HIST363: Global Perspectives on Industrialization

The shift from payments in kind, characteristic of the feudal period, to a money economy was one key development. By the late fifteenth century, as regional, national, and international trade continued to blossom, European currencies expanded as well; circulation was more common, widespread, and vital. The early mercantilists recognized the seminal fact of this period. Money was wealth sui generis; it gave its holder the power to obtain other commodities and services. Precious metals, especially gold, were in universal demand as the surest means to obtain other goods and services.

At the same time, the rise of more powerful European states with burgeoning bureaucracies, frequent dynastic wars that required larger and more expensive armies, and more lavish court expenditures exacerbated this fundamental need for money in the form of precious metals. Foreign trade, not domestic trade, was viewed as the preferred method for obtaining bullion, while manufacturing, which provided the goods for such trade, was, in the context of foreign trade, favored over agriculture. However, as mentioned above, agriculture was all-important because it minimized costly imports of foodstuff and, in addition, wealthy farmers provided a strong base for taxation.

 

Mercantilism helped create trade patterns such as the triangular trade in the North Atlantic, in which raw materials were imported to the metropolis and then processed and redistributed to other colonies.

Finally, the discovery of the New World by Columbus in 1492, and the discovery of the sea route to India by Vasco da Gama in 1497–1499, provided fertile ground for obtaining such wealth, while creating an ever greater need for wealth to conquer and protect these colonies and their imperial trade. All of these factors ensured that the rising late medieval and early modern states embraced mercantilism as an economic theory that allowed them to adapt to and seek to exploit these shifting structures.

The importance of the discovery of America (and colonies generally) cannot be stressed enough. New markets and new mines propelled foreign trade to previously inconceivable heights. The latter led to "the great upward movement in prices … and an increase in … the volume of merchant activity itself". Mercantilism focused on how this trade could best aid the states.

Another important change was the introduction of double-entry bookkeeping and modern accounting. This accounting made extremely clear the inflow and outflow of trade, contributing to the close scrutiny given to the balance of trade.

Prior to mercantilism, the most important economic work done in Europe was by the medieval scholastic theorists. The goal of these thinkers was to find an economic system that was compatible with Christian doctrines of piety and justice. They focused mainly on microeconomics and local exchanges between individuals. Mercantilism was closely aligned with other theories and ideas that were replacing the medieval worldview. For example, this period saw the adoption of Niccolò Machiavelli's realpolitik and the primacy of the raison d'état in international relations.