The Great Discoveries and the development of European trade

Having received the necessary financing from the royal couple in Granada, Columbus later in 1492, on 3 August, sailed from Palos de la Frontera with three ships and arrived at the Bahamas on 12 October.

The Far East had played an important part in the Middle Ages, both as a kind of fairy-tale area of incredible wealth and beauty, including gold and silver, and as the place of origin of attractive merchandise, such as spices. Both the long and costly transport and the near monopoly of Venice and Genoa of this trade made these commodities very expensive and formed an incentive for trying to find an alternative route. When this became a reality in the fifteenth and early sixteenth century, the main explanation must be sought in the gradual development of the ship-building technology from the thirteenth century onwards.⁴¹ The rudder replaced the long oar that had earlier been used for steering the vessel in the northern seas in the thir­teenth century and was later adapted in the Mediterranean. The compass, originally a Chinese invention, was introduced from the end of the century. In the following period until the fifteenth century, the classical sailing ship used for military as well as commercial purposes was created, based on a combination of elements from north­ern and Mediterranean models.

Finally, as we have seen, the ship was large and strong enough to be equipped with cannons, which made it into a floating fortress. On the other hand, it was smaller than the Chinese ship and thus easier to manoeuvre and more difficult to hit with cannons. These warships proved superior to the traditional galleys used in the Mediterranean and gradually replaced them. Thus, the warship that dominated the seas until it was replaced by the steamship of iron in the nineteenth century was fully developed in the fifteenth century; later changes were mainly adjust­ments, including increased size and heavier cannons. The development of studies of astronomy and cartography was also important for the Great Discoveries. Colum­bus’ idea of reaching India from the west was based on such studies but he was wrong about the size of the Earth.

Before Columbus, Portugal was the pioneer in exploring the routes across the Atlantic. Prince Henry, nicknamed the Navigator, although he never personally took part in any expedition, began by sending ships south along the coast of Africa. The initial stimulus was the conquest of Ceuta in North Africa from Aragon in 1415, an end-point on the trade route across the Sahara, which suggested that greater wealth might be found further south. The journeys in the following period led to the discovery or rediscovery of Madeira (1420), the Azores (1427), and the Canary Islands (fourteenth century), the two former uninhabited, while the latter was inhabited by indigenous peoples who were suppressed and largely extermi­nated by the Spaniards after prolonged and bloody wars from 1402 until the end of the century.

The motive for the discoveries was greed. Europe lacked a number of attractive commodities such as gold, silver and spices, and Europeans were fas­cinated by the allegedly fabulous wealth of the East. In the following period, they gained great wealth from the trade in spices and other valuable com­modities from the East and from gold and silver from America. Mines were opened and the native population was forced to work in them, under terrible conditions. When this labour force eventually proved insufficient because of high mortality, partly due to the work itself and partly to the new diseases the Europeans brought to America, slaves were imported from Africa, a trade that became very lucrative. In addition to the metals, the cultivation of sugar on large plantations, worked by slaves, was also very profitable.

To a greater extent than the Dutch and the British, the Spaniards introduced government and institutions in the colonies modelled on their homeland. New towns were founded and the previous ones, such as Mexico City, were rebuilt according to Spanish models, with monumental churches, monasteries and uni- versities.⁴² The centres of many Latin American towns are still largely dominated by early modern colonial architecture. A number of religious orders were intro­duced. The Franciscans were particularly important in the beginning but were surpassed by the Jesuits from the second half of the sixteenth century.

America was regularly conquered by the Spaniards. The inhabitants of South America had great empires and densely populated cities, but their military tech­nology was backward compared to that of Europe. They not only lacked firearms but they did not use metals at all and they had no horses or other animals that might have been used to develop a cavalry. The result was that the whole Aztec Empire could be conquered by 630 Spaniards and the Inca Empire by 168, admittedly in both cases aided by far larger numbers of rebels within the empire.⁴⁵ The importance of the latter has often been underestimated; the Europeans would hardly have succeeded without it, but neither would the indigenous peoples have succeeded without the Europeans.

By contrast, the technological difference was less in the East. Here the result was not conquest of large territories but the foundation of smaller colonies serving to transmit the trade to Europe. A mixture of negotiation and violence was used for this purpose. On his second voyage to India, Vasco da Gama bombarded Calicut and mutilated the crews of captured vessels. Later, in 1513, the Portuguese gover­nor in India wrote to the king that all the native ships vanished and even the birds ceased to fly over the water at his coming.⁴⁸ If not the birds, the sailors had cer­tainly learnt their lesson. In both places, the Europeans behaved differently from at home; there was no rule about chivalrous warfare and respect for treaties. The way the Dutch took over the trade on the South Asian Islands is characteristic. They replaced the Asian intermediaries by force and took over the leadership of the production. When this was not possible on the island of Banda in present-day Indonesia, they simply massacred the population, except for a few skilled artisans who were forced to teach them how to work.⁴⁹

The main pattern in Europe from the sixteenth century onwards was the decline of centres along the Baltic and the Mediterranean and the rise of those along the Atlantic. This had both political and economic reasons. Venice was the great loser from the opening of the sea route to the East, as this city had previously controlled the trade from the end of the caravan routes to Europe. Nevertheless, Venice was soon able to compete.

The discovery of America explains the rise of Spain to the leading power of Europe in the sixteenth century but also largely its decline in the following period. The main aim of the Spaniards in America was to find gold and silver, which they succeeded in doing after some disappointment in the beginning. The Spaniards were the earliest colonizers and seemingly took the most profitable colonies. In contrast to the southern part of America, the northern one was not rich in gold and silver and could only to a limited extent be exploited for plantations. The native population consisted of hunters and gatherers and was less numerous than the one further south and in addition warlike and little suited to forced labour. The colonizing powers, England, France, the Dutch Republic and others, had the same aims as the Spaniards, to make the colonies a source of profit for the homeland, but had little possibility to achieve this aim. The colonies were settled by farmers, in many cases, people leaving their native countries for religious reasons, who created their own environment and gave little surplus to their homelands. The different natural conditions go a long way towards explaining the different development of North and South America: capitalism and democracy among the white population of the North in contrast to a white elite of great landowners ruling a large native population in the South. Only Argentina and Chile form exceptions to this pat­tern, showing some resemblance to the North.⁵²

In Spain, colonial trade was a Castilian royal monopoly and strictly controlled.⁵³ Only for short periods of time were foreigners allowed to participate, mainly in the beginning, when capital was needed to develop the resources in America. Arago­nese merchants were also excluded. In 1503, a company for the trade with Amer­ica, the Casa de Contrarian, was set up in Seville, which became the only harbour for trade with America until 1680, when Cadiz took over. Seville thus became extremely wealthy and increased its number of inhabitants from 60,000—70,000 around 1500 to 150,000 by 1588. In practice, due to the risk and difficulties in exploiting the American mines, the Crown rented out its rights over them to pri­vate merchants in return for a proportion of the profit, finally fixed at one-fifth. The Crown’s incomes from America included this rent plus taxes from the con­tinent. In principle, the trade with America ought to have stimulated the Castilian economy, as the exports to America equalled the imports. The colonists, possibly around 118,000 in 1570, wanted familiar goods from home: arms, horses, clothes, grain and wine. Some European crops were introduced to America but they were slow to grow, so a considerable market for European export remained. Never­theless, the demand from the colonies failed to stimulate the Castilian economy. The peasants were too burdened by taxes and rents to be able to exploit the new opportunities and invest in increased production and the textile industry was of low quality because of lack of skilled workers. The result was that other countries than Spain, notably England and the Dutch Republic, profited from the increased demand in the colonies. Nor was the gold and silver used for investment; it served the government, above all its wars. However, a large amount of gold and silver created inflation, so that the state was constantly in debt despite the regular influx of wealth. In addition, the imports from America, combined with the monopolistic policy of the government, destroyed trade and industry within the country, which had had a revival in the fifteenth and early sixteenth centuries in what is usually regarded as the golden age of Spain, the reign of Ferdinand and Isabella.

The Portuguese colonization differed significantly from the Spanish one. Portu­gal was a smaller country with only around 1.4 million inhabitants whereas Spain had around 8 million.⁵⁴ Although the Portuguese were also settled in America, in Brazil, their most important colonies were in the Far East. After the discovery of the sea route to India, they quickly established settlements and fortifications in order to control the essential trade routes. Their main strategic points were Malacca, on the narrow sound between Thailand and Sumatra, Goa, on the wes­tern coast of India, and Ormuz, at the mouth of the Persian Gulf, which, together with some other harbours and fortresses along the way to Europe, secured the shipping of valuable spices from the East. Later, the Portuguese also managed to extend their trade links to China, where they established a colony at Macao, and for a period also to Japan. However, they had no chance of becoming the domi­nant power in the East; they were one of several actors in the lucrative trade in the area. In Brazil, they behaved in a similar way to the Spaniards, establishing planta­tions worked by slaves, partly indigenous people and partly people imported from Africa. Economically, however, Brazil was less attractive than the main Spanish colonies in America, so the settlements here were relatively small. Like the Spa­niards, the Portuguese were also engaged in the spread of Christianity to the New World, mostly in contrast to the Protestant powers. In particular, the Jesuits were important in this and contributed to the fact that the Portuguese were less unpopular with the indigenous population than the Dutch and the British.

Despite being surpassed financially by the Dutch and the British, the Spanish kept their American Empire until the colonies made themselves independent in the early nineteenth century. By contrast, most of the Portuguese possessions in the East were lost to the Dutch in the seventeenth century. The global expansion of the Dutch Republic had started in the 1590s, during the war of independence against Spain.⁵⁵ As early as in 1600, there were more merchants from the Dutch Republic in the Far East than from any other nation. Amsterdam eventually became the leading centre of trade in Europe, surpassing the cities in the South, as well as the German and Italian ones. The number of its inhabitants increased from 30,000 in 1570 to 60,000 in 1600 and 140,000 in 1647. In the first phase, the reason for this was partly the great number of Protestant merchants who had left the areas under Spanish rule. The Dutch Republic became the main European power in the Far East, with Batavia (= Jakarta) on Java as the main centre. Some­what later, with the conquest of Curasao from Spain in 1634, they established colonies in America and participated in the transatlantic trade, including the slave trade. In addition, Dutch trade expanded in the Baltic area and in Russia; Dutch merchants sailed to Russia both across the Baltic Sea and along the northern route via Norway.

The trade between the Baltic area and Western Europe was largely taken over by the Dutch, while the Hanseatic towns declined. The change in Dutch trade was not only quantitative but also qualitative; there was a shift from the traditional bulk-carrying traffic in grain, timber, salt and fish to ‘rich trade’ in luxury goods. The former trade continued, but did not expand greatly, whereas there was a great expansion in the latter, which gave far greater profit. The Dutch Republic also became an important centre of production of textiles, brickwork and pottery, of tobacco processing and sugar refining, breweries and distilleries, shipbuilding and sawmilling. Finally, agriculture there was more efficient than in the rest of Europe, with some exception for England, and produced significantly larger crops, which made it possible to manage with less than 50 per cent of the population working on the land, whereas the corresponding figure in most other countries was 80 per cent or more. The fisheries were also of considerable importance; the Dutch caught fish inland, along the coast and on the great seas, the North Sea banks, around Spitsbergen, Greenland, Newfoundland and Novaja Semlja where they also caught whales. In the mid-seventeenth century, the Dutch Republic was the greatest shipping nation in Europe, with a merchant fleet of around 2,000 vessels.

England had begun its overseas expansion in the late fifteenth century, when the Venetian Giovanni Caboto (English: John Cabot) in the service of Henry VII explored North America in 1497.56 Later, during the conflict with Spain, English pirates attacked Spanish ships in America and the Atlantic. As a late arrival in America, however, England in the beginning had to confine itself to North America, although it later succeeded in gaining colonies in the far more lucrative Caribbean. The English East India Company was founded in 1600, two years before its Dutch counterpart, but was for a long time was of less importance. During most of the seventeenth century, the Dutch Republic was a more impor­tant colonial power than England.

Both the Dutch and the English also had colonies similar to the Spanish ones, in the West Indies and in East Asia. The plantations, slave trade and the treatment of the local population were largely similar to that of the Spanish colonies, but the role of the state was different. The Dutch and British companies were essentially trading companies. As the use of military power, against the native population as well as against competing Europeans, was an essential part of the colonial expansion, a state monopoly combined with warships and troops was necessary, but was strictly a means to an end, to make profit for the shareholders. Costly investments in war and fortifications were avoided as much as possible. In this way, the companies could expand their wealth and activities, while the profit from their trade increased the wealth of their countries. In addition to the big companies for colonial trade, joint­stock companies, particularly for overseas trade, became more common and made it possible for passive partners with capital to invest in business.⁵⁷ Consequently, Eng­land — from 1707, Great Britain — and the Dutch Republic increased their wealth through the colonies whereas Spain was actually impoverished. Both the former countries followed the examples of the Venetians and Genoese, conquering territory to the extent that it was necessary for trade and production of merchandise, not to build large empires.⁵⁸

The conquests of colonies overseas and the profit from trade and production there contributed to increasing the wealth of the Dutch and other colonial powers. However, this is not the whole explanation for the ‘European Miracle’ in the early modern period; trade and production within Europe were of far greater impor­tance. Thus, in the 1650s, the Dutch exports to other European countries amounted to 115 million guilders and the one outside Europe to 5 million. The corresponding numbers for imports are 140 and 15 million. The percentage for extra-European trade increased in the eighteenth century but was still far less than the European one. Only in Britain did colonial trade, with 49 per cent, equal the European one by this time; the corresponding percentage for France is 38 and for the Dutch Republic 20.⁵⁹ Finally, the expansion of Dutch trade made Amsterdam the financial centre of Europe. This meant that it was not only the leading trading city internationally, but also a centre for credit, negotiations and information about markets and prices.

However, the period of the Dutch Republic as the centre of the European economy was of short duration; the decline had already begun towards the end of the seventeenth century. A series of factors contributed to this, including the strain resulting from the great power status of the republic which led to a series of costly wars and competition from Britain, which had greater natural resources and became the leading maritime and commercial power in the eighteenth century. There is also a natural tendency for merchant elites to become less bold and dynamic as the result of greater wealth. Finally, the many partners in the great Dutch trading network began to develop their own shipping, in which they were aided by the English Navigation Act of 1651, which decreed that all maritime transport to the British Isles should be carried either on British ships or ships from the country of origin.