Note on the historical background for European industrialization. Social organization. Trade in Feudal era. Social norms 9/20/2017

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1 European Feudalism, ca AD Note on the historical background for European industrialization Roman empire weakens after 4 th Century AD plague, decadence, too big and complex.. Infrastructure, law and order decline after Muslim invasions of Spain, North Africa, Persia in 7 th C. Europeans lose access to the Mediterranean and Eastern trade No effective central power remained The dark ages Social organization People now lived on self-sufficient rural estates (called manors ) Work for feudal lords and engage in communal farming Lord gives military, economic protection A manor is the lord s castle plus surrounding villages The Manors do belong to a larger kingdom, but the monarchs are weak They collect some tax revenue and bargain with lords for help in wartime. Manors mostly self-sufficient Social norms Tradition, religion are key Birth decides your status, your job, how you do it, where you live. Cannot trade land, labor, capital for investment peasants tied to land Economic, political, social life tied together Trade in Feudal era Little trade outside the manor Unsafe and costly Peasants too poor to trade much Lords buy armor and luxuries Import special items like salt, tin, copper to the estate 1

2 Cities in Feudalism City rulers, trade guilds control the small cities, strict rules also Prices, wages are regulated Money lending is bad A system geared to preserve the social order, both in country and city. Why restrict economic freedom so much? Why restrict economic freedom? Collective security, predictability preferred over individual freedom and risk-taking - banditry, disease, harvest risk - life hard and unsafe - trade creates dependence - innovation is risky - the lord exploits you but protects you. Why restrict economic freedom? Freedom could also erode power of lords and Church, so they resisted Social hierarchy (kings over lords over peasants/artisans over moneylenders/merchants) and religious hierarchy reinforce each other Philosophy is you play your role in God s plan, take care of God s land, you neither can nor should you try to create progress Decline of Feudalism Feudalism eroded AD - Growth of cities: peasants need the lord less - Lords pressed for money for taxes, armor, luxuries; give up control in exchange for money rents plague, famines, wars, reformation (1500s) erode faith in the old system Mercantilism, ca Monarchs and urban merchants band together to challenge lords, Church - merchants easier to tax than lords, wealth is increasingly in cities, and guns require heavy financial outlays political power is shifting to cities and commerce, early industry and away from landed lords and agriculture By 1500 Monarchs powerful in ex. England, France, Spain, Portugal Rise of competing nation-states in Europe Voyages of discovery, colonization aims to get ahead of competitors - war is costly, partly due to rise of guns 2

3 Rulers and states use the economy and trade to get military and political strength This defines mercantilism Mercantilist economic ideas Internally: promote food, industry, trade, build roads, security Allow new activity, profits, commerce, money lending, trade in land, labor, investment Help economy become strong, independent Grant monopolies loyal to the state Feudalism vs. Mercantilism brief contrast Externally: promote exports, lower imports to get trade surplus Trade surplus gives you gold, power, wealth This idea remains important today Feudal ideas value security and stability: preserve the world as it is Mercantilist ideas are about controlled progress: let the economy grow and progress as long as it stays under the your [state/king/elite] control While heavy regulation still, this is much closer to modern economic freedom/ free markets than feudalism was Role of colonies Get resources, revenues from colonies Monopoly companies loyal to state, ex. Dutch and British West India Companies (Indonesia, India) Control of international trade is a means to power Spain initially lucky, find gold and massive silver deposits in Mexico, Bolivia etc. from 1520 Vasco da Gama opens sea route to Spice Islands for Portuguese early 1500s, but Dutch quickly take control of spice trade 3

4 Sugar and slavery Columbus looks for route to India but fails No gold or silver in North America, not profitable Try cash cropping: tobacco, rice, indigo Sugar (and rum) key in world trade after 1650, Caribben and Brazil Drives large slave imports from West Africa Italian city-states, Ottoman empire declining, Atlantic trade grows bigger than Indian trade Industrial era/capitalism In mercantile era people developed national identity: we English must beat the French before no nations, only tribes or loose tribal alliances National identity unites people New ideas Mercantilist ideas replaced feudal ideas but now themselves being replaced New political ideas (John Locke): - the rights and obligations of people and government should depend on reason, not on birth - all persons have right to individual freedom and property New economic ideas: - free trade and enterprise is good for society: David Ricardo, Adam Smith in England Where do new ideas take root? New ideas appear/most influential where people have most to gain + elite-supported England: advanced, not afraid of being invaded or outcompeted if the state deregulated Powerful landlords like wool exports, do not need peasants anymore - support free trade and labor English merchants, bankers, entrepreneurs also powerful (partly due to Americas trade) and want free markets England s revolution/coup of 1688 leads to Bill of Rights, constraints on monarchy and government 4

5 Netherlands: also strong merchant and banking sectors supporting freer markets England, Holland first to turn mercantilist economy into modern capitalist economy -with economic and later political freedom Elsewhere monarchy/landlords stayed powerful, industry weak, social values conservative, Spain, Portugal, Russia, Austria- Hungary Prussia/Germany begin some reforms after Napolean invades early 1800s, exposing weakness. Marriage of iron and rye Spread of liberal ideas Ideas of individualism, private property, free markets spread from Northwest to Western, later Southern and Eastern Europe And to European colonies and the Americas. But powerful elites hostile to progress remain important some places, ex US South, Latin America Economic history resources US Economic History: Walton, Gary M., and Hugh Rockoff. History of the American economy. Cengage Learning, International economic history: Findlay, Ronald, and Kevin H. O Rourke. Power and plenty: trade, war, and the world economy in the second millennium. Princeton University Press, Hendrik Spruyt: War, Trade, and State Formation, in The Oxford Handbook of Political Science, Robert E. Goodin (ed.), Oxford Univ. Press, New York, Section 2 Industrialization as an Historical Process (click) 5

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