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Economic Patterns
Economic changes that came to Europe after 1500 had widespread consequences for the economy and society. New patterns emerged while traditional hierarchies and status relations continued to define the roles of individuals in many groups.
Changes in Banking and Finance
To handle the global trade market, banking and finance needed new tools. In the 15th and early 16th centuries, prominent families such as the Medici in Italy and the Fuggers in central Europe mostly controlled Europe’s banking. (See topic 1.2 for more about the Medici family and Topic 1.5 for the nobles of the robe.) But as ever-larger amounts of capital flowed into Europe in the form of trade profits and precious metals from the Americas, banks needed to meet the new requirements of commercial capital markets.
Such changes helped grow the money economy, an economy based on cash for investment, for wages, and for buying and selling goods. The money economy replaced the earlier economy, in which people grew or made most of what they used. A money economy is more convenient because it can be used by anyone to purchase any good, not just by an individual who produces a specific good and can only barter for that good. Also, money doesn’t spoil as many agricultural products do, is simple to divide, and easy to store.
Double-Entry Bookkeeping As business deals became more complex, merchants needed a better way to keep track of where their money went. Double-entry bookkeeping is a type of accounting where both sides of each transaction is tracked in a ledger, or book where the information is recorded. For example, if you sell a wool blanket for one coin, you write down what you no longer have (the blanket) and what you now have (the coin).
Venetians used double-entry bookkeeping by the early 1300s. Because Venice was a center of printing and publishing, authors created manuals on this topic, and those manuals spread throughout Europe.
Joint-Stock Companies One important financial innovation of the late 16th and early 17th centuries was the joint-stock company. This type of business venture raised large amounts of capital for international trade and colonization ventures. In this enterprise, many investors bought stock, or shares, in a company. Because many investors buy stock, the risk is distributed among the stockholders and is limited to any individual investor. They received dividends, or payments, as a return on their investment based on the company’s profits.
Investors could receive high returns from such ventures. For example, the Dutch East India Company was a joint-stock company formed in 1602 to finance Dutch trade in Asia. During the first ten years of its operation, the company paid investors a return of about 30 percent. To put that in perspective, in the last century, modern U.S. stocks have paid investors a return of about 10 percent a year. If the company existed today, it would be worth almost $8 trillion.
TOPIC 1.10 THE COMMERCIAL REVOLUTION 67

























































































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