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CHAPTER THREE Feudalism, Mercantilism and Beyond The political economy of the Middle Ages would gradually change from a traditional economic system based on agriculture to an economy based on markets and capitalism. The forces of exploration, nationalism, imperialism, colonization, and mercantilism would profoundly change the stability and insular nature of feudal society. The shift from the traditional political economy of the Middle Ages to the new political economy occurred over several centuries. This chapter examines the forces which irretrievably altered the political economy of the Middle Ages. A culmination of factors were beyond the control of any king, the Church or any society. New agricultural practices encouraged population growth. The increased food supply supported the expansion of cities as laborers moved from the manors. The Black Death decimated the population of Europe at its height. The Crusades brought back knowledge and an appreciation of science to Europe. A spirit of scientific inquiry grew to challenge feudal conceptions of authority, society and the order of the Universe. The Protestant Reformation ultimately challenged the authority of the Church. The emergence of new political and economic institutions accompanied these changes which redistributed economic and political power in society. The power of the king would grow at the expense of the Church and the feudal lords. New division of classes based on economic status emerged to replace the division based on birth, right and social obligation. In many regards, the shift from feudalism benetted a growing middle class at the expense of landless peasants and manor lords. Catalysts of Change Feudalism was a highly established order of obligations and responsibilities which structured society. The weight of tradition and Church doctrine directed the daily lives of most people. Society was stable; slow to innovate or change. Social class was rigid and education extremely limited. Reading and writing all but vanished from society. Literacy was preserved by the Church, initially by the Benedictine monks in England Changes in the political economy of the Middle Ages took place gradually, though certain events such as the Black Death, had sudden and overwhelming impacts. The development of new agricultural practices, the growth of populations and urbanization, the impact of the Crusades and wider trade, and the decline in Church authority laid the foundation for a new political and economic order. The effects of urbanization, the formation of trading unions and guilds, and the expansion of trade and commerce reduced the insular nature of feudal society and the need for self-sufcient manors. 29 30 Feudalism, Mercantilism. and Beyond Agriculture Agricultural practices in medieval Europe had remained virtually the Same as those at the time of the Roman Empire. Towns and cities were slow to expand because the food supply was inadequate to support them. Gradual changes in farming methods and agricultural technology reduced the importance of self-sufficient manors and encouraged the growth of larger cities. Agricultural and technological innovations produced a larger, more stable and more varied food supply. A three-crop rotation system was substituted for the traditional Roman two-crop rotation system. Under the two crop rotation systems, two elds were planted with crops and a third eld was allowed to lie fallow. The three crop rotation system called for sowing crops in the spring and fall and reduced the length of time land was allowed to lie fallow. This system reduced the depletion of the soil and encouraged greater productivity. The result was a 50 percent increase in land under cultivation. The use of farm animals in agriculture was signicantly expanded with the introduction of the harness and yoke. The traditional method of breaking ground relied on a wooden plow pulled by sling harness by either man or single draft animal. The technique greatly limited the number of acres which they could plow. With the introduction of the harness and yoke, the plow could be pulled directly behind the draft animal without choking it. The technique allowed teams of animals to be linked together. The use of additional draft animals increased the amount of land that they could plow in one day, and reduce in small measure the number of farm workers needed. The effectiveness of farm tools was also improved with the introduction of iron tips and iron implements. The iron tipped wheeled plow substituted for wooden plows on runners. Wooden plows were slow and prone to breakage against buried rocks. The iron tipped wheeled plow was relatively fast and could turn aside some rocks and stones. The addition of iron tips to hoes and axes further increased the productivity of agricultural workers. The introduction of the grain barrow improved the production of grain. The greater production of grain produced several benets. It improved the lives of the peasant farmers who had more to eat. Expanded production supported an increase in the population expanding the supply of labor. Finally, the additional grain supported wider use of draft animals. Advances in agriculture produced an economic surplus. An economic surplus is created when a surplus occurs in excess of immediate consumption needs. By giving up current consumption a society can invest the economic surplus in future growth. Without technological improvements in agriculture, supply could not be increased. Urbanization The economic surplus of food supported an increased population and the growth of nonagricultural production. The manor often became the foundation of a medieval town. Agricultural surpluses indirectly enabled serfs and peasants to escape the traditional fanning life and pursue a trade. Expanding supplies of food encouraged population growth. The population of Western Europe tripled between 1000 AD. and 1300 A.D., much of the growth occurring in cities. In 1000 AD. the population of Western EurOpe was estimated to be between 13 and 15 million. The population would grow to approximately 45-50 million by the beginning of the 14"1 century. Growing economic surpluses combined with the emergence of crafts encouraged trade and the development of urban markets. Permanent markets were established in the center of cities to sell Chapter Three 31 agricultural produce and other goods. Urban and regional specializations generated increasing economic surplus which in turn attracted greater populations to the cities. Some of these early economic specializations are still known today. For example, England remains well known for the production of raw wool and woolen goods, and the Bordeaux region of France is renown for its wines. The junction of individual economic interests and markets in cities and towns led to the development of partnerships to pool capital to purchase goods. The increased availability of capital supported an expansion of trade and commerce, which improved the potential for prot. Commercial interests were promoted by an expanding class of merchants and capitalists. The search for prot and personal material gain substituted for religious obligation. Gold and silver would eventually replace land as the measure of status and wealth. The expansion of trade and the availability of new goods reduced the need for self-sufcient manors. The desire for goods that they could not produce on the manor led manor lords to sell some of their crops for cash. The use of gold and silver for trade undermined the feudal economy and would eventually become the basis for a money economy. The expansion of trade also brought an increased risk of piracy. Several cities in what is now Northern Germany formed the German Hanse, or Hansean'c League in the late 1200's to protect their trading interests against pirates. in High Old German house means \"armed host.\" During the 15th Century, at the height of the Hanseatic League, more than 160 towns were members (Dollinger 1970). Italian cities also formed similar unions to protect their trade interests. The Crusades The Crusades were a dramatic demonstration of the power and inuence of the Medieval Church. In 1095, Pope Urban 11 called for a Crusade to recapture Palestine from the Moslems. The Crusades became series of wars fought between 1096 and 1209. The rst Crusade was successful in wresting control of Palestine from the Muslims, and in establishing four new states: Edessa, Antioch, Tripoli and Jerusalem. The fall of Edessa started the Second Crusade (1147-1149), which was unsuccessful for the crusaders. The fall of Jerusalem initiated the unsuccessful Third Crusade (1189-1192); the Fourth Crusade (12021204) was also unsuccessful. Though the Crusades were unsuccessful in taking back the Holy Lands from the Moslems they had several important impacts on feudal society. First, the Crusades resulted in an expansion of trade between western Europe and the Middle East. The expansion of trade inuenced the growth of towns. Trading companies emerged to take advantage of new markets and goods. Commerce opened feudal society to outside influences. A second impact of the Crusades was the introduction of state taxes. Kings and emperors were forced to levy taxes on their nobles to support the Crusades. The state's power to tax would remain after the end of the Crusades. The ability of the king to tax his nobles ultimately weakened the nobles and placed the king on equal footing with the Church. Third, the Crusaders brought back knowledge of science and mathematics which would eventually challenge the Medieval philosophy of scholasticism. The Black Death Growing urban population centers in Europe created special problems. The lack of clean water, the presence of open sewers and drains, the lack of modern medicine, and the poor personal habits of city 32 Feudalism, Mercantilism, and Beyond residents left urban populations open to disease. The inhabitants of cities were often struck by outbreaks of smallpox and the plague. The Black Death was a plague of Biblical proportions. The Black Death, now known to be the bubonic plague, was brought in the holds of trading ships from Asia. Ships' rats carried disease-ridden eas, which infected humans with their bite. The Black Death raged through Europe in 134850 and killed an estimated third to half the European population. The Black Death would return in cycles over the next century, preventing any population growth. The labor shortage and wages The Black Death created a shortage of labor which would undermine the very structure of feudal society. Without adequate numbers of farm workers, agricultural production fell and famine was widespread. Manor lords were forced to pay their peasants to work on the land in order to have enough labor. This marked a shift from the manorial practice of work week to wage labor. Serfs, paid for their work, in turn had to pay the manor lord a rent to farm the land. The monetarization of feudal dues supported the development of a money economy which undermined the traditional feudal relationships between peasant and lord. As a result of the shortage of labor some landlords sought to impose wage controls which served to increase strife between manors and tenants. The imposition of higher manorial dues often resulted in riots. A notable riot occurred in England in 1381. Wat Tyler led a serf uprising that marched on London and was temporarily successful in ending manorial dues. The Church The decline of the feudal political economy was in part the result of a decline in the power and authority of the Church. The claim of divine authority, the right to confirm the king, and taxing power made the Church a very powerful institution in the Middle Ages. The authority of the Church led to conicts between kings and the Pope. The taxing power of the Church and extensive land holdings created resentment and envy among the kings and nobles. By the eleventh century, the rival powers of the Emperor and Church came into direct conict. In a struggle over who would appoint bishops (clerical lords), Pepe Gregory VII excommunicated Henry IV in 1075. The conict would last two centuries before it was resolved through a number of compromises. In the end, the Pope remained as the recognized head of Western Christendom. Bishops were made responsible to the king for secular affairs and to the Pope for the affairs of the Church. The power and authority of the papacy reached their height in the thirteenth century under Pope Innocent III. He forced the French king to take back his divorced wife and forced the English king to acknowledge himself as a vassal of the pope. The Church forced heretics to conform to the teachings of the Church through imprisonment, torture and death. The Inquisition, a special court to try heretics, was established during the Thirteenth century. But, by the fourteenth century the political power of the Church was increasingly under attack. Both external and internal causes weakened the power and authority of Church. The expansion of commerce and commercial interests weakened the Church's control over economic affairs. The Church was forced to modify its prohibition against usury because many trading companies were engaged in borrowing and loaning money to nance trade. The Black Death also weakened the authority of the Church. Shortages of labor following the Black Death undercut the principles of justum pretiurn and pretium laboris. Chapter Three 33 The struggle for taxes framed much of the fight between Church and state. French monarch Philip IV wanted to tax property owned by the Church. The Pope resisted and in 1305 Philip arranged the election of a French archbishop as the new Pope. Starting in 1307 and continuing for 70 years, the French monarch arranged the appointment of the Pope. All Popes during that time were French and held office in Avignon, France, not Rome. The Great Schism In 1377, a new Pope was appointed who returned to Rome. Following a protracted disagreement with the Roman cardinals, a second Pope was appointed who took up residence in Avignon. This is known as the Great Schism of the Church. To solidify their power, the two Popes offered concessions to the rulers of various countries. The expenses of two Popes required a great increase in papal taxation, which some states tried to prohibit the Church from collecting. Ultimately, higher Church taxes and the coercive manner in which they were collected led many kings and nobles to support the Reformation. The division of papal authority and the levy of higher taxes created divisions which would be difficult to overcome. Public reaction against Church abuses such as the sale of church offices and indulgences signaled the end of the power and authority of the Medieval Church. The Reformation The Protestant Reformation was the final blow to the power of the Church. The Reformation was actually a series of movements against the Roman Church which led to the creation of new churches independent of Rome. The spark which finally ignited the Reformation was the sale of indulgences. By 1500, it was a common practice in the Church to sell indulgences to raise revenues. The faithful purchased indulgences for absolution of their sins. Martin Luther, a German monk in Wittenberg, attacked the sale of indulgences setting off a larger rebellion against the Church. On October 31, 1517, Luther nailed his Ninety-five Theses or arguments against Church abuses to the door of the Wittenberg church. In 1520, Luther was excommunicated from the Church, but he would not renounce his beliefs. The roots of the Reformation lie deeper than the sale of indulgences. Basic to the Reformation was a change in the relationship of the people to the Church and to God. Luther and Calvin, another leader of the Reformation, introduced the concept of a personal relationship with God, with each individual responsible for his own salvation. The Bible, and not Church doctrine, became the foundation for the the Reformation and the Protestant Church. The Reformation was also a protest against high Church taxes and the wealth of the Church. The Church was the largest single land owner in Medieval Europe. The Church appeared more concerned with temporal wealth than salvation. The Reformation initially sought to protect some individual freedoms of worship. Church doctrines against heresy had created many abuses. The Courts of Inquisition, begun in the 13th Century, tried and punished persons who were not Catholics. These courts often practiced torture to extract confessions from so-called heretics. The Church's lack of religious toleration extended to Jews who were often put to death for failing to convert from their beliefs. The fight by Luther to create a new church independent from Rome was taken up by Calvin in Geneva, Switzerland. Through John Knox, a Scottish reformer, Calvinism eventually became the foundation for the Presbyterian church in Scotland. Calvinism was also the basis of the Puritan church in England.34 Feudalism, Mercantilism. and Beyond In England, the Reformation came after a series of steps which weakened the Church. The dissolution of monasteries in the 1530's and sale of clerical manors and properties had eliminated clergy from the English social structure. In 1534, King Henry VIII replaCed the Pope as head of Church of England. The English Reformation also removed the Pope as a recipient of taxes, and diverted clerical taxes and tribute to the King. Taxes began to ow downward from king to support various undertakings. The merchant class welcomed the emergence of Protestantism because it taught that hard work and the accumulation of worldly goods were virtues. The struggle between church and state for supremacy also affected political institutions and thought. The power of the state Under feudalism, the primary political question concerned the nature of the relationship between Church and state. The doctrines of ecclesiastical supremacy and divine right argued that the Church had supreme authority and granted the authority to rule to designated monarchs. Most kings accepted these principles. During the Reformation the principle of ecclesiastical supremacy was refuted, but the divine right of kings to rule remained part of Lutheranism and Calvinism. A signicant impact of the Reformation was the development of doctrines which distinguished between the authority of the state and the Church. Martin Luther made a clear distinction between spiritual and political authority, placing political authority above spiritual authority. However, Luther still saw the state as holy, drawing on the divine right of kings. To preserve his church, Luther was eventually forced to rely on German princes to make his church the state religion. Yet, a state religion was contrary to the fundamental principles of individual freedom of worship advocated by Luther. Like Luther, Calvin saw a distinct separation between church and state. He argued that the primary purpose of the state was to promote religious worship. While Calvin taught that individual had a religious duty to obey the laws of the state, his followers would become identied with modern democracy and liberty. Resistance to the state would become important to secure the existence of the Calvinist Church. Calvinists and their doctrines were frequently oppressed as minorities in different states. Out of this oppression evolved the doctrine that the authority of the state had absolute limits. The collapse of the supreme authority of the Church and the rise of individualism and the power of the state marked the end of feudalism. The immediate effect of the Reformation was to strengthen the authority of the state. The ultimate effect was to irther individual liberty and democracy. Property Rights and the Enclosure Movement A gradual erosion of the peasants' feudal tenant rights and the emergence of private property rights signaled the end of feudalism. The restoration of private property rights signaled the end of the feudal system based on mutual rights and obligations. Beginning in the 13th Century, the enclosure movement reestablished the institutiou of private property. Under the so-called enclosure movement, common lands were gradually enclosed with fences by the manorial lords, converting them to private ownership. This signaled a dramatic change in the traditional economic institutions of feudalism. The movement displaced the peasants from the land, and in the process changed the social relationships between peasant and lord. The enclosure movement resulted in the widespread disenfranchisement of peasants and the loss of tenancy and legal rights. The enclosure movement also struck at the authority of the feudal king as the ultimate owner of property. Chapter Three 35 The enclosure movement would radically change the entire organization of agricultural production. By enclosing common lands and individual plots, more pasture land was made available for sheep which encouraged increased production of wool. In addition, farming was made more efficient by converting separate strips of land into larger holdings. In the end, landless peasants were forced into wage labor, either as farmers or as craft workers, or forced into begging (or worse) in cities and towns. The growth of cottage industries In the search of labors to produce low-cost goods, urban merchants turned to peasants for labor. Merchants took advantage of peasants who had lost their land rights, and avoided the restrictions of the urban guild system. Under this putting-out system, urban merchants bought unfinished wool to be spun and finished by rural workers; workers were paid directly by the merchants. The putting- out system resulted in increased handicraft production, with the increase in the woolen goods production most significant. Combined with the enclosure movement, the putting out system increased the production of woolen textiles. Landless peasants who could not afford land rents and were not part of household craft industry were forced from town to town looking for work. Poor and unemployed, these rural migrants formed the bottom of the economic ladder. They were forced to sell their only resource, their labor, at whatever price it would bring. Handicraft workshops became increasingly centralized during the 16th century. The substitution of centralized production for domestic production had two significant effects. First, it reduced, then eliminated the decentralized putting-out system. Second, the division of labor increased as workers became more specialized in their tasks. Increased factory production would become a basis for the commercial revolution. The New Economic Order: Nationalism, Mercantilism and the Commercial Revolution A new political economy rose from the ashes of feudalism based on nationalism, mercantilism and a commercial revolution. The struggle between church and state during the Reformation left the authority and power of the church greatly diminished and political authority centralized in the hands of the king. The use of general taxation and the creation of standing armies supported the power of the king. The doctrine of state sovereignty strengthened the authority of the king against rival feudal or Church authorities. The Renaissance and its spirit of inquiry challenged traditional concepts of authority. Science and scientific methods challenged the traditional authority of the Church based on revelation. The competition for wealth and power between states encouraged state support of exploration, trade, and colonization. The intellectual foundations of nationalism The concepts of state sovereignty and the absolute power of the monarch were essential to the formation of nation-states. These ideas found early support in the writings in Niccolo Machiavelli (1469-1527), and in the later writings of Thomas Hobbes (1588-1679).36 Feudalism, Mercantilism, and Beyond Machiavelli took an active part in Italian politics. His most important works, The Prince (15 13) and The Discourses, reected his concern with practical politics and not political philosophy. At the time Machiavelli wrote, Italy was divided into small feuding republics and kingdoms. Michiavelli advocated Italian unication to maintain Italian independence against the stronger monarchies of France, Spain and Germany. In The Prince Machiavelli addresses the practical concerns the monarchy and ruling the state. His basic theme is that the powers of the monarchy should be extended. He suggests the interests of the state take precedence over all other considerations: politics is separated from ethics and religion. Machiavelli is concerned with the practical means of gaining and keeping power and not the ethical uses of power. In The Discourses Machiavelli wrote about the importance of the territorial sovereignty of the state. He suggested that a state must expand its territory or perish. Force coercion and state-craft were acceptable to Machiavelli to ensure the continued existence of the state. Machiavelli argues that monarchs were not bound by natural law in the performance of their duties. The primary concern of the king must be the preservation of the state. He substituted the concept of positive law created by the sovereign, for the theory of natural law. Hobbes, writing during the Reformation, sought to establish the authority of the state on rational grounds. Unlike Luther and Calvin, Hobbes challenged the principle of divine right by reintroducing the theory of natural law and social contracts. In The Leviathan (1651), Hobbes suggests that the ordinary life of man in nature (without the protection of the state) is "solitary, poor, nasty, brutish, short." Men are motivated to form social contracts out of self-interest for security and preservation. Political society is created on the basis of these social contracts. In political society, Hobbes argued, the individual willingly gives up all rights to the sovereign to guarantee his security. In this way, Hobbes sought to establish in principle the absolute power of the monarch above the individual. Hobbes suggested that strong monarchs and a strong state were essential to keeping order and preserving peace. Yet, the principles of state sovereignty and strong monarchy advanced by Hobbes provided intellectual support to territorial conquest and expansion by the European states. Imperialism and nationalistic sentiments grew out of competition for trade, commerce and colonies. The commercial revolution The commercial revolution and emergence of capitalism represented the culmination of many economic changes. The introduction of wage labor and the reestablishment of private property rights separated the peasant from the land. The creation of a new supply of labor encouraged the development of new forms of production, including the "putting-out" system and the factory. The commercial revolution was also supported by increased trade. Trade promoted the use of gold and silver for exchange. Standardized currency and the development of a money economy based on gold and silver would follow and were necessary elements of the commercial revolution. The commercial revolution was sustained by the availability of cheap and convenient access to credit. Prots from overseas trade, as well as land rents and higher agricultural prices were invested in productive use rather than consumption. Merchants and traders invested their prots in entrepreneurial ventures seeking to accumulate further prots. Markets A growing economic class composed of merchants and traders emerged in the middle between the peasants and land owners. These merchants and traders sought prot through trade, Chapter Three 37 money lending, and commerce. Markets centralized the economic activities of society. Markets and the competition for prot determined how goods were produced and distributed in society. Credit and nance Commercial credit rst evolved out of Speculative joint ventures. Initially, merchants and traders pooled their resources to invest in single voyages, sharing in the risk and the potential for prots. The practice of pooling nancial resources created credit. The practice became established, growing beyond the original merchants and traders to include more speculative investors. Joint stock companies were organized to sell shares in joint ventures to raise capital. Joint stock companies were the rst example of modern corporations. They were formed when a group of merchants pooled their capital at the request of the state. Mercantilism shielded joint stock companies with monopolies on trade. Holland and England formed the first joint stock companies. The British East India company received its charter from Queen Elizabeth I in 1600. The Dutch East India Company was charted in 1602 by the Dutch government. In 1612, the Dutch East India Company was allowed to sell shares on the Amsterdam stock exchange to raise money to pay investors. This marked the beginning of a stock exchange. At rst, the Dutch East India Company paid for trade with Asia in silver and gold. Asian countries would not accept trade in European manufactured goods. This had the effect of increasing the European demand for gold and silver. The Dutch East India company eventually introduced a new form of exchange between its Asian trading partners. Instead of trading silver for spice, it traded goods between different Asians countries. For example, the company purchased tea in Ceylon which was traded for ivory in Africa; African ivory was traded for silk from China. The creation of joint stock companies encouraged the development of commercial credit. Investors were increasingly willing to pool their resources and risk in return for profit. Soon, commercial credit expanded beyond trade to nance the construction of factories, the purchase of raw materials and new technologies. The expansion of commercial credit forced capitalist to reconsider their relationship with the land and labor. Land, labor and capital were reduced to commodities, purchased and sold by capitalists seeking the lowest price to maximize their profits. Technological change The Industrial Revolution introduced new technology and applied it to manufacturing and industry. Technology was a more important factor in the start and growth of the industrial Revolution than laissezfaire government policies. Through technology, the skills and abilities of labor are leveraged to increase production. Technology may be applied at some relatively low levels of sophistication, such as the application of the wheeled plow in medieval agriculture. Technology may be applied at relatively high levels, such as today' 5 application of robotics 1n complex automobile production lines. In both examples, the increased productivity of labor 15 achieved through the application of technology. The successful application of technology to production results 1n higher levels of production at the same or lower costs. This translates into greater efciency for the manufacturer, and can mean greater satisfaction for the consumer. There is a higher level of supply available to the consumer at all prices. For example, improvements in technology and the use of robotics has resulted in greater production capacities and lower prices in many industries such as personal computers. 38 Feudalism, Mercantilism, and Beyond Synergy The Industrial Revolution was led by the use of technology to improve production. Each of these improvements was singly important, but their synergistic effect was more than the sum of the single inventions. For example, the Industrial Revolution saw signitant improvements made in textile manufacturing. Many improvements were designed to meet a demand which was created by an earlier invention. A change in one part of the textile manufacturing process often led to advancements in another part of the process. For example, the invention of the y shuttle by John Kay (1733) expanded the width of the cotton cloth which could be produced. This increased the demand for cotton yarn. Hargraves invented the spinning jenny in 1764 to meet the demand for more cotton yam. The jenny replaced a single spindle spinning wheel with eight spindles, but the threads produced were not very strong. Stronger threads were made using a new water powered spinning machine called the water frame, invented by Arkwright in 1769. Stronger threads meant that more of the weaving process could be performed by machinery. By 1771, the rst cotton yam factory was in operation. The Cartwright power loom (1785) used the stronger thread to weave cloth. The power loom was used in the rst textile weaving factory established in 1791. The use of technology combined with water and steam power resulted in the explosive growth of the textile industry. We can see another example of the multiplier effect of technological change with the invention of the steam engine. The introduction of the steam engine by James Watt (1769) and its use in industry led to an increase in the demand for coal. The demand for coal in turn stimulated increased coal mining. The steam engine was then used for steam powered drilling machines and water pumps, which permitted higher coal production. The adoption of steam technology expanded the use of steam powered machinery throughout industry. New larger economies of scale were possible in factories. Over time, new, large-scale organizations emerged to manage a production process which was becoming ever more complicated. Larger steam-powered factories were more efcient than small-scale human powered production. The use of steam technology produced an increase in the number of machines and in the size of factories. The introduction of the steam-powered blast furnace in 1790 and a switch from charcoal to coal red furnaces improved the process of iron-smelting. The Catalan forge, the forerunner of blast furnaces, improved metal smelting. Higher quality steel could be produced to replace wood in the production of machinery. The application of these various technologies made many industries more efcient, improved the quality and quantity of output while maintaining or lowering the price of the goods sold. More goods were produced and higher quantities were available at all prices. Economists call this phenomenon a shift in supply. The new technologies increased the amount firms were able to supply at all prices. Resistance to change The other side of technological innovation is not as bright, however. Technology can effectively replace lower skilled or higher priced workers with machinery. Today, as in the past, the jobs of many workers are threatened because new production methods and new technologies reduce the need for workers. During the Industrial Revolution, the introduction of new machinery was often met with violence. As early as 1675, silk weavers in East London rioted and destroyed mechanical looms imported from Holland. A hundred years later in 1779, the loss of thousands of jobs led English weavers in Lancaster to destroy textile machinery. Between 1811 and 1817, the displacement of tens of thousands of traditional weavers in England resulted in sustained violence. Resistance to the new machines was often organized and led by a group known as the Luddites. The Luddites took their name from the legendary Ned Ludd whom they believed to have destroyed textile machines in the 17 80's. The Luddites attempted to destroy Chapter Three 39 textile machines and sought the right to organize and bargain collectively. The industrialists vigorously opposed the demands of the Luddites, who sought help in England's Parliament. In reaction to the destruction and the efforts of Luddites to organize, Parliament enacted the Combinations Acts in 1799-1800. The Combination Acts prohibited workers from organizing for any purpose, and established the death penalty for workers convicted of destroying machinery. Resistance against the advance of new technology would prove futile. Economic institutions were changing and workers had little control over their destiny. Mercantilism A new relationship between the state and the economy called mercantilism supported the growth of commerce, exploration and the establishment of colonies. Through mercantilism, the state created an economic framework to protect domestic industries from foreign competition so that individual capitalism could flourish. Mercantilism was an outgrowth of commercial capitalism. Mercantilism shifted attention outward from domestic agriculture to the development of trade and acquisition of gold bullion. Trade and gold gave kings new sources of revenue to support standing armies, wage war, support the national government, to explore and conquer distant lands and establish colonies. Mercantilism was essential to supporting the national aspirations of the king. Economic and political rivalries between European kings encouraged imperialism. Kings supported exploration and encouraged colonization to develop new sources of revenue. Colonies offered new sources of wealth including gold, slaves, and raw materials, and provided an outlet for the output of domestic industries. The new colonies also offered the possibility of religious conversion for the native population. The political economy of mercantilism The expansion of trade and commerce in the 15th and 16th centuries increased the power of merchants, manufacturers, and commercial interests. These groups assumed an increasingly important role in politics, and were crucial in defining the new relationship of the state to the economy. Under mercantilism power became unified under in the king. An alliance between the state and the economic interests of merchants and some industries was created to protect that power. In this alliance, the desire of kings for wealth and power was combined with the aspirations of merchants for profits. In return for political support from the growing class of merchants, manufacturers and traders, kings developed economic policies which guaranteed their profits. The merging of politics and economics under mercantilism resulted in state control of commerce, trade and colonization. Mercantilism became a driving force behind the creation of the new nation states. State controls and restrictions replaced the customs, regulations and monopolies of the Church and guild. The state promoted trade and industry above agriculture, and foreign trade became more important than domestic trade. Through restrictive tariffs and trade prohibitions, states waged economic war against each other in the belief that the wealth of one country was gained at the expense of another. The export of domestically produced goods was promoted and the import of foreign goods was restricted to improve the balance of trade. To ensure a favorable balance of trade, many states levied import duties or tariffs on foreign goods. State grants of trade monopolies were also given to state charted companies like the Dutch East Indies company, to control trade with the new colonies.40 Feudalism, Mercantilism. and Beyond State intervention in the domestic economy extended to include the adoption of special laws and regulations to protect commercial interests. For example, the English Parliament enacted the Enclosure Acts which permitted the enclosure of feudal lands. The Enclosure Acts had the effect of increasing domestic output of wool and woolens by making additional pastures available. The English Corn Laws regulated the production and price of grains. The Statute of Articers encouraged production by xing wages at a relatively low level. The Poor Laws required all able-bodied persons to engage in productive labor. Elements of mercantilism Mercantilism was never a consistent policy, and varied over time in each country and between countries. Competition between different economic interests, the emergence of industrial capitalism and the development of a middle class affected the extent of mercantilist policies in each country in Western Europe. Several common elements describe meroantilism in a general sense. First, mercantilism was direct government intervention in the economy to increase the power and prosperity of the state. Second, mercantilism was a system of political economy which centralized both economic and political power in the hands of the king. The state attempted to control foreign trade and the domestic economy through various policies. In England, mercantilism meant the state ended internal tolls, tariffs and guild requirements for long apprenticeships; the state also raised import duties on foreign manufactures. These policies benetted the special economic interests of merchants and manufacturers. It is not surprising that mercantilisrn drew its strongest support from these economic interests. Mercantilism supported the ideal of national self-sufficiency: independence from rival states. By producing all the goods needed by its population the state could become selfsufcient. To encourage self~sufciency, mercantilist policies encouraged and supported development of domestic industries and colonial exploitation. High tariffs on imported goods, regulation of labor and wages, and subsidies and guarantees were designed to protect specic domestic industries. Domestic industries also benetted from imperialism and colonization. The colonies provided cheap raw materials for European factories. Though colonies were intended to become new markets for European manufacturers they failed to live up to this expectation. Mercantilism is a form of national paternalism, in which the state assumes responsibility for the success of certain businesses and industries. Bullionism Bullionism was part of the drive for national power. Bullionism argued that national political power and strength was based on the wealth of the state. Bullionism dened national wealth as the amount of gold and silver in the state treasury; gold Was called "bullion" as in "gold bullion.\" Some countries like Spain, pursued exploration for gold at the neglect of domestic industries and trade. Limits of Mercantilism The most powerful nations in Europe were those embarked on the path of mercantilism. The belief that there was only so much gold and silver available led to intense competition between nations, which often resulted in war. Mercantilism also supported the institution of slavery and the exploitation of human beings. Government involvement in the economy, high taxes and abuses of state power eventually led to the emergence of opposition such as the Physiocrats in France and writers such as Adam Smith in England. Smith would argue that it was the productivity of labor, not bullion, that formed the wealth Chapter Three 41 of nations. Countries such as Spain which continued to follow the path of mercantilism blindly would never catch up with countries that favored free-market capitalism. Exploration, colonization and imperialism Exploration and colonization supported nationalism. The decline of overland trade with Asia began with the fall of the Mogul Empire in the 1300's which encouraged exploration for new trade routes with Asia and India. The shift from overland trade to ocean trade with Asia was a fundamental change with profound effects. The new nation states entered an age of exploration and exploitation which continued from the end of the Fifteenth Century through first half of the Sixteenth Century. Spanish and Portuguese sailors explored Africa and started trading in ivory, gold and slaves. The Spanish explorer Christopher Columbus sailed West from Spain seeking a new route to India and found instead the West Indies. Vasso de Gama sailed East around Cape of Good Hope to India in 1497. Spain sought riches in South America: Cortez invaded Mexico and Pizarro invaded the Inca empire in Peru. England explored North America and the Dutch took over the trading route to India from the Portuguese. Exploration led to colonization and imperialism. By 1501, Spain had introduced slave labor from Africa. England, Portugal, Holland and France were major participants in the slave trade, with England the most extensively involved. Between 1686 and 1780, England shipped approximately 2,300,000 slaves to the Americas and like numbers were killed in capture and transit. Overseas colonization provided raw materials for manufacturers of the home country. The nation states encouraged colonization by granting charted companies a monopoly of trade and governing authority in the colonies under their control. The British East India Company monopolized trade in India. The Dutch East India Company received a state monopoly on trade between Holland and the Indies. In the Americas, the London Company and Plymouth Company founded Virginia and Massachusetts as state charted companies. Commerce would shift from the Mediterranean to the Atlantic ports of Western Europe as the expansion of trade shifted from the East Indies to the New World. The Atlantic ports of Cadiz, Lisbon, Antwerp, Amsterdam, Bristol, and London gained in importance as a result. The global economy A global economy evolved out of mercantilism, colonialism, and imperialism. International trade developed as Western Europe began to sell goods to the rest of the world reversing centuries of one-way trade from the East to the West. The development of global trade evolved out of imperialism, colonization, and mercantilism. European advances in technology made global trade possible. Improved naval technology gave European countries military superiority. Improved sails made it possible for ships to "tack" into the wind making ocean trade easier and faster. Detailed maps, the compass, and improved knowledge of wind patterns enabled European explorers, and later traders to navigate the Atlantic and the Pacific. The impact of trade on economic institutions The development of global trade had several impacts, including the creation of new economic institutions. State chartered companies were formed and received monopolies on trade. Stock companies were formed to raise funds from private investors. Banks were founded to lend money to merchants and traders, and received interest for their credit. For example, the English Parliament created the Bank of England to make low-interest loans to industry and merchants.42 Feudalism, Mereantllism, and Beyond State support of industry and trade improved prots, which drew new capital and entrepreneurs into similar ventures. Over time, a growing middle class of capitalist would realize that state support of selected industries ran against their own interests. Capitalists would argt'ae that prot and success should depend on the market, not the benevolence of mercantilist policies. Summing Up This chapter examined the forces of change leading to the decline of feudal political economy and the establishment of a new political economy. As we have seen, feudalism was a transitory economic system, replaced eventually by mercantilism. Mercantilism was also transitory, replaced in turn by capitalism. The emergence of a new political economy based on nationalism, mercantilism and markets produced new patterns of production and distribution in society. The closed, insular societies of the Middle Ages were changed dramatically by the forces of nationalism, monarchy, and competition between states for resources and colonies. The growth of science and trade weakened the old feudal order, and encouraged the growth of a merchant class. The shift from agriculture to industry, the introduction of wage labor and the reestablishment of private property rights signicantly changed social relations and economic institutions. Control of social organizations and the economy was transferred from feudal lords and aristocrats to merchants and traders. Impersonal authority and property rights replaced a feudal order based on reciprocal rights and duties. Market relationships replaced feudal relationships based on tradition and custom. Competition between merchants and labor substituted for medieval regulations which had protected and controlled the production and distribution of wealth. The goal of accumulating personal wealth replaced religious obligation. Gold and silver replaced land as the measure of wealth. A growing middle class composed of merchants and traders sought prot through trade, money lending, and commerce. Nationalism, mercantilism, and commercial capitalism eventually replaced feudalism. Under strong kings, the countries of Europe became increasingly imperialistic, intent on forming empires through colonial exploitation. Gold, slaves, and raw materials taken from the colonies served the needs of the new nationstates. The shift from the feudal system to mercantilism and the emergence of capitalism produced advantages and disadvantages for different economic and political interests. Overall, the middle class benetted at the expense of landless peasants and the landed aristocracy. The power of the king was increased while the power of the Church and feudal lords declined