16th century economy: the colonial expansion, agriculture and trade

The beginning of the Early Modern Age did not bring any major changes in the economic and social structures, in respect to those existing in the later Middle Ages. Although the main features of the medieval feudal society were maintained, from the 16th century onwards new privileged social groups developed in urban areas outside the feudal system; they became rich through new mercantile activities, such as large-scale trade and finance.

The rise of the bourgeoisie, an essentially urban phenomenon, marked in many ways the entire modern period. The bourgeoisie, as a social class, always viewed political power with resentment and centred its activity in the cities, imposing new ways and styles of thinking.

The privileged social estates of the Modern Age, which were the nobility and the high clergy, retained in this new historical stage their estates' prerogatives inherited from the Middle Ages. Meanwhile, a broad category of workers flooded the countryside and the cities and lived in an atmosphere of marginalization and social rebellion.

The agrarian world in the 16th century

The capability to obtain food resources in the traditional estates' society was the most important factor in regulating population size. Europe in the 16th century was a heavily rural society that needed the agrarian resources produced by its countryside to survive. Birth and death rates, along with cultural, social, economic and political factors, were interrelated within the demographic system of this period.

A distinctly rural society

In 1500, 7 out of 10 Europeans lived in the countryside, the other 2 lived in small urban centres and only 1 out of 10 lived in medium or large cities. Even cities such as Barcelona had a rural aspect, with many of its citizens living in the city but engaged in agricultural work. The pace of agricultural production made or broke much of 16th century European society. A well-known German picture makes farmers the roots of the social tree.

In 1450, population growth led to an increase in the demand for agricultural production, which was met by the extension of pastures (breaking the previous trend of reduction). In 1500, the economy based on cereal cultivation recovered the ground lost in the previous decades. Cereal crops were rather important because the caloric yields of the space devoted to cereals were 10 times higher than those of livestock. The Italian bishop Claude de Seyssel wrote in 1519: "many places and regions that used to be wooded or uncultivated are now all cultivated and populated with lavish villages".

The development of an extensive agriculture, a phenomenon that began in the 16th century, was manifested by four elements:

There are two theses, the pessimistic and the optimistic:

• The optimistic thesis: it emphasizes progress in yields as a sign of progress towards intensive agriculture. England and the Netherlands (7.3 per 1 of sown wheat and rye, while Germany and Russia have 4.3);
• The pessimistic thesis: outside Northern Italy, the Netherlands and England (with the demand for very dense trade circuits) there was real progress in yields. Improvements were slow, the marinade was scarce, the tools were primitive and there was a lot of resistance to change.

Nevertheless, there are some elements that would have contributed to the intensification of crops, especially improvements in irrigation systems, thanks to the implementation of hydraulic works of a certain magnitude. In addition, the improvement of cropping systems with the application of longer rotations, the elimination of fallow land together with the successive cultivation of species with different nutrient requirements.

The permanent planting of cereals meant that fallow land (uncultivated land) had to be set aside; part of the new crops were used for fodder. From this period, agronomic manuals are important, for example that of the Venetian Camillo Tarello who wrote "Ricordo d'Agricoltura" in 1556. Besides the intensification of crops, we should refer to diversification.

In the 16th century, two traditional crops that had been forgotten once again gained ground: the olive tree and the vine, which returned to the Mediterranean (Italy and France consolidated wine-growing regions such as Beauyolais). Newly discovered non-European products arrived: these changed consumption habits. A century earlier, rice and citrus fruits were introduced. From 1500 onwards, coffee and bananas began to be produced. The most rapidly spread American plant was maize.

European agriculture moved towards specialization, especially in and around the major cities. In the Netherlands, cereals were replaced by flax or grain (commercial plants) for textile manufacturing and relied on imports from Sicily and the Baltic, cereal-growing areas that supplied 13-14% of total consumption (1562-1569).

Land ownership and tenure regimes

Who were the landowners in Western Europe?

• Farmers and rural communities: they owned 50% of all land in France (1550). This was not a homogeneous group, but rather a group with increasing social differentiation (landowners and vassals);
• The Church in 1500 was the most important landowner: it owned 25-35% of the land in the territory of Florence, or 20% in Sweden. In England, the monasteries' rents were double those of the Crown. By 1600 the status had changed substantially: the nobility had jurisdiction over entire counties. The lord was not always the owner, he had to respect the previous rights or those of the vassals who reached a stable condition of semi-ownership;
• Lay and ecclesiastical lords enjoyed different degrees of dominion, which created two different Europe. Changes in the agrarian world forced the fall of feudalism in the West and reinforced a second serfdom in the East.

And in Eastern Europe, who were the landowners?

East of the river Elbe, the concentration of land was in the hands of the gentry, at the expense of the small landowners, taking advantage of the corvées (forced labour of the vassals). Three factors made this situation possible:

1. Rising grain prices (fourfold in the 16th century), driven by Western demand. Exports of Polish oats increased by 20,000 tons in 1500 to 170,000 tons in 1618;
2. Low labour force: very low population density, 14 inhabitants/km² in Poland and 3 inhabitants/km² in Ukraine;
3. Political structures dominated by the nobility.

In Eastern Europe, social groups of landed gentry were consolidated, such as the Junkers in Prussia, the Szlachta in Poland and the Pomeščik in Muscovy. In none of these territories was there a bourgeoisie that could act as a counterweight: in 1600 Poland had 5 million inhabitants, and there were only 8 towns in the country with more than 10,000 inhabitants.

Within these eastern territories, the large landowners ensured that legislation was put in place to fix the labour force in a second serfdom. In Prussia, successive ordinances of 1526, 1540 and 1577 limited the mobility and inheritance of the farmers.

On the contrary, west of the Elbe manorial lands were divided between peasant holdings and reserves with an increasingly secondary role (1 holding for the lord, who was rattling often absent). The corvée tended to disappear and the stability of the farmers increased, with forms of transmission in exchange for money.

The diversity in the forms of ownership within Western Europe was also remarkable. In England at this time, the feudal system was already actually weak, and many farmers were free: in 1500 only 30% of peasants were labourers (they did not own their land). In contrast, in Castile, 70% of the farming population worked on land they did not own.

Yet, the accumulation of costs for non-landowners was significant. A farmer who was not a landowner had to pay:

• 10% of the profits in manorial rights;
• 10% of ecclesiastical tithe;
• 10% of royal taxes;
• In total, between 35-50% was land rents. The remainder: 29-40% (plantings) + censuses.

Throughout the modern period, there was a considerable growth in polarization within the peasant community itself. There were rich peasants and poor peasants. It was the path towards a proper rural bourgeoisie and a rural proletariat.

The urban world: finance, trade and manufacturing

Finance: the role of money

In rural areas, monetary exchanges were very rare and infrequent. Exchanges of products and bartering were the norm. Many agrarian communities were self-sufficient. Money came into play when self-consumption was broken and access to commercial networks (three levels of markets: local, weekly/regional and specialized fairs) was gained.

In the 16th century, a low proportion of income was in money form (textile workers were paid in clothing). What was important at that time was the possession of land and the accumulation of credit, not the conversion into cash.

In the urban world, however, things were different. Urban groups engaged in commerce (the bourgeoisie) began to develop a certain financial capitalism, supported by various means of exchange:

• Exchange of feudal rights for money;
• Expansion of manufacture, trade and markets;
• Limitation of moral controls on usury;
• Inflow of vast quantities of metal from America.

These urban groups made use of capital in the form of credit in two key ways for capitalism: it offered greater mobility, which facilitated investment, and it led to the accumulation of assets from both the rural world and the nobility in the hands of the bourgeoisie.

Who became a creditor? It was goldsmiths, notaries or textile merchants with large-scale economic transactions who took the step. Firstly, they lent, then they took deposits from their clients. After completing this process, they became private bankers.

Bankers and creditors

There were public banks and private banks. Private banks were often quite unstable, with small capital and high risks. In 1584, of the 103 banks in Venice, 96 had failed. Public banks, on the other hand, were born out of uncertainty. Some examples are: Banco di San Giorgio (Genoa), Messina and Venice (1587), Milan (1597), Rome (1605) or Amsterdam (1609). Open to public and private clients, with public (often municipal) support for the funds deposited.

It existed, also, the figure of the financiers: a response to the weakness of private banking and the credit restrictions of public banks. It was speculative finance provided by the old merchant bankers. They did not hold deposits but traded in money, goods and credit.

The bill of exchange

These financiers benefited from three instruments:

• Major international trade fairs;
• Improvements in accounting techniques;
• The bill of exchange, which was born in the 12th century, and was widely accepted in the financial world.

The bill of exchange was not a physical transfer of money, rather a credit. A commitment to pay at an exchange on a specific date was signed: merchants had capital available on credit anywhere in Europe and speculated on the exchange of merchant currency with bills of exchange.

The problem of government debt

The main stimulus to the bill of exchange market was the warmongering monarchies. It also led to concentrations and monopolies, with extraordinary profits. Examples:

• Nicolò Grimaldi: 1515 (80,000 Ducats); 1575 (5 million);
• Fugger Family, Germany: 1511 (196,761 Guilders); 1575 (5 million). An annual profit of 54%.

Yet, the downfall came in 1557 when the Spanish monarchy's first suspension of payments took place. The growth of debt had two consequences:

• Creation of a rentier class: in Valladolid, in 1600 there were 200 holders (taxes);
• Consolidation of the debts: creditors were trapped and this gave financial stability.

Trade

The development of trade in modern times had many traditional barriers that made it less competitive: physical length and travel times. The slow transportation of certain commodities made long-distance trade (e.g. foodstuffs) unsuitable.

Sea and river transport was used to move large volumes of heavy goods (such as timber or grain). Nevertheless, by the time Polish wheat reached the Mediterranean, almost a year had passed.

By land, the problems were not a few: the precariousness of the road network and the lack of motive power made transport very difficult. As a result, long-distance transport was only profitable for actually expensive products, such as silks or spices.

On top of all this, there were the legal problems associated with trade: at the time, there was a tide of small jurisdictions that interfered with free trade and had repercussions on the costs and final prices of products.

International seaborne trade

The difficulties in domestic trade were compensated by a leap forward in the volume of cabotage as well as medium and long-distance maritime traffic. The cost of these voyages did not exceed 5-6% of the volume of the operation. Profits of almost 100% were obtained.

• In America: the volume of goods shipped from Seville was 10,000 tons in 1520 and 40,000 tons in 1600. Shortly afterwards, the American possessions were self-sufficient in basic products (textiles, wine, oil and iron) while European imports were 90% precious metals. The peninsula redistributed manufactured goods from the north. American metals soon ended up in the hands of third parties.
• In Asia: Venetians and Portuguese had the same problem as the Castilians in America, they had nothing to offer in exchange for spices and silks. They exported precious metals.

The development of commercial activity

The expansion of trade took place in the 16th century for four reasons:

• Easy access to credit: it allows speculative gambling and increased profits;
• By the development of insurance;
• Thanks to technical advances in shipbuilding: increased capacity to make operations profitable. The Mediterranean galleys were surpassed by the Atlantic caravel;
• By the formation of joint-stock companies: e.g. the Muscovy Company (1555) in London (a "merchant adventurer"). Previously capital for a single transaction; now a permanent capital fund. Merchants no longer intervene, they buy shares in companies that trade for them.

Manufacturing

The main industries

In the 16th century, industry accounted for a tiny proportion of capital and labour. Nevertheless, there were notable qualitative advances, for example, in mining infrastructures (drainage and ventilation of galleries), metal extraction (amalgamation method), weaving (primitive mechanical looms), and the manufacture of armaments (blast furnaces taking over from traditional forges).

Large-scale enterprise existed only in the extractive, naval and textile industries (the Venetian Arsenal in 1560 had 3,200 workers). The majority of these enterprises were located in the countryside, not in urban factories. The textile industry helped in the diffusion of inexpensive fabrics (new draperies, cheap, light and fashionable).

The role of guilds

The guilds played a key role in the organization of trades in the cities. They were active in:

• Defence of producers: curbing innovation, restricting skilled workers (long training periods), production volumes and production rates;
• To exert a control that prevented:
  • The move to manufacturing in rural areas;
  • The incorporation of immigrant workers with knowledge of new techniques;
  • The impossibility of extending restrictions to new industries;
  • Royal concessions under special conditions.

Organized workers

As in medieval times, the modern centuries also witnessed episodes of labour conflicts (strikes and lock-outs), such as in the French printing industry: Paris and Lyon (1567, 1571, 1577) as well as demands for shorter working hours, the authorization of trade unions and the establishment of arbitration between employers and workers.

Minorities and the spread of capitalism

Refugees played a pivotal role in the spread of capitalism: they were citizens free to innovate, and had contracts that facilitated trade. Most of the minorities were religious in nature.

In the 16th century, refugees from northern Italy and the southern Netherlands played a huge important role:

• Amsterdam prospered with the arrival of the exiles from Antwerp, Brussels and Ghent;
• Two minorities played an important role:
  • Huguenots: French Calvinists;
  • Jews: persecuted and expelled from many places.

The price revolution

In 1500, a new phenomenon occurred: the increase in the living costs. The work of the American historian Earl J. Hamilton, published in 1934, American Treasure and the Price Revolution in Spain, 1501-1650, which has become the mainstream theory, places the concept of the price revolution as a key factor in the economic history of the 16th century. For Hamilton, inflation was related to the massive arrival of precious metals from America.

Yet, is this concept appropriate? Between 1500 and 1600, basic consumer goods became more expensive: wheat (a staple of the diet at the time) rose by 318% in the Netherlands and by 651% in France. Inflation in manufactured goods was not as high: in England 1.5% (1532-1580); in Florence (1552 and 1600), less than 2% a year. On the continent as a whole, it averaged 4%.

Why did this "price revolution" take place? For three reasons:

• It wasn't the magnitude but the appearance of the phenomenon being revolutionary: before, seasonally altered price stability;
• Economy not very flexible: the doubling of the price of bread led to hunger among a dramatic percentage of the population;
• Inflation combined with the evolution of wages and incomes: fall in the standard of living.

Causes of price increases

The sifters (the farmers who separated the seeds from the cereals) were blamed for the increase in the price of staples. However, it is necessary to take into account the monetary devaluation too: withdrawal of metal and automatic depreciation. The English and French currencies were weak; the Castilian currency remained stable during the 16th century (as opposed to the 17th century).

Classical explanations: Martín de Azpilcueta (1556), Jean Bodin (1568) and Tomás de Mercado (1569), all point to the problem of prices being caused by the abundance of gold and silver.

So, is there only one explanation for the phenomenon of inflation? To refute the classical theory, it was found that prices rose before the arrival of the American metals (in parts of Germany and France, 1470); in England and Sweden, prices had risen earlier, with little input until 1550/1570.

Thus, it seems that gold and silver's inflow would not be among the causes of inflation:

• Inflation / metal prices relationship based on the quantitative theory of money: in addition to the demand, the price of products is determined by the amount of money available;
• There is no constant demand: this explains differences in inflation between products: in England (1500-1550) the price of cereals increased by a factor of 3 and non-agricultural products by a factor of 2;
• The demographic increase had a key impact: it affected mainly the prices of commodities (more cereals than livestock products), which had a more elastic demand.

The arrival of American metals

Gold period: West Indies and mainland. At cheap costs: plundering with the conquest of Mexico (1519-1521) and Peru (from 1531 to 1533). Atahualpa's ransom, equivalent to half a century of European production.

Silver period: Taxco (1534), Potosí (1545), Zacatecas (1546) and Guanajuato (1548), more silver in volume and value. A refinement of mining techniques led to an increase in remittances up to 1600. In 1590, 120,000 workers worked in the mines of Potosí (at an altitude of 4,000 metres, 80% Peruvian silver).

The Castilian Crown kept a fifth (20% of the value) of everything that arrived from America. Metals in exchange for peninsular goods. The Castilian economy suffered the most inflation: rising manufacturing costs and the arrival of goods from Northern Europe at more competitive prices.

Soon the American treasury crossed the Peninsula to pay European suppliers and the costs of the Spanish armies in the banks of Genoa, Augsburg and Antwerp, the major lenders to the Spanish Crown.

The English and Dutch brought Baltic grain and manufactured goods to the Mediterranean through free trade with Malta (1582); in 1595, the English Levant Company was formed with 15 ships. Twelve Years' Truce (1609-1621) between Spain and the Netherlands.

Wages and inflation

In an inelastic economy, the impact of 2/4% inflation was considerable, so it is necessary to know how it evolved in regard to wages. The 16th century is characterized by a deterioration in the quality of life; all workers' wages were left behind by inflation.

Real wages fell by 50% (English construction workers, Viennese and Valencians); other examples concern rural and urban workers. For Hamilton, delaying real wage increases creates "profit inflation" for employers and landowners; chain effect: accumulation of capital, generation of savings and investment, development of capitalism.

Marxists criticized Hamilton for putting the burden of development on the workers. They believe that the inflation of profits is also explained by the profits of unequal international trade and the large-scale practice of smuggling and piracy.

Three considerations nuance the discussion:

• Many workers were paid partly or wholly in kind, which was detrimental to them in the period of regression;
• Studies on the diet of workers shows a reduction in the food consumption: for example, meat consumed in Sicily went from 16/23 kilos per person/year (1450) to 2/10 (1594-1596);
• Rising wages: high wages reduce profits and put higher value-added industries into crisis (Venice); very low wages prevent the creation of a consumer market (France and Iberian Peninsula); intermediate wages, the most suitable for economic growth (Holland and England).

Governments and the Price Revolution

Inflation worried governments. It affected monetary stability and made their main activity, warfare, more expensive. The impact of the costs and the quest for stability marked political life: the bankruptcy of the Spanish Treasury (1557) dragged other states from France, the Netherlands, Naples to Milan and made the peace of Cateau-Cambrésis necessary.

Inflationary role of silver: in Italy it became currency. In Naples, between 1548 and 1587, 10.5 million Ducats were put in circulation, while the last year only 700,000 circulated yet; they fled into the hands of speculators and those who defended themselves against bad money.

During the price revolution, governments faced lower fiscal yields (resistance in times of difficulty) and increasing military expenditure:

• The French monarchy was insolvent at the end of the century; the Spanish monarchy went bankrupt regularly: 1557, 1575, 1596, 1607 (1627, 1647); a statement of accounts (1574) predicted a debt of 13 times the expected revenue by 1575;
• The governments responded by increasing taxation: in Castile, indirect taxes increased threefold (1556-1584), in Montpellier, the "taille" doubled (1550-80).

Travels, conquests and colonization

Europe and the outside world

Throughout the Early Modern Age, Europe opened up to the outside world. With growing international trade and the impact of American metals, Europe was ending a 1,000-year period confined, besieged and impoverished within its territory.

Although Europeans never broke their contact with the "outside" world by trading with Asia and Africa (silk, spices, gold and slaves), it was not until 1492 that such a large control of territory had been established, marking a four-century period of world domination in political, economic and cultural terms.

Reasons for overseas expansion

The 15th-16th centuries are characterized by the building of great empires and imperialist practices. We find:

• Islamic expansion along the coast of India, from East Africa into Indonesia;
• Early 15th century: Chinese (Ming) occupation of Vietnam and expeditions into India, Arabia and East Africa;
• Ottoman Turks conquer the Balkans (Europe), Syria (Middle East) and Egypt (Africa);
• Ports supporting commercial traffic (Christians in the Mediterranean). Since 1509 they enjoy naval superiority in India. Conquests: Malacca (1511) and Hormuz (1515).

Three key questions: why this chronology; why Portuguese and Castilians; and why such easy success?

• Chronology: the process coincided with the demographic expansion in Europe (young population without access to land);
• Castilians and Portuguese: consolidation of the monarchies and then their "reconquest" process (1492);
• Easy triumph: military and political supremacy, commercial and financial techniques.

The exploratory voyages and the quest for the passage to the west

In 1500 Europe's advantages were limited: Africa and Asia were fortified. Europe needed to establish strategic ports in the territory and trade treaties, which would not come until the conquest of the 18th century.

Timeline of the voyages to America:

• 1340-1415: Canaries and Azores, maritime circuits (sugar cane): good school of navigation (2,200 km and Atlantic regimes and winds);
• 1415-1460: exploration of the African coast as far as Cabo Verde and the Senegal estuary (1444), Portugal invests capital (old nobility and new urban bourgeoisie) greater than that of the whole of Europe. Later, so did the Monarchy;
• 1460-1497: Bartolomé Díaz rounded the Cape of New Hope (1487-1488); Vasco da Gama (1497-1499) reached Calicut, a Muslim Indian port;
• As part of the exploration phase, and with the experience of Atlantic navigation, Christopher Columbus' adventure (1451-1506) looking for a western route to India.

Columbian journeys:

• 1st (1492-1493): Palos / Canary Islands / Cuba;
• 2nd (1493-1496): define new routes (17 ships and 1,200 men);
• 3rd (1498 to 1500): 6 ships;
• 4th and last (1502-04): 4 ships and 140 men. Touches the American mainland coast.

1499: "minor journeys" or "Andalusian trips"; capitulations of the Crown with other navigators (Yanes, De la Losa, Vespucci).

The conquering process

With the conquest, the Spanish monarchy wanted to establish stable commercial exchanges with the colonizing centres:

• The caravel was replaced by ships with more cargo and fewer crews;
• Voyages between Andalusia and Mexico took 5/6 months in convoy (up to 90% of the tonnage and 95% of the value): outside the official circuit it was considered smuggling;
• Material and human risks and losses: 15% of Portuguese ships sunk (16th c.); men, 15/25% (two-year voyages); 20/30% (3 years).

Employment and economic exploitation of the "West Indies":

Speed and intensity (contrast with the Canaries); 1500: 50,000 km, in 1515: 250,000 and in 1540: 2 million. High points:

• 1492-1509: occupation of the island of Santo Domingo;
• 1521-1513: Cuba and Panama; Vasco Nuñez de Balboa arrives in the Pacific;
• 1519-1522: Ferdinand Magellan circumnavigates the world with five ships, and Hernán Cortés begins the conquest of Mexico with 600 men;
• 1530-1549: Brazil (infeudation of the main coastal towns to 12 nobles): from the first expedition of Martin Alonso de Souza (1530) to the first governor general (1549);
• 1513-1533: Peru. Franciso Pizarro and his men: the last Inca, Tupac resists (1572). 1538-1542: division between Pizarro and Almagro;
• 1564-1565 / 1590: López de Legazpi and Andrés de Urdaneta. Regular route between the Philippines and Mexico. 1590: control of 150,000 km. Castilians: control of metals and access to spice production (competition with Macao, 1555).

Structures of colonization

There are two models of colonization and conquest: the Portuguese and the Castilian.

• In the first place, control of indigenous labour and of vast continental spaces must be ensured; economic exploitation and cultural and religious imposition (acculturation).
• The Catholic Monarchs reserved for the Castilians the monopoly of founding colonies (model of Columbus' journeys): it stimulated the colonizers' capacity for initiative.
• Creation of the encomiendas (public law institutions, e.g. "Leyes de Burgos" of 1512): delegation of seigniorial rights over a domain or repartimiento; their indigenous people: cheap labour, destruction of indigenous structures.
• Creation of central bodies to control trade and colonial administration: the Casa de Contratación in Seville (1503), goods and metals; the Council of the Indies: supreme jurisdiction in overseas affairs.
• American colonial administration: Viceroys in "New Spain" (1535) and Peru (1542). Advised by: Audiencias with the highest political and judicial power: Santo Domingo (1511), Mexico (1527), Panama (1538), Lima and Guatemala (1542); 1565 owes America; in 1589 Manila.

Military and administrative conquest, as well as religious: evangelization at the time of the Counter-Reformation, a visible sign of the triumph of renewed Catholicism; Castilian heritage; the first Catholic stronghold in the world.

Consequences of extra-European expansion

Demographics: arquebuses and inhumane working conditions add European contagious diseases (especially smallpox). Between 1500-1520: death of some 20 million Indians; 80 in 1500 to 12 in 1600. Demographic collapse: explains the formation of a large mestizo group (among newcomers and indigenous women).

Cultural: process considered by contemporaries to be of enormous historical importance; about four times as much is published in the 16th century on the Ottoman Empire and Asia as on the Americas. Unknown cultures: in Africa and Asia, exchanges with known cultures (especially Islamic).

America, contact with pagan peoples endowed with very strange organizations. Pope Paul III (1537) establishes that the Indians are men and slavery is forbidden; Dominicans such as Bartolomé de las Casas (1474-1536) and Francisco de Vitoria (1480-1546) discuss whether it is before beasts or innocents. It would not be done again until the 18th century.