12.3 The Role of Trade and Economic Motivations
8 min read•july 30, 2024
European trade routes to Asia were disrupted by Ottoman control, sparking a search for new sea routes. Portugal led the way, exploring Africa's coast, while Spain sponsored Columbus's westward voyages. These expeditions kickstarted the Age of Exploration.
The spice trade was a major motivator for European exploration. Seeking to break Arab and Venetian monopolies, European powers raced to find direct routes to Asian spice markets. This competition fueled colonial expansion and shaped global trade for centuries.
Trade Routes and European Exploration
Renewed Interest in Sea Routes to Asia
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- In the late 15th century, Europeans sought new sea routes to Asia to bypass overland trade routes controlled by the Ottoman Empire
- The Ottomans imposed high taxes and restrictions on trade passing through their territory, making direct maritime trade with Asia more attractive
Portuguese Exploration of Africa
- Portugal took the lead in seeking an all-water route to Asia by sailing around Africa
- Portuguese explorers like Bartolomeu Dias and Vasco da Gama made steady progress down the West African coast (Gulf of Guinea, Cape of Good Hope)
- Dias rounded the southern tip of Africa in 1488, proving the existence of a potential route to the Indian Ocean
- In 1498, da Gama reached India by sailing around Africa, opening up direct maritime trade with Asia
Columbus and the Spanish Discovery of the Americas
- Christopher Columbus proposed that sailing west across the Atlantic would provide a faster route to Asia than going around Africa
- Columbus made four voyages to the Americas between 1492 and 1504, initiating Spanish colonization of the New World (Hispaniola, Jamaica, Panama)
- Though he never reached Asia, Columbus' voyages marked a major turning point in the Age of Exploration by revealing the existence of the Americas to Europe
Treaty of Tordesillas and the Division of the World
- The 1494 divided the non-European world into two zones of exploration and colonization
- Lands to the east of a meridian 370 leagues west of the Cape Verde islands were assigned to Portugal
- Lands to the west of the line were reserved for Spanish exploration and colonization
- The treaty aimed to settle disputes between Spain and Portugal and avoid conflict over newly discovered territories
- It effectively split the New World between the Iberian powers and spurred a race to claim and colonize new lands
Later European Voyages of Exploration
- In the 16th-17th centuries, other European powers launched their own voyages of exploration to challenge Iberian dominance and find alternate routes to Asia
- The English (Martin Frobisher, Henry Hudson) and French (Jacques Cartier, Samuel de Champlain) sent expeditions to find a Northwest Passage through or around North America
- Dutch explorers (Willem Barentsz, Abel Tasman) sought a Northeast Passage along the Arctic coast of Russia and also explored the Southwest Pacific (New Zealand, Tonga)
- These later voyages expanded European knowledge of world geography and laid the foundations for Dutch, English, and French colonial empires
Spice Trade's Impact on Europe
Value and Uses of Spices in Europe
- Asian like pepper, cinnamon, cloves, and nutmeg were highly prized commodities in Europe
- Spices were used to flavor and preserve food, as well as for medicinal purposes (treating illness, masking spoilage)
- Due to their exotic origins and high demand, spices commanded premium prices and were status symbols among the European elite
Arab and Venetian Control of the Spice Trade
- Prior to direct European trade with Asia, the spice trade was dominated by Muslim Arab and Venetian merchants
- Arab traders transported spices by sea from India and Southeast Asia to the Middle East and North Africa
- Venetian merchants then distributed the spices from ports like Alexandria throughout Europe, often at markups of 1000% or more
- The Arab-Venetian spice trade monopoly kept prices artificially high and enriched the middlemen at the expense of European consumers
Spices as Motivation for European Exploration
- The immense profitability of the spice trade made finding a direct sea route to Asia a top priority for European powers in the Age of Exploration
- Spices were so valuable that they often traded at prices higher than gold by weight, making their potential profits irresistible
- The desire to break the Arab-Venetian monopoly and gain direct access to the source of spices was a key motivator behind the voyages of explorers like da Gama and Columbus
Portuguese Dominance of the Spice Trade
- Portugal's discovery of a route around Africa allowed them to trade directly with Asian spice markets and undercut Venetian prices
- The Portuguese captured key ports like Goa, Malacca, and Ormuz, establishing fortified trading posts to control the spice trade
- By the early 16th century, Portugal had broken the Arab-Venetian monopoly and established its own dominance over the European spice trade
- The resulting wealth and power of Portugal inspired envy and rivalry among the other European powers, who sought to muscle in on the lucrative trade
European Rivalry over Spices
- The success of Portugal in the spice trade soon attracted Dutch, English, and French competitors who wanted a share of the profits
- The Netherlands was an early challenger, with the fighting the Portuguese for control of the Spice Islands in the early 17th century (Dutch-Portuguese War)
- Later in the 17th century, the English and Dutch fought three wars largely over rivalries in the spice trade ()
- Clashes between European powers over the spice trade continued until the 18th-19th centuries, when spices became more widely cultivated and declined in value
Mercantilism and European Expansion
Mercantilist Economic Theory
- was the dominant economic philosophy in early modern Europe, especially the 16th-18th centuries
- Mercantilists believed that global wealth was finite and that a nation's power came from accumulating gold and silver
- They held that the only way for a nation to get richer was to take wealth from others through trade surpluses (exporting more than importing)
Role of Colonies in Mercantilism
- Mercantilist thinkers saw overseas colonies as vital sources of wealth and economic advantage
- Colonies were expected to provide cheap raw materials (sugar, cotton, timber) to the mother country, which could then process them into finished goods
- The colonies also served as captive markets where the mother country could sell its manufactured goods without competition
- Under mercantilism, colonies were discouraged or banned from trading with foreign powers to keep wealth within the empire
Mercantilism as a Driver of European Imperialism
- The mercantilist emphasis on colonies as sources of economic power motivated European nations to establish vast overseas empires
- Mercantilism justified European conquest and exploitation of foreign lands and peoples in the name of national wealth and power
- Colonial policies were shaped by mercantilist ideas like maximizing exports, restricting imports, and extracting wealth from colonial possessions
- Mercantilist thinkers saw imperial expansion as a zero-sum game, where one nation's gain was another's loss
Consequences of Mercantilist Competition
- European powers' mercantilist rivalries often led to wars as they fought for control of trade routes and colonial resources (Anglo-Dutch Wars, )
- Mercantilist policies caused resentment and resistance from colonists who wanted free trade rights (American Revolution)
- In the long run, the mercantilist drive for colonies contributed to imperial overextension and fueled independence movements in Latin America, Asia, and Africa
- Critics argue mercantilism inhibited economic growth with its emphasis on hoarding finite wealth instead of creating new wealth through free trade and industrialization
Economic Competition in the Age of Exploration
Portuguese and Spanish Colonial Monopolies
- In the late 15th-early 16th centuries, Portugal and Spain established the first European trading empires in Africa, Asia, and the Americas
- The 1494 Treaty of Tordesillas divided the world into Portuguese and Spanish spheres of influence, giving them exclusive rights to colonize and exploit those regions
- Portugal monopolized the trade in African slaves, Brazilian sugar, and Asian spices (pepper, cinnamon, cloves)
- Spain controlled the silver mines of Mexico and Peru, as well as the lucrative trans-Pacific galleon trade with China and the Philippines
Dutch Challenges to Portuguese Power
- The Dutch were the first to break the Portuguese monopoly on East Asian trade in the early 17th century
- The Dutch East India Company (VOC) aggressively attacked Portuguese trading posts and ships in India, Sri Lanka, Indonesia, and Taiwan
- The Dutch expelled Portugal from the Spice Islands (Moluccas) and established their own monopoly on nutmeg and cloves
- At its height in the mid-17th century, the VOC was the richest corporation in the world, with over 150 merchant ships, 40 warships, and 50,000 employees
Anglo-Dutch Commercial Rivalry
- The English and Dutch competed fiercely for control of trade routes and colonial markets in the 17th-18th centuries
- The two powers fought three Anglo-Dutch Wars (1652-1674) largely over commercial rivalries in the East Indies, West Africa, and North America
- The English Navigation Acts (1651-1696) aimed to exclude the Dutch from trading with English colonies and carrying English goods
- The English ultimately gained the upper hand, seizing Dutch colonies in the Americas (New Netherland, Suriname) and securing a monopoly on the slave trade through the Royal African Company
Franco-British Colonial Wars
- The 18th century saw a series of wars between Britain and France for colonial dominance, particularly in North America and India
- The War of the Spanish Succession (1701-1714) and War of the Austrian Succession (1740-1748) involved clashes over the lucrative Spanish American trade
- The Seven Years' War (1756-1763) was a global conflict fought in Europe, North America, West Africa, India, and the Philippines
- The British captured key French colonies like Canada, Senegal, and Bengal, establishing themselves as the world's dominant colonial power
- However, the massive war debt would soon lead to tensions with the American colonies and set the stage for the American Revolution
Spanish Treasure Fleets and Privateers
- Spain's wealth in the Age of Exploration depended on the annual treasure fleet (flota) that brought silver from Mexico and Peru to Europe
- This made Spanish ships prime targets for privateers (government-sanctioned pirates) from rival nations who sought to disrupt Spain's economy and enrich themselves
- English privateers like Francis Drake and Henry Morgan became national heroes for their daring raids on Spanish ports and ships (Cadiz, Panama, Portobelo)
- The activities of privateers caused ongoing tensions and warfare between England and Spain throughout the 16th-17th centuries (Anglo-Spanish War, War of Jenkins' Ear)
Endemic European Rivalry and Warfare
- The Age of Exploration was marked by near-constant warfare and competition between European powers for overseas trade and colonial resources
- Mercantilism viewed global wealth and power as a zero-sum game, encouraging nations to seize wealth and territory from rivals
- Colonial conflicts in the Americas, Africa, and Asia often merged with wars on the European continent, making them larger, longer, and more complex
- Competing national trade companies like the Dutch and English East India Companies frequently clashed, leading to government involvement and escalation
- Ultimately, the British emerged as the dominant global empire by the late 18th century, but at the cost of numerous expensive wars with European rivals
Key Terms to Review (21)
Adam Smith: Adam Smith was an 18th-century Scottish economist and philosopher, best known for his work 'The Wealth of Nations,' which laid the foundations for classical economics. He introduced the idea of the 'invisible hand' guiding free markets and emphasized the importance of trade and economic motivations in driving prosperity and growth.
Anglo-Dutch Wars: The Anglo-Dutch Wars were a series of conflicts fought between England and the Dutch Republic during the 17th century, primarily over trade rights and naval supremacy. These wars were largely driven by economic motivations, as both nations sought to control lucrative trade routes and resources, significantly shaping the dynamics of European trade and colonial expansion during this period.
Barter system: The barter system is an ancient form of trade where goods and services are exchanged directly for other goods and services without the use of money. This system relies on mutual agreement regarding the value of items exchanged, which often creates complex networks of trade that were vital for economic interactions in pre-monetary societies.
Colonialism: Colonialism is a practice where a country establishes control over a foreign territory, often by settling its own population there and exploiting the resources and people of that region. This process is marked by the imposition of the colonizer's culture, governance, and economic systems upon the colonized. It has historically led to significant cultural exchanges, trade developments, and technological advancements, as well as profound social and political changes.
Columbian Exchange: The Columbian Exchange refers to the widespread transfer of plants, animals, culture, human populations, technology, diseases, and ideas between the Americas and the Old World following Christopher Columbus's voyages in the late 15th century. This exchange drastically altered both European and Indigenous ways of life, leading to significant cultural and ecological changes on both sides of the Atlantic.
Commercial Revolution: The Commercial Revolution refers to the period of European economic expansion, colonialism, and mercantilism that lasted from the late 11th century to the early 18th century. This era marked a significant shift in trade practices and economic motivations, leading to increased commerce, the rise of a capitalist economy, and the growth of urban centers fueled by trade.
Comparative advantage: Comparative advantage is an economic principle that explains how individuals or nations can gain from trade by specializing in the production of goods and services for which they have a lower opportunity cost. This means that even if one party is more efficient in producing all goods, they can still benefit from trade by focusing on what they do best, allowing for increased overall efficiency and wealth creation.
Dutch East India Company: The Dutch East India Company, established in 1602, was a powerful trading company that played a crucial role in the spice trade and the expansion of Dutch colonial interests in Asia. It is known for being one of the first multinational corporations and for influencing trade dynamics, economic motivations, and colonial policies during its operation.
Feudalism: Feudalism was a social, economic, and political system that dominated medieval Europe from the 9th to the 15th century, characterized by the exchange of land for military service and loyalty. This system structured society into hierarchical classes, created obligations between lords and vassals, and shaped the governance of kingdoms during the Middle Ages.
Hanseatic League: The Hanseatic League was a commercial and defensive confederation of merchant guilds and market towns in Northwestern and Central Europe from the late 12th century to the 17th century. It played a significant role in fostering trade, economic development, and urban growth across the region while also contributing to the decline of feudal structures by promoting a more interconnected economic landscape.
Marco Polo: Marco Polo was a Venetian merchant, traveler, and writer who became famous for his extensive travels to Asia, particularly China, during the late 13th century. His accounts provided a detailed glimpse into the cultures, economies, and trade practices of the regions he visited, influencing European perceptions of the East and fostering interest in trade routes.
Market expansion: Market expansion refers to the process of increasing a company's or an economy's reach into new markets, often by targeting new customers or geographic areas. This concept is closely tied to the growth of trade and economic motivations, as societies seek to enhance their wealth and resources by accessing broader markets for their goods and services.
Mercantilism: Mercantilism is an economic theory and practice that emphasizes the importance of accumulating wealth, primarily through a favorable balance of trade, to increase national power. This system encouraged government intervention in the economy, promoting exports over imports and fostering colonial expansion to secure resources and markets.
Resource acquisition: Resource acquisition refers to the process through which individuals, businesses, or nations obtain the necessary materials and assets needed for production and trade. In the context of historical trade dynamics, this term highlights how various economies sought out and secured vital goods, services, and resources to enhance their wealth and power.
Seven Years' War: The Seven Years' War was a global conflict that lasted from 1756 to 1763, involving most of the great powers of the time, and is often considered the first true world war due to its vast geographic scope. It was primarily fought over colonial and territorial disputes, particularly between Britain and France, leading to significant changes in trade routes and economic power dynamics in Europe and beyond.
Silk Road: The Silk Road was an ancient network of trade routes that connected the East and West, facilitating not only the exchange of goods like silk, spices, and precious metals but also ideas, culture, and technology. This extensive route played a crucial role in linking different civilizations and contributed significantly to cultural exchanges and economic development during the medieval period.
Spices: Spices are aromatic substances derived from plants, including seeds, roots, bark, and fruits, used for flavoring, preserving food, and medicinal purposes. Their demand in Europe during the Middle Ages spurred extensive trade networks and influenced economic motivations, particularly during the era of the Crusades, leading to significant cultural exchanges between Europe and the Middle East.
Tariff: A tariff is a tax imposed by a government on imported or exported goods, intended to regulate trade between countries. Tariffs can influence economic motivations by affecting the price and demand for foreign products, thereby shaping the dynamics of international trade. They can also serve as a source of revenue for governments and a tool for protecting domestic industries from foreign competition.
Trade embargo: A trade embargo is a government-imposed restriction that prohibits trade with a specific country or the exchange of specific products. This measure is often used as a political tool to exert pressure on a nation, promote compliance with international law, or respond to violations of human rights. Trade embargoes can have significant economic impacts, affecting not only the targeted nation but also the countries imposing the embargo.
Trade surplus: A trade surplus occurs when a country exports more goods and services than it imports, resulting in a positive balance of trade. This situation can indicate strong economic health and competitiveness in the global market, as it shows that domestic industries are able to produce more than they consume from foreign producers.
Treaty of Tordesillas: The Treaty of Tordesillas was an agreement made in 1494 between Spain and Portugal that divided newly discovered lands outside Europe between the two countries along a meridian 370 leagues west of the Cape Verde islands. This treaty aimed to resolve conflicts over newly explored territories and established a line of demarcation that influenced European colonization and interactions with indigenous populations.