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Western economic history
Professor: L. Pluta
December 13 2007
1. Rise and fall of Feudalism.
During the 9th and 10th centuries Europe was no longer under the highly organized
and centralized Roman government. This required them to adopt any institutions that
would work for their situation. They adapted to a moneyless economy with no central
government and a constant threat of armed attack from various groups. There were many
poor landless peasants with a few rich landowners across Europe. These landowners
began to give the peasants fiefs or loans of land with which they could then farm. This
however is not totally correct the rich land owners would actually give the land to knights
who would then delegate it out to peasants who would work the land and give some of
their crops to the knights in payment for the land. The peasants would also work the
feudal lords’ land as a part of their agreement. The knights in this contract, which was
completely verbal, where expected to give military service to the feudal lord when he
called them for it. This was important because the 9th and 10th centaury was a very violent
and uncertain time and if you didn’t have military groups to defend yourself with you
were likely to become a casualty of the many barbarian hordes, such as the Vikings or
Magyars. The peasants for all practical purposes owned the lands which they worked
because they could not be removed from them by the lords or knights, the peasants were
allowed to break up the land to give to their sons or they could inherit the land from their
fathers. The social construction of this society was one in which the aristocracy held the
most power, the king and lords who had the land, and under them was the clergy, who
held the knowledge since they were basically the only literate people of the time, and
then there were the townspeople or burgers, who were laborers and merchants and then
came the serfs. The economics of feudalism were based on Christianity and on policies
that reflected the justice and piety of the church. Policies such as no usury and others that
were designed more towards getting to heaven rather then gaining wealth.
The economic system of the time was as mentioned above a moneyless economy
based on the barter system. This was not completely the case as they needed gold and
silver to trade with Asia for its goods, however the Silk Road which brought spices and
other Asian goods into Europe was closed in 1453 because Constantinople was captured
by the Turks. This created the need to find another route with which to gain Asian goods.
The Ottoman Empire route still remained but the Europeans did not want to deal with non
Christians who raised heavy taxes. These goods were so important because the goods
produced in Europe were no where near as good as those produced in Asia. Portugal was
the first country to find a better route to Asia; Vasco De Gama traveled around the Cape
of Good Hope in 1497 and traveled to India where there were spices and Asian goods for
trade. Other Europeans countries wanted in on this lucrative trade and commissioned
their own explorers to search for a route to Asia and India. They ended up finding north
and South America, of which South America was the most substantial at the time because
it was full of gold. The combination of this newly found wealth of gold and the new
easier trade routes which had been opened created a new merchant class that was growing
very wealthy and powerful from this new found trade. Land ceased to be the key to the
economy and capital became more important as the black death allowed more serfs to
become freemen ( by buying their freedom for the lord or moving to the cities for a year)
because they now had more land with which to work. This led to capital being more
important then land because peasants started paying their lords with money instead of
agricultural surpluses, also called tenant farming. However these payments became
relatively worthless as the South American gold started to come into Europe rapidly
inflating prices causing Lords to look for better ways with which they could make money
from their land since the rents tenants paid were fixed. The lords started enacting
enclosure acts in the Tudor period in order to switch from agriculture to sheep farming
which was more profitable. However in the 17th and 18th century the enclosure acts
became to become acts of parliament, these acts took common woodlands and grazing
lands and made them private lands for the use of rich landowners, often displacing
peasants. During this period the parliament became more powerful then the king because
of the glorious revolution in which the bill of rights was created giving much more power
to the parliament. The royal power to suspend and dispense with law was abolished, and
the crown was forbidden to levy taxation or maintain a standing army in peacetime
without parliamentary consent. This was also the time when Nation states were beginning
to develop from the feudal estates decline. This displacing of peasants and increase in the
demand for capital was the beginning of the mercantilist system.
The development of the printing press in 1453 took power away from the clergy
since they no longer had a monopoly on ideas. This allowed for an economic system to
develop that was not based on the Christian values as feudalism was before. The
protestant reformation was a large part of the changing of ideas within the general public.
This reformation happened because of Martin Luther being unhappy with the way in
which the church was conducting itself, i.e. though indulgences and corrupt clergy
members, and wanted to break away and form his own church. The new ideas that the
Protestants held were very different from that of the Catholics, for instance Protestants
viewed wealth as good while Catholics viewed it as a bad thing “a rich man getting into
heaven is like a camel walking through the eye of a needle”. Protestants also viewed
savings differently then Catholics who believed you shouldn’t save while Protestants
believed you should save and be thrifty. The reformation also took the power from the
church and placed it with the monarch. These changes in ideas furthered the change in the
institutions which led to mercantilism.
2/3. The rise and fall of Mercantilism and the rise of industrial Capitalism.
Mercantilism was the major economic system of the 16th, 17th and 18th centauries.
It was based on the idea that national wealth and power were based on increasing exports
and collecting precious metals in return. It was developed out of feudalism in Europe.
During feudalisms decline feudal estates were being replaced with centralized nation
states as the focus of power. Technological changes in shipping, combined with the
growth of urban centers and the great discoveries of the 15th centaury led to a rapid
increase in international trade. This increased trade created the theories of mercantilism
on how trade could best aid the state. The theories of mercantilism were mainly based on
a zone sum game in which each country tried to best the other in ruthless competition.
The goal was to have a surplus of trade and to amass great stores of precious metals. This
striving for a surplus of trade led the European powers of England, France, and Spain
among others to seek out colonies with which to trade. The colonies would provide their
benefactor states with cheap raw materials and the state would then sell the finished
products from these materials back to the colony for a higher price. The colonies were not
allowed to produce certain manufactured goods or those goods experienced high tariffs
and were not profitable to sell in the colonizing state. This occurred in Indian where the
linens they produced were of a much superior quality to the English linens as well as
cheaper. The English created high tariffs restricting the import of these linens and are said
to have cut off the thumbs of many Indian weavers. Mercantilist policy was based on
creating a strong manufacturing industry along with a strong agriculture since importing
agriculture was also seen as bad. Mercantilist manufacturing was based on guilds that
controlled their entire industry, such as alchemists or weavers or blacksmiths. No one was
allowed to operate outside of these guilds as they were highly regulated. The guilds
however we still based on cottage type of industry called the putting out system in which
raw materials were sent to decentralized skilled workers who created the finished product
from start to finish then sent the finished product back to the merchants.
The fall of mercantilism happened because of technical and theoretical
innovations. These innovations also signaled the start of industrial capitalism. The
changes in technology such as the spinning jenny, power loam, and steam engine which
came into use in the textile industry in 1830, allowed a new class called capitalists to
centralize workers under one roof increasing productivity immensely. These capitalists
could do this because textile work was no longer a skilled job, with a power loam one
child could watch two loams at the same time, which replaced the work of 15 weavers.
The deskilling of work and new machines allowed the capitalists to make enormous
profits, all they needed was to invest in the machines. The bringing together of workers
under one roof, with their labor deskilled into small simple tasks, and the use of machines
for production was the beginning of industrial capitalism. The theoretical frame work for
industrial capitalism was put forth by Adam Smith’s lassie faire economics. The people of
the 17th and 18th centuries realized that unregulated industries grew much faster and
became much more efficient then regulated ones. The guild system was being
overthrown. This led to the theory of lassie faire economic in which the government takes
a hands off approach to the economy. Unlike the mercantilist system where the
government is setting tariffs and granting monopolies the new industrial capitalism
economy is based on limited government involvement and competition.
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