Commerce and Markets
COMMERCE AND MARKETS
COMMERCE AND MARKETS. "Commerce" refers primarily to the exchange of the products of nature or art, that is, of merchandise, through buying and selling. This activity of exchange takes place in "markets"—"not any particular market place in which things are bought and sold, but the whole of any region in which buyers and sellers are in such free intercourse with one another that the prices of the same goods tend to equality easily and quickly" (Marshall). If the defining characteristic of these more abstract markets—as opposed to marketplaces—is a tendency for the same price to be paid for the same good at the same time in all parts of the market, then some scholars would argue that markets have existed in Europe since at least the twelfth century c.e. Early modern Europe witnessed an extension and intensification of commerce and markets to the point that a worldwide system emerged from which fewer and fewer people were excluded.
The "exchange of the products of nature or art" is probably as old as human civilization, dating at least from the time of the first settled communities, when it became necessary somehow to link the production and consumption of a wide variety of goods. The ancient Greeks made use of an exchange of gifts between households or communities with dissimilar resources to expand consumption and promote specialization. Yet, gift-giving relied on a sense of reciprocity in which social honor resided in giving and a social burden attached to receiving. Herodotus (c. 484–between 430 and 420 b.c.e.) observed that the Persians had no marketplaces but rather a vast system of tribute payments, which imperial authorities collected and redistributed. The same may have applied to wide regions of early medieval Europe, where dues paid in kind to feudal or manorial lords fueled production and consumption. What separates commerce and markets from these other systems of exchange is that goods and services are traded not out of a sense of social prestige or political duty but rather in pursuit of economic profit.
The origins of markets are usually located in trade fairs. These temporary markets, held at regular intervals and fixed locations, brought buyers and sellers together to exchange goods, demonstrate crafts, and trade ideas. Fixtures of the Roman Empire, they survived its collapse to gain new prominence under the Carolingians (seventh to tenth centuries), and grew where trade routes crossed or people congregated, providing a crucible for the refinement of business practice and law. The fair at Saint-Denis, near Paris, had achieved international importance by the seventh century c.e., but it was joined and eventually surpassed over time by others: the Easter fairs at Cologne in the eleventh century, the great fairs of Champagne in the twelfth century, the fall fairs at Frankfurt am Main in the fifteenth century, and the fairs at Leipzig in the seventeenth century. In addition to these great international fairs, where products from all over Europe as well as Asia, Africa, and, eventually, America might be inspected and traded, there were regional markets of great importance, such as those of Lyon in France, Geneva in Switzerland, and Stourbridge in England. Every town and city in Europe held weekly or yearly fairs, where local producers brought surplus or cash crops to sell or barter for the needs they could not satisfy at home. As towns and cities grew to the point that the demands of their populations required daily markets, as transportation was organized and improved to the point that supplies became more regular and varied, and as commerce itself evolved toward increased standardization of goods, quality, and prices, fairs became less important. Ironically, specialty fairs, known as trade or industrial fairs, breasted this tide to become more important over time as a means of stimulating demand and consumption for new products and technologies.
TRADE CIRCUITS AND POLES
Fairs and markets tended to grow where goods flowed and people gathered—at the junctions of established trade routes or near the walls of great cities. When goods traveled, they increased in price the farther they went; the obstacles presented by the transportation system were always expensive and inflexible. Thus, all commodities moved the least distance possible between one point of sale and the next, and all commodities, but especially those of greater weight and less value, such as grain or lumber, traveled most expeditiously by water. It is not surprising that routes tended to be dictated by geography, given the relatively primitive means of transportation. Only luxury goods assured profits that could bear the relatively high cost of long-distance overland transport. Coasts and rivers were favored, therefore, and valleys, plains, and passes served as needed. In the Carolingian Empire, the most heavily used routes ran along the coasts of the Mediterranean, North, and Baltic Seas as well as the Atlantic Ocean and along the courses of the Rhone and Marne, Rhine and Danube, and Dnieper and Volga Rivers. Such overland routes as existed—the road from Pavia north over the Alps to the Rhine or the one from Mainz east through the central forests to Prague—were less heavily traveled. All this changed with the slow growth of cities and the intensification of commerce. By the sixteenth century a relatively dense network of interlocking local, regional, and international routes had arisen to supplement those in use for centuries.
Augsburg, for example, was certainly one of the premier industrial, commercial, and financial centers of the late fifteenth and sixteenth centuries. Like the other great market centers of Europe, it stood at a confluence of ways. Its advantage resided partially in the essential role its magistrates and merchants could play in the expedition of goods along north-south and east-west axes. Bulk commodities reached it via the Lech River—a relatively modest waterway but still sufficient to transport a great city's grain and lumber—which flowed north from the city until it joined the Danube. Past the city's walls and gates ran several important routes linking Prague and Vienna with Lyon, Paris, and Seville and, even more important, linking Venice with Antwerp. The ancient salt highway ran from Salzburg via Munich. Augsburg's merchants regularly traveled the roads south, to Innsbruck via the Brenner Pass to the mining fields around Merano, Bolzano, and Trent, to Verona, and finally east to the great entrepôt of Venice. Another route followed the Roman Via Claudia through Upper Swabia and its imperial cities of Memmingen, Kempten, and Lindau on Lake Constance, thence to St. Gall and Chur in the Swiss Confederation, and via the St. Bernhard Pass to Lugano and the great manufacturing metropolis of Milan. Trade with France and Spain took a western road via Ulm, Constance, Zurich, Bern, Lausanne, and Geneva to arrive at the great fairs of Lyon, a center for German merchants trading with colleagues in France. From Lausanne, a route ran north to Dijon and Troyes in Burgundy and onward to Paris. From Lyon, the Rhone River Valley provided a convenient highway south to Marseilles, the Mediterranean, and Spain.
To reach the other great entrepôt of the sixteenth century, Antwerp, merchants and merchandise started north or west from Augsburg, traveling to Donauwörth or Ulm and thence to Nuremberg and Würzburg or to the Rhenish cities of Speyer, Worms, and Mainz respectively. Both routes then headed to Frankfurt with its important fall fairs and onward via Cologne to Maastricht and Antwerp. From Nuremberg, via the northward route, two branches increased in importance over the course of the early modern period. A route from Prague across the Bohemian Plain to Nuremberg and south provided cattle for the butchers and tanners of Augsburg, and a route from Leipzig in Saxony, through the metallurgical centers of Freiberg, Schneeberg, and Zwickau, and south via Nuremberg kept the merchant financiers of Augsburg in close touch with their mining interests. This bewildering complex of highways and stopovers was typical of any major market, whether Augsburg, Lyon, or Milan. Yet, it was far from stable. As the economy evolved between the fifteenth and eighteenth centuries, the relative importance of these routes and the markets they served, measured in terms of the volume and value of commerce that flowed along and among them, shifted.
The relative weight of commerce and markets shifted away from those routes that had served the principal Mediterranean ports—Barcelona, Marseilles, Genoa and, above all, Venice—since the Middle Ages and toward those connected to the Atlantic Ocean and the growing volume of global trade—Seville, Amsterdam and, ultimately, London. Initially, overland routes from Venice across the Alps to Antwerp and to the Hanseatic cities of Bremen, Hamburg, and Lübeck connected the main commercial poles of Europe. Along these circuits, goods from Italy and the east flowed north: luxuries, such as silks, spices, and gems; essentials, such as cotton, alum, and dyestuffs; and manufactured goods, such as cotton cloth, glass wares, and metal goods. Merchants in Venice gathered these commodities from Italian markets but also from an overseas circuit that extended east into the Mediterranean, connecting the Levantine ports of Tripoli, Acre, and Jaffa with Famagusta in Cyprus, Candia on Crete, Istanbul and Caffa on the Black Sea, Bari and Ragusa on the Adriatic Coast, and, finally, Venice at its head. Against the northward stream bulk items flowed south from Scandinavia, Poland, and Russia—grain, timber, iron, and furs—carried by Hanseatic merchants from a connecting circuit that extended from the North Sea through the Jutland Straits to the Baltic ports of Copenhagen, Gdańsk (Danzig), and Riga. From Antwerp came textiles: the "new draperies," brought from England and the Low Countries. This admittedly over-simplified summation—it ignores, for example, the circuit that connected that commercial colossus Genoa to the North African ports of Tunis and Ceuta, across the Gulf of Lion to Marseilles and Barcelona or along the Ligurian and Tyrrhenian Coasts of Italy to Pisa, Naples, and Messina—must, finally, include the annual arrival in Antwerp of the Portuguese spice ships from South and Southeast Asia via Lisbon. From the late fifteenth until the late sixteenth century, the disembarkation of pepper in Lisbon and Antwerp marked the economic calendar for all of Europe. It stimulated the flow of capital and set the pace for the commodity exchange throughout the continent. It allowed debts to be paid and enterprises to be undertaken; in short, it set the financial, industrial, and commercial wheels of Europe in motion.
THE EMERGENCE AND EFFECTS OF OVERSEAS COMMERCE
The spice ships mark a development that altered the commercial activities of Europe. One must be careful not to overstate the rise of the Atlantic economies; Mediterranean commerce did not suddenly lose all value and significance. Yet, between the late fifteenth and the late eighteenth centuries, the balance of economic and political power moved west to those countries with immediate access to global commerce.
What drove Europeans to push beyond the boundaries of their known world? Historians traditionally emphasize three factors, to all of which the explorers and conquerors themselves attested: gold, glory, and the Gospel. All played a role, but one was paramount. The voyages were driven by the desire for profit, and "discoveries" were seen through the lens of commodities and exchange. They captured the European imagination, spreading an awareness of a wider world and a conviction in the possibility of limitless profit. They expressed as well the European circumstance, drawing on the resources of a burgeoning economy and utilizing the advantages of new transportation technology.
Seagoing merchant-explorers relied on a series of innovations in shipbuilding, without which the growth of worldwide commercial networks would probably have taken a much different course. The fifteenth century witnessed extraordinary developments in the hulls and rigging of ships. Throughout the Middle Ages, ocean-going trade had been dominated by two types of ships: the Mediterranean galley, powered by oars and triangular "lateen" sails, and the northern round ship or "cog," powered by a single square sail. Though swift and maneuverable, the galley was not seaworthy except in calm weather; the cog could carry large cargoes, though its single sail made it neither handy nor maneuverable. These two types began to merge in the late fifteenth and early sixteenth century, yielding a revolutionary moment in early modern shipbuilding. By 1450, three-masted ships, known as "carracks," were beginning to dominate the sea lanes of the world. These full-rigged ships had a number of advantages: their larger hulls could hold larger crews and cargoes for longer voyages; their higher sides made them more easily defensible; and their multiple masts and triangular sails made possible better, safer handling.
Seaworthy ships alone did not suffice; navigation was improved as well. Traditional methods, devised for the relatively sheltered waters of the Mediterranean Sea or the continental shelf, required the proximity of a coast and were, therefore, inappropriate for the blue-water sailing required for trade with markets on the far side of the world. The Portuguese Prince Henry the Navigator (1394–1460), patronized master cartographers, astronomers, and mathematicians in order to extend his state's shipping to the Azores and down the western coast of Africa. Master James of Majorca (probably the Jewish scholar, Jefuda Cresques), helped develop a new method of navigation, called "running down the latitude." With knowledge of the destination's latitude, a navigator merely had to find it by sailing north or south through the open sea and then to set course east or west until land was sighted. This required that early modern voyagers accurately determine latitudes, which they accomplished by determining the height of a celestial body, initially the pole star, from the horizon. During the late fifteenth and sixteenth centuries the quadrant was used for this purpose, followed and surpassed by the sea-astrolabe and the cross-staff. In addition to latitude, navigators had to measure the distance sailed. Early charts showed the north-south lines, today called longitudes, as parallel, thus misrepresenting east-west distance, as sailors learned from hard experience. A ship's easting or westing remained an insoluble problem until the second half of the eighteenth century, when John Harrison (1693–1776) invented a reliable navigational clock.
By the fifteenth century these developments in shipbuilding and navigation combined to encourage European merchants to seek direct trading connections with the Far East. Until the fifteenth century, the Mediterranean had served as Europe's primary commercial circuit to a wider world. Seeking greater profits, the Europeans wished to circumvent the Mediterranean middlemen. Moreover, the rise of the Ottoman Empire, sealed by its conquest of Constantinople in 1453 and its invasion of the Balkans shortly thereafter, made the established routes less secure and the search for direct routes to the East imperative. Such was the cost and risk, however, that only the largest merchant-bankers of the day, located in Italy and Germany, could afford to underwrite the efforts of those states that formally sponsored exploration. Two maritime routes suggested themselves. The more conservative involved coasting south along the continent of Africa, turning east around its tip, and sailing on to China. Portugal took up this challenge. It outfitted fleets of ships to explore the coast of Africa and establish points of supply. By 1498 the investment paid dividends. Vasco da Gama (c. 1460–1524) sailed around the southern tip of Africa, the Cape of Good Hope, and followed the coast north again via Sofala and Kenya before striking across the Indian Ocean to a landfall near Calicut in India. The Portuguese came neither to conquer nor to colonize but only to secure trading rights, especially for pepper. The profits were extraordinary. Yet, however great the profits, the costs for Portugal were too much over time. Lacking human and material resources, it could not maintain a far-flung trading empire and so was forced in the course of the seventeenth century to yield its foothold in Asia to more aggressive competitors, first the Dutch, then the English.
The other, far bolder route to the Indies involved sailing west. The Genoese merchant and sailor Christopher Columbus (1451–1506) offered this route to Ferdinand of Aragón and Isabella of Castile. Spanish advisors argued against the risk of a voyage into uncharted seas, the distance across which was totally unknown. Yet the potential profits were staggering, and the costs were minimal. Rather than a painstakingly gradual process of exploration and experimentation, in the Portuguese manner, Columbus projected a single voyage with three ships. In return, he asked only 10 percent of the profits and the governorship of any conquered territories. In 1492, he and his tiny fleet landed in the Bahamas.
That the Spanish crown was minimally involved in the early stages of exploration and conquest had to do with the risks inherent in the western route. It also had to do with the nature of the discoveries. Initially, they were less profitable. The Americas did not initially offer the Oriental luxuries that Europeans demanded: no pepper or silk. Great wealth came not through trade but rather through conquest, colonization, and development, winning for Spain a more durable empire, if not a more lasting fortune. Genoese bankers would see to it that the wealth of the Indies, as it became known, would flow through Spain into a quickening European economy, and Dutch and English merchants would eventually draw a great deal of the trade in commodities into their hands. In place of Antwerp and Seville, Amsterdam and London eventually arose as the great poles of world commerce.
Well into the seventeenth century, however, the landing of the American treasure fleet—galleons bearing cargoes of precious metals and exotic goods—made Seville the beating economic heart of Europe that Antwerp had been less than a century earlier. Pierre Chaunu attributes great importance to the so-called carrera de India, the circuit of commerce that ran from Seville out via the Canary Islands to the Americas and back again via the Azores to Seville. As he puts it, "Waiting for the European products bound for the Indies was one of the principal preoccupations of the merchants of Seville when the ships were due to sail" (p. 260, n. 2; p. 293, n. 1.). Trade with the world, in a sense, mobilized an ever greater proportion of the financial and industrial resources of Europe from the sixteenth century onward, the existence of political empires notwithstanding. To that exact proportion, it makes less and less sense to speak of a European economy.
The discoveries of overseas routes to a wider world had staggering consequences affecting both economic and cultural life. Contact, conquest, and colonization filled the markets of Europe with a vast array of precious metals and exotic goods. The influx of gold and silver swept away old economic relations and created new social tensions. Most of the silver was minted into coin, the increased circulation of which allowed commerce to function at a higher rate and volume—throughout the sixteenth century chronic inflation resulted. The expansion of commerce created opportunities that encouraged investment and indebtedness, favoring those with disposable incomes and oppressing those on fixed incomes.
A stunning array of hitherto unknown commodities likewise transformed patterns of production and consumption. Tastes changed under the influence of new consumer goods. Coffee and sugar are two striking examples. Industries evolved to absorb new materials and supply new markets. Particularly worthy of mention is industrial slave labor. The slave trade was not unknown in medieval Europe, with well-established markets in North Africa and the Levant. Apart from occasional appearances in European courts and households, however, African slaves had played a limited role in the European economy until the development of sugar plantations in the Canary Islands. The importance of slaves—and therewith the commerce in them—increased greatly with the discovery of the Americas and the growth there of industrial farming in sugar, coffee, cotton, and tobacco.
New sources of wealth altered as well the old balance of power. From the sixteenth century onward, political power was increasingly measured in terms of colonies and commerce. Portugal and Spain were but the first of a series of empires that drew their financial and therefore political power from the control of the new worlds.
THE GLOBAL COMMERCIAL NETWORK
The development of overseas trade encouraged further expansion and intensification in European commerce. As the traffic grew between markets in the Old World and the New, exotic goods eventually penetrated to even the most remote areas of the Continent, and the commercial circuits in Europe gradually merged into a single network. Cities and their economic catchment areas—those surrounding areas from which they acquired material, human, and financial resources and to which they sold their goods and commodities—formed the nodal points of this vast global network. Smaller and larger catchment areas, local and regional circuits, were linked together and connected to that emergent network of international commerce. These linkages extended well beyond the economic ties of purchase and sale that could exist between neighboring markets. Urban merchants established regular ties with rural producers and suppliers, ties that were often strengthened and made permanent through the purchase of landed estates and noble titles. Local governments competed and cooperated in matters of commercial and industrial regulation. Commercial enterprises developed networks of representatives or factors, connections often made more intimate and reliable through ties of blood or marriage.
Business practices and organizations. Unlike trade routes, which have an independent existence of their own, trade circuits and the larger commercial networks of which they are part express the activities of commercial agents. Without merchants at various points who exchange goods, communicate information, and compete or cooperate as circumstances dictate, they cease to exist. Early modern merchants moved daily, either in person or via correspondence, along these circuits and networks, buying and selling myriad goods. An ideal typical exchange might involve as many as four individual transactions: buying domestic goods for resale abroad; exchanging these goods for cash or other commodities; buying foreign goods for resale at home; exchanging them for cash. Profits could only be calculated at the close of the entire series. Obviously, such complex trading required a number of arrangements, which might be summarized as compensation, cooperation, and communication.
Merchants had to have secure means of moving specie or its equivalent value across large, often dangerous geographic spaces. They needed associates who would enter into transactions with them or facilitate their trading far from home. They also had to have a clear sense of prevailing market conditions at home as well as abroad; they needed to know what would sell and for how much. In an age that lacked the legal and political institutions to enforce business conduct efficiently, early modern merchants resorted to a number of different types of business practices and organizations to promote reliable, successful exchange.
Though merchants continued to move silver and occasionally gold coin from market to market—indeed, the commerce in precious metals has received less attention than other commodities, such as textiles—the favored mechanism for transferring money and paying debts was the bill of exchange. In its simplest form, the bill involved the payment of money in one market and an agreement to repay that money, often in different coinage and at a prearranged exchange rate, in another. Thus, a traveling merchant with business to transact in a distant market might turn to another merchant who had factors or associates in that distant market for a bill of exchange. The first merchant would pay a given amount to the second for which he would receive a document, the bill itself, redeemable by the second merchant's representative for the amount specified. Having to carry only the bill, the traveler was spared the inconvenience, expense, and risk of transporting coin. By the early modern period, the resort to bills of exchange had become commonplace. They often functioned not only as means of compensation but also as instruments of credit. The church forbade Christian merchants to charge interest on loans, except under restricted circumstances, but bills of exchange allowed the interest to be disguised as part of the exchange rate. They also became a commodity in themselves, a fungible instrument that could be discounted, bought, and sold. Although payment in coin constituted the initial act in the creation of any bill of exchange, their increasing tendency to circulate independently constituted a small step toward a fiduciary system of paper money.
The presence of representatives in distant markets—whether employees, partners, or colleagues—was a response to the necessity of cooperation in a commercial network that was characterized by slow transportation and imperfect information. Without the state, or some other uninvolved party, to enforce contracts, guarantee transactions, and provide information, merchants needed reliable associates to serve as go-betweens, mediators, facilitators, and informants. Only thus could bills of exchange be redeemed, market conditions assessed, or goods exchanged over greater and greater distances. The challenge, of course, was to assure reliability. The family firm, in which partners and associates at home and abroad were related by ties of blood and marriage, sought to reinforce economic interests through social connections. Common as it was in early modern Europe, the family firm was not the only possibility. Many firms resorted to a more authoritarian model that made use of factors who were simple employees, hired and fired as suited the principals. The Fugger family of Augsburg (midfifteenth to mid-sixteenth century) is thought to have been the pioneer in this business model, but other prominent companies made use of it as well. Lucas Rem, whose diary from the period 1494–1541 survives as one of the most important egodocuments of the age, served for nearly two decades (1499–1518) as the employed factor of the Welser Company, another enterprise with commercial and financial connections that spanned Europe and extended to the New World, before leaving it to begin a highly successful trading company of his own. In the fifteenth century the Medici developed a unique system in which their factors in foreign markets were organized as quasi-independent branches or subsidiaries that could be separated from the parent firm in case of emergency, an ingenious method of protecting assets in one place from debt or bankruptcy in another.
By the sixteenth century, other more flexible and less costly forms of business organization were becoming commonplace. Most merchants came to rely on commission agents rather than employed factors; these agents, themselves merchants, would take a small percentage of deals they negotiated or transacted on behalf of other parties. There was an element of reciprocity in all this, each side acting on commission for the other as circumstances dictated. Matheus Miller, one of the wealthiest merchants of Augsburg in the second half of the seventeenth century, relied almost entirely on commission agents in Venice, Leipzig, Frankfurt, and Amsterdam and thus spared himself the expense of maintaining a widespread network of employees and the inconvenience of traveling to distant markets. Another short-term, practical business arrangement that became more common was "participation," a partnership limited to a single enterprise, for example, a single overseas voyage. Once the enterprise was complete, accounts would be settled and the partnership dissolved.
What is remarkable about the use of representatives, whatever form that representation happened to take, is the ethos it required. Reciprocity was expected. Solidarity was essential. One had to be able to rely without question on one's agents abroad to provide accurate information and to act in good faith. Indeed, foreigners in any market were completely dependent on the good faith of their native agents and associates. Well-known examples are the Spanish metedores and cargadores, who ran or accompanied Dutch cargoes on board the Spanish fleets that traded between Cadiz and the New World at the height of the Dutch Revolt (1570s and 1580s) against the Spanish Empire. Merchants had to rely on agents; agents had to be reliable. This did not prevent cutthroat competition, even among merchants who occasionally cooperated, but it limited the practice of open duplicity or dishonesty. Reputation was, to a very large extent, fortune in commerce. A reputation for hard but honest dealing assured a merchant access to financial resources, essential in an age of money scarcity. A reputation for reliability assured the cooperation of others, encouraging them to act on commission or enter into partnership. A reputation for probity assured access to news of current events and market conditions that might affect business fortunes.
Communication. Like compensation and cooperation, communication was an essential component of early modern commerce and markets. News and ideas—the invisible but invaluable cargo of merchants, teamsters, and peddlers alike—always flowed along trade routes. For merchants, factors or agents were consistent and reliable sources of information, given their intimate familiarity with the markets in which they worked. They could provide up-to-date news about which goods were plentiful or rare, indicating which goods were to be bought, being in good supply and therefore cheap, and which goods were to be sold, being in short supply and therefore dear. Yet, the intensification and extension of commerce spurred developments in commercial communication as well. It seems probable, though finally indeterminable, that business correspondence intensified and expanded with the system in which it functioned. Businesses, especially those engaged in international or overseas commerce, likely invested more human and financial resources on correspondence with contacts and employees in distant markets. Likewise, the need for general information about distant places and peoples would have grown with the emergence of a global commercial network. The quickening literary interest in travel accounts of new worlds may have derived in part from a more than casual interest in their commercial potential.
Commerce might have had a hand in new forms of communication as well. The so-called Fuggerzeitung may be one of the first, if not the first, periodical news publications. It contained information—regarding politics, weather, transportation, and prices, among other things—gathered out of nearly forty thousand reports sent to Philipp Eduard and Octavian Fugger by their factors during the period 1568–1605 and disseminated to all their agents and associates with information of events or developments that could affect markets where they did business. Commerce demanded daily reading and writing. Accounts had to be kept; contracts had to be negotiated; correspondence had to be read. The increase in autobiographical writing, which seems to have begun in the fifteenth century, has been attributed to European merchants, both as readers and as writers. Thus, just as commerce helped to promote an increase in communication through an insatiable appetite for information, so it helped to spread literacy through the propagation and valuation of reading and writing.
The emergence of global commerce, a network of traffic and transactions that bound the world together with greater and greater immediacy, gradually changed the organization and practice of commerce itself. Nor were these refinements limited to commerce. The global network introduced new commodities, and the taste for material goods changed. It brought Europeans into contact with strange and unexpected peoples and places, and the sense of Europe's place in the world began to shift. Finally, commerce with a wider world fostered new skills and values, of which literacy was but one, that extended far beyond the business world.
SUPPLY AND DEMAND
Behind all of these developments operated the ubiquitous forces of supply and demand. Markets exist and commerce occurs to supply the goods and services that people demand. As abstractions, supply and demand are readily defined as the relationship between the quantity of any good or service that producers wish to sell at a certain price and the quantity that consumers wish to buy. The market functions to equate the two through the price mechanism: if buyers wish to purchase more of a given good than is available at a certain price, their demand will bid that price up; if buyers wish to purchase less, suppliers will bid the price down. As historical realities, however, these things are more difficult to isolate and examine. It has been noted by more than one economist or historian that there is no supply without demand and no demand without supply. Together, they produce exchange and are produced by it, simultaneously cause and effect. Nor do they exist in economic isolation. Supply and demand are subject to extramarket forces. Climate, politics, and culture can all work to alter the value attached to goods and services by affecting their supply or the demand for them.
The vagaries of supply and demand stand at the center of efforts to understand the early modern economy as a whole. What caused it to grow and to change? For centuries, economists and historians insisted that supply was, until the eighteenth century, an insignificant factor, marked by inelasticity, unresponsive to demand. Still, historians believed until recently that changes in supply led the economy of Europe into its modern phase, beginning in the eighteenth century in Britain, for example. Traditional explanations of early industrialization concentrate on changes in organization or technology that resulted in massive increases of supply and decreases of price. In the last decade, however, attention has shifted to demand. Jan de Vries has argued for an "industrious revolution" rather than an industrial revolution, whereby European consumers came to desire a better, more comfortable standard of living and were willing to work longer and harder to achieve it. The demand for more consumer goods prompted an increase in supply that, finally, could only be sustained by the development of new production technologies.
Whatever the outcome of this debate, it recalls a simple truth. Commerce and markets are products of the societies that create them. Supply and demand are, indeed, connected, and arise out of the perception of need. Changes in patterns of consumption are complex events that involve relationships to material goods, patterns of values as well as patterns of behavior. These reflections recall the truth of Fernand Braudel's observation that "the economy is only a 'sub-division' of social life" (p. 226).
See also Banking and Credit ; Capitalism ; Colonialism ; Fugger Family ; Hansa ; Industrial Revolution ; Industry ; Liberalism, Economic ; Mercantilism ; Money and Coinage ; Shipbuilding and Navigation ; Shipping ; Slavery and the Slave Trade ; Smith, Adam ; Trading Companies ; Triangular Trade Pattern .
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——. "The Industrious Revolution and the Industrial Revolution." Journal of Economic History 54 (1994): 249–270.
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Thomas Max Safley
Commerce of Education
COMMERCE OF EDUCATION
By the end of the twentieth century, the world economy had shifted in two important ways. First, the free flow of capital had created a high level of global interdependency. Second, production and distribution were no longer regionally bound within the nation-state. Trade agreements provide evidence of these trends. Educational commodities in the global marketplace are evident as services and goods. Though increasingly evident, however, the effects of a growing global economic interdependence are not well understood theoretically or empirically.
Reactions to these changes range from an acceptance of democratic and economic possibilities to a resistance to open-market trends. Proponents embrace the economic order because these initiatives move their country toward the free flow of information and capital. Opponents recognize a power imbalance, and fear a loss in national identity. The arguments rest on the standardization processes couched within trade agreements.
Trade agreements encourage countries to participate in international standards organizations with a view toward harmonizing the technical regulations of individual countries. Organizations engaged in standards development call for increased certification, accreditation, and rigorous assessment of these standards. Adherence effectively allows labor to move freely across national boundaries. More subtly, it seems that nonelected governance bodies (e.g., a trade agreement) can become imbued within the architecture of a country's educational system.
Trade Agreements and the U.S. Economy
Trade agreements typically deal with the commodification of raw materials and manufactured goods. There are few systematic studies that address the practical impact of trade agreements on education. This is because the notion of treating services as tradable commodities is new, both internationally and nationally. The General Agreement on Trade in Services (GATS), concluded in April 1994, was the first broadly based international agreement on trade in services. In the 1980s the U.S. services sector moved into the competitive market, driven by the deregulation of telecommunications, financial services, banking, and transportation.
Trade agreements rarely address service sectors broadly, nor is education as a service generally addressed. For example, consider three ways in which education has been introduced in these agreements:
- Global agreements, such as the General Agreement on Tariffs and Trade and the World Trade Organization (GATT/WTO), generally mention education, but only as a low priority service item.
- Regional agreements, such as the European Community, the North American Free Trade Agreement (NAFTA), and the Association of Southeast Asian Nations (ASEAN), provide inconsistent structural recognition of education. For example, the Single European Act dealt with education issues only at the national level. However, when polled, a majority of Europeans felt that "testing, certification, technical standards, and science and research" should be handled at the European level.
- Bilateral agreements, such as those between Japan and United States, open up markets for provisional time periods.
The dominant trend in every facet of the United States economy is the shift from the production of goods to services. In 2000 the U.S. export of private services totaled $278.6 billion, exceeding imports by $78 billion.
Educational services encompass both programs and ancillary services. Programs are defined as sets of curricular activities that may lead to a certificate or degree. These may include aspects of the following: elementary, secondary, postsecondary, university, vocational, and technical education; child care; special education; adult and continuing education; corporate training; distributed learning; and technology-based training. Ancillary services are a necessary component to managing the needs of individuals and the logistics of servicing equipment. Activities include: the design, marketing, and sales of testing, certification, test preparation, tutoring, and other enhancement programs; management consulting; and administrative and human resources. Educational goods include the design, manufacture, and sale of textbooks, teaching materials, vocational and scientific equipment, software, videos, multimedia, school supplies, and furniture.
In 2000 U.S. exports of educational services totaled $10,287 million, which exceeded imports by $8,144 million and doubled the amount of exports in 1990 ($5,126 million). Asia and the Pacific Rim accounted for 55 percent of the 2000 export volume; Europe for 17 percent; and South America for 13 percent. In 1997 exports of educational goods included $11,600 million worth of textbooks and supplementary materials; $4,800 million in technology; and $3,000 million in testing and test preparation.
Changes to educational systems are neither monolithic nor consistent. Changes in the content and form of educational services and goods occur at all levels and across cultures. The changes can roughly be categorized as being technological, organizational, social, or adaptive. These are not mutually exclusive categories, but provide a way to understand the complex interplay between global trade, the free-flow of information and labor, and the impact of trade on education. The role of technology in education can illustrate this complex interplay.
Information technology is one of the fastestgrowing economic sectors in the global economy almost without exception in every country. That is, countries at all different phases of development recognize the importance of being technologically connected. This may include funding projects for telecommunications infrastructure, buying hardware and software, or any type of technology training. Countries like South Africa or the twelve newly independent states of the former Soviet Union represent countries in transition to a market economy. Examining the telecommunications trade occurring in these countries can provide a helpful framework for imagining how to de-commodify education in these countries. Telecommunications in Sub-Saharan Africa has grown to 8 percent of the total market of goods and services. In Botswana the leading sector for U.S. exports and investment is in telecommunications; in Cote d'Ivoire telecommunications is the third leading export sector; in Guinea telecommunications is the sixth leading export sector and in Nambia it ranks fourth. In all cases, telecommunications follows agriculture or civil infrastructure sectors; i.e., it is ranked more important than household goods. Advanced computer technologies in multimedia, real-time delivery and e-mail through Internet connections, and the ease of use of interface of personal computer systems can drastically alter the traditional form and content of education. U.S. educational technology funding went from $23 million in 1994 to $766 million in 2000. In 1996 the Technology Literacy Challenge was issued in order to provide a major commitment of resources to connect every classroom to the Internet, expand access to modern, multimedia computers; make high-quality educational software an integral part of the curriculum; and enable teachers to effectively integrate technology into their instruction. Some argue, however, that access to computers does not improve reading scores, but that access to books does, and that money spent on computers is therefore better spent on libraries and reading programs.
At the postsecondary level, the impact of technology on education is illustrated by the growth in distance education, which is perceived to overcome geographic barriers to access, and may reduce costs. On the one hand, the challenges involved in implementing distance education include the need to handle organizational, management, and educational changes over the short and long term; limited access to quality programming among certain populations defined by race, social class, or geography; the need for teachers to learn new approaches to teaching, monitoring, and mentoring to adequately serve their students; and the need for standards of quality for new programs. On the other hand, the move to commercialize and digitize curriculum delivery is dismissed as an attempt to de-skill and get rid of teachers with little consideration toward the pedagogical impact. This viewpoint sees automation as a strategy for reducing the need for highly skilled tasks that are expensive to maintain; in the field of education teachers are highly skilled at educational tasks. When their tasks become automated then the need for teachers with those skills is reduced, thus the expectation of what is wanted from a teacher, a teachers' skills bank, is that one can get by with or pay less for teachers who are less skilled. The general caveat is to warn against addressing people as information processors or to redefine complex human issues such as trust as simply information.
The digital classroom gives rise to new teaching and learning styles that can be more flexible and adaptable, yet it raises issues of equity and access that are not fully understood. Curricular changes are extrapolated to the entire university level with the creation of virtual universities. Western Governors University (WGU) illustrates the move from a bricks and mortar to a clicks and mortar, virtual institution. WGU is a collaborative effort of eighteen western states to create a fundamentally online higher-education program. The WGU plan ensures that it be "market-oriented, independent, client-centered, degree-granting, accredited, competency-based, non-teaching, high quality, cost-effective, regional, and quickly initiated."
In general, commercialism and privatization are advocated as organizational mechanisms to address controversies around how best to improve educational efficiency, cater to pluralistic preferences, make institutions more accountable, and reduce government spending. The phrase school/business relationship can be misleading, since such partnerships encompass everything from genuine altruism to cynical exploitation of the youth market. For example, at the K–12 level, a school may receive computer equipment in exchange for electronic marketing to students; or a school may receive free pizza from a specific pizza franchise if students read so many books. At the university level, partnerships include university connections to science parks that impact the processes of invention, innovation, technology transfer, commercialization, and enterprise. Many universities encourage faculty entrepreneurship, provide support systems, and promote university-industry links. These changes in the university environment effected by the increasing roles of knowledge and technological innovation can lead to healthy economic benefits, but excessive commercialization may undercut the mission of public universities. Knowledge generation no longer in the public domain becomes owned by or proprietary to corporations and individuals connected to technology transfer license agreements. The ability to advance scientific knowledge can be restricted by access to proprietary knowledge.
Globalism can be examined from several angles. In a general sense, globalism can refer to the process in which events in distant locales make a difference in the lives of people in a local area. Global processes have heavily influenced changes in technology, changes in capital, and changes in the mobility of labor. No one theory of globalization that tries to account for its effects can capture the inherent ambiguity of the multitude of ongoing processes. Some theories of globalization say it has a homogenizing effect, resulting from the imposition of capitalist logic. Other theories say it creates heterogeneity by circulating goods, ideas, and culture, thus creating new hybrid cultures that emerge from processes of globalization, e.g., youth subcultures. Others claim that globalism is functionally equivalent to modernity, but is a more neutral term.
However, globalization can be construed as a cover word for what used to be called imperialism. This is a Marxist formulation, describing capitalism as having reached the imperialist stage, though rather than imposing its will through force and colonization, it does so through the force of advertising and commodification.
It is not a question of whether or not the global economy will happen, but a question of the global economy on whose terms. What is at stake is both how globalization is theorized and how technologies are used to better understand the complex interdependencies between commerce and education.
See also: Globalization of Education; International Trade in Education Programs, Goods, AND Services.
Bray, Mark. 1998. "Privatisation of Secondary Education: Issues and Policy Implications." In Education for the Twenty-First Century: Issues and Prospects. Paris: UNESCO.
Brown, John Seely, and Duguid, Paul. The Social Life of Information. Boston: Harvard Business School Press.
Collins, Timothy, and Dewees, Sarah. 2001. "Distance Education: Taking Classes to the Students." In Rural South: Preparing for the Challenges of the 21st Century. Mississippi State, MS: Southern Rural Development Center.
Feenberg, Andrew. 1999. "Reflections on the Distance Learning Controversy." The Canadian Journal of Communication 24 (3):337–348.
Henrickson, Leslie, and Kim, Songmi. 2000. "Education as Commodity in the Global Marketplace." International Journal of Education Policy, Research and Practice 1 (3):377–388.
Heyneman, Stephen. 2000. "Educational Qualifications: The Economic and Trade Issues." Assessment in Education: Principles, Policy, and Practice 7 (3).
Kearns, Michael. 1999. The Education Industry: Markets and Opportunities. Boston: Eduventures.
Rust, Val D., and Kim, Anna. 1997. "Free Trade and Education." In International Handbook of Education and Development: Preparing Schools, Students and Nations for the Twenty-First Century, ed. William K. Cummings and Noel F. McGinn. London: Pergamon.
Torres, Carlos, and Morrow, Raymond. 2000. Globalization and Education: Critical Perspectives. New York: Routledge.
Mann, Michael, and Borga, Maria. 2002. "Detailed Services Transaction Guide." International Trade Administration. <www.ita.doc.gov/td/sif/TradeData2001.pdf>
U.S. State Department. 2000. "Closing the Digital Divide." <http://usinfo.state.gov/usa/able/close.htm>
WGA Virtual University Design Team. 1996. "Western Governors University: A Proposed Implementation Plan." <www.westgov.org/smart/vu/imp.html>
Latin America, Commerce with
LATIN AMERICA, COMMERCE WITH
LATIN AMERICA, COMMERCE WITH. U.S. commerce with South America originated in the inter-course of the thirteen colonies with ports in the Spanish Indies. Shortly after the United States acknowledged the independence of the Spanish-American republics, it began to negotiate treaties of commerce with them. During the period from 1825 to 1850 large quantities of cotton goods were exported from the United States to Colombia, Chile, and Brazil. South America sent to the United States hides, wool, sugar, guano, and copper. After 1850, because of the Civil War and the increasing competition from European countries, the export trade of the United States with South American nations declined. Although in 1867 the United States made purchases of coffee and rubber from Brazil and of sugar, spices, fruits, chemicals, and woods from other nations of South America, its sales of manufactured goods to these countries amounted to scarcely one-third of the total of its purchases from them.
During the years from 1900 to 1914 a marked development took place in the commerce of the United States with South American nations. In particular, there was an increase in the volume of imports from Argentina, Brazil, Chile, Peru, Colombia, and Venezuela.
During World War I, leading nations of South America sent larger shares of their products to the United States and purchased more manufactured goods in this country. Imports into the United States from South America in 1916 were nearly 100 percent in excess of those in 1914, while exports from the United States to that continent showed a gain of 140 percent during the two-year period, 1914–1916. By 1917 the United States enjoyed about one-half of the total trade of South America.
The years immediately following World War I were distinguished by a great expansion of commercial life in South America. After the construction of the Panama Canal (1904–1914), the trade of the United States with countries on the west coast of South America increased considerably. The chief exceptions to this tendency were countries in the basin of Rio de la Plata, where the staple products were the same as those of the United States. Import duties levied by the U.S. tariff on wheat as well as the stringent application of sanitary regulations to meat provoked resentment in Argentina, which made that country turn more and more toward English marts and markets.
During World War II and immediately thereafter South America was the most important source of U.S. imports and the second most important market for U.S. exports. But in the late 1940s the South American share of U.S. trade began to decline steadily as Europe and Japan rapidly recovered from the devastation of the war and together with Canada became the major U.S. trading partners. Nevertheless in 1973 the region was still the fourth largest market for U.S. goods and the fourth largest U.S. supplier.
The United States provided about half of South America's imports around 1950, but only about one-third in 1970. During those two decades the U.S. market for South American products declined in similar fashion. Nevertheless, although South America reoriented its trade to Europe and Japan, the United States remained South America's most important single trading partner by far.
After 1968, as the region's industrialization accelerated, South American demand for U.S. products increased more sharply than its exports to the United States. South American trade formed a triangular pattern, the region being a net exporter to Europe and Japan and a net importer from the United States.
By the late 1960s Brazil surpassed Venezuela as the largest market for U.S. exports to South America, importing nearly $2 billion from the United States in 1973, nearly double Venezuela's purchases. As U.S. suppliers, however, the importance of these two countries was reversed: U.S. imports originating from Venezuela were more than double those from Brazil in 1973.
Argentina—the country with the highest standard of living in South America and, after Brazil, the region's largest in terms of population, national income, and degree of industrialization—has had a relatively weak commercial relationship with the United States. From World War II until 1975 its trade with the United States was consistently exceeded by that of Venezuela and Brazil and in some years also by Colombia, Peru, and Chile, economically much less developed countries than Argentina.
About 75 percent of U.S. exports to South America has traditionally consisted of manufactured goods, but the kinds of manufactured goods exported changed during the post–World War II period from primarily finished consumer products to primarily machinery, equipment, industrial raw materials, and supplies. This change coincided with the acceleration of industrialization based on import substitution in the major South American countries. The production of most of the manufactured consumer goods that had been formerly imported from the United States began in Argentina, Brazil, Chile, and Uruguay and then developed in Colombia, Peru, and Venezuela. This industrialization process required imports of investment goods for the establishment and operation of South America's new factories. In 1970 the United States supplied between 33 and 50 percent of the manufactured imports of South American countries.
Because the emphasis of U.S. aid shifted from donations to loans during the mid-1960s, a significant part of South America's imports from the United States was financed through increasing indebtedness. The external public debt of South American countries became a serious burden on their economies during the 1960s, surpassing $15 billion in 1971, nearly five times the earnings from their exports to the United States in that year. Interest payments on their external public debt amounted to nearly one-third of their 1971 exports to the United States.
Natural resource products have been the traditional U.S. imports from South America. Between World War I and World War II coffee and petroleum were the most important single imports. After World War II, crude oil and petroleum products began to outweigh coffee in the value of U.S. imports from South America. It is estimated that their import value amounted to about $2 billion in 1972, nearly all the petroleum imports originating in Venezuela. More than one-third of this amount came to the United States via the Netherlands Antilles, where much Venezuelan crude oil was refined after the 1950s. The value, but not the quantity, of petroleum imports from South America quadrupled in 1974 because of the sharp price increases imposed by the Organization of Petroleum Exporting Countries (OPEC), of which Venezuela and Ecuador were members. Crude oil imports from Ecuador did not become significant until 1973.
Brazil and Colombia provided by far the largest share of U.S. coffee imports immediately after World War II, supplying almost 1 million metric tons a year, or about 90 percent of U.S. consumption. U.S. coffee imports from South America declined thereafter, as Africa became an important U.S. supplier. By the end of the 1960s South America was shipping to the United States about 650,000 metric tons yearly, which amounted to roughly two-thirds of the U.S. market.
Copper has been the third most important U.S. import from South America, with most copper imports coming from Chile, which shipped to the United States over 200 million metric tons of refined copper and about 50 million metric tons of the unrefined product ("blister" copper) a year during the early 1950s. By 1960 nearly all U.S. copper imports from Chile were in unrefined form, as Chile shifted its refined copper exports to Western Europe. During the second half of the 1960s Chilean refining capacity increased, and U.S. imports of refined copper resumed. During the 1950s Peru became another South American source of U.S. copper imports. Peruvian production increased rapidly during the 1960s, primarily in the form of concentrates, but exports to the United States remained far below those of Chile. Until the early 1970s most copper output in Chile and Peru was produced by U.S. subsidiaries, which, except for one in Peru, were subsequently expropriated by the respective governments.
After World War II, South American iron ore production increased rapidly and, aside from sugar, was the only other commodity of which the export value to the United States began to exceed $100 million. Venezuela, Brazil, Chile, and Peru supplied over 22 million metric tons of iron ore for the U.S. market by 1960, but after that time most of the increase in South American production for export was sold to Japan.
Other important U.S. imports from South America have been sugar, primarily from Brazil and Peru; bananas, primarily from Ecuador; cocoa from Brazil and Ecuador; fishmeal from Peru; tin from Bolivia; manganese from Brazil; tungsten from Peru and Brazil; zinc ores from Peru; and processed meats from Argentina. As late as 1970 the U.S. import value from the region for any of these products, except sugar, still remained below $100 million, although these imports from South America accounted for significant proportions of U.S. consumption. The elimination of the U.S. import quota for sugar in 1974 benefited South American exports.
Of all South American countries, Argentina's exports of temperate zone agricultural products have competed most directly with U.S. production, which may explain the relatively low level of United States–Argentine trade. As U.S. consumption of beef began to outstrip domestic production after World War II, the United States imported increasing quantities of beef, Argentina's most important export commodity beginning in the mid-1950s. Although U.S. imports of fresh and frozen beef reached $1 billion in 1973, none of it came from any South American country because of the strict enforcement of U.S. sanitary regulations.
Manufactured products accounted for about 5 percent of South American exports to the United States in 1950 and about 12 percent in 1970. Exports of manufactures continued to rise, reaching 20 percent of Argentine exports, 12 percent of Brazilian, and 13 percent of Colombian exports in 1972. A significant part of this increase was the result of the expanded role of U.S. and other foreign investments in South American manufacturing production.
By 1970 the industrialization of South American countries had become increasingly dependent on the import of U.S. technology and capital and had led to a large foreign indebtedness. Subsequently the prices of the region's raw material exports increased more than the prices of its imports, and the value of South American exports grew faster than its external debt to the United States as shortages of raw materials made themselves felt during the economic boom of 1973 in industrial countries. As a result of the ensuing economic recession in the United States and other developed countries, South America's raw material prices had weakened again by the end of 1974. Nevertheless, the first half of the 1970s brought into sharp focus what was already apparent: a growing economic interdependence had become a fact of United States–South American relations.
Hyperinflation plagued South American economies in the 1980s, and the region's economic instability continued into the 1990s. Nevertheless, American investment in South America grew rapidly, spurred in no small part by the spread of democratic governments across the continent. By 2000 U.S. direct investment in South America reached $80 billion. Brazil alone received $35 billion in U.S. investment, a sum greater than the total of U.S. investment in First World economies such as Australia, Italy, and Sweden. The United States is now the largest trading partner of Brazil, Columbia, Ecuador, and Peru, and one of the top three trading partners of virtually every other South American country. Moreover, the U.S. dollar operates as the de facto currency in many parts of South America. Most economists expect that the early twenty-first century will see an expansion of the North American Free Trade Agreement to Latin America, and thus the creation of the world's largest free trade zone.
Baily, Samuel L. The United States and the Development of South America, 1945–1975. New York: New Viewpoints, 1976.
Friedman, Thomas. The Lexus and the Olive Tree. New York: Anchor Books, 2000.
Grunwald, Joseph. Latin America and World Economy: A Changing International Order. Beverly Hills, Calif.: Sage, 1978.
Haring, Clarence. South America Looks at the United States. New York: Arno Press, 1970.
Kraus, John. The GATT Negotiations: A Business Guide to the Results of the Uruguay Round. Paris: ICC Publishing, 1990.
Weaver, Frederick. Class, State, and Industrial Structure: The Historical Process of South American Industrial Growth. Westport, Conn.: Greenwood Press, 1980.
Whitaker, Arthur P. The United States and the Southern Cone: Argentina, Chile, and Uruguay. Cambridge, Mass.: Harvard University Press, 1976.
Yergin, Daniel. Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the Modern World. New York: Simon and Schuster, 1999.
William SpenceRobertson/a. g.
See alsoAgricultural Price Support ; Balance of Trade ; Dollar Diplomacy ; Foreign Investment in the United States ; Good Neighbor Policy ; Latin America, Relations with ; Reciprocal Trade Agreements ; Roosevelt Corollary .
com·merce / ˈkämərs/ (abbr.: comm.) • n. 1. the activity of buying and selling, esp. on a large scale: the possible increase of commerce by a great railroad.2. dated social dealings between people: outside the normal commerce of civilized life.3. archaic sexual intercourse.
The exchange of goods, products, or any type ofpersonal property. Trade and traffic carried on between different peoples or states and its inhabitants, including not only the purchase, sale, and exchange of commodities but also the instrumentalities, agencies, and means by which business is accomplished. The transportation of persons and goods, by air, land, and sea. The exchange of merchandise on a large scale between different places or communities.
Although the terms commerce and trade are often used interchangeably, commerce refers to large-scale business activity, while trade describes commercial traffic within a state or a community.