Curren on Economic History

Compare the world economy of the 16th century and that of the period 1871 – 1914.

The 16th century world would have been unfathomable to those who lived in the period from 1871 to 1914; however, these ages are united by their progressive economies.

Thesis: The alternative novelty and inventions during these times sparked the invigoration that led to increased globalization and a world economy that, though not without their economic problems, boasted an ultimately upward trend.

Novelty and inventions in the 16th century:-

The commercial expansion of the sixteenth century was made easier by new forms of commercial organization, especially the joint-stock trading company.
Joint-Stock trading company
• Individuals bought shares in a company and received dividends on their investment while a board of directors ran the company and made the important business decisions
• The joint-stock company made it easier to raise large amounts of capital for world trading ventures
- Enormous profits were also being made in shipbuilding and in mining and metallurgy, where technological innovations, such as the use of pumps and new methods of extracting metals from ores, proved highly successful
Mercantilism
• The belief that the total volume of trade was unchangeable
• The prosperity of a nation depended on a plentiful supply of bullion (gold and silver)
• It was desirable to achieve a favorable balance of trade in which good exported were of greater value than those imported
• Belief that state intervention in some aspects of the economy was desirable for the sake of the national good
Novelty and inventions from 1871 to 1914:
- In the Second Industrial Revolution, steel, chemicals, electricity, and petroleum led the way to new industrial frontiers
• Substitution of steel for iron
• New methods of rolling and shaping steel made it useful in the construction of lighter, smaller, and faster machines and engines, as well as railways, ships, and armaments
• Electricity was a major new form of energy that proved to be of great value since it could be easily converted into other forms of energy
• Spawned invention of light bulb, telephone, radio, and electric railway
• The development of the internal combustion engine gave rise to the automobile and the airplane
• The desire to own material possessions created a anew consumer ethic that became a crucial part of the modern economy

Increased globalization and a world economy in the 16th century:

- Overseas trade and Colonies: Movement toward Globalization
• With the development of colonies and trading posts in the Americas and the East, Europeans embarked on an adventure in international commerce
• What made transoceanic trade rewarding was not the volume but the value of its goods
• Indies: pepper and spices
• West India and Brazil: sugar
• Asia: coffee and tea
• All becoming readily available to European consumers
Increased globalization and a world economy from 1871 to 1914
- The economic developments of the late nineteenth century, combined with the transportation revolution that saw the growth of marine transport and railroads, also fostered a true world economy
• Foreign countries provided markets for the surplus manufactured goods of Europe; with its capital, industries, and military might, Europe dominated the world economy by the end of the nineteenth century
• Argentina and Australia: beef and wool
• Brazil: coffee
• Chile: nitrates
• Algeria: iron ore
• Java: sugar

Economic setbacks in the 16th century-

Inflation was a major economic problem in the sixteenth century
Inflation
• Price-revolution
• Phenomenon throughout Europe
• Relatively low 2-3%, yet noticeable in a Europe accustomed to stable prices
• As a result of the price-revolution, wages failed to keep up with price increases
• Standard of living dropped for workers
• Landed aristocrats prospered by raising rents
• Some historians regard profit inflation as a valuable stimulus to investment and the growth of capitalism > economic expansion and prosperity of sixteenth century
• Despite inflation, economy of this time was ultimately on an upward trend
Economic setbacks from 1871-1914
- The Second Industrial Revolution played a role in the emergence of basic economic patterns that have characterized much of modern European economic life
• Age of material prosperity
• Yet, recessions and crises were still very much a part of economic life
• 1873-1895, Europeans experienced a series of economic crises
• Prices, especially of agricultural products, fell dramatically
• Slumps in the business cycle reduced profits
• However, from 1895 until WWI, Europe overall experienced an economic boom: la belle époque, a golden age in European civilization