Western Civilization_ Volume B_ 1300 to 1815 - Jackson J. Spielvogel [167]
Enormous profits were also being made in shipbuilding and in mining and metallurgy, where technological innovations, such as the use of pumps and new methods of extracting metals from ores, proved highly successful. The mining industry was closely tied to sixteenth-century family banking firms. In exchange for arranging large loans to Charles V, Jacob Fugger was given a monopoly over silver, copper, and mercury mines in the Habsburg possessions of central Europe that produced profits in excess of 50 percent per year. Though these close relationships between governments and entrepreneurs could lead to stunning successes, they could also be precarious. The House of Fugger went bankrupt at the end of the sixteenth century when the Habsburgs defaulted on their loans.
By the seventeenth century, the traditional family banking firms were no longer able to supply the numerous services needed for the expanding commercial capitalism. New institutions arose to take their place. The city of Amsterdam created the Bank of Amsterdam in 1609 as both a deposit and a transfer institution and the Amsterdam Bourse, or Exchange, where the trading of stocks replaced the exchange of goods. By the first half of the seventeenth century, the Amsterdam Exchange had emerged as the hub of the European business world, just as Amsterdam itself had replaced Antwerp as the greatest commercial and banking center of Europe.
Despite the growth of commercial capitalism, most of the European economy still depended on an agricultural system that had experienced few changes since the thirteenth century. At least 80 percent of Europeans still worked on the land. Almost all of the peasants of western Europe were free of serfdom, although many still owed a variety of feudal dues to the nobility. Despite the expanding markets and rising prices, European peasants saw little or no improvement in their lot as they faced increased rents and fees and higher taxes imposed by the state. In eastern Europe, the peasants’ position even worsened as they were increasingly tied to the land in a new serfdom enforced by powerful landowners (see Chapter 15).
Jacob Fugger the Rich. Jacob Fugger, head of one of the wealthiest banking firms of the sixteenth century, is pictured here with his faithful secretary, Matthaus Schwartz, who painted this scene in 1516. The cabinet in the background lists the names of the cities where Fugger’s firm had branch offices, including Milan, Innsbruck, Nuremberg, and Lisbon.
© Duke Anton Ulrich Museum, Braunschweig, Germany//AKG, Berlin/SuperStock
Mercantilism
Mercantilism is the name historians use to identify a set of economic tendencies that came to dominate economic practices in the seventeenth century. Fundamental to mercantilism was the belief that the total volume of trade was unchangeable. Therefore, states protected their economies by following certain practices: hoarding precious metals, implementing protectionist trade policies, promoting colonial development, increasing shipbuilding, supporting trading companies, and encouraging the manufacturing of products to be used in trade.
According to the mercantilists, the prosperity of a nation depended on a plentiful supply of bullion (gold and silver). For this reason, it was desirable to achieve a favorable balance of trade in which goods exported were of greater value than those imported, promoting an influx of gold and silver payments that would increase the quantity of