Capitalism+and+Mercantalism

**In the fifteenth and sixteenth centuries, the Spanish and Portuguese voyages of exploration were often government ventures, and both countries tried to restrict overseas trade of their colonies through the use of royal monopolies. Monopoly control was more expensive and inefficient. The Atlantic economy’s success, (in the 17th and 18th centuries) owed much to private investors who were attracted to the profits they could make from established and growing trade and colonial system, but their successful participation with the Atlantic economy was dependent on new institutions and government protection to reduce the chance of catastrophic loss.** **The ability to manage large financial resources through mechanisms labeled as capitalism enabled (along with another European innovation,) private investors to fund the rapid growth of the Atlantic. The expansion of credit and development of large financial institutions, (banks, stock exchanges, and chartered trading companies,) enabled merchants and investors to conduct business while far away from home, reducing risks and increasing profits. Originally developed for business dealings in Europe, the capitalist system expanded overseas, (in the 17th century,) when slow economic growth in Europe led many investors to look for greater profits in the production, and export of colonial products like sugar and tobacco and in satisfying the colonial demand for European products.** **Banks are referred to as a central capitalist institution. By the early seventeenth century, Dutch banks had developed such a reputation for security that individuals and governments from all over Western Europe entrusted them with exponential amounts of money. To make a profit, the banks invested these funds in real estate, local industries, governmental loans, and overseas trade.** **Those who were seeking higher interest rates than the low ones paid by banks could buy shares in a joint-stock company, (a sixteenth century forerunner of the modern corporation.) Stock exchanges were specialized financial markets where shares were purchased and sold. After being founded in 1530, The Amsterdam Exchange became the most successful stock market in the seventeenth and eighteenth centuries. Specialized companies agreed to cover the losses on merchant ships and their cargo, after the merchant(s) bought insurance to reduce oversea trading risks. Because banks and stock market appeared much later in the Iberian world, the rate of economic growth slowed.** **The capitalism of these centuries was supported by mercantilism, and mercantilist policies strongly opposed citizens from trading with foreign merchants and used military force when needed to secure exclusive relations.** **One of the first examples of mercantilist capitalism was that of chartered companies. In 1602, a charter issued by the Netherlands government, gave the Dutch East India Trading Company a legal monopoly over all Dutch trade in the Indian Ocean. This act encourages private investors to purchase company shares, and they were greatly rewarded after the Dutch East India Trading Company captured control of long-distance trade routes in the Indian Ocean from the Portuguese. A sister firm, The Dutch West India Trading Company was chartered in 1621 to engage in the Atlantic Trade, and to gain power over the sugar-producing areas in Brazil as well as African slaving ports from the Portuguese.** **The successes of both companies triggered a trend that other governments urged to charter. A royal charter monopolized all English trade with West Africa to a new Royal African Company,(RAC,) in 1672. The RAC established it’s headquarters at the Cape Coast Castle, (just east of Elmina on the Gold Coast). The French minister of finance, Jean Baptiste Colbert, chartered French East India and French West India Companies to reduce the French colonial dependence on Dutch and English traders.** **To break the trading advantage of the Dutch in the Americas, the French and English governments used military force to pursue commercial dominance. The Dutch West India Company was driven into bankruptcy after restrictions on Dutch access to French and English colonies led to a series of wars with the Netherlands, (between 1652 and 1678). The English and French navies held victory over the Dutch, and forced the company under. Spain was also coerced under militant and diplomatic pressure to grant England and later France monopoly rights to equip their colonies with slaves.** **After the Dutch competition in the Atlantic was reduced, the English and French governments wanted to revoke the monopoly privileges of the companies they chartered. After England ended monopolies, they established trade in Africa to any English subject, and this competition was hoped to have cut the prices for slaves to West Indian planters; prices soon were driven up again by demand.**
 * __Found on pages: 511-513 in your textbook!__**
 * Competition was fostered within a nation’s own citizens with such mercantilist policies excluding foreigners with high tariffs and restrictions. In the 1660’s, England passed a series of Navigation Acts that confined trade with its colonies to English ships and cargoes; the French had similar mercantilist legislation in 1698 called the //Exclusif.// Other mercantilist laws defended manufacturing and processing interests in Europe that was against competition from colonies, imposing prohibitively high taxes on any manufactured goods and refined sugar imported from colonies. **
 * In the eighteenth century, Britain, France, and Portugal’s most pertinent asset in overseas trading, due to mercantilist measures, was the Atlantic. Over one-fifth of the value of total British imports could be accounted for from its West Indian colonies during this period. The French West Indian colonies were playing an even larger role in overseas trade, and only the Dutch, closed out of most of the American trade, finding Asian trade of greater importance. Further economic expansions as well as increased European governmental revenues could be attributed to the profits from the Atlantic economy. **