Boriana Handjiyska 10.29.2000

European Economic History

Professor Chris Magee

 

Reasons for the European Economic Success until the 1750’s

 

 

There are two ways of defining economic success: relative to the rest of the world, and in itself. Relatively, I will compare Europe with India, China and the Muslim Near East and North Africa. In itself, I will mark the organization of Europe in the 1750’s as a success and I will describe everything that led to it as a reason for the European economic success.  The two perspectives are mutually related: the period around the 1750’s is considered a success because of the superiority of the European economy at that time relative to the other countries[1].

 

At the beginning of the second half of the Middle Ages Europe was not a leading power. China, India, East Asia and the Muslims of the Middle East and North Africa were at least as developed as Europe was at the time. Between 960 A.D. and 1127 A.D. China underwent a period of economic success, founded upon rapid extension of rice cultivation and a large-scale increase of both local and long-distance trade. Such growth, often compared to that of 15^th century Europe, had never happened before in Chinese, some dare say, world history. “China became the leading society in the world in terms of productivity per capita” [Curtin, 1986][2].

 

Around 1000 A.D. several other Asian empires emerged: the Chola empire of South India, the Khmer empire of Cambodia, and the Champa empire in Vietnam. This emergence was concurrent with a change in the structure of trade: while earlier merchants had shipped their goods directly from the place of production to the place of consumption, after 1000 A.D. commercial centers, so called emporia, appeared, which led to the exercise of re-export, and an increase in the volume of trade. In this context the Chola empire of South India experienced an expansion in the early eleventh century A.D. [Rothermund, 1988]. 

 

The Muslim merchants with center Baghdad also were proliferating, as Thousand and One Nights, a famous compilation of children’s fairytales suggests through the depiction of the Muslim wealth and thriftiness [Lopez and Raymond, 1961]. Historians talk about a “Muslim monopoly” over the Indian Ocean trade [Curtin, 1986].

 

Thus, in the beginning of the Middle Ages Europe was not the only player. It was not even among the flourishing ones. By the year 1750, however, she became the most prosperous, prestigious, and prodigious continent where one could choose to live, it was the continent where the Industrial Revolution was about to happen. Was it circumstances or her inherent superiority that predestined her taking up the lead?[3]

 

 

Factors that influenced the pace of history in the advantage of Europe are favorable geography, climate in particular, propensity towards innovation, religious dynamics, internal and external migrations which contributed to the spread of knowledge and ideas, the discovery and colonization of the New World, the dissolution of feudalism and manorialism, the consequent rise of nationalism and mercantilism, and the expansion of trade, manufacturing and agriculture.

           

 

Landes’ argument of cold climate being superior to hot one[4] is invalid for both empirical and theoretical reasons. Empirically, there were times when dominant nations occupied hot regions: e.g. India, the Muslim empire; the first cradles of civilizations appeared in hot areas: Egypt, Shumerus and Akad, the Roman Empire. On the other hand China has a temperate climate (and other advantages) but was not dominant in the 1750s. Theoretically: humans are flexible and adaptive beings. They either get used to a situation, or they correct it. Indians were never inefficient because of heat. Of what Landes accuses them in his chapter “Why not India [accommodate the Industrial Revolution]?” is that they were not receptive to inventions, but he did not state idleness as a reason for it. In human history there are numerous examples of adjustment of habits and corrections of natural phenomena that human beings undertook: In France and Spain everything closes up between 1:00 and 4:00 so people avoid working at the hottest part of the day, but still work an 8-hour day: 8:00-1:00 and 4:00-7:00; the Low Countries had land under the sea level but they managed to protect it from disappearing and made gardens out of it. Climate can only be a short-term factor that slows temporarily the development of a nation, but it cannot be a long-term obstacle to the growth of a country. “It would be a mistake to see geography as destiny” [Landes, 1999]. However, favorable climate with its beneficial effect on soil fertility, did give a head start to the European development.

           

Propensity towards inventions is a characteristic of a nation that is changeable. Whether a nation is receptive towards innovation depends on its tradition, habit and culture, that is to say it is acquired and not inborn[5]. What happened to Europe after the fall of the Roman Empire? Europe entered a period of regression. The organized structure that she had developed during the history of the Roman Empire, fell apart, and in the beginning of the Middle Ages she had to start to organize herself from scratch. She began with the feudal system – a fall back into a lack of organization. Who would have told at that period of time that the star of Europe would shine again 1000 years later? In the beginning of the Middle Ages Europe had little to lose and a lot to gain from any act of initiative or aggressiveness that she performed. While the Indians and Muslims were controlled by their cannons, the Northmen were in their blossom, and they robbed, raided and invaded within all of Europe. But “the Northmen far surpassed other peoples in their daring and in their technique of navigation on the seas… It is to the Northmen that we owe the rise of commercial activities in northwestern Europe in the ninth and tenth centuries.” [Barnes, 1937] While the Indians and the Chinese were happy with the slow but sure growth of their economies [the Indians, for example, succeeded in their trade in the Indian Ocean, but it was the Europeans, who initiated the long-distance trade], the Europeans had the ambition of at least reviving their previous prosperity “The dream of Rome reborn never died” [Landes, p.34]. Ambition for growth and dominance is a good in itself. Getting into the habit of having such ambition is the greatest luck Europe had. A more recent example of the vice of having wealth with no ambition is 17^th century Spain. She was rich and because of that she had no incentive to develop her industries. “Spain… became (or stayed) poor because she had too much money. The nations that did the work learned and kept good habits, while seeking new ways to do the job faster and better.” [Landes, p.173] “There was too much parasitism, too many people whose ambition was to be parasites” [in reference to 17^th century Spain, Davis, 1973 p.155] It was not Spain’s incapability or the lack of qualities of her nation, but the lack of stimulus that compelled her to misery after centuries-long luxurious life. In the same way it was not India’s or China’s inferiority that inhibited them from dominating the world economy. In the 11^th century both India and China were in a period of success. Thus, the ambition of their rulers was to maintain their status rather than to improve[6]. Maintaining requires less risk taking, discourages from financing of innovative experiments, and makes novelties and unprecedented innovations dubious and unnecessary. “Society is a prisoner of practices passed on from generation to generation and altered only with difficulty.” [Duby, 1979] The propensity towards inventions was a reason for the European Economic success, but it was dictated by circumstances, not by an inherent quality. It was a temporary feature of Europe[7], not a long-lasting determinant of the European populace[8].  

 

Religion in itself was by no means a reason for the European economic success. “…Few realize that perhaps the richest and most highly developed of all civilizations during the medieval period was one that grew up under the auspices of an alien religion, namely, Mohammedanism, or as it is more correctly called, Islam.” [Barnes, 1937 p. 111] “It is, in fact, hardly accurate to identify Christendom with the West and Islam with the East, at a time when Asia Minor was still a Christian land and Spain and Portugal and Sicily were the home of flourishing Moslem culture.” [Dawson, The Making of Europe, 1932] The fact that Christianity was successful in 1735 does not certify its rightness or superiority: paganism was dominant but vanished; Islam was dominant but diminished in power.

 

What fostered economic success in Europe was the dynamics within Christianity. Christianity was not a unitary religion. In the beginning of 16^th century Protestantism emerged, with its most influential branch: Calvinism. Protestantism did give a push towards a desire for profits as opposed to wealth because of its notion of predeterminism, which implied that whether one is chosen by the Lord or not, is to be seen by one’s prosperity in the earthly life. An observation was made that most scientists in a French university were protestant despite the fact that France is Catholic, because Protestantism was more approving of science. Catholicism was actually against a lot of innovations and scientific discoveries, since they threatened its authority in attaching explanations to world phenomena. Worth mentioning are the mechanic clocks and the rotation of the Earth – the first deprived the Church of its influence on its subjects’ daily routine, and the second, they thought, contradicted the idea of egocentrism and Holiness of the Earth created by the Almighty.

 

An economically positive side of Christianity was its missionary impulse. Christians traveled all around the world to preach and spread the Gospel thus initiating cultural and intellectual exchange from both sides. The Crusades (1095-1291) are the most significant example for that: as a consequence of them the western world became better acquainted with the Muslim habits and achievements, and made use of the ones they considered worthy of appropriation. The Crusades also contributed to the development of trading relations between the East and the West.

 

Another positive phenomenon is that at a certain point the religious and the secular authorities in Europe split, so that the main decision making unit was not governed by religious laws and was not concerned primarily with the benefit of the church. In the Muslim world this was not the case and there the religious and the secular were unified in one ruling body, giving a bias of all decisions towards the mosque.

 

Religious conflicts were a usual occurrence and as much as they might have been unwelcome by individuals and rulers, they were economically of benefit. They caused migrations of people within Europe, for example from Spain (Catholic) to Netherlands (Protestant), which contributed to diffusion of knowledge and spread of religious and non-religious trends. India and China did not have those internal dynamics of the populace, so necessary for the spread of ideas.

 

Feudalism saw its dissolution in the period 1350 –1450. Feudalism was a stage in the evolution of the political and economic situation in Europe characterized by protection of the helpless members of society, and their exploitation by the noble class for economic and military purposes. In the middle of 14^th century nationalism emerged as an alternative way of organization. Parallel to this process occurred the substitution of manorialism with mercantilism. The manorial system could no longer fulfill the needs of the people and in particular could not sustain the trend towards urbanization. The creation of towns required both agricultural and industrial surpluses: the former to allow the concentration of people in towns, the latter to permit capital accumulation and reinvestment in industry. With the self-sufficiency of the manor large-scale surpluses were hardly possible. Mercantilism, on the other hand, encouraged specialization, which in turn led to surpluses. The main change, however, was in the goal of the national ethic. For first time the increase of wealth became the main aim of the rulers as well as of the individuals. There were four ways of pursuing this goal on the national scale: restrict imports through tariffs and quotas, encourage domestic output, encourage exports through subsidies, and encourage direct flow of gold from the colonies.  Other positive effects of mercantilism were that it encouraged the building of infrastructure such as roads, schools, and harbors; it developed currency as a standard unit of transaction, eliminating the confusion over multiple types of coins with different values; it encouraged the development of financial institutions and new business techniques; it led to the increase of the power and importance of the merchant class.

 

With the development of nationalism and mercantilism by the 16^th century Europe acquired strong and centralized national governments and experienced a commercial expansion. The organization of the European countries gained the first features of capitalism, like a caterpillar in its early stage of being a butterfly.

 

In 1492 Columbus discovered America, named after Amerigo Vespucci – the first to explore the inland of the new world. The discovery of the new world added another dimension to the prosperity of Europe. Natural resources, land, and new types of vegetation and animals[9] enriched the European countries. Large inflows of gold entered Spain and England, and through them – the rest of the countries. Significant number of people moved from Europe to the new land and alleviated Europe’s hardships caused by her population increase. As the colonies expanded they constituted both a place where production was growing thus benefiting the crown, as well as a territory with a huge demand for the European exports. Trade proliferated and blossomed.

 

On the background of an evolving mercantilist system, and the expansion of the European markets, improvements in navigation and shipbuilding led to the Commercial revolution. It was characterized with a great increase in the volume of trade. A controversial reason for the growth of the Atlantic trading system was slavery. According to Williams slave labor was crucial to both the increase of trade and to the development of the Industrial Revolution (He suggests that otherwise the Industrial Revolution might have happened later).

 

The growth in trade led to an unprecedented growth of the manufacturing industry. It also contributed to the Agricultural Revolution characterized with the introduction of more efficient farming organization and techniques. The growth of trade in general augmented the volume of financial transactions and this stimulated the development of the banking system. The first central banks were established: Bank of Amsterdam (1609) and Bank of England (1694).

 

On these premises modern capitalism was initiated. Its first features to evolve were the following: desire for profit, estimation of success and social status in terms of monetary units, the evaluation of goods and services in terms of prices set by bargaining, the accumulation of large monetary resources for investment in business ventures, the existence of a free market for the trade of goods, the presence of a sufficient labor market, a credit system adequate to the needs of the businesses, and a development of the industrial and commercial life [Barnes, 1937]. 

 

 

Relative to the rest of the world Europe succeeded because of her encouragement of invention, propensity for innovation, and religious dynamics within her that helped the spread of innovations, knowledge, and ideas in general. In itself Europe achieved her level of growth in the 1750’s and established the foundations of capitalism because of a chain of developments: the fall of feudalism and manorialism, the consequent rise of nationalism and mercantilism, the discovery and colonization of the new world, the expansions in trade, manufacturing and agriculture. Favorable geography and climate gave her a head start. However, in my opinion her success was contingent, it could have been India or China taking up the lead. The latter did not happen because of circumstances, not because of inherent superiority of the European organization, culture and religion. Europe and the rest of the world were runners with similar capabilities placed at different positions due to circumstances, and in 1750 it was still possible that circumstances would change around. Only our knowledge of what was to happen next allows characterizing the status of Europe in the 1750’s as an absolute success: Europe was about to accomplish the Industrial Revolution, and was about to fully employ the ethic of capitalism whose foundations by that time were already established.

 

 

 

 

 

BIBLIOGRAPHY:

 

 

Landes, David. (1999). Wealth and Poverty of Nations.  New York: W.W. Norton & Company.

Rider, Christine. (1997). Introduction to Economic History. Cincinnati: International Thomson Publishing Company

Barnes, Harry. (1937). An Economic History of the Western World. New York: Harcourt, Brace and Company.

Rothermund, Dietmar. (1988). An Economic History of India. London: Croom Helm.

Curtin, Phillip. (1986). Cross-cultural Trade in History. London: Cambridge University Press.

 Lopez, R. and Raymond, I. (1961). Medieval Trade in the Mediterranean World.  New York: Columbia University Press.

 Davis, Ralph. (1973). The Rise of the Atlantic Economies. New York: Cornell University Press.