The First Global Economic Systems Preview n Main

The First Global Economic Systems Preview n Main Idea / Reading Focus n The Columbian Exchange n n Basic Principles of Mercantilism The Rise of Capitalism

New Patterns of Trade Main Idea The creation of colonies in the Americas and elsewhere led to the exchange of new types of goods, the establishment of new patterns of trade, and new economic systems in Europe. Colony: A country or area under the full or partial political control of another country, typically a distant one.

New Colonial Rivals

Colonial Land Claims by 1914

Reading Focus • 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?

The Columbian Exchange • Voyages launched large-scale contact between Europe and Americas. • Interaction with Native Americans led to sweeping cultural changes. • Contact between the two groups led to the widespread exchange of plants, animals, and disease—the Columbian Exchange.

The Exchange of Goods • Plants, animals developed in very different ways in hemispheres • Europeans—no potatoes, corn, sweet potatoes, turkeys • People in Americas—no coffee, oranges, rice, wheat, sheep, cattle

Beasts of Burden • The introduction of beasts of burden to the Americas was a significant development from the Columbian Exchange. • The introduction of the horse provided people in the Americas with a new source of labor and transportation.

Effects of the Columbian Exchange Different Foods • Exchange of foods, animals had dramatic impact on later societies • Over time crops native to Americas became staples in diets of Europeans • Foods provided substantial nutrition, helped people live longer Economics and Gastronomics • Activities like Texas cattle ranching, Brazilian coffee growing not possible without Columbian Exchange; cows, coffee native to Old World • Traditional cuisines changed because of Columbian Exchange Italian Food Without Tomatoes? • Until contact with Americas, Europeans had never tried tomatoes • Most Europeans thought tomatoes poisonous • By late 1600 s, tomatoes had begun to be included in Italian cookbooks

Effects Widespread Effects of Columbian Exchange felt not only in Europe, Americas n China n n n Also a main consumer of silver mined in Americas Africa n n Arrival of easy-to-grow, nutritious corn helped population grow tremendously Two native crops of Americas—corn, peanuts—still among most widely grown Scholars estimate one-third of all food crops grown in world are of American origin

The Introduction of New Diseases • Native Americans had no natural resistance to European diseases • Smallpox, measles, influenza, malaria killed millions • Population of central Mexico may have decreased by more than 30 percent in the 10 years following first contact with Europeans Devastating Impact • Native American population continued to decline for centuries • Inca Empire decreased from 13 million in 1492 to 2 million in 1600 • North American population fell from 2 million in 1492 to 500, 000 in 1900— but disease not only factor in decrease of population • Intermittent warfare, other violence also contributed

Find the Main Idea Write a paragraph describing the effects of the Columbian Exchange. Answer(s): possible answers—changes in cuisine, changes in crops grown around the world, epidemics

Mercantilism

Bellringer

New Economic Policy Founding of colonies, new goods in Europe led to significant changes 1500 s, Europeans developed new economic policy, mercantilism

Balance of trade n n n Mercantilists believed there was fixed amount of wealth in world Mercantilists believed that the prosperity of a nation depends on a large supply of gold and silver. To bring in gold and silver payments, nations tried to have a favorable balance of trade.

Balance of Trade n n Balance of trade: difference in value between what a nation imports and what it exports over time. When the balance is favorable, the exported goods are of greater value than the imported goods.

Intense Competition • • For one nation to become wealthier, more powerful —had to take wealth, power away from another nation Mercantilism led to intense competition between nations

Does the US have a favorable balance of trade with China?

Colonies n n Why did European colonization provide a favorable balance of trade? Raw materials imported from colonies: not expensive Manufactured goods exported: expensive! VALUE ADDED AT HOME

Summarize What were the main principles of mercantilism? Answer(s): nation's strength depended upon its wealth; needed a favorable balance of trade

The Rise of Capitalism Increasing trade between Europe and colonies created new business and trade practices during the 1500 s and 1600 s. These practices would have a great impact on the economies of European nations. Capitalism Emerges Overseas Trade Increased Business Activity • During this time, capitalism expanded • Individuals amassed great trade fortunes • Overseas trade many merchants rich • In capitalism, most economic activity carried on by private individuals, organizations in order to seek profit • Merchants supplied colonists with European goods • Wealth enabled them to invest in more business ventures • Returned products, raw materials • Business activity in Europe increased greatly

Rising Prices • Investors took risks of investing in overseas trade because of inflation • Inflation, steady increase in prices • Demand for goods increased due to growing population, scarcity of goods; rising demand drove prices higher Money Supply • Increase of money supply another factor in higher prices • Shiploads of gold, silver flowed into Europe from Americas to be made into new coins • Over time, increase of money in circulation pushed prices for goods still higher

A New Business Organization New Ventures Joint-Stock Companies • Overseas business ventures often too expensive for individual investors • Investors bought shares of stock in company • Investors began pooling money in joint-stock companies • If company made profit, each shareholder received portion Shares Financing Colonies • Profit, loss based on number of shares owned • British East India Company, one of first joint-stock companies • If company failed, investors lost only amount invested • 1600, imported spices from Asia • Others formed to bear cost of establishing colonies

Identify Cause and Effect Why did new business practices develop in Europe? Answer(s): because of increasing trade between Europe and its colonies