Economic Changes

European transoceanic voyages resulted in the integration of the Western Hemisphere within the global trading network. This integration had profound effects on the global economy. Maritime trading empires emerged, led by the Portuguese and followed by the Dutch and the English. As a result, Europeans established trading ports and cities along the coasts of Africa and the Indian Ocean. This brought Europeans into contact—and often into conflict—with existing merchant networks.

One consequence of this contact and conflict was that Europeans came to dominate global trade at the expense of Arab, Indian, and Chinese merchants. Europeans, then, made considerable profits from transporting the goods from one region to another. (Connect: Identify the differences between the Atlantic System and trade on the Indian Ocean. See Topic 2.3.)

Colonies in the Americas In contrast to the trading empires in the Indian Ocean, Spain created an empire in the Americas. Soon Portugal, England, France, and the Netherlands established colonies there. The discovery of large deposits of silver in Spain’s colonies helped further integrate Europeans into the global economy. Asian markets and merchants, especially in China, desired silver. Shipments of silver to Asia from the Americas became a regular feature of the global trade network and helped finance the increasing volume of trade between Asia and Europe. Some experts estimate that the amount of silver in the global economy tripled in the 16th century.

Mercantilism and Capitalism European rulers soon came to see the benefits of encouraging the expansion of trade, as the wealth that could be amassed was considerable. To ensure they participated in wealth accumulation from trade, many European monarchs devised mercantilist economic policies that would provide the ruler with a steady stream of income. While expanded international trade continued to be an important goal of European monarchs, mercantilism eventually gave way to capitalism as the predominant economic system in the new global economy. Investors formed joint-stock companies, also called chartered companies, so they could share the risks and rewards of global trading opportunities.