Between the 16th and 18th centuries, major developments associated with economic growth had taken place across Europe in response to the emergence of a burgeoning overseas trade network. These trends became the foundation for the birth of modern capitalism. Previous medieval trade and commercial arrangements were too restrained by the guild system, remained local in orientation and adhered to inadequate financial procedures to handle the distance, scope, and scale of a growing world-wide economy. Fierce competition resulted in the creation of new communities across the Atlantic as the British, Dutch, and French gained a toehold in North America and the Caribbean and European ships dominated international trade and commerce. A complex hierarchy and trade network sent European manufacturers to Africa for slaves, who in turn were taken to the Caribbean and North America as a source of labor. Raw materials from the New World traveled to Europe and were exchanged for its manufactured goods that colonial subjects desired to acquire. The importance of the colonies cannot be underestimated. For example, colonial exports from Great Britain increased nine times in the period 1699 to 1774; French exports to its West Indies and North American colonies increased eight times in the 1700s. Colonial exports also represented the close economic relationship with Europe. Moreover, as the British textile industry blossomed in the early stages of the Industrial Revolution, American cotton exports to Great Britain outpaced its former main suppliers of India and Asia. These large-scale trade arrangements, often referred to as the Atlantic System, stimulated a major commercial revolution in Europe and resulted in a large accumulation of capital. Profits from these overseas ventures flowed into European agricultural development, mining, and the manufacturing enterprises in the early stage of the Industrial Revolution. In response, private interests experimented with new ideas in business, commerce, and technology and in many instances joined forces with governments to develop more complex and less constrained economic arrangements to increase profits, reduce risk, and sustain growth.
These trends included the breakdown of old family arrangements and its replacement with new organizations, fresh approaches in legal systems, adoption of new business practices and standards such as banking procedures, bills of exchange, a guarantee of insurance, and more sophisticated tax collection. In many cases, former family kinship business arrangements shifted to the idea of a firm around which individual working lives revolved and separated private family property and business interests. In the legal arena, Europe witnessed the emergence of sophisticated commercial law and court systems specifically designated to adjudicate disputes in trade and commerce. In the case of Great Britain, by the late 18th century this trend had resulted in the recognition that even foreign merchants should be provided a fair and impartial hearing in British courts.7 In 1694, the Bank of
England was founded with an initial capital of 1.2 million pounds. Following the previous developments of the creation of a stock exchange in London in the 1660s and the establishment of rates of exchange for European countries, the Bank of England developed innovative financial instruments and facilitated the creation of a number of new regional or country banks over the next century. The growth of the banking system was a critical component in marshalling capital resources across the nation and stimulating private investment in transportation and new industrial infrastructure. The Bank of England, in the minds of some scholars, became an extension of the British constitution because it brought together men of property with the government—men who as members of the political system now also served as the watchdogs of government borrowing. Thus, wealthy and political interests joined forces in ways never before possible in the country. Trust between the borrower and the lender was the essential ingredient in the increasing sophisticated financial transactions. As a result there was a reduction in interest rates on bills of exchange or the money lent to the government from the pre-Bank of England rates of 12% to 20% to an average of 8%. In addition, the adoption of bills of exchange reduced the requirement to have huge sums of money on hand to conduct business. These monetary policies stimulated a financial revolution in the early 1700s.8
This practice began to find increasing utility in the growing number of complex international and regional transactions and resulted in the eventual appearance of deposit banking, which operated similarly to the process by which banks facilitate the transfer of large sums of money today. The country banks accumulated a ready money supply for the working capital that could be used by the growing number of entrepreneurs. Finally, Great Britain and the Netherlands became the first nations in northwestern Europe to adopt a more stable and rational system of taxation. By the 17th century, these nations had moved away from the old feudal approach of arbitrary confiscation and had adopted a stronger parliamentary or representative voice in the area of taxation. In fact, the merchant classes dominated the seats in their respective parliaments and thus guided tax policy to improve their respective position regarding wealth and investment. Thus, those men of means who had the ability to accumulate wealth were provided greater security to do so. The creation of a rational tax system meant that these individuals had identifiable collection rates and times and provided them the ability to accumulate wealth to pour back into a variety of investment ventures such as real estate, commerce, or manufacturing enterprises that emerged in the early days of the Industrial Revolution.9
These important trends contributed to the growth of a large consumer-oriented society in the 18th century, one that would only increase in size and consumption levels as the Industrial Revolution progressed. The expansion in population in the 18th century also resulted in the creation of a large number of new family and household arrangements and thus a stimulus for more goods and products. In many cases the former family enterprises began to shift from producing goods that it consumed itself to the production of goods that others might purchase. The ensuing consumer revolution occurred because the desire to acquire such goods and products became a prerogative not only of the wealthy but of all classes of society. It appeared in Great Britain first because the class lines of that nation were more blurred and social mobility was more possible than in other countries of Europe. Furthermore, the growth of literacy and the ability to be influenced by advertising and the printed word made more of an impression at an earlier date in Great Britain. Women and children began to find employment opportunities less tied to agriculture as the economy expanded in the 18th century, and more discretionary income became available. While it is true that necessities continued to dominate purchasing habits, there is evidence that income was increasingly available for the purchase of wants in addition to needs. As one example, the growing number of trade catalogues by the 18th century illustrates the variety of new and improved products from the booming British textile industry. Clothing certainly was a prime commodity, but apparel also stimulated accessory items such as buttons, belts, hats, shoes, handkerchiefs, gloves, etc. Not only did a variety of items appear for the first time, but they also began to be marketed by such distinctions as for women or men and by size, color, etc. In addition, the rise in demand created a corresponding increase in producer goods as manufacturers and businessmen purchased items such as machinery, tools, engines, and other forms of equipment for their firms and enterprises and, as a result, stimulated the growth of associated and subsidiary industries and enterprises. In this regard, the acquisition of producer goods increased the production and quality of consumer goods and also fueled growth in consumer demand.
Another example of the growth of consumerism was the increasing consumption of luxury items such as tobacco, sugar, tea, chocolate, and coffee. In 1660, the American colonies shipped 9 million pounds of tobacco to Europe. That number had risen to 225 million pounds on the eve of the American Revolution. In the last quarter of the 17th century, tobacco imports into Great Britain doubled. Sugar trade imports to France doubled in the years 1698 to 1733. In the 1770s, sugar made up 60% of Great Britain’s imports from the American colonies and nearly half of France’s imports. In the 1670s, almost no tea was imported into Great Britain, but a half century later it was 9 million pounds and by 1750 amounted to 37 million pounds.10 These commodities created an insatiable demand in the European populace and changed social habits and patterns. For example, in the early 1700s England had an estimated 2,000 coffee houses, and within four decades almost every country town boasted at least two coffee houses. The first cafes appeared in Paris at the turn of the 18th century, the first coffee house in Berlin in 1714, and eight Leipzig establishments in 1725. Coffee houses became the local spots for men to gather, smoke, read the latest newspapers, imbibe, and converse on important topics of the day. The public sphere now gained greater visibility and acceptance and attracted the attention of an ever broadening spectrum of society.
World History
