The relentless revolution: a history of capitalism (7 page)

Jumping ahead for a minute, we can see that as the volume of legitimate trade increased, the sober, solidly middle-class side of commerce asserted itself. Merchants got tired of losing valuable cargoes to pirates and having to pay high insurance premiums even when they didn’t lose their ships. The great trading companies began agitating for protection from the random seizures of their goods. The celebrated career of Captain Kidd is exemplary. Hired to protect English East Indian vessels in the Red Sea in 1696, William Kidd, who operated out of New York, figured that he could make more money becoming a buccaneer. He scuttled his own ship, took one that was flying French colors, and began seizing the very ships that he had been hired to protect. Finally the government listened to the merchants. Captured when he returned to New York City four years later, Kidd was tried, convicted, and sent back to London for execution to publicize official intolerance of piracy.
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Governments were now charged with making the seas safe for legitimate commerce. When Edward Teach, who terrified sailors in the Caribbean, where he marauded as the pirate Blackbeard, turned honest, the colonial governor of North Carolina colony married him to his fourteenth wife!

What Spain and Portugal did most significantly was to open up doors for their neighbors. The baton of economic development, if we can so consider it, passed to France, Holland, and England. Informally, they had entered these trades as pirates and smugglers because profits from the East and West Indies trade made those risky occupations worth pursuing. By the beginning of the seventeenth century, the French, Dutch, and English governments had chartered legitimate trading companies to challenge the Spanish monarchy that now controlled both Iberian empires. The stakes were high. As Sir Walter Raleigh, another Englishman entranced by the New World, shrewdly observed, “Whoever commands the sea commands the trade; whoever commands the trade of the world commands the riches of the world and consequently the world itself.”

The Atlantic Ocean became the principal freeway of the trading universe that was fast becoming global in scope. First Spain and Portugal, then the Netherlands, France, and England benefited from easy access to the waters that carried European traders in all directions. The great losers in this geographic repositioning were the Italian city-states, the Turks, and other Muslims who had operated in the complex commercial network of the Indian Ocean. Up until the first half of the sixteenth century Venice had sent a fleet of merchants to trade with England, which had virtually no navy or merchant marine. All that changed when the English formed their own trading companies and sent ships around the world. Closed out by the Dutch from the spice trade centered in Indonesia, the English East India Company, chartered in 1600, established settlements at Surat, Bombay, Calcutta, and Madras. By the eighteenth century it had succeeded in taking control of most of India. The winners of this European intrusion into the Far East narrowed down to England and the Netherlands.

The Impact of Civil War

English and Dutch success invites a closer look at what was going on in these countries politically. While it might not have appeared a blessing at the time, both England and the Netherlands fought wars for greater national self-determination at the same time that they were challenging Spanish and Portuguese domination in the New World and East Indies. The Dutch fought for independence from the Spanish Hapsburg Empire over an eighty-year period. In the Netherlands there was greater wealth than in any place in Europe after the Dutch won their freedom from Spain in the late sixteenth century, officially recognized in 1648. But that wealth did not translate into the successive organizational and technological changes that characterize capitalism as a system. The Dutch grew fat and happy and complacent without following the English path toward progressive improvements. Indeed, its backward neighbor Belgium, which stayed within the Hapsburg Empire until the nineteenth century, industrialized first. Riches were not enough in these early decades of capitalist development to pry open the doors of a closed society in Spain and Portugal; Dutch prosperity did not translate into continued innovation.

From the 1620s through the 1680s, the English government was in turmoil. A king was executed, a Parliament dismissed, another king restored, and a hereditary succession rejected, ending with the so-called Glorious Revolution of 1688. Although these were primarily political conflicts, economic issues helped define the opposing sides. The king was the largest landholder in England, so his income could vary with good and bad times like that of other landed families. But the king, thanks to his unique prerogatives, had other sources of income, like payments from grants of monopolies, patents, and company charters. The most lucrative “gifts” he could sell were licenses for the exclusive public control of a product, a trade, or even a government service, like the inspection of tobacco or collection of customs.

King James I found in the granting of monopolies a particularly facile way of increasing his income. As one scholar reported, in the early seventeenth century a typical Englishman lived “in a house built with monopoly bricks…heated by monopoly coal. His clothes are held up by monopoly belts, monopoly buttons, monopoly pins…. He ate monopoly butter, monopoly currants, monopoly red herrings, monopoly salmon, monopoly lobsters.”
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The holders of monopolies had the exclusive right to sell these items and charged as much as people would pay for them.

Such a lavish sale of privilege would have been a burden at any time, but with the growth of internal and external markets, monopolies distorted the whole pattern of trade. Even the nobility became attracted to commercial ventures, especially if they involved colonies that would enhance the prestige of England.
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The more the English rulers attempted to extract money in unconventional taxes, grants, and patents, the more economic issues got pulled into parliamentary debates. Defenders of royal prerogatives exuded the confidence of carriers of an old commercial tradition, appealing more to sensibilities than to economic reasoning. Men close to power continued to evoke the old ideal of subordinating economic activities to social solidarity, but fresh disputants were finding their voices and a new vocabulary for talking about harvests, rents, trade, and taxes as part of a new economic order.

In England the king came to represent adherence to tradition and the use of arbitrary power. Monopolies and closed corporations shared in the opprobrium of all things royal. In the wrangling over monopolies and other economic ills, a large swath of the English elite with seats in Parliament—improving landlords, members of trading companies, clothiers—discovered their common interests. Economic grievances transmogrified into political issues. With gross simplification it could be said that even if the forces behind economic development didn’t cause the English Civil War, the conflict assured that they would eventually triumph.

Civil unrest in the seventeenth century, because it lasted so long, weakened the political authority requisite for policing economic restrictions. It’s one thing to have a law—even a venerable law—on the books and another to be able to enforce it in the face of powerful incentives for evasion. With the leaders of England’s political and religious institutions distracted by the long civil unrest, entrepreneurs strengthened internal transportation systems, marketed colonial products, and turned London into a great emporium. After this thirty-year period during which authorities were elsewhere engaged, many defended defiance of restrictions as good for the country. With less formal direction, an informal system of cooperation had prevailed. Once some restraints were removed, the subsequent commercial buoyancy earned more supporters for freeing up economic life. In the Netherlands and England, merchants and manufacturers ended up with a greater share of political power and a louder public voice than they had before.

After the Dutch achieved independence, they established a loose confederation with each province headed by a regent who was usually a prominent merchant. This decentralized blend of political and economic power put government squarely behind the commercial interests in the Netherlands. Only the northern provinces of Holland and its neighbors, which were largely Protestant, gained independence. More than offering protection to traders and manufacturers, Dutch leaders devised new supports for their economy with free ports, secure titles to land, efficient processes for settling lawsuits, the teaching of bookkeeping in schools, and the licensing of agents to sell marine insurance.

The Dutch as an Economic Model

In their struggle to hold on to the Spanish Netherlands, Spanish troops had destroyed Antwerp, whereupon its famous bankers simply moved north to Amsterdam. As a magnet of payments as well as of goods Holland became Europe’s financial center. The Bank of Amsterdam, established in 1609, offered interest rates less than half those available elsewhere. Again flexibility triumphed as the Dutch developed credit arrangements for every circumstance and customer. Even the spurned Spanish monarchs turned to the bankers of their erstwhile possessions to borrow money. Over time the Spanish monarchy became so indebted to Dutch financiers that the famous silver fleet convoyed across the Atlantic sailed directly to Amsterdam. Those largely Catholic provinces that remained in the Hapsburg Empire later formed themselves into an independent Belgium.

Everyone marveled at the prosperity of the Dutch. How could a couple of million people packed into cities and towns along the North Sea defy all odds and grow rich? The backbone of their trade was a humble fish, the herring. Herring could be easily dried, and as an all-season source of protein in a protein-short world, it was in great demand. One contemporary estimate concluded that the fishing industry with its hundreds of boats employed half a million Dutchmen and women, twice as many as in agriculture and almost as many as those in crafts, retailing, and finance. Guilds closely controlled the fishing industry, making sure that fishermen observed the government standards of quality. During the first half of the seventeenth century, more than a thousand Dutch ships carried grain from the Baltic countries, exceeding the English by thirteen to one.
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In England, Dutch success started a cottage industry of pamphlet writing to explain it.

Shipbuilding also flourished in the United Provinces of the Netherlands. Boatwrights created the flyboat, a flat-bottomed seagoing barge well designed for carrying heavy cargo like herring, timber, and grain. From their perch on the North Sea the Dutch reached out across the Atlantic to the colonies of the New World, down the west coast of Africa, into the Mediterranean, and around Cape Hope to the East Indies. Beginning with a few basic commodities for transshipment like herring, iron, timber, grain, and salt, Dutch merchants branched out to everything that the world’s population wanted to sell or buy. They built a fleet that was larger than all the boats plying the waters under the flags of Portugal, Spain, England, France, and Austria combined.
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Daniel Defoe, the author of
Robinson Crusoe,
shrewdly described the Dutch as “the Middle Persons in Trade, the Factors and Brokers of Europe…. They buy,” he continued, “to sell again, take in to send out, and the greatest Part of their vast Commerce consists in being supply’d from All Parts of the World, that they may supply All the World again.”
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But the Dutch were not just traders; they were also accomplished craftsmen. They finished the products that other countries grew or mined, and they benefited handsomely from the value that they added to goods. They took raw wool and turned it into dyed draperies; they transformed timber into wainscoting for the dining rooms of the rich; they made fine paper for the printing presses that abounded in their country; they rolled tobacco into excellent cigars. They even constructed a network of canals to carry goods and passengers that confirmed their ability to fund and organize complex projects. The sailing vessels moored at their wharves looked like so many moving forests; their quays and warehouses spilled over with crates, tubs, barrels, and packages, with cranes moving back and forth to unload silk from China, grain from the Baltic, coal from Newcastle, copper and iron from the mines of Sweden, salt from Spain, wine from France, spices from India, sugar and tobacco from the New World, and timber from Scandinavia. The slaves they took from West Africa to sell in the New World were never brought home.
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Needless to say, the aristocrats in the societies abutting the Netherlands spoke with disdain of a people so devoted to making money. In their eyes the Dutch were crude, greedy, and cursed by bad manners. The men and women of the Netherlands were notoriously frugal; they were also devoted to their homes. They supported hundreds of artists and artisans who engraved, designed, and crafted adornments for themselves and their houses. Dutch artists contributed a whole new genre of painting depicting ordinary people at ordinary tasks. Without noble patrons, the arts found new sponsors in the growing prosperous middle class that also supported engravers, book designers, and musicians. With artists like Rembrandt and Vermeer, the Netherlands had little to be ashamed of when it came to culture.

The Portuguese too felt the sting of Dutch commercial assertiveness. They claimed to be lords of the “conquest, navigation, and commerce of Ethiopia, India, Arabia, and Persia,” but Dutch sailors who had served on Portuguese ships brought back home descriptions of this vast trading empire. They also reported that Portuguese control was not as effective as their titles suggested.
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An even more egregious insult came when the Dutch occupied the richest part of Brazil between 1635 and 1644, an invasion the Dutch paid for by seizing the Spanish silver fleet.