism”  the economic health of a nation could be measured by the amount of precious metal [gold or silver] which it possessed • Each nation must try to achieve economic self-sufficiency • Thriving agriculture should be carefully encouraged • Sea power was necessary to control foreign markets • Impose internal taxes of all kinds

11. Characteristics of Mercantilism • Colonies would provide captive markets for manufactured goods & sources of raw materials • Trade is a “zero-sum” game • A large population was needed to provide a domestic labor force to people the colonies • Luxury items should be avoided • State action was needed to regulate and enforce all of these economic policies Manufactured goods MotherCountry Colony Raw materials Cheap labor

12. Impact From Mercantilism • Certain groups benefited from mercantilism • Development of French-British Rivalry • Coveted same territory • By eighteenth century, mercantilist assumptions far removed from reality • Colonists of different countries wanted to trade with each other – the “golden age of smugglers”