The pattern of continuities amid change that characterized agriculture and production
in Europe in the seventeenth and eighteenth centuries also extended to
commerce and banking. Many merchants continued to operate through family
fi rms and hired associates, while others developed new forms of business organization,
including commissioned agents who took a percentage of whatever deal
they negotiated but were not permanent employees. There were few international
laws that applied to business matters, so merchants had to rely on their agents to
be both effective and trustworthy. Commercial agents guarded their reputations
carefully; deceit or open theft might provide a profi t in the short run, but could
ruin an agent’s chances of gaining future contracts. Advice manuals for merchants
and would-be merchants include long discussions of honor, honesty, and reliability
along with practical concerns, for access to credit or to partners depended as much
on reputation as on skill.
Local and national laws regarding personal or business bankruptcy, which were
fi rst issued in the sixteenth century, also viewed commerce as a moral issue of honor
and trust. They couched bankruptcy in terms of fraud, rather than simply bad decisions
or mismanagement. An English bankruptcy law of 1571, for example, spoke
about merchants who “craftily obtaining into their hands great substance of other
men’s goods, do suddenly fl ee to parts unknown,” or use the money obtained on credit
“for their own pleasure and delicate living, against all reason, equity, and good conscience.”
Such laws did not prevent waves of bankruptcies, however, often precipitated
by government defaults on loans, especially in Spain and France; lenders to these governments
generally had little recourse when this happened, although the 1575 Spanish
bankruptcy led Genoese bankers – the major creditors of the Spanish throne – to
suspend all commercial credit to Spain. This suspension meant Spain could not pay its
army, and in frustration soldiers sacked the city of Antwerp, sharpening the revolt of
the Netherlands against Spain. The Spanish crown did get its Genoese bankers to agree
to terms several years later, but they in turn called in other loans, and a series of business
and personal bankruptcies resulted.
Private and public fi nance were interwoven in banks as well as bankruptcies. In the
fi fteenth and sixteenth centuries the most important banks were private international
merchant banks such as those run by various families in Florence and by the Fuggers
of Augsburg. Their practice of extending large loans and keeping only some of their
money on reserve led to frequent bank failures, and some cities, including Barcelona,
Genoa, and Naples, responded by opening public banks. In 1609, Amsterdam opened
the Wisselbank, a public bank that gained a monopoly of major transactions in gold
and silver, took in deposits, and loaned money to the government and to the large
Dutch trading companies. During the seventeenth century in London, goldsmiths began
operating as deposit banks, keeping coinage and valuables for the government
and private fi rms and issuing deposit receipts; in 1694 they were joined in this function
by the Bank of England, a public institution. Northern merchants in Antwerp,
Amsterdam, Hamburg, and London gradually transformed receipts of deposit into
more fl exible fi scal devices; depositors could assign them to others instead of having to
redeem them themselves, so that they grew into modern banknotes. Such notes were
not always backed up by adequate deposits, however; in 1664, the Bank of Stockholm
failed when too many depositors demanded coinage, and in 1720 a similar scenario led
to a bank collapse in France. This left many people in France distrustful of banks, and
a central public bank was not founded there until 1800.
Along with banks, stock exchanges slowly evolved out of less formal arrangements.
Like any other commodity, stock – shares in a private or public enterprise that can be
bought and sold easily – requires sellers and buyers. The earliest sellers were Italian
city-states, who sold shares in the public debt to wealthy merchants and nobles. (These
shares were similar to the bonds sold by municipal and national governments today;
the buyers did not become owners the way they would if they had purchased stock,
but creditors whose investment the cities promised to pay back with interest at a later
date.) In 1602, merchants in various cities in the Netherlands joined together to form
the Dutch East India Company, and offered shares to individuals who wished to invest
in its overseas ventures. Specialists who bought and sold these shares began to meet at
the Bourse in Amsterdam, the general wholesale market for all types of commodities,
and also began to trade shares in other public and private ventures, listing prices regularly
in the new Dutch newspapers. After 1688, traders in London also bought and sold
public debt and shares in companies such as the British East India Company and the
Bank of England; in 1773, they formed an organization to increase public confi dence
in their services and guarantee to investors that they would follow certain rules, and in
1801 they established themselves formally as the London Stock Exchange.
Trade in stock and government debt was often intertwined by brokers in complicated
schemes that led to speculation and rapid price spikes, usually called “bubbles.” There
were two dramatic bubbles in 1720, the Mississippi Bubble in France and the South
Sea Bubble in England. In France, Scottish businessman John Law (1671–1729) set up a
national bank with much of its capital in government debt, along with several companies
that gained monopolies of trade with French territories in North America and the
West Indies. Law then merged the companies with the national bank, and traded company
shares for the entire national debt, making France theoretically debt-free. Speculation
by investors eager to cash in on possible New World profi ts drove the price of a
share from 500 livres to 15,000 livres in a few months. People of all social classes bought
shares, and some became “millionaires” (a word fi rst invented during this speculative
mania) – at least on paper; the national bank issued more banknotes to keep up with the
demand for money. When it became clear that the possibility of returns was much lower
than predicted, the price tumbled back down to 500 livres. Many investors had bought
their shares with borrowed money and now defl ated banknotes, so there was a wave of
bankruptcies and the French national bank collapsed. Law fl ed from France.
In Britain, the founders of the South Sea Company similarly purchased government
debt in return for exclusive trading rights to the Spanish colonies in the Americas. The
company bribed government offi cials and other infl uential people, lied about the rights
it had been granted to land in Spanish ports, opened lavish offi ces, and spread stories in
newspapers and coffeehouses about how much profi t trade would bring. Owning stock
became fashionable, and the price of a share rose from £100 in January of 1720 to nearly
£1,000 in June. Other companies suddenly appeared, offering shares in various overseas
enterprises, some as vague as “a company for carrying on an undertaking of great advantage,
but nobody to know what it is.” The directors of the South Sea Company realized the
stock was dramatically overvalued and began selling; when word of this leaked out, other
investors started selling, and the price dropped to £135 per share by September. Panicked
investors sold their stock in other companies as well, which led to a general stock market
crash and numerous bankruptcies. Sir Isaac Newton lost over £20,000, and later commented,
“I can calculate the motions of heavenly bodies, but not the madness of people.”
Crowds in London demanded government action, but the directors fl ed the country, carrying
their fortunes and the records of their bribes. Robert Walpole was brought back in
as First Lord of the Treasury to deal with the mess, and he succeeded in slowly restoring
public confi dence in Britain’s fi nancial institutions. This cemented his political power,
and he served as prime minister in all but name for twenty years.
Though banknotes became increasingly important for major transactions in Europe,
most buying and selling still involved coins. The expansion in the amount of
gold and silver available for coins – and the infl ation caused by that expansion – led
to steep increases in the number of coins produced in the sixteenth century, and mint
masters tried to make their coins more uniform in thickness, size, and markings.
Water-powered rolling mills, cutting presses, and coin stamps slowly replaced handheld
hammers and dies, and in 1797 the fi rst steam-driven coin press was introduced for
making copper pennies. Machines also made marks around the edges of coins – called
mill-marks – to prevent people from clipping or trimming off these edges, through
which they slowly acquired gold or silver shavings that could be melted together and
sold. Governments continued to debase coinage when they needed money for war –
requiring people to turn in their old coins and accept new coins with less silver, and
then keeping the difference – but currencies slowly grew more stable.
Changes in banking and business organization occurred throughout Europe in the
seventeenth and eighteenth centuries, but in general the lead shifted from cities in Italy
to those of northwestern Europe. In 1500 the center of European banking was Genoa,
while in 1700 it was Amsterdam and in 1800 London.
CHAPTER SUMMARY
The shift in the economic center of Europe from Italy to northwestern Europe was the
result not only of innovations in banking, but also of changes in agriculture, production,
and transportation. In the Netherlands and England, new crops and crop rotation patterns,
improved livestock breeding, draining of marshes, and other developments led to
signifi cant growth in agricultural productivity, though they were also socially disruptive,
and the increase in the food supply contributed to a growth in population. Many people
combined agricultural work with handicraft production, or migrated to cities in search of
work. First in England and then elsewhere, work increasingly involved the use of machines
powered by hand, water, and by the end of the eighteenth century, by steam. Movement
of agricultural and manufactured goods and of people was facilitated by a network of
canals, and by improvements in ship design. Urbanization, dense networks of exchange,
technological advances, demand for consumer goods, institutions that promoted capital
accumulation, and relatively high levels of literacy all promoted economic expansion in
northwestern Europe. The lack of all these made eastern Europe the least prosperous part
of the continent. The cities of northern Italy had initially led the way in economic development,
for this was where banking, organized business procedures, and large-scale cloth
production began in Europe. By the seventeenth and even more the eighteenth century,
however, Genoa and Venice had been eclipsed by Amsterdam and London.
The shift in the economic center from Italy to England and the Netherlands was
the outcome of processes that were not limited to Europe, but extended far beyond its
borders. In the fi fteenth and sixteenth centuries, Portuguese and Spanish voyages and
colonization brought products into the harbors of western Europe, especially Lisbon,
Seville, and Antwerp. Trade routes centered on the Mediterranean gradually lost volume
and value when compared with those centered on the Atlantic. In the seventeenth
and eighteenth centuries, Dutch, French, and British trading voyages and colonial ventures
made Amsterdam and London the centers of this new Atlantic economy. These
global processes enhanced the connections between Europe and the rest of the world
in ways that went far beyond the economic.
QUESTIONS
1 What were the social, economic, and
environmental effects of changes in
agricultural practices in the Netherlands
and England? Why were these changes
adopted more slowly elsewhere in
Europe?
2 What factors contributed to population
growth in early modern Europe?
3 How did more intensive production
processes, such as proto-industrialization
and the establishment of manufactories,
alter workplace hierarchies and family
and gender structures?
4 How did machinery change the techniques
and organization of the production
of cloth in the eighteenth century? What
aspects of cloth production remained the
same despite the introduction of
machinery?
5 What technological, organizational, and
legal innovations were important in the
process of industrialization, and how did
these interact?
6 How did investment in private companies
and in public debt fuel economic
growth, and what were the risks
involved? Can you identify contemporary
parallels to the stock bubbles and
government defaults of the early
modern era?
FURTHER READING
General surveys of economic developments in this era include Jan de Vries , The Economy of Europe
in an Age of Crisis, 1600–1750 ( Cambridge: Cambridge University Press , 1976); Fernand Braudel,
Civilization and Capitalism, 15th–18th Century, trans. Sian Reynolds, 3 vols. ( New York : Harper
and Row , 1982); Robert Duplessis, Transitions to Capitalism in Early Modern Europe ( Cambridge:
Cambridge University Press , 1997); KeithWrightson , Earthly Necessities: Economic Lives in Early
Modern Britain ( New Haven : Yale University Press , 2000); Jan Luiten van Zanden, The Long Road
to the Industrial Revolution: The European Economy in Global Perspective ( Leiden: Brill, 2009); Joel
Mokyr , The Enlightened Economy: An Economic History of Britain ( New Haven : Yale University Press ,
2010). On the “industrious revolution,” see Jan de Vries , The Industrious Revolution: Consumer
Behavior and the Household Economy, 1650 to the Present ( New York : Cambridge University Press ,
2008), and Craig Muldrew , Food, Energy, and the Creation of Industriousness: Work and Material
Culture in Agrarian England, 1550–1780 ( Cambridge: Cambridge University Press , 2011).
For consumer goods, see Carole Shammas, The Pre-Industrial Consumer in England and America
(Oxford : Clarendon Press , 1990); Beverly Lemire , Fashion’s Favorite: The Cotton Trade and the
Consumer in Britain, 1660–1800 ( Oxford : Oxford University Press , 1991);Wolfgang Schivelbusch,
Tastes of Paradise: A Social History of Spices, Stimulants, and Intoxicants ( New York : Vintage , 1992);
John Brewer and Roy Porter , eds., Consumption and the World of Goods ( London: Routledge,
1993); Lisa Jardine , Worldly Goods: A New History of the Renaissance ( New York : Norton, 1998);
Maxine Berg and Helen Clifford , eds., Consumers and Luxury: Consumer Culture in Europe,
1650–1850 ( Manchester: Manchester University Press , 1999); John Styles, The Dress of the People:
Everyday Fashion in Eighteenth-Century England ( New Haven : Yale University Press , 2008).
For changes in agriculture and the social dislocations these caused, see Robert C. Allen,
Enclosure and the Yeoman: The Agricultural Development of the South Midlands, 1450–1850
(Oxford : Clarendon Press , 1992); Cynthia A. Bouton, The Flour War: Gender, Class, and
Community in Late Ancien Régime French Society ( University Park, PA : Penn State University
Press , 1993); Liana Vardi , The Land and the Loom: Peasants and Profi t in Northern France
1680–1800 ( Durham, NC : Duke University Press , 1993); Mark Overton, Agricultural Revolution
in England: The Transformation of the Agrarian Economy 1500–1850 ( Cambridge: Cambridge
University Press , 1996); Steven Laurence Kaplan, The Bakers of Paris and the Bread Question,
1700–1775 ( Durham, NC : Duke University Press , 1996); Govind P. Sreenivasan , The Peasants
of Ottobeuren, 1487–1726: A Rural Society in Early Modern Europe ( Cambridge: Cambridge
University Press , 2004); John Bohstedt, The Politics of Provisions: Food Riots, Moral Economy,
and the Market Transition in England, c. 1550–1850 ( Burlington, VT : Ashgate, 2010).
For changes in the pre-industrial workplace, see Thomas Safl ey and Leonard Rosenband, eds.,
The Workplace before the Factory: Artisans and Proletarians, 1500–1800 ( Ithaca, NY : Cornell
University Press , 1993); Daryl Hafter , ed., European Women and Pre-industrial Craft ( Bloomington:
Indiana University Press , 1995); James R. Farr , Artisans in Europe, 1300–1914 ( Cambridge:
Cambridge University Press , 2000); S. R. Epstein and Maarten Prak, eds., Guilds, Innovation, and
the European Economy, 1400–1800 ( Cambridge: Cambridge University Press , 2010).
For early manufacturing, see John Rule, The Experience of Labour in Eighteenth-Century
Industry ( London: Croom Helm , 1981); Myron Gutmann, Toward the Modern Economy: Early
Industry in Europe, 1500–1800 ( Philadelphia: Knopf, 1988); Maxine Berg, The Age of
Manufactures, 1700–1820, 2nd edn ( Oxford : Oxford University Press , 1994); Sheilagh Ogilvie
and Markus Cerman, European Proto-Industrialization ( Cambridge: Cambridge University
Press , 1996); Maria Ågren , ed., Iron Making Societies: Early Industrial Development in Sweden
and Russia, 1600–1900 ( London: Berghahn Books , 1998); Giorgio Riello and Prasannan
Parthasarathi, eds., The Spinning World: A Global History of Cotton Textiles, 1200–1850 ( New
York : Oxford University Press , 2010); E. A. Wrigley , Energy and the English Industrial Revolution
(Cambridge: Cambridge University Press , 2010). Arlette Farge, Fragile Lives: Violence, Power, and
Solidarity in Eighteenth-Century Paris ( Cambridge, MA : Harvard University Press , 1993), explores
the impact of economic and social changes on the residents of one of Europe’s largest cities.
For banking and money, see Carlo Cipolla, Money, Prices, and Civilization in the
Mediterranean ( Princeton: Princeton University Press , 1956); Eric Kerridge, Trade and
Banking in Early Modern England ( Manchester, UK : Manchester University Press , 1988); Larry
Neal, The Rise of Financial Capitalism: International Capital Markets in the Age of Reason
(Cambridge: Cambridge University Press , 1990); Ann L. Murphy , The Origins of English
Financial Markets: Investment and Speculation before the South Sea Bubble ( Cambridge:
Cambridge University Press , 2009); Carl Wennerlind , Casualties of Credit: The English
Financial Revolution, 1620–1720 ( Cambridge, MA : Harvard University Press , 2011).
For more suggestions and links see the companion website www.cambridge.org/wiesnerhanks .
NOTES
1 Glickl bas Judah Leib, Memoirs, trans. Marvin Lowenthal ( New York : Schocken, 1987), pp. 166,
179.
2 Gustav Schmoller , Die Strassburger Tucher- und Weberzunft: Urkunden und Darstellung, 2 vols.
(Strasbourg: Karl J. Trübner , 1879), p. 519. My translation.
3 Hans Medick, “ The Proto-Industrial Family Economy: The Structural Function of Household and
Family during the Transition from Peasant Society to Industrial Capitalism ,” Social History 1
(1976): 312.
4 French royal statutes, 1675, quoted in Cynthia M. Truant , “ The Guildswomen of Paris: Gender,
Power, and Sociability in the Old Regime ,” Proceedings of the Annual Meeting of the Western
Society for French History 15 ( 1988): 131.
5 Adam Smith, Inquiry into the Nature and Causes of the Wealth of Nations, book I, ch. 10, “Of
Wages and Profi t in the Different Employments of Labour and Stock,” paragraph I.10.67.
World History
