A History of Capitalism Season 1 Episode Transcripts
S01E01 - The World in 1400 CE
Welcome to the start of our journey through the history of modern capitalism. We are going to kick this trip off by going back to its beginning. Now don’t worry, we are going to keep this manageable and only pop out to the 1400s CE, the point in time when the foundations of modern capitalism were first built. Now this might come as a surprise, especially thanks to modern society’s tendency to use the word, “capitalism” to refer to nearly any form of economic activity.
Capitalism, for the purposes of this podcast, is a bit more specific and has some distinct features which make it what it is. A great place to start is by defining the word economy. An economy is how a society organizes the production and distribution of goods and services. This includes everything from hunter-gatherer societies to the modern United States and everything in between. What makes capitalism different from other economies is that the pursuit of profit is the primary goal of any economic activity. Capitalist economies do this by protecting the rights of those who own means of production, which are the tools, raw materials, and facilities needed to produce goods or offer services, so that they can extract the profits of these economic enterprises for themselves. This is known as private property, a form of ownership which needs specific legal and political systems to exist.
These two features, the pursuit of profit and private ownership of the means of production, are what set capitalism apart from all other forms of economy. Wage labor is also often considered a key feature of capitalism but, as we will see over the course of this podcast, not all forms of capitalism utilized wage labor so this podcast is going to hold that part a bit more lightly. Understanding how the pursuit of profit and private ownership of the means of production became the norm for economic organization is going to be one of the big questions this season will help answer.
Historically speaking, the necessary ingredients for making capitalism as we know it didn’t start coming together until around the year 1400 CE. This fascinating period sees the decline of European feudalism, the collapse of the Mongol Empire, and the rise of the first modern states of Eurasia. These larger changes were made possible by the rise of professional militaries, centralized bureaucracies, and most importantly for our story, an evolving need for hard currency and credit to pay for all that. This transformation was not easy or painless. This was a world that had just begun crawling out of the wreckage from plague, war, and destruction on three continents. What a time to be alive.
The story of capitalism invites you on a wild world tour from the economic powerhouse of China to the sophisticated, wealthy societies of the Middle East and South Asia, better known as the Indian subcontinent,the booming mercantile societies of East and West Africa and of course to Europe, the least economically developed region of this world. How Europe managed to surge ahead of the rest of the world is the other major question that will be tackled this season.
The European end of the world in 1400 CE was a slew of multiple societies in crisis. Much of Europe, North Africa, and the Middle East had only finished clawing their way out of the Black Death. From 1346 CE to 1353 CE between one-third and one-half of the inhabitants of Europe and one-third of inhabitants of the Middle East perished in one of the deadliest pandemics in history. The survivors were left with the task of rebuilding a world that was forever changed.
The European continent was the end of the line for the great trade systems of the world. Europe, in contrast to much of modern history, was an economic backwater compared to the wealth of the Middle East, South Asia, and China. The societies of Europe traced their origins to the various warlord states that emerged during the collapse of the western Roman Empire. The military elites at the head of this political system ruled with the support of the Catholic Church as part of an arrangement known as feudalism. The nobles ruled and fought, the Church administered and tended to everyone’s spiritual needs, and everyone else worked and did as they were told.
Feudalism had reigned for centuries when the Black Death upended everything. Post-plague Europe’s economy, despite widespread death from disease, remained heavily agrarian with approximately 95% of the population living in rural areas. Upwards of 85% of the rural population were under the yoke of serfdom, a form of involuntary labor where each individual person and all their descendants are bound to the land they lived on. Enserfed people were required to pay feudal dues to their lords, render services like forced labor, and be drafted to fight on their lord’s behalf.
The main differences between serfdom and slavery were enserfed people could not be bought or sold individually because they were attached to the lands they were bound to and, technically, enserfed people enjoyed greater rights to personal property and protection under the law than enslaved ones but one might expect how good those protections were depended entirely on who was enforcing them. Most of the payments they made to their lords were in kind, which is to say in raw agricultural produce like heads of cattle or bushels of grain. Anything that wasn’t paid to their lords could be used for meeting personal needs or sold at market for a small amount of hard currency. Those 15% who were not enserfed were members of the small yeoman farmer strata which existed to varying extents throughout the region, skilled free laborers like millers and blacksmiths, and the feudal lords and their attendant households.
The other 5% or so of Europeans lived in the towns and cities which dotted the region. Some, like London, Paris, and Madrid, could trace their origins back to old Roman colonies while others, like Marseilles, had sprung up to meet the needs of the growing medieval economy. These cities owed taxes and obligations to their feudal overlords but, in contrast to rural estates, had a far greater degree of autonomy in their affairs which was protected by royal charters enshrining their special rights. Though some urban dwellers were born and raised in town, others were rural migrants who were free laborers or enserfed people seeking new lives by fleeing their lords for the nearest town.
City-dwellers were often members of one of several trade guilds that dominated the European urban economy. Trade guilds, which covered everything from masons and carpenters to fishmongers and even universities, had total control over all work under their purview in any given city. Such labor organizations were not unique Europe and similar trade associations also operated in the Middle East, South Asia, and China. Their labor monopolies made it possible for them to set prices and control who was and was not allowed to work within their profession. If, for example, a new mason came to town seeking work they had to be received and accepted by the local guild chapter. If they were not they had to find work elsewhere. In exchange for this control, members received training, preference for employment, and an early form of pension. This economy, in contrast to rural regions, was cash-heavy with gold, silver, and copper coinage seeing regular use in many of Europe’s urban areas and by merchant households.
This arrangement was thrown into disarray by the Black Death. The sudden loss of a third to a half of all people threw society into chaos. Further exacerbating conditions was the disproportionate losses suffered by rural and urban dwellers compared to aristocratic and religious elites who rode out plague in relative safety on isolated estates. The result was a labor shortage and simmering resentment which periodically exploded in violent popular uprisings like the 1358 French Jaquerie Revolt and the 1381 English Peasants’ Revolt. The nobility, clergy, and gentry were forced to offer concessions like rent reductions and cash payments in exchange for the labor of their once-obedient and previously plentiful peasant workforce. The result was more cash money flowing to the bottom of the economic pyramid.
The Black Death also saw another significant shift in the feudal system pick up some real momentum. Kings and powerful lords were already increasingly relying on hiring professional soldiers and maintaining their own paid troops instead of utilizing the traditional system of undisciplined, unreliable feudal levies led by their vassals. Their vassal lords were also increasingly favoring sending money to cover these costs to their lords instead of risking their lives on campaign. These new demands and constraints, which will be discussed more in Episode 4, accelerated the demise of in-kind payments, further encouraged the growth of the European cash-based economy, and increased the demand for silver and gold.
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Across the Mediterranean, the Middle East was undergoing its own upheaval. For the Middle East, trade and pastoral communities were a more critical element of their economic system than was the case in Europe. Even though the Mongol conquests of the 1200s seriously disrupted life in the region, one thing which remained unchanged was the Middle East’s status as the main western endpoint of the massive Silk Road trading networks. These flows of luxury goods were sustained by generous funding from political elites in the region for hostels, stables, and other lodgings and market spaces for the caravans.
Further facilitating these caravans were the nomadic groups who dwelt in the Saharan and Arabian Deserts and on the Central Asian steppe. These Bedouin, Taureg, Berger, and Turkic nomads had long played a vital role in the society of the Middle East as soldiers and traders alike. The great historian and scholar Ibn Khaldun, whose writings laid the first foundation stones for the discipline of economics, famously argued these pastoral groups played a vital role in rejuvenating Islamic society and many a ruling dynasty traced their origins to warriors from steppe and desert. These populations also provided livestock and goods like hides or furs for more settled populations living in the great cities or countryside of the Middle East.
Slavery was far more significant for the economy of the region than it was in Europe, though Europe did not lack for their own slave markets as shown by the bustling slaving ports of Genoa and Venice. Enslaved peoples included, but were not limited to, Bantu speakers trafficked from the Swahili coast, Turkic slave-soldiers who had long served as the backbone of many a Muslim power’s military forces, and Christian Europeans. Manumission was, while not the norm, heavily encouraged as a way of expiating wrongs and bringing the enslaved person into Islam.
Another critical difference between the economy of the Middle East and Europe were the dhimmi communities. Dhimmi was a term used to refer to religious minorities who were not Muslim but permitted to live within Muslim society so long as they paid a special tax known as the jizya. Jizya taxes created an incentive, at the individual level, to convert to Islam while for political elites it created a conflicting incentive to protect the integrity of these communities so that they could continue paying the increased revenues. Dhimmi communities also enjoyed a considerable degree of internal autonomy so long as they obeyed the larger policies handed down by their political overlords. Jewish communities, in particular, enjoyed far greater security and protection in the Muslim world during this period than they ever experienced in Christian Europe.
If Europe’s economy was a mix of payments in kind in the countryside and cash-based transactions in the cities and towns, then the Middle East was far more decisively on the side of cash-based transactions. Their long-standing status as a critical nexus for the Silk Road trading network meant luxury goods, silver, and gold were relatively common compared to other regions. Even the upheaval of plague, Mongol invasion, and the later rise and fall of Timur’s Empire did little to change this. If anything, the security the Mongols provided for central Asian trade networks ensured the flow of goods continued without too many serious hiccups.
The Muslim Mamluk, Ottoman, and Timurid polities were not the only major players in the region. The Orthodox Christian Byzantine Empire, the last direct remnant of the Roman Empire, still stubbornly and desperately clung to life in parts of Anatolia, Greece, and the Balkans. The ancient city of Constantinople remained a critical juncture for all trade flowing into Europe from the Middle East. Even though most of their possessions had been lost over the previous three centuries and the Black Death had wiped out half of Constantinople’s population in seven years, they still benefited from being a crossroads of an intercontinental trade system which had operated without serious interruption since the days of Constantine. There isn’t much more to say here because, spoiler alert, they won’t be in this podcast for much longer.
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Directly to the east and north lay the Mongol Empire’s successor states. The domain of the Great Khan was long dead and the short-lived empire of Timur also met its end in 1403 CE after shattering the Tughlaq dynasty’s rule over the Delhi Sultanate and nearly destroying the Ottoman Turks. The Mongol Empire, at its height, had consolidated control over the territory where the overland Silk Road routes traveled and their successors understood the importance of keeping these trade lines open. It was these trade systems that spread technologies like gunpowder and paper from China to the rest of the Eurasian continent. Even in decline, the remaining steppe warlords exerted considerable influence over the world’s trade networks.
Continuing east and south brings us to South Asia, a region facing renewed turmoil and upheaval. The Muslim Delhi Sultanate had ruled the vast majority of the Indian subcontinent since the late 13th century and were reeling from Timur’s expedition. Within decades a resurgent Hindu-led Vijayanagaran had reclaimed much of the southernmost territories of the subcontinent while regional governors broke away to form independent states. Despite this declining central power, South Asia remained an incredibly wealthy and critical component of this world’s economic order. Spices sourced from this region were in high demand on three different continents, creating a continuous source of exports and incoming precious metals and currency. The Delhi Sultanate further enhanced the ties between Indian spice sellers and foreign markets, increasing the flow of these valuable commodities.
The Indian subcontinent was also famous worldwide for their high-quality cotton cloth. The region’s cotton production was primarily conducted at the household level which meant the benefits from this trade were relatively evenly distributed as farmers could choose to supplement their food crops with cotton and households could sell the cloth they wove. While cotton alone was not enough for a small farmer to be wealthy, it did provide a large swathe of the population with a high-value good they could produce for use or sale.
This period saw a renewed boom in cotton production thanks to two new pieces of technology: the spinning wheel and the worm-geared cotton gin. Spinning wheels came to the subcontinent in the wake of the Delhi Sultanate’s founding and drastically lowered the cost of producing yarn, making it much cheaper for home spinners to produce cotton cloth. The invention of worm-geared cotton gin in the early 1500s CE improved on these gains by eliminating a major bottleneck in cotton production, the labor-intensive process of removing sticky cotton seeds from the fibers which was necessary for spinning fibers into yarn. These technologies enthroned the Indian home cotton spinner as the world’s dominant source of cotton fabric, a status they held uncontested until the rise of the spinning mills of Manchester in the late 18th century.
These riches ensured South Asia’s status as a commercial powerhouse. The subcontinent had long stood as a central crossroads for land and sea trade moving between southeast Asia, the Chinese frontier, and the Iranian plateau. By the 15th century, despite political upheaval, India remained a central fixture in these trade systems. Merchant vessels moved goods to the Persian Gulf, Egypt, and the Swahili coast across the Arabian Sea from ports like Calicut. To the east, Indian traders connected with their Chinese counterparts while importing goods from the rulers of the Southeast Asian powers. All these transactions floated on an ocean of silver coins.
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Continuing east brings us to Ming China. If there was any one society which was the dominant economic power in the world, it was China. China had long been famed as the source of high-quality manufactured goods like porcelain, paper, and silk, all of which were invented there centuries earlier. These goods were churned out by a fairly sophisticated manufacturing culture which had invented their own printing press around the year 700 CE which was further improved by the development of the movable type press in 1040 CE, some of the first windmills in human history, and of course gunpowder. The Ming Dynasty’s successful overthrow of the Mongol Yuan Dynasty in 1368 CE did little to significantly dent this status and would soon usher in a renewed period of Chinese trade, maritime travel, and economic expansion. From their capital in Nanjing, this new dynasty consolidated their control over the largest centralized state on Earth.
Economically speaking, Ming China had a lot to offer. The Ming Empire was the largest economy in the world during this period and held between a quarter and a third of the world’s entire population. Chinese products were in high demand in every market who knew of them. Along with the aforementioned silk, paper, and porcelain, China was adopting large-scale plantation agriculture for tea and other cash crops which were consumed throughout China and exported to their trading partners.
This robust economy was further buttressed by Ming investments in public works for fostering trade and commerce. One of the best examples of this was the renovation of the Grand Canal, the world’s longest artificial waterway, that directly linked the Yangtze and Yellow Rivers into one massive, interconnected waterborne transport network. The Grand Canal was already centuries old when the Ming rose and in serious need of repair. Between 1411 and 1415, a massive program of renovation and restoration saw new reservoirs dug, rivers redirected, and locks updated to new standards that would later be copied in the 19th century on projects like the Erie Canal in the United States. These investments were bolstered by the abolition of forced labor for the peasantry, a policy change which gave birth to a large wage-earning class of workers with disposable time and income in the towns and cities of Ming China.
China was also no slouch when it came to exerting their power over their neighbors. China’s place in the world, as their rulers saw it, was at the center of all civilization, learning, and culture and to set the tone through their might and wealth. To enforce this, the Ming re-asserted the tributary obligations owed by the rulers of the Korean peninsula and occupied Vietnam for twenty years in a bid to force them into subservience. Ming China also made a huge leap into the maritime world with the famed treasure fleet of Zheng He, an armada Ming-built ocean-going ships whose largest vessels were four to five times the size of Columbus’ flagship the Santa Maria. From 1402 to 1435, Zheng He’s massive vessels would take on ambassadors, collect local goods, and bring treasure and tribute back to the Ming Emperors in China including wonders like a captive giraffe. These ships sailed from ports like Guangzhou as far as South Africa and the furthest eastern end of the Indonesian archipelago.
Across the China Sea lay the Japanese Empire which was currently ruled by the Ashikaga Shogunate. This military government had only just come in the saddle after suppressing the Kenmu Restoration, an attempt by the Japanese Emperor to re-assert control over the government and break the power of the samurai-backed Shogun. This failed and the Ashikaga family became the Shoguns. They made reforms that weakened the imperial court while strengthening the power of local constables who were their political allies. Though this seemed like a good idea at the time, it set the foundation for the bloody Sengoku period, a time of violent warfare between samurai warlords fighting for the office of Shogun.
For now, however, Japan was a mostly rural satellite of Imperial China. Though they paid tribute, in the form of raw materials like iron, copper, wood, and sulfur, they also received goods like porcelain, paper, and silk and enjoyed access to Chinese markets. Life in Ashikaga Japan was dominated by regional notables, known as daimyos, who owned most of the land and received their wealth from primary commodity production. Samurai, in stark contrast to their later dominance, held low social status due to the associations between their work and death.
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Our journey now brings us back across the Indian Ocean to the Swahili coast, a region stretching from modern-day Kenya to northern Mozambique, where a bustling collection of mercantile city-states like Zanzibar, Mombasa, and Kilwa grew wealthy from the Indian Ocean trade network. One of the biggest reasons why the Swahili coast was such a huge beneficiary of this trade system was geographic. The Monsoon storms of South Asia, which shaped the region’s climate since time immemorial, followed a predictable yearly pattern. During the summer months, prevailing winds in the region blew from west to east, propelling merchants from East Africa and the Middle East to the subcontinent while during the winter months the winds reversed, bringing merchants from South Asia back to ports of call in the Persian Gulf, the Red Sea, and on the Swahili coast. The Swahili-speaking city-states exported goods like timber, ivory, hides, spices, and gold in exchange for the products of the global trading networks of 1400 CE. These city-states also enslaved neighboring Bantu-speaking peoples known as the Zanj who were then trafficked throughout the Indian Ocean trade systems.
The societies of West Africa were just as connected in the Eurasian world of trade as those of the Swahili coast. By 1400, the epicenter of economic, social, and cultural development was found along the banks of the Niger River and specifically in the fabulously wealthy Mali Empire’s capital at Timbuktu. The bedrock of the empire’s wealth was gold. Mali’s borders contained three massive gold mines and multiple other gold fields and sources of the precious metal. It is estimated by historians that almost half of the gold used in Europe and the Middle East was originally sourced in the mines of Mali and West Africa had long enjoyed a vital role as the main source of gold for both regions. Mali’s wealth in gold was so great that when the Malian ruler Mansa Musa, a devout Muslim, went on his pilgrimage to Mecca he reportedly shared his wealth with every poor person he encountered along the way. His generosity was said to have sunk the value of gold in every stop on his hajj, leaving temporary, localized inflation in his wake. Mali’s other major commodity was salt which was cut into blocks for internal use or export north to the Mediterranean world.
As we’ve already seen, the world before modern capitalism was already a highly interconnected one, with sophisticated trade systems, globe-spanning travel networks, and even the beginnings of economies based on the large-scale production of finished goods. You could even make the case that early forms of capitalist economics were already developing in South Asia and China in the form of South Asian cotton production and Chinese manufacturing of luxury goods at scale. These activities were happening in economies that were cash-rich, well-connected to world markets, and had growing, wealthy merchant classes. There was no question then or to historians now that if anywhere was the economic center of gravity in this vast, interconnected world it was certainly not the backwater, cash-poor, and war-torn European peninsula.
As we will soon see, these conditions were vital for making that transformation possible and next week we will explore the mechanics of this world trading system through the eyes of two famous travelers, Marco Polo and Ibn Battuta, and how these networks propelled European political and economic elites to seek direct access to the fabulous wealth of Asia.
Until then, thank you for tuning in. If you enjoyed this episode please like, subscribe, and share this podcast far and wide. We here at Stolen Fire Media could not do this production without you and every repost brings us one step closer to making this whole operation sustainable. Thank you again and until next time, this has been a History of Capitalism.
S01E02 - Merchants and International Trade
Welcome back everyone. We covered a lot of places last time, but now we’re going to shift our focus to the people who made all the trade in the world of 1400 CE happen. The three core elements of global commerce in this period were the world’s merchant classes, the markets where business was done and trade networks like the Silk Road and the Indian Ocean and Mediterranean maritime trading systems. These networks were the bones, muscle, and sinews of the first ever global economy. In this episode, we will see it all through the eyes of two of history’s most famous travelers: Venice’s Marco Polo and Tangier’s Ibn Battuta.
Before we get into our story, let's take some time to unpack the terms trade and commerce. Although It’s quite common to see both treated as interchangeable with the term capitalism, however trade and commerce, like economy, are very much their own independent concept. Trade is what happens when two parties voluntarily exchange goods or services. This covers everything from multinational corporations purchasing bulk commodities to children swapping collectible cards over lunch. Likewise, Commerce refers to exchanges of goods but on a larger-scale exchange such as across national borders or within economic networks like the historic Silk Road exchanges.
The shared goal of trade and commerce is acquisition of goods or services. The pursuit of profit is not necessary for trade and commerce to happen, but surely no one complained if it did. Certainly the two featured travelers of our trade episode were young rising stars who did very well off these “early networks of exchange”
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(Cry out) “Marco! Polo!” its not just a name you called out in swimming pool game that tortured your relaxing parents
The original Marco Polo was the son of a Venetian merchant family. His father and uncle, Niccolo and Maffeo, were already heavily involved in the Silk Road trade by the early 1200 CE. Young Marco joined the family business at age 15 when the three Polos set off on a long trek across the Asian continent by camel and caravan. What an adventure!. They soon reached China where they were received by Kublai Khan, the Mongol ruler and the founder of the Yuan Dynasty. Khan instantly took a liking to the young Venetian and appointed him as a special emissary for the Khan. He spent the next seventeen years traveling throughout China, Southeast Asia, South Asia, and the Indonesian archipelago. The Polo men began their return trip to Venice in 1291 CE, traveling through Persia then overland across Anatolia by way of the great Imperial city Constantinople. Here, Marco was unexpectedly captured by agents of Venice’s rival, Genoa. He was imprisoned for six years and during his incarceration,dictated the account of his journey, The Book of the Marvels of the World or as it is commonly known in English The Travels of Marco Polo, to his cell-mate Rustichello da Pisa. This book spread like wildfire, the airport best seller of its day and soon became one of the main sources on EastAsia for Europeans. Polo’s riveting accounts would go on to inspire later world explorers like Christopher Columbus.
In the same time frame, across the busy Mediterranean maritime highway, another star was on the rise. Ibn Battuta’s travels and writings rang rings around Marco Polo, yet his name is less well known to middle schoolers dive bombing in public pools Born in in Tangier, Morocco in 1304 CE, Abu Abdullah Muhammad ibn Battuta was the son of a Berber Islamic legal scholar. Based on his own autobiographical account he was pursuing life as a legal practitioner when, at age 21, he set out on his hajj, the once in a lifetime pilgrimage to Mecca that all Muslims are expected to take if they have the means to do so. The trip from Mecca to Morocco usually took approximately sixteen months, ibn Battuta, to the likely surprise of his friends and loved ones, would take quite a bit longer and did not return home for another twenty-four years. His journey took him across the North African coast through Egypt, Syria, and Palestine ultimately spending three years in Mecca. Instead of returning home to his studies and legal calling, ibn Battuta like many a grad student took to the road. He set out to the Swahili coast in East Africa before traveling to what we now call India, Indonesia, Southeast Asia, and finally China. He then doubled back, retracing most of his route as he journeyed to West Africa, reaching the astonishing city of Timbuktu by 1353 CE. He finally returned home in 1354 and dictated an account of his journeys titled, A Masterpiece to Those Who Contemplate the Wonders of Cities and the Marvels of Traveling or as it is usually referred to as his Rihla, which translated from Arabic simply means The Travels.
So who was this merchant class that Marco Polo came out of and Ibn Battuta frequently interacted with? There wasn’t a singular merchant class but rather a series of different, interconnected merchant classes with varying status in their respective societies. Their social standing varied considerably, ranging from the disdained, but otherwise wealthy merchants of Ming China, to the highly respected and valued merchants of the Muslim world. This is why the best way to talk about the merchant classes is through understanding their guilds and households, the Italian merchant republics, as well as the fraught history of Jewish merchants worldwide.
In this time period, Merchant households and guilds were the most common organizing structures that facilitated trading. Households were “all family affairs”, consisting of a merchant, their immediate family, and associates involved in trade like the Polo family. Guilds, in their various forms, were associations of all the merchants within a particular town or locale, who came together to provide each other with mutual assistance and make commerce easier to manage.
Regardless of the specifics, what both have in common is the “pooling of resources… for the benefit of the whole”. Guilds prioritized the overall well-being of their members and health of the marketplace over any individual's profits though it would be a stretch to say profit was not a significant goal. Households, similarly, focused on passing increased wealth on to their descendants over immediate short term gains, especially if those gains put the household’s future at risk. Legacy was the buzzword of the day and strategic marriage played its part (Cue the travails of Romeo and Juliet)
These economic organizations were the bedrock of the Italian merchant republics. Since the fall of the Roman Empire, Italy held the dubious distinction of being a battlefield for Europe’s rulers. Everything north of the kingdom of Two Sicilies was carved up between distant monarchs or local grandees in the various city-states such as fair Verona where we set our scene, well you get the picture. Some, like the Duchy of Milan, were a more urban, carbon-copy of the feudal model, while others like Genoa, Florence, and Venice followed republican-based models where governance was based on popular sovereignty. In practice all the major government positions were under the sway of each city’s most powerful merchant families despite aspirations of republicanism.
These mercantile republics rose to be some of the most powerful commercial actors in the Mediterranean basin. Each moved goods from Constantinople, the Middle East, and North Africa, to the rest of Europe and brought European goods into the world’s markets. They were also a major channel for bringing new ideas of all kinds into Europe. Each merchant republic managed to carve out an effective monopoly on Christian commerce within their respective regions of operation. One of the most infamous displays of power by the merchant republics was the Fourth Crusade wherein the Republic of Venice strongarmed a force of Christian Crusaders to divert from their intended destination of the Holy Land and instead sack the Christian city of Constantinople in 1204 CE. Their Italian merchant control over the trade routes of the Mediterranean consistently presented a problem to feudal lords and kings seeking more direct access to the wealth and goods of Asia without the Venetian, Genoese, or Florentine markups.
The last player to identify in this game are the Jewish merchant communities found in Europe, the Middle East, South Asia, and China. This topic requires nuance and care thanks to centuries of anti-Semitic misrepresentation, disinformation, and conspiracy theorizing layered on top of the true real history of the Jewish people While it is true there was a web of Jewish communities with significant influence in the trade networks of the Mediterranean basin and beyond, their status was a direct product of the systemic marginalization and oppression that Jews faced in Europe and the autonomy offered by the Muslim powers of the Middle East. Their role as significant players in the trade networks of these times was thanks to the patterns of oppression and exclusion they experienced in this period.
Jews in Europe lived in a precarious state , dictated by willful and deliberate persecution at the hands of their neighbors. Much of Christian Europe was intensely and institutionally anti-Semitic. The fever swamps of European anti-Jewish sentiments accused Europe’s Jews of kidnapping and devouring Christian children, causing plagues, poisoning wells, and having sexual congress with animals. Historians specializing in the witch hunts have argued many of the traits ascribed to witches, like big noses and eating children, were first used as anti-Semitic stereotypes. Jewish groups in Europe were forced to live in segregated, walled-off districts known as ghettos, wear badges on their clothing identifying themselves as Jews, and were excluded from working in most professions or owning land. Pogroms were frequent and Jewish migrations under the threat of mass expulsion and death were a common occurrence in European history until 1945 CE.
Jews in the Middle East and Muslim Spain, by contrast, lived much more freely thanks to the dhimmi system. Jews, in Muslim theology, are considered spiritual cousins who, under Muslim law during this period, were allowed to live and worship freely. The main stipulations were being barred from most high secular offices, which was normal for all non-Muslims in the region, paying the jizya tax which was levied on all non-Muslims, and being subject to Muslim law when outside of their own communities. All these conditions would have been known and accepted as normal by people like ibn Battuta and he interacted with some of these communities during his journeys. By modern standards Jews, in the Muslim world were undoubtedly second-class citizens but it was still a much better deal than Christian Europe was offering. Nothing better reinforces this than how the worst anti-Jewish massacres in the Middle East prior to 1400 CE, such as the 1086 CE sack of Jerusalem, were perpetrated by invading Christian crusaders. Jews in South Asia and China,such as the Chinese Kaifeng Jewish community who Marco Polo encountered in Beijing, thrived with some independence thanks to the lack of any existing anti-Semitic attitudes in these region, having first arrived with the trade caravans moving east.
The conditions faced by the Jews of Europe forced Jewish populations to take up jobs working in commerce, the performing arts, and other professions that were already disrespected in European society, a tendency reinforced by laws banning them from owning land or engaging in most forms of economic activity. The ghettoization of the Jewish communities of Europe encouraged these groups to establish regular, reliable contacts through marriage, trade, and travel with other Jewish communities throughout the world. These webs of relationships provided Jewish merchants with a reliable set of contacts to other merchant households and their business partners. Such successes encouraged further participation in mercantile pursuits and other, related professions. Even though they were cast off to one side in the Muslim world and actively persecuted in Europe, Jewish merchants were vital for stimulating the growth of international commerce in both regions, in part caused by heir deeply marginalized status.
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All this trade needed somewhere to happen and in this period it was in the world’s growing marketplaces. Marketplaces were the first formal commercial exchanges in world history and can be traced back as far as written evidence exists. Generally speaking, the markets of the year 1400 tended to be locally-organized and administered affairs but there is also no question that they were actively regulated by clearly established authorities. European markets, for example, existed at the behest of aristocratic or local authorities, with the day to day operations handled by merchant guilds and law courts. What goods could be legally sold and who could sell, was under the control of the trade guilds including but not limited to food, trade, and manufactured goods. Similar systems existed throughout Eurasia and Africa, with trading spaces being the products of the protection and regulations of the relevant authorities. Ibn Battuta even helped cover his travel costs by adjudicating legal disputes in places like these markets.
Physically speaking, these marketplaces were usually located in some kind of large square as is often described by both our travelers. It was also common for some professions, particularly smelly, nasty ones like tanning hides or loud, dangerous ones like metalworking, to be confined to their own markets and districts. Every merchant selling goods in the square needed permission to be present and all market participants were expected to help keep the peace. The treatment of marketplaces as neutral ground made them great places for doing some low-level diplomacy, socializing, and catching up on the latest gossip, as Marco Polo and ibn Battuta often did.
As these examples make quite clear, markets, as a historical phenomenon, did not simply emerge spontaneously from the forces of supply and demand. Trade, without question, is probably as old as stone tools, ye trading within the context of a market, with all of its protections and guarantees, is a specific social phenomenon that always requires deliberate decisions by the societies in question to create, nurture, and protect their existence. The markets of 1400 were actively cultivated because of the benefits they could bring for the members of their societies.
[Sound break]
So how did all these people and goods move from continent to continent? Travel technology was not, as Marco Polo and ibn Battuta knew quite well, fast or reliable. On land, the swiftest means of delivering anything was using a courier on a fast horse, but this limited what could be moved and only worked if you had a whole chain of stables, fresh horses, and personnel to guard those facilities. Otherwise, your speedy delivery may grind to a halt thanks to the courier’s horse being ridden into the ground or ambushed by bandits on the road.
If you wanted to move serious goods, you needed an ox or horse-drawn cart, pack animals, or a ship, which each had their own limitations. Carts were slow and only worked well if you had maintained road networks for them to travel on. Pack animals were more of an all-terrain option, but required more in terms of resources like food and water for animals while being less efficient in terms of number of animals needed per pound of cargo. Ships, without question, were the fastest and most efficient way to move goods in bulk, but were only an option for coastal and maritime communities and subject to the hazards of the sea like stormy weather, pirates and often inaccurate or unreliable navigational charts. All these means of conveyance had space for passengers going in the same direction if you didn’t mind nuzzling up with the grain on a cart or bunking down in sailors’ quarters and cramped cabins. Marco Polo, at least, had his own mount for most of his journeying while ibn Battuta was far more familiar with these humbler options.
For most serious trading expeditions were limited by what they were carrying and how long it was practical and safe to do so. For many bulk goods and overland trade, this meant the journey was short and followed a set, reliable circuit, while maritime commerce largely hugged the coast as ships hopped from port to port. Merchants who were in for a longer haul, like ships masters plying the Mediterranean Sea or caravaneers crossing the Central Asian steppe, would often drop off goods in one market while picking up other goods for exchange at each stop along the way. A merchant vessel plying the Indian Ocean, for example, may start their trip by picking up spices in Calicut before first docking in the Persian Gulf where they sell their spices and pick up some fine Chinese silk which is then sold in the Red Sea for gold. This gold could then be exchanged for rare animal pelts in Kilwa before then being sold to purchase timber in Zanzibar.
For most other people in commerce, the way you got goods was by finding them in your nearest market before then selling them to local consumers or moving them on to another location where something like silk or cinnamon was worth selling. That vial of spice our Indian Ocean merchant sold in Iran would have enjoyed a lengthy journey punctuated by resale and repurchase in markets in Baghdad, Constantinople, Venice, and eventually Paris and that would’ve been a fairly direct trip by the standards of the day.
This patchwork, hopscotch system was fully on display on the Silk Road. The Silk Road is probably a term you’ve heard before but never really had it clearly defined. It was less a single, fixed route and more a massive trade system spanning multiple polities that stretched from the Chinese frontier all the way to the Mediterranean and Black Seas. If we follow Marco Polo, the journey would most likely begin by taking a ship from Venice to Constantinople, the crossroads of two continents and capital of the declining Byzantine Empire. You would then travel through Anatolia and the Iranian plateau. One could then choose to travel south to the Persian Gulf and across the Arabian Sea to East Africa and South Asia, as ibn Battuta did, or continue overland to Herat in modern-day Afghanistan, a major hub for Central Asian trade and commerce. Marco Polo had a taste of the luxuries of the city before his party proceeded through the forbidding mountains jutting north from the Himalayas into the heart of modern-day Tajikistan and Kyrgyzstan. On the other side lay Xinjiang and the furthest western outposts of Imperial China. From here, it was a comparatively easy journey for the Polos to the heart of China and the court of Kublai Khan.
Travel along the Silk Road was facilitated by centuries of well-established trade networks. The first recorded evidence for the Silk Road dates back to the time of Julius Caesar. Societies who lay on its path had a long, well-established history of extracting wealth in the form of tolls, customs duties, and all the consumer spending that inevitably comes from hosting weary travelers. When the Umayyad and Abassid Caliphates ruled over the Middle East they spent considerable sums on networks of hostels, roads, couriers, protection, and caravansaries to ease the passage of overland trade. The Mongol conquest of much of Central Asia and the Middle East, while devastating to the communities caught in their path, created a new era of peace and security on these sometimes fraught trade routes. Commerce exploded as local and regional rulers wisely continued funding this well-worn network of support systems which made the Silk Road move as smoothly as it did.
Parallel to Marco Polo’s route are the maritime voyages taken by Ibn Battuta across the Indian Ocean trading system. As Ibn Battuta did, you could begin by boarding a ship in Jeddah on the Red Sea bound south for the East African Swahili coast. After settling accounts in Kilwa or Zanzibar you might then board a new ship headed north, hugging the coast up to the Gulf of Aden in modern-day Yemen. From there you would take on provisions and catch the prevailing monsoon winds for the ports of South Asia’s western coast. Following Ibn Battuta’s path further takes you to the Bay of Bengal and what is now Thailand and Myanmar. After a brief stop, the next big hop was down through the straits of Malacca, passing what is known today as Singapore, and from there north to Vietnam and finally the port of Guangzhou in China.
Supplementing these trade systems was the Mediterranean Sea trade network. The Mediterranean was the great nexus for commerce moving from Europe out into the broader world. While other trading regions, like the Baltic and North Sea, were vital to the European regional economy, the Mediterranean was the gateway to the riches of Asia. The main eastern points of entry, which Marco Polo and Ibn Battuta passed through multiple times on their journeys, were the ports of what is known today as Syria, Lebanon, Israel, and Egypt sold the goods to European traders in dock. Some also traveled overland to the port of Constantinople where ships from the Black Sea and more northern branches of the Silk Road came into port. A merchant might then hop a trading vessel bound west for Venice or one of the merchant city’s many outposts in the Illyrian Sea and even further to modern-day Algeria, Morocco, and Spain.
Like the Silk Road, the maritime systems of Indian Ocean and Mediterranean trade were sustained by a complex web of support systems. Local polities funded improvements in harbors and ports which were sustained by usage fees and customs duties. The maritime communities who benefitted from this trade transformed the urban districts where they lived into their own, unique world where the foreign came in regular contact with the familiar. Dockyards, warehouses, and other port areas also acquired something of a seedy reputation, firmly establishing one tendency which will remain consistent throughout most of this podcast. Local rulers who invested in maintaining these trade connections regularly launched campaigns against pirates, rivals, and others who threatened the flow of goods. Marco Polo’s capture by Venice’s Genoese enemies was a product of such conflicts.
As these examples of trading systems show, their existence was the result of a whole slew of contingent factors, ranging from having goods that people were interested in trading for to the various kinds of infrastructure and protections extended by all the societies involved. Even the markets merchants traded in were, by and large, possible because of the guarantees of protection extended by local rulers to the markets in their territories. These trading systems did not simply spring up because there was supply and demand, they were cultivated over the course of decades and centuries which, in their own way, also created further demand and growth.
These conditions imposed a lot of constraints on what could actually be moved on a global scale. While there are many examples of localized and regional trade in agricultural goods and other consumables, there are few which happened over long distances thanks to their perishability and the lack of sufficiently reliable communications for coordinating such commerce. Instead, the main commodities moved were all what could be described as durable goods. The steel, spices, silk, porcelain, ivory, pelts, and gold which were the big export goods of the period that we talked about in Episode 1 are all things that can be thrown on the back of a cart or in a ship’s hold and, provided you treat it properly, be mostly intact and usable after hundreds or even thousands of miles of travel. What these goods also had in common is they were all high-value goods in this period. You did not need to move huge quantities of cinnamon, spices, or fine steel to make a significant profit and anyone playing with a whole shipload of any of these goods risked making or losing whole fortunes on such a venture.
This same pattern of intervention by states and societies for fostering market development is one we will continue to see as our story unfolds. Capitalism’s existence, forms, conditions, and norms were the product of deliberate social and political choices as much as they were responses to conditions on the ground. Nothing demonstrates this better than money, which will be next week’s topic.
Until then, thank you for tuning in. If you enjoyed this episode please like, subscribe, and share this podcast far and wide. Thank you again and until next time, this has been a History of Capitalism.
S01E03 - Money and Banking
Hey listeners, it’s good to have you back. This week’s topic is money, the lifeblood of capitalism, and how one of the “most taken-for-granted aspects” of modern economics emerged. We will pick up on 1400 CE where Marco Polo and ibn Battuta left off and learn how and more importantly why money, which we know so well, was invented. We will do this by first examining the systems of exchange that preceded money’s invention, gifting and barter economies, before then discussing the first examples of money, how the concept was spread, and why early money’s limitations led to the invention of the first banking systems. We’ll then talk about how those banks developed many of the core practices we associate with finance today.
In case you’re worried this might be a bit boring, there’s a lot more to the story of banking than meets the eye. Films like The Wolf of Wall Street and The Big Short show finance has far more twists and turns than people expect and its story runs through the heart of the history of capitalism.
As we know, money functions as a means of resolving payments for goods and services, repayment of debts, and storing value. Money was originally an object with an agreed value, but that object could be precious metals or distinct and rare items. Rare metals like gold, silver, or copper may have had steep competition from ivory, exotic parrot feathers, or tobacco as long as its value was accepted by the traders exchanging it. To understand why money was invented, we first need to examine how people handled economic exchanges before money. The two most common methods found in human history are gifting economies and trade in kind.
Gifting economies are systems of exchange where commerce is used for establishing and reinforcing social relations and they are found on every continent, often practiced by indigenous societies. “A good or service’s value” was based on how useful it was for the receiving party and how the exchange influenced the Relationships between all parties to the exchange. Gifting economies tend to be limited to communities where the necessary relationships for sustaining one already existed. Gifting exchange still exists in some forms today, such as friends buying each other rounds of drinks at the pub, however, it is not the dominant form of economic exchange. The bartender still runs your credit card!
Trade in kind or barter, by contrast to gifting, is done by exchanging goods or services for other goods or services. Value is determined based on a shared understanding of how much the goods, such as a great milking cow or a ripe bushel of grain, is worth for the community where the transaction is taking place and when. In 1400, A straight brace of finished oak beams trumped a bundle of freshly cut logs if you were raising a barn.
[Sound break - Coins sound]
Despite the benefits of gifting and the utility of barter, the versatility offered by money allowed it to supplant both those systems in many parts of the world by the year 1400 CE. Gifting economies had hard limits on what could be bought or sold as they used personal favors and reputation as the main guarantors for settling accounts. This also unintentionally inhibited trade between groups who were not part of the same gifting networks . Barter had the inherent inconveniences that come with exchanging literal bushels of wheat for heads of cattle or other, similarly bulky goods. For one thing, the cows won’t stand still and they might eat the wheat.
It was these inconveniences and shortcomings which likely first inspired 11th century BCE Shang Dynasty Chinese artisans and merchants, to use carved cowrie shells as an early form of money. For these early money users, the carved shells and later cast copper Tong Bei coins, were far more compact and easier to transport than raw goods. Soon, Shang royal authorities got in on the game by providing guarantees for the purity and authenticity of all coins entering circulation. Merchants and craftsmen in Anatolia and the Iranian plateau made a similar leap in 600 BCE with electrum coins. These early coins were cast or hand-forged at the order of state-owned mints, as shown by their uniform design, production, and decorations depicting important figures like rulers and symbols of their political systems.
Neighboring societies soon began copying this successful trading system, especially if they wanted to do business with money-using societies. The growth of empires like the Romans, Persians, Maurya, and Han Chinese, accelerated the spread of both the concept of money and the use of metallic coins produced by government-owned mints. They also each used a combination of silver and gold for making coins, ensuring these metals would enter widespread use as a material for money.
The use of gold and silver in coins raises a very common question: Why did these metals become so popular for use as money? You may have heard these precious metals were commonly used because they have some kind of inherent, universally recognized value that transcends time and space. The truth is more mundane. Gold and silver are too soft and malleable to be useful as tools though these qualities made them suitable for more decorative uses like jewelry. Their malleability also made them easier metals to work with compared to more durable ones like bronze or iron. Silver was the most commonly used precious metal for currency in much of Europe and Asia. Gold, much of it sourced from West Africa, also saw considerable use.
Even though silver coinage was in use throughout the trade systems of Europe, Asia, and Africa, these different coins did not all have the same value or retain that value when outside of their main areas of use. Precious metal coins were assessed based on their purity, weight measured in often inconsistent local units, and how the metals in the coins were valued in local markets. A solid gold coin was worth far more in Venice than it would have been in gold-rich Timbuktu.
[Sound break - bank vault sound]
As much as coinage revolutionized long-distance trade and commerce, it also created new problems. Coins were still heavy and bulky items which were physically taxing to move in large quantities. Coins also had to be stored somewhere when you weren’t using them. If you had the means, you could purchase a strongbox or even an in-home vault, but that still meant each individual was responsible for keeping their money safe. It was also not that easy to make large transactions or transfers of funds, since that required hiring teams of horses, drivers, guards, and carts to move your money safely.
Early banks were the solution to those challenges. They solved the security problem by keeping all that money in safe locations for their customers and tracking it for them. In exchange, they charged use fees and provided deposit slips to their customers which could be used to withdraw funds when needed. Many of the first bankers were originally goldsmiths, jewelers, and merchants. This was because these tradespeople already had the necessary heavy vaults, security, and strongboxes for storing the precious materials that were essential to their crafts. Keeping other people’s coinage safe was just one more item in the vault alongside other already precious materials.
Holding deposits did more than just resolve physical currency’s security problem. It also made it much easier to move money around and access it thanks to another development known as a bill of exchange. A bill of exchange was a promissory note which entitles the bearer access to a certain amount of funds held by a bank or organization. The bearer of a bill was entitled to receive funds equal to the amount specified by the bank that extended it. Banks, meanwhile, satisfied the terms of bills by using on-hand currency instead of waiting for the arrival of that specific individual’s money. Bills of exchange became their own form of currency wherever they popped up since it is quite a bit easier to trade a stack of bills for a cow than it is to physically haul a chest of coins to the livestock dealer. It also was easier for the banks since they could resolve transactions by deducting from one account’s existing balance before adjusting the receiving account.
Deposit holding and bills of exchange were what then made the practice of financial lending as we know it possible. Banks had found all these deposits, use fees, and exchange transactions were great for accumulating money of their own. They also found they tended to always have more money on hand most days than they had to pay out as withdrawals by customers. One solution that caught on quickly was lending out this money, charging handling fees and interest from the borrower, and using the profits for tasks like covering the value of deposits. This use of existing deposits as money for extending loans is what has become known as fractional reserve banking, a practice which has been central to making banking as we know it ever since.
These general tendencies were at work in Europe, the Middle East, South Asia, and China when each developed their own systems of banking. For Europeans, the three groups who played the greatest role in shaping their financial practices were Italian merchants, the militant monastic order of the Knights Templar, and Jewish moneylenders. Each contributed raw capital, new business practices, and far-flung social networks to the development of early banking and finance.
Italian merchants are the most critical of these groups to the origins of European banking. Nothing better shows this than the very Italian origins of the word bank, which originally referred to the benches merchants sat on while negotiating business deals. The near-monopoly Italian merchants held on the trade pouring in from the Silk Road made them fabulously wealthy in goods and money. What further contributed to this process was how the luxury commodities moved by Italian merchants could only be reliably purchased with gold and silver coins and not through in-kind payments. These products were also in high demand, ensuring the Italian traders could always get and sell more and accumulate increasing quantities of money.
These realities made it easy for Italian merchants to become some of the biggest moneylenders in Europe. Kings and Popes regularly borrowed from the cash-rich moneychangers of the Italian peninsula. Their importance had grown considerably by the year 1400 CE thanks to the growing importance of money for funding armies and paying for the expenses of late medieval monarchies and aristocrats.
Financiers who were once snubbed by their social betters had now become some of the most influential people in Europe. No one family’s story better illustrates this than the Medicis of Florence, who will be coming up more throughout this season. The Medicis will, before this season ends, successfully make the leap from money-grubbing bankers to major players in Papal politics and even get one of their daughters married into French royalty, the bluest of Europe’s blue-blooded elite.
If the Italian moneylenders were the ones who had the muscle, it was the Knights Templar who developed a system of bills of exchange which revolutionized moving money in Europe. The Knights Templar began as a crusading order of knights whose mission was protecting Christian pilgrims in the Holy Land. The order soon found maintaining holdings in Palestine, recruitment in Europe, and sustaining the necessary supply lines for all that was a huge administrative challenge. As a solution to these problems, the Knights Templar began holding deposits from members and benefactors of their order and used bills of exchange to move the money around.
Though bills of exchange were not invented by the Knights, their status as a military order made it possible for the Templars to revolutionize this practice. Along with holding a lot of land and resources, the Templars also had a fairly robust system of record-keeping and couriers. They were also, as much as the word is appropriate in this period, a truly international organization that commanded respect across Christendom. This made it easy to physically move money and guarantee the value of Templar bills of exchange. If any one organization could be called a genuine precursor to international banking, it was the Knights Templar.
Even though the Templars played a critical role in creating finance, their rise to power and wealth led to their downfall. In 1307 CE the members of the Knights Templar were all arrested by King Philip IV of France under lurid charges of heresy. Shortly after, Pope Clement V issued a decree dissolving the Knights Templar as a militant monastic order. This decree further mandated that all Christian monarchs must confiscate the property of the Templars in the name of the Church. Even though the Knights were finished, their unique organizational system was an important forerunner in the development of international finance in Europe.
Their sudden elimination has spawned numerous conspiracy theories popularized by authors like Dan Brown and video games like Assassins Creed but the truth of the matter is very different from how these works of fiction have portrayed their downfall. Politically, the Templars had become a serious force in Europe. Even the Papacy which, theoretically, held their leash was facing increasing challenges keeping the order under their control. Financially, the King of France and many other politically powerful borrowers owed significant sums of money to the Templars. Disbanding them would make all those loans go away and allowing Philip to ransack the Templars’ substantial holdings in France provided even further incentive to break up the order. It is therefore no surprise that the monarchy who long stood as protectors of the Papacy would team up with the Holy See to solve both problems in one bloody stroke. It’s not as exciting as secret bloodlines, ancient plots, or hidden occult knowledge but, as far as historians can tell, the whole story is another example of powerful people crushing a rival and walking away from their debts.
This brings our story to Europe’s Jewish communities and the region’s financial systems. Jewish merchants were early players in the banking and lending game. Part of this was thanks to their existing monetary wealth brought in from trade of commerce but it was also thanks to a practice known as usury. Usury, in medieval Europe, was a prohibition on anyone charging interest on debts or loans. The one exception was if these debts or loans were held by people who followed a different religion, providing Jewish merchants and Christians merchants they did business with opportunities for getting around the prohibitions on usury. Moneylending was also one of the few professions which European Jews could legally pursue. Jewish money-lenders also benefited from the same family networks which made Jewish merchants so prominent in the Mediterranean basin but they were easily eclipsed by banking families like the very Italian, very Christian Medicis. Jewish moneylenders were a sufficiently consistent element in the markets of Europe for a character inspired by them to feature in William Shakespeare’s The Merchant of Venice.
Jewish moneylenders were, however, highly visible and thanks to their lack of real power in medieval Europe incredibly vulnerable to retaliation and persecution. Some of the more notorious instances of anti-Semitic violence in medieval Europe were caused by powerful people running up significant debts to Jewish moneylenders before using legal or extralegal force to physically expel them, ensuring the debts never had to be paid. One noteworthy example of such behavior was King Edward I of England’s 1290 CE expulsion of England’s Jewish residents, an order which was handed down after Edward had borrowed massive amounts of money from Jewish merchants for financing the conquest of Wales, and the castle-building campaign he initiated to secure his new holdings. King Philip IV of France did the same thing in 1306 CE, a year before doing the same to the Knights Templar, when he seized assets and property held by Jews he had borrowed money from before expelling them from his realm.
[Sound break - coins]
The stories of other banking systems in this period are broadly similar. The Islamic world’s financial systems developed their own, unique system which included a strict ban on usury and required loans to be structured more like installment payment plans than as the interest-bearing transactions most people associate with the word loan. Despite these differences, banks in the Middle East and North Africa offered many of the same services as their European counterparts like bills of exchange. Though banks could not make money from interest-bearing activities, banks nonetheless spread freely in the Islamic world. These developments were further aided by the Middle East’s role as a major crossroads for global trade. If one of the great advantages enjoyed by Italian merchants and Jewish bankers was easy access to liquid currency, then their Middle Eastern partners were unquestionably swimming in regular flows of money.
Continuing eastward brings us to the money exchanges of South Asia. Bills of exchange, letters of credit, and loan deeds all have been documented in the region we know today as India, Pakistan, and Bangladesh as far back as 200 BCE. The Delhi Sultanate was the latest in a long line of political entities who dealt with these realities. During their rule, loan deeds, banks, and bills of exchange became more widespread and sophisticated as trading systems matured. Growing trade through the Arabian Sea and the Persian Gulf only increased the flow of goods and liquid currency in both directions, firmly ensuring the services of these money exchanges were in high demand throughout the region.
China’s financial systems traced their origins to counting houses, which emerged during the Tang Dynasty in the 600s CE. Counting houses sprung up as places where merchants could safely store their money and offered services like bills of exchange and letters of credit. They also became the hubs for the first known example of a money system based on paper banknotes rather than physical coins beginning in 11th century Song China.
Using paper in commerce was not new for the country which invented the stuff. Paper bills of exchange and letters of credit were highly popular but were still a stand-in for metal coinage and not money unto itself. One of the most commonly accepted of these systems of paper promissory notes were the jiaozi, bills of exchange and letters of credit which were used as money in all but name.
Then, in 1023 CE, the jiaozi was transformed from a stand-in for money to becoming money in its own right when the Song Zhengzong Emperor brought all production of new jiaozi notes under state control. These new paper notes were backed by gold and silver held by the Song government and could be redeemed for their printed value. The Ming Dynasty further changed this system with the introduction of the Da Ming Baochao, a form of fiat currency whose value was backed by the authority of the Ming Emperor. Unfortunately, no limits were ever placed on their production which saw the value of the jiaozi decline over time, leading to price inflation. These inflationary pressures forced the Ming Hongzi Emperor to abandon the system in the late 1400s CE in favor of perceived safer, more valuable metallic coins.
Though this period saw widespread regional-level systems of credit and exchange, they were not heavily interconnected. Banks mostly serviced local customers whom they knew well and did regular business with. Though banks did, sometimes, lend to each other the kind of bustling interbank trade that makes modern finance possible simply did not exist. This meant the resources of any given bank were limited to what they could muster in local markets. The same was also true of risk. Banks’ fortunes in these times rose and fell with the customers in their immediate region and financial contagion was often a symptom rather than a cause of economic woes.
[Sound break - Coins and shouting]
The greatest problem facing these early banks was the lack of guarantees for their business in law or the political climate of the time. This was because power in every part of Eurasia and Africa at this time depended on your ability to control land and people. Feudal lords, imperial dynasties, sultanates, and steppe khanates all operated on this same basic logic regardless of the local particulars. Money, commerce, and trade were certainly valued and important but, if push came to shove, the demands of power won out over what was good for the politically vulnerable merchant class. Two examples we’ve already discussed are the dissolution of the Knights Templar and the expulsion of England and France’s Jewish communities. Banks engaging in sovereign lending ran the risk of sovereigns deciding the best way to resolve a financial crisis was walking out on it.
Banks in this period also were vulnerable to the classic problem faced by every lending institution ever: overlending and overborrowing. Overlending and overborrowing are what happens when banks and other lending institutions extend more credit than they can afford to cover and the people they’ve extended this credit to can no longer afford to pay for their debts. There is quite a bit of chicken and egg debate over which begins the process because historically they tend to create a self-reinforcing spiral. Banks, in such circumstances, often overextend their lines of credit in hopes of this round of loans being the one that gets them into solvency just as often as debtors bet on a new round of credit being the thing which gets them through this little rough patch..
What didn’t help was the plethora of potential causes for such crushing debt spirals. Disasters like a ship lost at sea, an inopportune hailstorm just before the summer harvest, or a mine accident spelled doom for any fortunes depending on them. The localized structure of finance during this period meant financial crises tended to follow economic downturns instead of leading them. When banks went under, they made existing economic crises worse but they often were not the immediate cause.
Yet.
This brings us to the end of what you could call our extended prologue. Next week, we’re going to kick the story of capitalism off with a bang when we talk about gunpowder, how it changed the world, and shattered the walls of the imperial city of Constantinople.
But until then, thank you for tuning in. If you enjoyed this episode please like, subscribe, and share this podcast far and wide. Thank you again and until next time, this has been a History of Capitalism.
S01E04 - An Explosive Recipe
[Bomb fuse followed by bang]
Hey there listeners, welcome to the episode where we kick the story of capitalism off with a bang. Gunpowder is mostly remembered for how it changed the war. While war is certainly the core of the story of gunpowder, it did more than just make knights obsolete. It completely changed how political systems were organized, the scale of resource extraction, and was responsible for making chemistry into an industry. At the center of this story is the 1453 conquest of Constantinople, the moment that showed the world what gunpowder could do when it ended the last surviving remnant of the Roman Empire.
We’ll explore this story in four parts. We will begin with gunpowder and war. We will then explore how it changed economics before discovering how gunpowder gave rise to a new kind of political entity known as a gunpowder state or a gunpowder empire. The birth and rise of these states laid the foundations of the modern concept of the state and government as we know them. We will finish with the Ottoman conquest of Constantinople, which is a story with everything you’d ever want from the final stand of a dying empire.
One economics concept which is vital for understanding how all of this unfolded is what is known as a chain of production. This term is used by economists to describe the network of markets, manufacturers, commodities, and methods of transportation which must all work together so that a good or service can be produced and used. Steel, for example, needed more than just a sufficiently skilled blacksmith to be manufactured. That blacksmith also needed sources of metal, fuel, and other materials for making their tools and markets where they could safely sell their wares. Every link in this proverbial chain has to be present or the blacksmith cannot make or distribute their steel. This also meant that building up more complex forms of manufacturing, like making gunpowder weapons, required investments in every piece of the production chain.
[Sound effect of a firework rocket]
So let’s get started with the place everyone goes to when you think of gunpowder: war. Gunpowder completely changed the face of war on every continent, beginning with Imperial China where it was first invented in the 800s CE. This early gunpowder was more incendiary than explosive. It was commonly used, in war, for making flaming arrows and the fire lance, which first entered use around the year 950 CE. Flaming arrows are probably familiar but you’re probably wondering what a fire lance is and if the weapon was as impressive as the name implies. A fire lance was a long, bamboo spear with a container filled with gunpowder attached to the end which was usually employed from horseback. When lit, it spewed flame, and later models added a hail of iron pellets along with other sharp objects to the mix. Chinese alchemists also, famously, used it for creating the first fireworks.
The Mongols added gunpowder to their repertoire following their conquest of the northern half of China in the 1200s CE. They used it for simple bombs and as their armies move west across the Eurasian continent, they brought gunpowder with them. Soldiers in the Middle East were also quick to adopt this new form of weaponry, with fire lances, rockets, and the first cannons proliferating throughout the region by the late 1200s. From there, it leapt across the Mediterranean and Baltic Seas into Europe. Gunpowder recipes also became increasingly explosive and less incendiary as the technology migrated west.
Of all of gunpowder’s military applications, the cannon was the one that revolutionized warfare and politics in this period. The conditions of war, before the invention of the cannon, heavily shaped by the enormous advantages enjoyed by fortified defensive positions like cities and castles. Breaking a well-fortified stronghold required huge quantities of troops, expensive equipment, and a lot of time free from interference by enemy forces. Even the Mongols, who were famed for their skill in siege warfare and military engineering, still needed to invest considerable resources in breaking prepared strongholds.
Cannons changed that. They were capable of laying down far more precise volleys of fire than earlier siege weapons which depended on complex pulley and counterweight systems. They fired their projectiles with far greater velocity and force than siege engines were capable of achieving. They also could be set up much faster than other siege engines and were easier to transport. Fortresses which once easily repulsed the most determined attacks could now be blasted to pieces with relative ease.
If the changes to land warfare were significant, then the story at sea was even more dramatic. Naval warfare throughout history had long been dominated by ranged combat, utilizing various bows and cumbersome siege equipment, and close-quarters combat where ships sailed up to their enemies, boarded their foes vessel, and seized it in hand-to-hand fighting. In most cases, the limitations of arrows and siege equipment made closing the distance and boarding the more attractive and reliable option. This also meant warships and naval strategy was mostly limited to protecting sea lanes and ferrying troops in preparation for land campaigns.
Cannons totally changed how war at sea worked. Warships could now reach out and touch someone from distances of up to two miles out with eight to ten pound iron and steel balls which flew faster than an arrow in flight. Any ship large enough to carry cannons could now project power as far as a cannonball flew and use that to batter fortress walls, bombard less protected targets, and sink ships at long range. Everything about warfare at sea now depended on whether or not you had cannons and if you didn’t, you were dead in the water.
[Sound of cannon firing]
Another major change attributed to cannons and gunpowder was the downfall of the traditional warrior castes of Europe, the Middle East, South Asia, and China in what is known as the military revolution. While there is an element of truth to this, what it misses is gunpowder only accelerated a process that was already well underway in each of these regions. Many states in these regions were already moving steadily away from depending on set social classes for their military forces and towards something resembling professional standing armies.
The main reason why this was happening was very simple: history had already painfully demonstrated in China, the Middle East, and Europe how militarily unreliable their largely hereditary military forces were. Though the details differed, each region’s armed forces generally consisted of troops who received land, enhanced social standing, and in some cases direct political power in exchange for service in war. The common problems with these military forces were the quality of training was often inconsistent, social priorities tended to get in the way of military objectives, and how long they were available for service was limited by law or custom.
The solution reached by the societies of these regions was replacing unreliable, socially obligated troops with professionals who received monetary payments or other forms of direct compensation for military service. One of the first moves in this direction was the Islamic institution of the ghilman, slave soldiers recruited from prisoners of war and peoples enslaved on the frontier. Unfortunately, these troops also sought political power and in some cases brushed aside their political superiors to take it. One of the best examples was the Mamluk Sultanate, a regime initially founded by Mamluk slave soldiers employed by the Ayyubid Sultanate of Egypt who grew tired of taking orders and decided they’d much rather be giving them.
Europe and China arrived at similar solutions to the same problem: replacing levies with troops who received direct money payments for their services. Some of these mercenaries were members of dedicated units who sold their services to the highest bidder while others, like the English yeoman troops of the Hundred Years War, were directly employed by their sovereign in exchange for money and other direct compensation. In some cases, these mercenaries became serious liabilities, particularly when, as became quite popular in Italy, they overthrew their employers and took charge. Despite these risks, they were more reliable, effective troops than European feudal or Ming wei-suo units whose service was solely compelled by social obligation.
One of the best examples of what happened when feudal troops clashed with these new professional forces was the Battle of Agincourt in 1415 CE. On one side were the English forces which mostly consisted of archers and men at arms of common birth who were paid with a regular wage, promises of plunder, and pardons for crimes alongside a handful of knights. On the other end were the French troops which consisted mostly of mounted noblemen at arms, their retainers, and levied infantry who were all there to fulfill their duties to the King of France alongside some mercenary crossbowmen. The English troops arrayed themselves in a disciplined line while French lords and gentlemen jostled for a place in the front lines where the most glory, and potential ransoms, could be won. What made matters worse for the French was the nominal commander, Charles d’Albert, drew his authority from royal appointment as Constable of France and he, unfortunately, was not the most senior noble present at the battle. This guaranteed the official chain of command took a back seat to social custom. What followed was a reckless charge across a muddy field by the flower of French chivalry into the teeth of a disciplined line of professional English archers and infantry that ended with the vaunted French cavalry dead on the field.
One of the big consequences of this revolution was that political authorities now needed money more than ever. Keeping soldiers in the field was increasingly a matter of possessing enough cash to pay for everything than it was a question of having vassals who were willing and ready to fight for you. Political systems who rose to meet this demand did so by creating new systems of taxation, state administration, and support for commerce in a bid to attract more money to their territories. This also provided the developing European states, the Ottoman and Mamluk Sultanates, and Ming China with significantly greater financial resources to work with compared to previously powerful regional elites like local lords and governors. These financial resources were also vital for making gunpowder production at scale possible.
Gunpowder, like most bleeding technologies, did not come cheap. This was because gunpowder manufacturing needed an extensive, rather sophisticated production chain to work properly. The powder mills which made the substance itself needed regular shipments of sulfur, charcoal, and saltpeter, known today as potassium nitrate, in the right quantities. They also needed skilled chemists to transform these materials into the right kind of gunpowder. Cannon and gun foundries, similarly, needed highly skilled metalworkers, specialized equipment, and reliable sources of quality fuel and ore. This was all very expensive and centralized states were, frequently, the only entities with the financial means to really invest in gunpowder production.
These investments also had significant indirect economic impacts. In the world of 1400, money for gunpowder meant early chemists and metallurgists were now in high demand. Even skilled artisans who were not supplying military forces benefited from the new production methods developed to meet military needs. Everything downstream from chemistry and metallurgy benefitted, including shipbuilding, papermaking, and tool manufacturing.
Gunpowder also directly contributed to economic activity in the form of blasting powder. This recipe was ideal for excavating deeper mining shafts and swiftly carving stone out of quarries. Even though gunpowder is most celebrated for how it changed the war, there is no question it was equally important for economic development and would have similar consequences for how political systems were organized.
[Hissing fuse followed by a sharp bang]
These financial and material resources became the bedrock of a new kind of political system known to history as a gunpowder state and one of the first, best examples of this new political system were the Ottoman Turks. It embodied all the attributes of the early gunpowder order with its centralized government, sophisticated bureaucracy, professional army, and state sponsorship of critical economic activities.
The Ottomans trace their origins to a group of Turkic peoples who migrated out of the Mongol Empire to the Anatolian peninsula at some point in the late 13th century CE. The region, at the time, was hotly contested between the Seljuk Turkic Sultanate of Rum, the fading Byzantine Empire, and the Mongol Ilkhanate along with several other minor warlords. The founder of the Ottoman dynasty was Osman I who began his family’s climb to imperial glory by carving out a small stretch of territory in this chaotic world. His descendants progressively centralized control over the region, bringing the unruly Gazi frontier warriors under their control and asserting the primacy of the House of Osman. As the Ottomans centralized power, they improved the efficiency of their taxation systems to fund their increasingly sophisticated government and growing armies.
Two important Ottoman innovations were the elite janissaries and their swift, widespread adoption of gunpowder weaponry. The Janissaries are, arguably, one of the first modern, professional armies in world history. The Janissary Corps first began under the reign of Orhan, Osman I’s successor, in 1324 CE. Members of the corps were recruited from Christian populations living under Ottoman rule through the devshirme system. Under this system of slavery, Christian children were taken into captivity, converted to Islam, and employed by the Ottoman state as soldiers and administrators. Janissaries, unlike other enslaved peoples in the Empire, received a regular salary. They were forbidden from marrying or engaging in trade until they reached the age of forty, served as a Janissary for life, and gave the Sultan their absolute loyalty and obedience. The Janissaries were only one tenth of the Ottoman army during this period but that tenth was always at the forefront of the empire’s expansion. In battle, they protected the Sultan and his household or held the center of Ottoman lines. Beginning in 1380 they were equipped with cannons and by the 1440s were issued some of the world’s first muskets. They became known as expert archers, gunners, and siege engineers.
The Janissaries’ use of gunpowder weaponry was just the tip of the Ottoman spear. The Sultanate was very enthusiastic to adopt gunpowder armaments quite early on and their sponsorship of gunpowder-related production ensured a reliable supply of cutting-edge equipment. These were the resources that made it possible for the Ottomans to bounce back from near-destruction by the Timurid Khanate in 1402 at the Battle of Ankara, consolidate their power over much of Anatolia, and seize Byzantine holdings in what we know today as Greece and Bulgaria.
The Byzantine Empire they clashed with was, without question, a shadow of its former glory. The empire had veered from crisis to crisis ever since the disastrous 1204 Sack of Constantinople by Christian crusaders and Venetian troops. The Black Death’s elimination of nearly half of Constantinople’s population further gutted the already battered city. By 1453 what was once the largest city in Europe and the Middle East had shrunk to a collection of towns and villages clustered behind the ancient, yet still formidable, Theodosian Walls. Merchants still did brisk business there, thanks to the city’s favorable position, but Constantinople’s glory days were long gone.
Things fared little better beyond the capital’s famous double walls. The Fourth Crusade had done more than just devastate Constantinople, it completely broke the empire. A short-lived Latin Empire was raised over the city and its immediate surroundings by the Crusaders which came to blows with the so-called Empire of Nicaea which was ruled by claimants to the Byzantine throne. By 1261 the Nicaeans had reconquered the city but they found their lands exhausted by years of war. The populace was increasingly resentful of Constantinople’s demands for growing taxes, the city’s unpopular mercenaries, and the empire’s growing weakness in the face of new enemies in the Balkans and Anatolia. By 1453 CE, Ottoman military power severed their last remaining links between these holdings and Constantinople, leaving the city standing alone against a new, expanding empire.
The stage was now set for Ottoman Sultan Mehmed II to make his move and write his name into the loom of history. The Sultan had only recently ascended to full control of the Ottoman Empire in 1451 CE following the death of his father Murad II and was quick to initiate preparations for conquering Constantinople.
[Underlay with sounds of simple construction like hammers on nails, saws, horses] 22.04
In 1452 he ordered the construction of a new fortress on the Bosporus Straits, effectively cutting off sea traffic to the city. On land, Mehmed mustered an army of an estimated 80,000 troops including approximately 10,000 elite Janissaries though foreign observers, who were prone to exaggeration, claimed he had over 300,000 soldiers at his command. At sea, he commissioned a fleet of a hundred ships to blockade Constantinople and choke out any remaining avenues for relief, reinforcements, and communications. Mehmed also hired a small army of carpenters and masons to overhaul the roads to Constantinople so they could handle the weight of his army’s seventy cannons. 23.09
Most of these guns were built by Turkish engineers but there was a cannon, the Basilic, which was not. The Basilic, which is also known as the Ottoman or Urban Gun, was one of the biggest cannons ever built. Basilic’s barrel was around twenty-four feet, or seven and a third meters, long and measured two and a half feet, or 76 centimeters, in diameter. Basilic’s massive barrel could fling a half-ton cannonball as far as a mile, inflicting catastrophic damage on whatever happened to be on the receiving end. The gun was designed by a rather mysterious engineer known to history as Orban or Urban, depending on whether you think he was Hungarian or German in origin. Orban originally pitched this monster to the Byzantine Emperor Constantine XI, the ruler of Constantinople and soon-to-be last Byzantine Emperor, but Constantine turned him down due to a lack of funds. Orban, being the enterprising fellow he was, promptly crossed the lines and made the same offer to Mehmed boasting his gun could “blast the walls of Babylon itself!”
Bigger, however, isn’t always better. Though the Basilic inflicted tremendous damage on whatever it hit, it also had a propensity to dish out similarly grievous harm to anyone crewing the thing. It also needed to be regularly doused in warm oil and could only be fired three times a day. It served its purpose well during the siege, as one can only imagine the terror the Byzantine defenders must have felt every time that beast roared, [insert shriek of a cannonball here 25.12-25.14] but this firepower was more than the gun could bear. After six weeks of operation Basilic broke down completely and its remains were hauled away for scrap.
Opposing Mehmed’s forces were an estimated 7,000 Byzantine defenders, 2,000 of whom were foreign-born mercenaries supplemented by a small collection of cannons and a fleet of twenty-six ships. Some of those mercenaries were even Turkic troops who fought loyally to the last, holding the Sea Wall against Ottoman warships. The rest of the population, which totaled approximately 50,000 citizens, were put to work fixing the walls, keeping watch, and salvaging gold and silver from the city’s many churches to melt down as payment for further reinforcements.
Now these odds probably sound terrible. It would be quite appropriate to assume the Ottomans’ lopsided advantages in numbers and equipment guaranteed victory. With hindsight, that makes sense but at the time of the siege, Constantinople was one of the most well-fortified cities on earth. The two lines of heavy stone walls, towers, and gatehouses known as the Theodosian Walls had turned back worse odds before. The people of Constantinople also believed all they had to do was last long enough for promised reinforcements from Christian Europe to save the day. Walls had, after all, dictated warfare since the time of Sargon and this exact strategy had worked for previous emperors so why should now be any different?
[underlay the following sequence with shouts, sound of swords and arrows, occasional boom of cannons] 27.05
The siege began on April 6th, 1453 when Ottoman land and sea forces, closed off all avenues of contact with the outside world and began long-range, though initially ineffective, cannon bombardment of Constantinople’s defenses. As Ottoman forces closed the distance, the volume and accuracy of cannonfire increased, pulverizing Constantinople’s venerable walls.
[Sound of exploding masonry 27.33]
Ottoman troops, led by elite Janissary units, staged multiple bloody frontal assaults on the city’s many gates, tunneled under the walls, and traded a constant barrage of fire with Constantinople’s defenders. Weeks of hard fighting saw little progress until May 26 when Mehmed ordered his generals to make preparations for a mass assault intended to break the siege once and for all. While the Ottomans made ready, a Byzantine fleet of twelve ships sailed out from the city’s harbor in a desperate bid to make contact with a promised Venetian relief fleet. They discovered the Venetians had been turned back in the Aegean Sea and with them went the promised reinforcements. The Byzantines were on their own.
The morning of May 28th was heralded with the thunder the largest barrage of cannonfire the world had ever seen.
[Cannon barrage followed by battle sounds 28.38]
Janissary siege engineers led Ottoman forces in a general assault on the Byzantine defenses. The Theodosian Walls buckled and broke in multiple places. In the confusion, Byzantine soldiers left the critical Kerkoporta Gate unlocked, and the Janissaries poured through, overrunning Constantinople’s defenses. Constantine XI, seeing his city and empire lost, cast aside the imperial purple and, depending on the source, either committed suicide or threw himself at the oncoming Ottoman soldiers in one last, desperate charge.
[End battle sounds 29.25]
1453 CE was, without question, the end of an era. The Ottomans’ gunpowder army had proven its potency in the most spectacular way possible, unleashing two centuries of Ottoman conquests in southeastern Europe. The carefully crafted network of Italian merchant colonies and trading posts were rolled up. The expanding Ottoman state was eager to encourage the growth of revenues from commerce and wealth in their new empire and so they shut down outside competition, including and most especially wealthy Genoa and Venice. The Italian trade of Silk Road goods fell from a flow to a trickle.
For Christian Europe, Mehmed’s conquest of Constantinople was a profound economic, political, and religious shock. Economically, declining trade and the rising cost of luxury goods infuriated European elites. Politically, the loss of Constantinople meant the Muslim forces once kept out of Europe by Byzantine military power were now pouring into the Balkans, conquering with ease. Religiously, many in Christian Europe saw the loss of Constantinople as a sign of the apocalypse and Mehmed II as the Antichrist incarnate. The best solution to all these new problems was sponsoring maritime expeditions charged with finding a direct sea route to East Asia.
And that is where we leave our story for now. Next week, we will talk about Columbus, the Americas, and how European colonialism helped birth modern capitalism. Thank you for listening, if you enjoyed this episode please like, subscribe, and share this podcast far and wide. Thank you again and until next time, this has been a History of Capitalism.
S01E05 - 1492
The following episode features discussion of anti-Semitic violence and the enslavement and genocide of indigenous peoples in the Americas, including mention of torture, mutilation, and suicide. Listener discretion is advised.
[Intro music]
[Seascape sounds]
Welcome back, everyone! This week, we’re going back in time to the moment which provided the backwater European economies with the necessary resources to leap ahead of the rest of the world. That moment was Columbus’ 1492 CE maritime voyage. As we will see over the rest of this season, the resources Europeans acquired through colonialism gave their societies the resources to economically and technologically leap ahead of the rest of the world. How these resources were extracted and distributed also was critical to the development of economic practices like private property, the corporation, and the pursuit of profit.
I’ll begin our journey by taking us back to where Episode 4 ended with the 1453 CE conquest of Constantinople. I will then take us through the Christian kingdoms of Iberia and why they wound up being the main backers for Columbus’ trip and other, similar voyages. We will then meet the societies of Central and South America prior to European contact. We’ll rejoin Columbus for his history-making voyage and time in Hispaniola. We will then finish with how Spain and Portugal carved up the world and created a new religious and legal doctrine for justifying future acts of colonization.
It is now time to head back to Europe in 1453 CE. As we saw last episode, the loss of Constantinople seriously disrupted trade in Christian Europe. Recent Ottoman victories in Anatolia, Greece and Egypt effectively closed many of the key ports used by Italian merchants for acquiring Silk Road goods. The Ottomans also targeted Venetian and Genoese trading outposts, further hampering Italian access to the region’s markets.
Choking out this flow of goods for Christian Europe sent the price of already scarce Silk Road goods skyrocketing, effectively transforming the high cost of an uncertain maritime voyage to a risky but potentially lucrative investment. It also just so happened the kingdoms of the Iberian peninsula, the home of modern-day Spain and Portugal, were perfectly positioned to do this. To understand why, we’ll be taking a quick hop back to the dying days of the Roman Empire and how seven centuries of conflict gave rise to some of Christian Europe’s first modern, gunpowder states.
Iberia, during the Middle Ages, was a region riven by conflict beginning with Rome’s collapse. In 418 CE, the Christian Visigoths seized outright control of the region from the Romans and founded a new, centralized kingdom under their rule. This regime fell in 711 CE when the Muslim Umayyad Caliphate invaded the peninsula. The Umayyads drove surviving Christian nobles into northern Iberia where they established the kingdoms of Leon, Castille, and Navarre. These kingdoms then launched a centuries-long struggle for control of Iberia known as the Reconquista. By 1453 CE, four Christian kingdoms, Portugal in the west, Castille in the center, Aragon in the east, and tiny Navarre in the north, ruled most of Iberia while the last remaining Muslim power, the Emirate of Granada, held the southern plains of Andalusia.
The economic foundation of the Christian kingdoms’ war effort was a system known as encomienda. Under encomienda, a noble known as an encomendero was granted the right to extract tribute, in the form of material goods and forced labor, from any non-Christians and peasants from a specific grant of territory. Monarchs could, if laws were broken or the interests of the crown were at risk, intervene in the administration of these grants, but the grants were usually left to the whims of the encomenderos for the most part. This feudal system provided an incentive for Christian rulers to seize frontier regions for resettlement and acquiring resources for fuelling further expansion.
In 1469 CE two of the most powerful Christian kingdoms, Castille and Aragon, were unified by the marriage of their rulers, Isabella and Ferdinand. They, like the early Ottoman Empire, got to work consolidating their power by establishing important governing institutions like the Councils of State and the Spanish Inquisition. The Councils of State handled matters in specific areas of government and were staffed by influential aristocrats, legal experts, and other specialists who streamlined processes like tax collection and management of revenues. The Inquisition increased the power of the central government by enforcing religious uniformity and serving as something similar to an early national police force which was invaluable for keeping the nobility in line.
These new administrative systems, along with encomienda, provided the Catholic Monarchs with the financial and military resources needed to raise an army of professional volunteers equipped with the latest weapons. The newly minted gunpowder state then put an end to the Reconquista with the Granada War which began in 1482 CE. By 1492 CE, the last remnants of the Muslim Emirate of Granada surrendered to Castille and Aragon. Isabella and Ferdinand then issued the 1492 Alhambra Decree which expelled all practicing Jews from their realms and seized their assets. The lands taken in the war were redistributed to Castillian nobles while the wealth seized from supporters of the Emirate and expelled Jewish communities was used by Isabella and Ferdinand for paying down war debts and funding projects like Columbus’ expedition.
[Seascape and sailing sounds]
While Aragon and Castille were pursuing political consolidation, Portugal was actively seeking new trade routes to East Asia. Portugal’s monarchs, since 1297 CE, sought to improve their kingdom through direct sponsorship of trade, providing insurance for merchants, and other subsidies meant to encourage commerce. Rural depopulation following the Black Death accelerated these trends as more money could be reliably made by fishing, sailing, and trading than through farming. Portuguese sailors also developed the caravel, a new type of sailing ship that could venture out into the open ocean and conduct longer voyages than Mediterranean galleys or North Sea cogs.
These existing developments were further boosted by Prince Henry the Navigator of Portugal. He furthered Portugal’s commercial influence by sponsoring expeditions to West Africa and promised successful voyagers with trade monopolies for any regions they “discovered” as a reward. Later Portuguese expeditions pushed as far south as the Congo River. These Portguese mariners also became the first Europeans to participate in the African slave trade and began taking thousands of enslaved people to work in Portugal. In 1488 CE, Portuguese navigator Bartolomeu Dias’ expedition became the first European to sail around the southern tip of Africa, a voyage which now made it possible for European merchants to reach India directly by sea and avoid the now hotly-contested Mediterranean.
This was the world where Columbus peddled his vision of an alternative route to Asia. Christopher Columbus was born in 1451 CE in the Republic of Genoa, a major center for Mediterranean maritime commerce. He entered into an apprenticeship as a business agent for a wealthy Genoese merchant family. His work sent him traveling by sea all over the Mediterranean and western Atlantic. Columbus also showed a lifelong, largely self-educated interest in navigation and astronomy. This combination made him quite ready to jump on the bandwagon of finding a new route to East Asia.
Contrary to popular myth, the biggest obstacle facing Columbus’ plan was his questionable math and not popular misconceptions about the shape of the Earth. In 1492 CE, most European scholars and sailors knew the Earth was round. Existing research estimated the distance from Europe to Japan was approximately 10,600 nautical miles, a distance no ship at the time could traverse. Columbus thought the distance was a more manageable 2,400 nautical miles based on his own interpretations of the works of Marco Polo and Ptolemy. He also underestimated the Earth’s size by about a third, making Columbus part a long, proud tradition of would-be entrepreneurs whose pitches depended more on big promises than sound business fundamentals.
This bad math was why King John II of Portugal’s advisors dismissed Columbus’ proposal in 1484. He took his pitch to Queen Isabella in 1486 before meeting a similar response. Despite this rejection, the Queen gave him a small salary and a job so she could keep him in Castille. In 1492 Columbus pressed his case again and this time the Catholic Monarchs, flush with cash and inspired by Bartholomew Dias’ return from the Indian Ocean, threw some money at his pie-in-the-sky plan. If his plan worked, Columbus was promised he would be named Admiral of the Ocean Sea, governor of all lands he discovered, and receive ten percent of all revenues from those lands in perpetuity.
[Sailing sounds]
This is where we meet the peoples and societies of Central and South America as of the year 1492 CE. Our trip will begin with the Caribbean before hopping across the Gulf of Mexico to Mesoamerica, home of the Aztecs, Maya, and many other sophisticated societies. From there we will head to South America to visit the vast Inca Empire.
The first stop on our trip is the Caribbean. The main inhabitants of the region were the Taino and Kalinago peoples. They engaged in agriculture, fishing, hunting, and were by all accounts skilled sailors and navigators. They also traded with groups on the mainland, including gold and silver jewelry which could not be produced in the Caribbean due to the lack of local gold and silver deposits. Each of these societies were governed by local leaders, referred to among the Taino as caciques. Conflict existed in the region, though it was mostly low-level and localized rather than a massive clash between two warring groups.
Moving further west to what is now central Mexico brings us to the Mexica-ruled Triple Alliance, better known as the Aztec Empire. The Triple Alliance was a union of the three Nahua city-states of Tenochtitlan, Texcoco, and Tlacopan which was located in the Valley of Mexico. Over time, the Mexica city of Tenochtitlan became the dominant member and began centralizing power at the expense of the other members of the alliance. By 1519 CE, just prior to Cortez’ arrival in the region, the Mexica-ruled Triple Alliance spanned from the Gulf of Mexico to the Pacific Ocean and contained between five and six million people.
The core of the Mexica’s empire was the city of Tenochtitlan. It had a population of between 200,000 and 400,000 inhabitants, making it one of the largest cities on Earth at the time. Spanish conquistadors described it as cleaner and better organized than any comparable city in Spain. Tenochtitlan was built on Lake Texcoco on a series of artificial islands constructed by the Mexica and its growth was centrally planned by the city’s rulers. The city had a highly sophisticated sewage and sanitation system which provided enough clean water for inhabitants to bathe on average twice a day while members of the nobility reportedly bathed as often as four times daily. The Triple Alliance also provided a form of public education for commoners and nobles.
The technology which made the city of Tenochtitlan possible were the chinampa, which are often referred to as floating gardens. Chinampa were artificial islands that were created by anchoring beds of woven reeds beneath the surface of Lake Texcoco. These reed baskets were then filled with soil which was piled up until it reached above the water’s surface. Chinampas were organized into rectangular strips and further segmented by drainage ditches. The same technology that helped build Tenochtitlan was also the literal foundation of a vast, centrally-planned, and highly sanitary city.
There is no question, based on ample archeological and textual evidence, that the Triple Alliance engaged in institutionalized human sacrifice. Historians have argued the reasons for this were likely religious and political with sacrifice being used as a tool to help keep subordinate groups under Mexica rule. What is doubtful are claims of thousands or even tens of thousands being slaughtered at a time. Many scholars now argue the scale was likely exaggerated by the Spanish to help justify their conquest and everything they did to achieve it, and by the Mexica themselves so they could better intimidate their neighbors.
South of the Triple Alliance in the Yucatan peninsula were the Maya peoples. Their society consisted of multiple competing city-states. The Maya peoples first built city-states like Chicen Itza, Copan, and Tikal as early as 250 CE and began constructing their famous pyramidal stone temples around that same time. They had the most sophisticated writing system of any society in the Americas, highly detailed knowledge of astronomy, and are one of the first recorded societies to invent the number zero.
Continuing south across the Darien Gap and modern-day Panama takes us to the northern edge of the Inca Empire, the largest empire in the Americas and one of the largest single political units on Earth at the time. The empire’s origins can be traced to the city-state of Cusco, which is located in modern-day Peru. By 1525 CE the empire had grown to hold over ten million inhabitants living in a swathe of territory stretching from what is now western Ecuador in the north to present-day Chile in the south.
The Inca were highly skilled builders and administrators. The physical backbone of their empire was a combination of highly sophisticated terrace farming, which made agriculture possible in otherwise inhospitable mountainous regions, and paved roads which rivaled those built by the Romans in Europe in terms of durability and reliability. Inca masonry was of such high quality that Inca-built structures stand to this day without any need for mortar or other joining compounds. Everything from thousands of miles of roads to massive temples and complex cities like Machu Picchu were products of this extensive knowledge of architecture and engineering.
One of the Inca Empire’s most unique elements was their non-market, centrally planned economy. Unlike the Mexica, Maya, and other groups in the Americas who had their own sophisticated market economies, the Inca used state officials to handle the production and distribution of critical goods and services. These officials were responsible for redistributing food, clothing, medicine, and other goods to members of their communities and collected taxes in the form of labor on civic projects or for military service. Historians have long argued the Inca Empire is one of the most successful examples of a centrally planned economy in history.
All these societies engaged in long distance commerce with each other by the time of Columbus’ arrival. Archeologists have found ample evidence of trade networks stretching from what is now the US Southwest to the western coast of South America and well into the Mississippi and Amazon River basins. These trade networks functioned in a very similar fashion to the Silk Road and Indian Ocean networks, with goods following hopscotch patterns of exchange and movement.
[Sailing sounds]
On August 27th, 1492 Columbus’ three ships, the Nina, the Pinta, and the Santa Maria, set sail. They restocked in the Canary Islands before catching the Atlantic trade winds for what turned out to be a five week voyage. On October 7th the crew spotted the first signs of land. On October 11th they landed in the Bahamas, making them the first documented Europeans to make contact with the Taino people. Columbus, thinking he had landed in India, promptly dubbed the inhabitants, “los Indios” or Indians. He went to his grave believing he made it to Asia.
The expedition then turned south, bringing them into contact with an island they named Hispaniola, which was most likely in the modern-day Dominican Republic, before exploring the coast of Cuba. In January 1493 Columbus returned to Spain. Before leaving, he claimed encomendero status over his “discoveries”, asserting his right to all tribute extracted from the island now known as Hispaniola.
Columbus’ second voyage of seventeen ships and approximately 1,500 Spanish colonists made this promise a reality. Columbus exploited existing tensions and conflicts to establish Spanish influence in the region and enslave any Kalinago and Taino who were captured during these clashes. They, along with indigenous peoples who found themselves under Columbus’ “protection”, were put to work extracting tribute in the form of silver and gold regardless of how rare these metals actually were.
Columbus’ implementation of encomienda was unquestionably brutal. Anyone who didn’t cooperate was enslaved and were beaten, tortured, mutilated, and even killed. In one especially brutal incident, Columbus suppressed an indigenous uprising by slaughtering everyone involved and parading their dismembered body parts through the colony as a warning to all others. Thousands of Kalinago and Taino people, according to primary sources, committed suicide rather than suffer further under the cruelty of Spanish rule.
European diseases were also a major killer of the indigenous peoples. Outbreaks of illnesses like smallpox reaped a terrible toll among populations who possessed no natural immunity. These factors have long been used to explain the vast majority of indigenous deaths in the Americas under colonization. The case of Columbus, however, suggests disease by itself was not enough to achieve the massive death rates experienced in places like Hispaniola.
According to scholars like Roxanne Dunbar-Ortiz, disease was a major cause of death among indigenous communities but the reason why European diseases were so destructive was the total disruption of indigenous economies and societies. According to scholars like Dunbar-Ortiz, forcing indigenous peoples to devote most of the time, energy, and resources to producing tribute for the Spaniards fatally undermined their ability to produce food and provide medical care. Grueling working conditions and other forms of violence also harmed the health and immunity of indigenous peoples while also killing a lot of people through overwork and malnutrition.
Regardless, there is no question Hispaniola’s peoples were subjected to what we, today, would call genocide. Historians estimate that, when Columbus and other Spanish settlers first landed in Hispaniola in 1492, there were between a high several hundred thousand to a million indigenous inhabitants of the island. By 1514, enslavement, disease, and malnutrition only left a recorded 32,000 indigenous peoples in Hispaniola, a death rate of over 95% of the pre-contact population. Hispaniola would also be the first of many instances of mass death and social destruction experienced by the indigenous inhabitants of the Americas.
These actions did not go unnoticed. On May 21, 1499, Isabella and Ferdinand appointed Francisco de Bobadilla as a special judge for investigating accusations of Columbus taking bribes, enslaving the Taino despite Isabella and Ferdinand’s opposition to slavery, and generally running Hispaniola into the ground. In June of 1500, Bobadailla set sail to bring the Admiral of the Ocean Sea back to Castille in chains while Bobadilla unilaterally named himself governor of Hispaniola. Bobadilla also compiled a highly detailed report of Columbus’ actions based on interviews and eyewitness accounts which was rediscovered by Spanish archivists in 2006.
Though historians have disputed Bobadilla’s account on the grounds that Bobadilla had clear ambitions for Columbus’ office, there is no question the accusations were taken seriously enough in their time. After six weeks in prison, Columbus was stripped of the governorship of Hispaniola, his rank as Admiral of the Ocean Sea, and his ten percent cut all revenues taken from Spanish colonies in the Americas. Though he was soon freed and persuaded the crown to fund a fourth expedition, Columbus had clearly fallen from grace.
Columbus perished in poverty, likely from syphilis, shortly after returning from his fourth and final voyage in 1504 CE. So passed the man who initiated European colonization of the Americas and the genocide of both continents’ indigenous societies. Columbus’ direct role in that process was so gruesome that the same monarchs who founded the Spanish Inquisition and expelled Spain’s Jewish communities felt his deeds justified stripping him of all rank, status, and wealth as punishment. Columbus will also be one of the few European colonizers to face genuine consequences for their actions while they lived and one of the only ones to die in disgrace.
Despite this, Columbus’ colonization and enslavement of the peoples of the Caribbean were the beginning of a much larger imperial project. As Columbus was laying the groundwork in the Caribbean, the rulers of Spain and Portugal were dividing up the New World he “discovered”. The results were the Doctrine of Discovery and the Treaty of Tordesillas, the foundation for all of Christian Europe’s colonial activities in the Americas and beyond.
[Cannon and musket blasts]
The Doctrine of Discovery were without knowledge of Christ or his Church. They, therefore, had no right to the lands they lived on or those lands’ resources. Their lands were declared terra nullius, or empty land, and Good Christians were obligated to bring it all under proper stewardship while, if possible, guiding the wayward indigenous peoples into Christian life. The Protestant Churches who will start springing up in the 1520s will also take up the Doctrine as their own, providing justification for soon-to-be Protestant monarchs to join their Catholic brethren in carving up the rest of the world.
This was first spelled out in the 1494 CE Treaty of Tordesillas, barely a year after Columbus’ return from the Americas. The Treaty drew a line down the globe from north to south approximately 370 miles west of the Spanish Cape Verde Islands. Everything west of the line and outside of Europe was Spain’s to colonize, convert, “civilize”, and monopolize all trade and commerce. Everything to the east, including the lucrative Indian Ocean trade, was given to Portugal. The 1529 CE Treaty of Zaragoza pushed the line further west following the arrival of Portuguese explorers in South America, ensuring what we know today as Brazil would become part of Portugal’s colonial empire.
None of the people actually living in the Americas were given any say in this process. That also didn’t really matter to the Europeans. They had God and guns which, as far as they were concerned, was all the justification they needed. Cortez and Pizarro soon got to work making such claims reality by exploiting existing political divisions in the Triple Alliance and Inca Empires, the impact of European diseases, and the military advantages provided by Spanish cannons to conquer the indigenous inhabitants of the Andes, central Mexico, and the rest of the Caribbean. They, like Columbus, used the encomienda system to claim the right to extract tribute and labor from the peoples now under their power and placed thousands under slavery.
These resources transformed the global economy. As we will see next time on A History of Capitalism, the precious metals and agricultural commodities taken from the Americas transformed Europe and the world’s economy. This process, which historians refer to as the Columbian exchange, triggered unprecedented, widespread economic growth in Europe and was directly responsible for birthing modern capitalism as we know it.
S01E06 - The Colombian Exchange
Welcome back everyone! This week, we’re going to explore how Spain’s new colonies in the Americas were vital for creating capitalism as we know it. Our story begins in the mid to late 16th century with the commodities that made up the Columbian Exchange. We will then head to Spain’s American colonies, learn how Spain built their colonial empire, and explore the chain of production that churned out an ocean of silver pesos. We will then join the famed Spanish treasure fleets that moved those precious metals into the world’s markets. Our journey will finish with what that new money was spent on, why the Spanish windfall is one of history’s first examples of the resource curse, and how it stitched the global economy together.
First, I’m going to define a couple of important terms that are going to come up. Those terms are metropole and colony. These terms are used by scholars to describe the economic and political structure of imperial societies. Metropole refers to an empire’s core regions. The core regions are home to imperial elites, the empire’s key institutions, and usually their most loyal subjects. Colonies are regions where an empire has established influence through military conquest, settlement, or economic leverage.
The main dynamic at work in imperial economics is the extraction of colonial resources for use by the metropole. Colonial markets are structured to favor the goods and services produced by their metropole. This provides the imperial metropole with regular flows of raw materials and captive markets for the products and services of the metropole.
With that all settled, let’s get into the Columbian Exchange. This term refers to the exchange of commodities, agricultural crops, and livestock between Europe, Africa, Asia, on one side and the Americas on the other. Though Portuguese, Spanish, and other later European colonization was responsible for initiating this intercontinental exchange, the Columbian Exchange reshaped all of global economics.
The most significant commodities in the Columbian Exchange were gold and silver. I’m going to put a pin in this for now because we’ll be spending a large chunk of this episode on that topic. Instead I’m going to talk a bit about food. Crops brought from the Americas were easily just as vital to the story of capitalism as precious metals. Four of the most important food crops were beans, corn, potatoes, and tomatoes. They provided new levels of food security and production everywhere they took root. Capitalism, modernity, and everything else we take for granted would look very different if not for beans, corn, and potatoes. Tomatoes were the odd crop out. 16th century Europeans treated them as a decorative item. The sole exception was the city of Naples where, at some point in the 1500s, a culinary love affair began with the planting of the first tomatoes in the Italian peninsula.
Along with food crops came cash crops like tobacco and chocolate. Both, as is often the case, inspired fierce debates amongst Europe’s moral guardians who suspected these new vices endangered good Christian souls. Central to their opposition was the widespread documentation of the use of both tobacco and chocolate for religious rituals by the Nahua-speaking peoples of Mesoamerica. Despite this, both were eventually adopted as high-value goods by European plantation owners.
Materials like iron, copper, stone, and timber were also critical to the Columbian exchange. Though the societies of early modern Europe possessed their own sources of each, they were more than happy to exploit the seemingly inexhaustible resources of the Americas. Everything from the tools used for extracting natural resources to the ships necessary for moving everything and colonial and metropolitan infrastructure were built with American stone, wood, and ore.
If this exchange sounds like the Americas were giving a lot and not getting very much in return then you would be correct. European colonists did bring their range of crops and domesticated livestock, including horses, which transformed life for indigenous societies throughout the region. This, however, was mostly done to establish and maintain colonial holdings so they could reliably extract resources for use in the Spanish metropole.
[Sound of quill on parchment]
Managing these colonies and their resources was a huge task and the Spanish monarchy knew it. They responded by creating new administrative systems known as the House of Trade and the Council of the Indies. The House of Trade, or the Casa de la Contratación de las Indias, was founded in 1503 CE by Queen Isabella in the port city of Seville. The House of Trade held authority over all aspects of trade with Spain’s new colonies in the Americas. It collected colonial taxes and duties, issued licenses for engaging in trade with Spanish colonies, approved maritime voyages, served as a law court for trade disputes, and maintained the Padron Real, the official, top secret Spanish nautical charts. Copies were only issued by the House of Trade and they were carefully guarded by Spanish merchants.
The House of Trade was soon bolstered by the administratively-focused Council of the Indies in 1524 CE by order of Emperor Charles V and yes, history fans, that is THE Charles the Fifth of the House of Hapsburg who, through a series of lucky marriages, inherited his way into the thrones of Spain and its massive colonial empire, Austria, and large chunks of Italy before being elected Holy Roman Emperor, making him the most powerful ruler in Europe. He’d also, much to his dismay, spend much of the rest of his reign fighting his numerous rivals and the Protestant Reformation before dividing the empire in 1556 between his son Philip, who inherited his Spanish, Italian, and Dutch holdings, and his brother Ferdinand, who got the rest including Austria and the headache that was the Holy Roman Empire. He also laid the foundations for three centuries of Spanish rule over the Americas, beginning with his Council of the Indies and ultimate . This Council held jurisdiction over all administrative, legal, political, and military matters including vast colonial revenues, making it one of the most powerful of the Spanish Councils of State. Conquistadors like Cortez and Pizarro launched their campaigns in his name and for the glory of his empire.
Beneath these metropolitan institutions were the territorial divisions known as the Viceroyalty of New Spain, which was centered in Mexico, and the Viceroyalty of Peru, which covered most of South America though the Inca Empire’s remnants continued resisting until 1572. Each territory was divided into several governorates which were ruled over by largely-autonomous captain-generals appointed by the crown in conjunction with administrative and legal courts known as audiencias. Governorates were then divided into districts who were administered by appointed officials and local town councils.
Most day to day business happened at the district level with governorates and viceregal authorities instead focused on maintaining control over their territories, defending Spain’s colonies from invasion, subduing indigenous populations, guaranteeing the flow of precious metals, and ensuring commerce continued uninterrupted. The only royal economic monopoly in the Americas was over the production of mercury, and this was because it was vital for refining silver. All other resource extraction and agriculture was handled by local-level prospectors, landowners with connections to the Spanish colonial government, and other similar figures who all depended on involuntary Amerindian labor.
How the indigenous inhabitants of the Americas were compelled to work underwent considerable changes during the course of the 16th century beginning with encomienda. Encomienda, for a brief recap from last time, was a feudal-based system which gave local notables known as encomenderos the right to extract tribute and labor from the populations under their rule. Though encomienda depended on involuntary labor, it was not slavery because individual persons were not treated as property. The Spanish crown even barred mass enslavement of indigenous peoples beginning in 1501 CE when Queen Isabella declared all indigenous peoples under Spanish rule were, “free vassals of the crown”
Explorers and conquistadors mostly didn’t seem to notice as they began enslaving Amerindian populations starting with Columbus in Hispaniola. Cortes and Pizarro’s forces enslaved thousands of indigenous people on the grounds of being war booty and subsequent campaigns followed this example. Emperor Charles V and his officials fought to eliminate it through reforms like the New Laws of 1542. Under the new repartimento system, royal officials were granted the power to allocate labor in cooperation with Amerindian leaders who were allied with Spain. These Amerindian leaders became responsible for deciding which members of their communities were put to work and collecting tribute for Spain.
These reforms also pushed the large-scale importation of enslaved Africans to do work once performed by enslaved Amerindians. Though reformers like Bartolomew de las Casas argued for this shift on humanitarian and spiritual grounds, the fact was Spanish conquest had been devastating to indigenous populations. Disease, drought, and warfare in Mesoamerica during after the Spanish conquest had destroyed over 80% of the Nahua, Mixtec, and other indigenous Mexican populations perished by the 1580s while 85% to 90% of known Andean Amerindians were killed from similar causes by 1600.
One of the more enduring legacies of these decisions was the emergence of the modern world’s first race-based caste system known as the Casta. At the top of this new order were Spaniards born in the Iberian peninsula and their immediate relatives. They ruled Spanish America in conjunction with the criollos who descended from the American-born children of the peninsulares. Criollos were the junior partners in power in Spanish America and sometimes intermarried with Incan and Nahua aristocrats.
Laboring beneath these dominant castes were indigenous Amerindian groups, Africans, and mestizos. Surviving Amerindian groups who cooperated with Spain were largely left to their own devices on a day to day basis so long as they showed up for work, provided tribute, and at least nominally accepted Christianity. Africans in Spanish America included both enslaved people taken from West Africa, Morocco, and the Congo and free laborers descended from the enslaved. Finally, there were the mestizos, the children of mixed-race relationships who enjoyed greater social standing to varying degrees over Africans and Amerindians but were still firmly below the criollos and peninsulares. This is also a bit of a simplification as the full Casta, by the early 1700s, had over sixteen different grades of blood purity used for ranking the social positions of the inhabitants of the Spanish Empire.
[Sound of pick-axes, explosions, rockslide and mining activity]
The casta is key for explaining how the estimated four billion Spanish pesos extracted between the early 1500s and the early 1800s were produced. The story during the 16th and 17th centuries begins in the mines of Mexico and Peru. One of the most critical of these sites was the mountain of Serro Ricco, first named Sumaq Urqu by indigenous Quecha-speaking peoples, which is located near San Luis de Potosi in modern day Bolivia. This site, whose name in Spanish means Rich Mountain, produced 85% of all silver mined in the Spanish Andes.
Mining was done by enslaved Africans, Amerindians performing labor under repartimento or voluntarily for pay after finishing their labor obligations, and mestizo laborers using hand tools, gunpowder, and livestock. Miners worked in cramped, hazardous conditions with many perishing from mining accidents, injury, and overwork. Silver mines were especially deadly thanks to the widespread use of mercury for extracting silver. Mercury poisoning and other dangers were so rampant at Cerro Rico that local Amerindians dubbed it, “the mountain that eats men.”
Once these metals were assessed by royal assay offices, they were loaded up and shipped by cart and beast of burden on the royal roads to the ports of Cartagena in modern-day Colombia and Vera Cruz and Acapulco in Mexico. Goods bound for Cartagena and Vera Cruz were then exchanged for European goods carried to the Americas by the vast Spanish treasure fleets. Cargo bound for Acapulco, in contrast, was exchanged for porcelain, silk, and spices purchased using Spanish silver from the markets of East and South Asia on ships that sailed to the Americas by way of Manila in the Philippines.
Everything, regardless of where it came from or was going to, was moved on the famed Spanish treasure fleets. These fleets were convoys of approximately fifty ships which sailed under the protection of Spanish warships. Conditions on board were far cry from the images conjured up by the phrase, “sailing through the Caribbean”. Journeys were long, boring, and punctuated by hardships like limited fresh water, subpar or rotten food like hardtack, military-style discipline which mostly consisted of flogging, and diseases like scurvy.
This system worked surprisingly well. The Spanish only lost one intact treasure fleet with cargo in tow once at the 1628 Battle of the Bay of Matanzas to the Dutch admiral Piet Hein. Though Spanish ships certainly were plagued by piracy throughout the early modern period, the treasure fleets faced more danger from hostile sea conditions than anyone flying the Jolly Roger.
Though these fleets flew the Spanish flag, the system propping them up was more global than that implies. Expatriate Japanese samurai, for example, were a not-uncommon sight in the Spanish Empire as this passage from Charles Mann’s 1493 illustrates:
“Katana-swinging Japanese had helped suppress Chinese rebellions in Manila in 1603 and 1609. When Japan closed its borders to foreigners in the 1630s, Japanese expatriates were stranded wherever they were. Scores, perhaps hundreds, migrated to Mexico. Initially the viceroy had forbidden mestizos, mulattos, negros, zambaigos, and chinos to carry weapons. The Spaniards made an exception for samurai, allowing them to wield their katanas and tantos to protect the silver shipments against the escaped-slaves-turned-highwaymen in the hills.”
In other words, a prestige television series featuring samurai, long-lost Mexica nobles, Spanish swashbucklers, West African highwaymen, and English pirates roaming the 17th century Mexican hinterland has a leg to stand on.
[Sounds of coins and scratching pens]
It is rather ironic that this vast flow of wealth, worth an estimated $530 billion in modern money, became one of the best examples of what economists call the resource curse. The resource curse is what happens when a society gains access to a highly valuable and plentiful natural resource which provides immediate economic prosperity before failing to effectively utilize it in ways that ensure long-term prosperity and growth.
What instead tends to happen is wealth gained from that resource and its production crowd out all other forms of economic activity. Future investment then prioritizes these reliably profitable pursuits at the expense of other options while the high profit margins encourage spending on luxury goods and conspicuous consumption. Government revenues also become increasingly dependent on that resource, making it difficult for political actors to diversify economic activity. The concentration of revenue also encourages authoritarian forms of government by providing central governments with sources of revenue that do not require unpopular measures like taxation or the consent of the governed.
These existing challenges were also made worse by structural problems with Spain’s economy going back to the Reconquista. The demands of seven centuries of war meant Christian men were increasingly expected to seek their fortunes in the military or by becoming Catholic clerics. Christian women, similarly, were expected to be homemakers and mothers or nuns. Engaging in primarily economic pursuits, like commerce or artisanal work, was heavily discouraged as good Iberian Christians were either soldiers or priests and nothing else.
This meant most of the production of goods and facilitation of trade was dominated by Spain’s Jewish and Muslim communities. During the Reconquista this mostly worked thanks to the tenuous state of religious pluralism which prevailed during the earlier years of this period. Isabella and Ferdinand changed all this beginning with the expulsion of Spain’s Jews in 1492 before doing the same to all Spanish Muslims. Rumors of secret Jewish and Muslim plots ensured the Inquisition continued harassing these communities even after they converted to Christianity. The upshot of all of this was that the inhabitants of Spain who were necessary for keeping the domestic Spanish economy functioning were no longer welcome or free to work. Spanish gold managed to paper over this loss of productive capacity by making it cheap to import goods from other regions but this only exacerbated the decline of the domestic Spanish economy.
So what, then, did the Spanish Empire get from all of this silver and gold? All the expensive luxury products of Asia of course! As we’ve mentioned on this podcast before and probably will be mentioning at least once per episode for the rest of this season, the whole point of voyages like Columbus’ was finding a direct trade route to China and South Asia. Columbus and other conquistadors had sort of done that with their various expeditions while also, quite unintentionally, finding a huge source of the one thing that Chinese and South Asian merchants were actually interested in taking from European buyers.
As we’ve also covered before, European products were of little value in these wealthy, sophisticated markets. The sole exception was the seemingly endless quantities of gold and silver pouring from New Spain’s mines. For Ming China, silver was in high demand thanks in part to the recent collapse of their four century experiment in paper currency that came up back in episode 3. Prior to the arrival of the first of the Manila galleons, China had been forced to rely on Japan’s far more limited supplies to meet their needs and revive their economy following this currency crisis. The arrival of silver from the Americas effectively solved the problem of available liquid, precious metal currency and spurred an economic revival for the later Ming dynasty. South Asian merchants were also quite keen to get their hands on as much silver as they could carry for domestic use and buying goods from abroad.
As a result, approximately of the gold and silver mined in New Spain was either shipped directly to East Asia from the port of Acapulco in modern-day Mexico or around Africa through the Indian Ocean so Spanish merchants could buy silk, porcelain, spices, and whatever other curiosities, tidbits, or trinkets looked neat. Any luxury goods purchased by the Manila fleet reached Europe after being shipped overland from Acapulco to Vera Cruz. Though some of the Spanish treasure ships on this voyage did carry significant quantities of gold and silver, many were also stuffed with high value Asian wares. Keeping these trade lanes moving smoothly was why King Philip II of Spain invaded the archipelago we know today as the humbly-named Philippines in 1571 CE with help from samurai and wakou pirate mercenaries.
If buying luxury goods was one major source of spending then sustaining the extractive systems of New Spain was another. Mining precious metals at the scale the Spanish Empire required demanded considerable investment in the tools and infrastructure needed for pulling all of those minerals out of the ground in the first place. Moving those products from mine to assay office and eventually to the docks of Acapulco and Vera Cruz required employing armed security, like the aforementioned samurai, paying local officials to ensure royal authority was followed, and also covering the expected return on investment for the owners of these mining operations. Some of this silver also was simply lost. Everything from bribes for officials to bandits and accidents saw approximately ten to fifteen percent of New Spain’s output falling prey to the good old five finger discount.
As for the rest of it, one-fifth of all treasure extracted from the Americas was earmarked for the King of Spain and was known as the King’s Fifth. Some of this money was used for funding the lavish spending sprees of royally-appointed merchants bound for the China Sea and the Bay of Bengal though most wound up absorbed by the costs of state. This included everything from paying for the expenses of the royal government to hiring and equipping soldiers, paying for mercenaries, and lending money to other European monarchs.
This seemingly endless flow of silver led to a kind of fiscal complacency in the Spanish government who had become confident there would always be money to pay for whatever they needed. What further complicated the situation, for the Spanish crown, was sovereign finance was seen as debts incurred by the monarch, specifically, and not their government, generally. This led to what were, at the time, unprecedented levels of sovereign debt because the Spanish crown always looked like they were good for it. This also discouraged investing in Spain’s domestic economies because there was no perceived need to increase local revenues when there were literal mountains of silver crossing the Atlantic every year.
These pressures inspired the Spanish to keep pouring any available money into expanding mining operations at the expense of all other options. These investments were followed by increased revenues which enabled even more borrowing, thus necessitating further spending on additional mines and treasure ships to keep up. The borrowing situation became so bad that Spanish gold and silver was often earmarked for paying off existing debts before it even arrived in Spain. No matter how deeply Spain dug, they simply could not pull out enough silver and gold to stay ahead and also could not afford to invest in anything that was less immediately profitable than mining precious metals.
Now in defense of Emperor Charles and King Philip, there was some awareness that all this spending might be a problem but, unfortunately for all involved, the discipline of economics was still at least a century or two away from being properly invented. Price fluctuations from the available supply of goods was somewhat understood as a thing but monetary inflation and long-term currency devaluation were not. This lack of knowledge, unprecedented economic conditions, and spiraling debts drove Spanish policymakers to cope by, among other things, declaring bankruptcy nine different times between 1557, barely a year after Philip inherited Spain from his father Charles V, and 1666 in a desperate bid to balance the books.
[Sound of bustling marketplace]
The same was not true for the economies of the rest of Europe, Asia, and Africa. The same Spanish silver which destroyed Spain’s domestic economy was also essential for triggering a global economic revolution. The flood of Spanish silver triggered what historians refer to as the price revolution, a phenomenon where the price of goods throughout Europe, Africa, and Asia skyrocketed thanks to the sudden increase in the quantity of precious metals now used for purchasing a more limited pool of goods and services.
In Europe, the flood of cash made money into the dominant form of economic exchange. This money was also, most importantly, invested by European manufacturers for producing goods for export to cash-rich Spain and use at home. Artisans in the modern-day Netherlands and Belgium, England, France, and what is today western Germany experienced an extended boom as everything from guns and black powder to printing presses, iron, and cloth came into high demand. Hapsburg spending on wars against the Ottoman Turks, their European rivals, the rebellious Dutch, and the rising Protestant Reformation further circulated these funds throughout Europe as a renewed period of violence was unleashed on the continent.
The other major beneficiaries of this trade were merchants in China and South Asia. This freely available, seemingly endless silver supply made business boom for anyone participating in this wealthy export trade. It also, as the world soon learned, bound China and Europe’s economies together when, in the early 1600s, the Chinese economy experienced a prolonged downturn following a similar decline in Spanish silver shipments and the Spanish economy. This recession helped set the stage for the decline and overthrow of the Ming Dynasty by the Manchurian-based Qing Dynasty.
By now, you’ve probably also begun to notice something of a running theme. Much of the early history of capitalism is intertwined with the development of early modern militaries. Part of this is because military power was the foundation of political power for early modern states but the influence of war, armies, and military organization runs much deeper than that. Next time, we will explore this dynamic and its implications through what historian Sven Beckert calls War Capitalism.
S01E07 - War Capitalism
[Sound of ships at sea and cannonfire]
Welcome back everyone! This week is all about war capitalism and how it developed.
As we will see in this episode, violence was a popular option for European merchants who were seeking entry into new markets beginning with Vasco de Gama in South Asia. We are also going to meet a couple of new actors, the Kingdom of England and the Dutch Republic, who will soon play pretty critical roles in capitalism’s story and how they got their start with a little bit of state-sponsored piracy.
I’m going to start with war capitalism, an idea first proposed by economic historian Sven Beckert, the economic historian who coined the term in Empire of Cotton. He argues that capitalism’s early history cannot be separated from the violence which was necessary for making it possible. War capitalism was an early form of capitalism that was characterized by slavery and involuntary labor, the forced expropriation of land in the Americas and Africa, and the active use of state power to advance economic policy and economic ends. We have already seen early forms of this model taking shape with Columbus in Hispaniola, Cortez in Mesoamerica, and Pizarro in the Andes.
These acts of conquest went hand in hand with the use of military power by European merchants to force their way into the markets of South Asia. The English and Dutch governments also got in on the game by sponsoring pirates to raid Spanish shipping. In every case, early profit accumulation was achieved first by using military power to compel the production of high-value goods, like gold and silver from the Americas, or to extract resources from existing markets, which we will explore further in this episode.
One term you may also see used to describe the economics of this period is mercantile capitalism. Mercantile capitalism usually is used to describe pre-industrial economies that enjoy sufficient monetary surpluses from the sale of high-value goods and cash crop agriculture produce for the pursuit of profit and other early capitalist elements to develop. Mercantile capitalism, as we learned in episode 1, was already in full bloom across the Middle East and much of Asia by the 1400s.
Mercantile capitalism can, and historically did, exist alongside the emergence of war capitalism. What makes war capitalism different is that while war capitalism does generate wealth through the production of high-value commodities and manufactured goods, the products of war capitalism would not be possible without the appropriated land and coerced labor acquired through war, colonization, and human trafficking.
The other major difference between war capitalism and mercantile capitalism is war capitalist economic operations tend to adopt more militaristic forms of organization than mercantile capitalist enterprises. The first English and Dutch corporations operated along strictly hierarchical lines and utilized many of the same systems of reward and punishment as military service at the time. The same was also true of mining operations in Spain’s colonial empire.
One area of activity where this was especially true was aboard the various merchant ships that were necessary for making this world spin. Discipline on merchant ships, in particular, employed military discipline characterized by reduced rations, physical beatings including repeated lashings by the whip, and summary execution.
The main difference between their life and military service was merchant sailors could, sometimes, leave their old ships once they came into port. These conditions, as one might imagine, created some pretty nasty working environments that came back to bite many a ship’s master and captain in the sweet spot throughout this period. That said, it’s going to be a while before all the tensions of this maritime world will genuinely come to a boil. When they do, they will be flying a very familiar black flag and don’t worry, we will be getting into that story later this season.
[Sounds of fighting, muskets, and cannons]
For now, we will return to the world of the Indian Ocean and South Asia with a particular focus on the latter’s state of turmoil following Timur’s destruction of the Delhi Sultanate which came up back in Episode 1. South Asia and the Indian Ocean are vital to our story because, as has come up a bit this season, the whole point of all these European merchants sailing the ocean seas was so they could gain entry to the markets of Asia and buy nice things like cotton, porcelain, silk, and spices. Part of how they did this was with the huge quantities of silver mined in Spanish America but that alone was not enough for Europeans to gain entry into the markets of the region.
When we last saw South Asia, the region was in chaos. The Delhi Sultanate, which had enjoyed a dominant position in the region before 1400 CE, had been utterly destroyed by the forces of Timur’s empire. In his wake, South Asia fragmented into several political units as local notables and rulers of independent polities, including the predominantly Hindu kingdoms of southern and central South Asia, pressed their advantage in the wake of Delhi’s retreat. Trade and commerce declined even as technologies like the spinning wheel helped inject new life into South Asian cotton production. This political fragmentation would prove to be essential to how Portuguese merchants first entered the markets of South Asia.
The man who made this all happen was Vasco de Gama, the Portuguese navigator and later governor of Portuguese India. Not much is known about Vasco de Gama’s early life. We know his father and brothers were prominent members of the Order of Christ, a Portuguese militant religious order founded by former Knights Templar who were dedicated to fighting the enemies of Christendom, and in 1480 de Gama joined a similar order, the Order of Santiago. This proved to be quite fortuitous as the master of the order was Prince John, the heir to the Portuguese throne. He also managed to pick up an education in navigation and mathematics though where this happened and who taught him is debated by historians.
Vasco de Gama also benefited from Portugal’s generous funding for maritime exploration which we covered back in Episode 5 and Bartolomieu Diaz’s successful 1488 CE expedition to South Africa. In 1497, de Gama took four ships in a bid to complete what Diaz had started by charting a viable sea route to South Asia. The first and most arduous leg was the long journey down the African coast. De Gama then stopped in Madagascar before sailing up the Swahili Coast to the bustling port of Mombasa. He then followed the routes used by other merchants in the region to make his way to the commercial center of Calicut on the Malabar Coast of South Asia.
Upon arrival, de Gama was welcomed with traditional hospitality by the ruler of the city, the Samudiri, where he made the case for allowing Portuguese merchants to establish a permanent trading post. De Gama then presented the Samudiri with gifts consisting of some bolts of scarlet cloth, four hats, a chest of sugar, two casks of fish oil, and a barrel of honey as examples of what Portugal had to offer the merchants of the Malabar Coast. The rather bemused Samuridi granted the Portuguese a warehouse but their goods failed to sell, leading to the Portuguese being forced to cease operations. Nonetheless, the spices and other goods De Gama brought back were heralded as a great triumph back in Portugal and justified further expeditions.
The next expedition, commanded by Pedro Alvarez Cabral, was the second of the annual Portuguese Indian Armadas. These expeditions were annual trading missions consisting of multiple vessels that sailed to Portuguese outposts in South Asia to purchase goods like spices and cotton cloth for sale back in Portugal. The second armada, to the disappointment of Portuguese authorities, also failed to establish a permanent outpost as their trading post suffered from a nasty case of being torched by an angry mob shortly after Cabral’s men attempted to seize an Arab spice ship at gunpoint.
[Sound of ships at sea and cannonfire]
Vasco de Gama was then granted command of the Fourth Armada, which set sail in 1502. This fleet consisted of fifteen heavily armed warships meant to punish the Samuridi of Calicut and force him to grant favored trading privileges to Portuguese merchants even though Portuguese merchants had, so far, failed to sell much of anything. De Gama used the superior firepower of the Indian Armada to shut down trade along the Malabar Coast, seize cargo ships, enslave sailors, sink any vessel that resisted, bombard the port of Calicut, and wage a campaign of state-sponsored piracy in all but name until the Samuridi relented.
De Gama’s offer that could not be refused was further strengthened by the 1510 conquest of Goa, which was the main Portuguese trading post in South Asia until 1961 when it was seized by the independent Republic of India. De Gama’s campaign was further assisted by the cooperation of local merchants who, understandably, decided they’d rather work with the Portuguese than continue losing their ships and merchandise to Portuguese guns and by rivals of the Samuridi who saw the Portuguese as a useful tool for undermining a hated enemy.
De Gama and his successors had come at a truly fortuitous moment in South Asian history and played a minor role in changing its trajectory. While Portuguese merchants were busy establishing their strongholds on the Malabar Coast, the next empire to unite South Asia was rising to prominence in what is today known as Afghanistan and Pakistan. The Muslim Mughal Empire, whose ruling family called themselves the Gurkani and referred to their empire as Hindustan in official documents, was born in 1526 when their founder Babur established his base of operations in the city of Kabul, located in modern-day Afghanistan. He launched several military campaigns into northern India through the Khyber Pass, establishing a powerful realm though constant warfare left the new power politically unstable.
Babur’s conquests became the foundation for the emergence of one of the most influential figures in South Asian history: Akbar of the Mughal Empire. Akbar used the wealth, territory, and administrative capacity built up by his predecessors to conquer most of the South Asian subcontinent from 1556 and 1575 and establish a powerful, religiously, and culturally diverse state. Key to how Akbar secured so much territory so quickly was thanks to his widespread use of the latest cannons and matchlock muskets procured from the Ottoman Turks and Portuguese merchants operating in the Indian Ocean. Akbar’s forces also used war elephants
[Sound of an elephant]
whose crews were armed with fast-firing swivel guns which provided his military with the closest thing anyone at the time could get to a tank.
Political consolidation was followed by support of trade by Akbar’s government. He used troops to secure safe passage within his realm and overhauled revenue collection systems so he could fund his expanding military and civil services. Akbar also reduced customs duties, encouraged cooperation with foreign merchants, and supported the growth of the Empire’s wealth through international trade. Over the course of his reign, the economy of South Asia is estimated by historians to have tripled in size, and inhabitants of the Mughal Empire enjoyed a long period of increasing prosperity, widespread patronage of the arts, and unprecedented access to global markets.
What made Akbar’s efforts so incredibly successful was the Indian Ocean trading network. As we covered back in Episode 2, the Indian Ocean was the home to a diverse, successful trading economy that connected the merchants of East Africa, the Middle East, South Asia, and Southeast Asia into a tightly-woven trading system. On the eastern side, merchants from modern-day Malaysia, Vietnam, and Thailand exported spices to South Asian markets in exchange for the wealth of this vast region. On the western end, the monsoon winds of the Arabian Sea provided merchants bound from the Persian Gulf, East Africa, and the Red Sea with a reliable superhighway for seaborne transport.
This economic growth also made Portugal’s existing trading outposts even greater sources of wealth for the growing Portuguese Empire. The growing economy brought on by Akbar and his successors directly benefited Portuguese merchants who were in an ideal position to profit heavily from growing prosperity. Akbar’s pro-trade policies were especially beneficial to Portuguese merchants who, by 1575, were already well-established economic actors in the region. This increasing prosperity also made Portugal’s wealthy foothold in South Asia an attractive target for Dutch, English, and French armed merchants.
Vasco de Gama’s methods set the mold for later European merchants operating in the Indian Ocean and East Asia, much like how Columbus had in the Americas. De Gama’s use of military force to enter regional markets was used by later Portuguese merchants to drive competing South Asian and Middle Eastern merchants out of business. Portuguese troops and ships took advantage of the divided political situation before Mughal dominance to displace local providers of transportation and trade. This was all done in cooperation with local merchants and political elites who either found the offers of European merchants sufficiently attractive to entice cooperation or, as was the case with Calicut, intimidated by European military power.
Attempts by Portuguese merchants to set up shop in China using similar methods wound up going very differently and inadvertently illustrated the limits of war capitalism. The first Portuguese merchants arrived in 1513 in the Pearl River Delta, clashed with the Ming Dynasty’s navy, and initially fought them to a draw in 1521. Long-time listeners may be surprised by this, especially since way back in Episode 1 Ming China was funding long-distance voyages of exploration, diplomacy, and tribute-gathering conducted by a massive fleet of ships which were easily superior to anything the Portuguese had to offer.
What made these initial gains possible were a shift in Ming politics. Factions in the Ming court opposed to Admiral Zheng He’s voyages had gained the upper hand against his supporters. They ordered the fleet scrapped and banned the construction of similar ships. Even so, Portugal’s isolated merchants were no match for the Ming Empire’s power, and further attempts at gunboat diplomacy failed thanks to the far greater ability of the Ming to repel Portuguese incursions. The Portuguese then turned to diplomacy in 1554 when they approached the court of the Ming Yingzong Emperor with a trade treaty. By 1557, negotiations gave Portuguese merchants access to Ming markets and Portugal was granted the right to lease the sparsely populated island of Macau for use as a trading post.
If any one place embodied the new, global economy created by the Columbian Exchange. Macau’s rise as a major port in the East China Sea directly parallels the growth of the new global economy. It originally served as a major port of entry for goods flowing to and from the Japanese archipelago as well as for largely Portuguese merchants traveling from Goa and points beyond. Spain’s 1565 conquest of the Philippines cemented Macau’s importance. The port was now the main point of entry for Spanish Manila galleons bound for the massive, lucrative Chinese economy. Macau’s boom times continued until the demise of the Ming Dynasty and the coming of the Qing Dynasty’s new restrictions on overseas trade. Despite this, its status as a major regional port endured until the First Opium War. Macau remained a Portuguese possession until the island was handed over to the People’s Republic of China in 1999.
[Ship sounds, shouting, and cannonfire]
While Portugal was busy forcing their way into South Asia, two new players were pursuing their own early form of war capitalism. They were Tudor England and the Dutch Republic. England is not a new power though they’ve been a bit busy with problems closer to home. When Isabella and Ferdinand were consolidating the new kingdom of Spain’s wealth, power, and military might, the English crown was mired in a civil war known as the Wars of the Roses which began in 1455 and ended with Henry Tudor’s final victory in 1487. Henry Tudor, now crowned Henry VII, consolidated his position by banning feudal levies, effectively forbidding the aristocracy from possessing the private armies that had been the foundation of their power. He also funded infrastructure improvements like canals, bridges, and new roads and became one of the only English monarchs to leave the treasury in a surplus upon his death.
His son Henry VIII, best known for his many wives, divorces, and beheading some of his wives instead of divorcing them, furthered many of these reforms by using the Protestant Reformation as a pretext to seize lands held by the Catholic Church before redistributing them to nobles who supported Henry VIII and using the sale of those lands to help fund projects of state. One of Henry’s most important state-building projects was his founding of the English Royal Navy, funding new shipyards at Deptford, Woolwich, and Portsmouth, founding the Navy Board to supervise the provisioning and supply of the new royal fleet, and establishing a royal arsenal which produced so many weapons that it was soon boasted that Henry had enough cannon to conquer Hell. These actions paved the way for his daughter Elizabeth I to advance English influence on a global scale.
Meanwhile, the Dutch Republic was emerging across the English Channel. The region that would become the Dutch Republic was, at the time, the property of the Habsburg monarchs who also ruled over Spain, Austria, and the Holy Roman Empire care of Charles V winning the inheritance lottery. The region had a long history of mercantile city-states that flourished from the production of wool cloth, their role in facilitating maritime trade in the North Sea-Baltic trading region, and other activities which made them wealthy and influential.
The Dutch first became a truly independent polity when, in 1568, a group of Protestant nobles led by William I of the House of Orange rose in revolt against the growing power of the Spanish crown and the persecution of Protestant Dutch by the Catholic Spanish monarchy. So began the Eighty Years War, the prolonged struggle for Dutch independence, which saw the Dutch expand their influence in global trading networks and establish their own colonial empire.
They also broke with the European political pattern of monarchy by establishing a representative republic. Politically, the Dutch Republic was a confederation of the seven provinces of the Netherlands each sent representatives to a parliamentary body known as the States General. Day-to-day governing was mostly handled by the provinces that made up the republic. Administrative and executive functions were handled by a stadtholder who was, in theory, appointed by the provinces. In practice, the highly influential House of Orange would finagle their way into making the office hereditary in all but name and the closest thing the Dutch Republic had to a head of state. They were, in many ways, very similar to the Serene Republic of Venice though the Dutch Republic operated on a larger scale and managed to integrate a far more diverse political class than a small, well-connected group of wealthy merchant families.
[Ships and cannons, someone shouting, “AVAST!”]
One thing both of these powers had in common was the extensive use of privateers as a tool of economic and political policy. Privateering was a form of semi-legal piracy where governments granted special licenses known as letters of marque to private ships. Letters of marque granted these captains the right to raid vessels belonging to the issuing government’s enemies. In exchange, privateers were expected to give a cut of whatever plunder they took to their sponsoring government and keep the rest for themselves.
For early modern governments like the English and the Dutch, privateers spared them of the headaches that came with building and maintaining large navies while the privateers enjoyed protection, safe harbor, and guaranteed markets for their ill-gotten goods. It also provided Dutch, English, and other sailors with practical experience in naval combat which proved decisive for both powers in their clashes with Spain.
Those benefits were secondary to the clear economic benefits that came from sponsoring piracy. Queen Elizabeth’s raiders, who became known as her Sea Dogs, brought in so much treasure at Spain’s expense that some years saw the Queen’s cut from sponsoring piracy make up a majority of the royal budget. For the Dutch, privateering allowed them to take their fight for independence deep into Spain’s colonial possessions and was a lucrative source of funds. Piet Hein’s 1628 seizure of an entire Spanish treasure fleet at the Battle of Mantzanas Bay, which we covered in our last episode, netted the Dutch Republic enough money to cover all of the new country’s expenses for the next eight months. It certainly was a good idea at the time and will keep seeming one until skulls and crossbones start popping up.
Despite this little hiccup, privateering’s upsides were so enduring that it continued as an accepted practice well into the 19th century before it was finally banned by the Paris Declaration of 1856. Funnily enough, the United States never signed it. Technically, this means the US still is free to issue letters of marque. Congress, however, has not exercised this power since 1815 so lobbying Senators for permission to raid and pillage on the high seas probably won’t go very well.
So that is war capitalism in its infancy. As we’ve seen so far, Beckert’s argument that early modern capitalism got started through the violent seizure of land, labor, and market access has been a pretty accurate description of early modern capitalism. That pattern is going to continue throughout the rest of this season, show up again throughout future seasons, and linger well into the present day.
That’s also why our next episode will be something of a breather from conquest, colonization, and slavery. Next time, we will be taking a short detour through the story of the printing press, how it invented the first modern mass media, and why it was essential for making an increasingly globalized, international economy possible.
Works Cited:
Empire of Cotton: A Global History by Sven Beckert
The Dutch Overseas Empire, 1600-1800 by Pieter C. Emmer and Jos J.L. Gommans
Pirate Nests and the Rise of the British Empire, 1540-1740 by Mark G. Hanna
“U.S. Privateering Is Legal” by Brandon Schwartz, Proceedings, U.S. Naval Institute, April 2020
The Career and Legend of Vasco de Gama by Sanjay Subrahmanyam
The Portuguese Empire in Asia, 1500-1700 by Sanjay Subrahmanyam