Global Trade, Mercantilism and the Agricultural Revolution

Your breakfast, 1750

Imagine a well-off family in London in 1750. Their tea came from China, their sugar from Caribbean plantations worked by enslaved Africans, their cotton tablecloth may have been woven in Bengal, the silver coins they paid with were mined in Bolivia or Mexico, and the father's felt hat was made from beaver fur traded by Cree hunters at York Factory on Hudson Bay.

By the 1700s, ordinary purchases depended on a world economy. This lesson asks how that economy worked, who controlled it and who paid its costs.

Mercantilism

Most European governments followed mercantilism. Its assumptions were:

• The world's wealth is limited, so one country gains only if another loses.
• A country should export more than it imports and build up gold and silver.
• Colonies exist to supply raw materials and to buy the home country's manufactured goods.
• The state should use tariffs, monopolies and navies to protect trade.

England's Navigation Acts (1651 and 1660) required that colonial trade be carried in English ships and that key colonial goods, such as sugar and tobacco, go to England first. France's Colbert followed the same logic.

Chartered companies

Much of the world's trade was run by chartered joint-stock companies, private businesses with powers usually held by governments:

• The Dutch East India Company (VOC, 1602) controlled the spice trade from Batavia (Jakarta), founded the Cape Colony (1652) and had its own soldiers, forts and courts.
• The English East India Company (1600) traded at Indian ports such as Madras, Bombay and Calcutta, and later conquered territory (see the lesson on European companies in Asia, Africa and the Pacific).
• The Hudson's Bay Company (1670) received a charter from Charles II for Rupert's Land, all the lands draining into Hudson Bay, without the consent of the Cree, Dene, Anishinaabe and other nations who lived there. The trade depended on Indigenous hunters, guides, food and the work of Indigenous women, and posts such as York Factory were places of negotiation. The company went on to operate in Canada for 355 years, until it closed its last stores in 2025.
• The Royal African Company (chartered 1672) traded in gold, ivory and enslaved Africans (see the next lesson).

The financial revolution

Wars cost more than taxes could pay, so states borrowed. The Bank of England (1694) lent to the government, and Parliament guaranteed repayment, so Britain could borrow cheaply. Investors bought and sold shares in Amsterdam and London. Speculation could turn wild: in 1720 shares in Britain's South Sea Company and France's Mississippi Company soared and then crashed, ruining many investors. These were among the first international financial bubbles.

Goods that connected the world

• Silver from Potosí (in today's Bolivia) and Mexico flowed to Europe and, by the Manila galleons from Acapulco to the Philippines, directly to Asia. Much of it ended up in Qing China, which collected taxes in silver.
• Sugar, tobacco, coffee and cotton grown in the Americas, much of it by enslaved people, turned luxuries into everyday goods in Europe.
• Tea from China and cotton cloth from India were so popular in Britain that Parliament passed the Calico Acts (1700 and 1721) to restrict Indian printed cottons and protect British wool and silk makers.
• Furs from North America, especially beaver, supplied European hat makers.
• Cowrie shells from the Maldives were used as money in parts of West Africa, and Indian textiles were among the main goods European traders exchanged on the African coast.

Historians call the rising demand for these goods in Europe a consumer revolution.

The Agricultural Revolution

In the 1700s, farmers in Britain and the Low Countries raised much more food from the same land:

• New crop rotations. Instead of leaving one field in three fallow, farmers adopted the four-course rotation: wheat, turnips, barley, clover. Clover puts nitrogen back into the soil; turnips and clover feed animals over winter. Charles Townshend promoted turnips so enthusiastically he was nicknamed "Turnip Townshend".
• Machines. Jethro Tull's seed drill (about 1701) planted seeds in neat rows at the right depth instead of scattering them.
• Selective breeding. Robert Bakewell bred sheep and cattle for more meat.
• Enclosure. Landowners fenced open fields and commons into compact private farms, often through acts of Parliament, especially after 1750. Enclosure made improvements easier but took away poor villagers' rights to graze animals and gather fuel on common land. Many became wage labourers or moved to towns, where they later became workers in the Industrial Revolution (studied in The World, 1789–1900).

Agricultural change was global: crops from the Americas, such as maize, sweet potatoes, potatoes and cassava, spread through China, Africa and Europe and helped feed growing populations.

Adam Smith's challenge

In The Wealth of Nations (1776), the Scottish philosopher Adam Smith attacked mercantilism. He argued that:

• A nation's wealth is its productive labour, not its stock of gold.
• The division of labour greatly increases output.
• When individuals pursue their own interest in free markets, they are often led, as if by an "invisible hand", to benefit society.
• Monopolies such as the East India Company and colonial trade restrictions harm consumers and the nation.

French thinkers called Physiocrats had already urged laissez-faire. Smith's ideas became the foundation of classical economics, which you will meet in first-year economics courses.