The European Economy in the Early Modern Era

From about 1470 to the mid sixteenth century there was sustained economic growth in all parts of Europe, apart from the north. There was little sign that scarce resources were being stretched, by the powerhouses for this growth which were eastern and southern Europe. However, many economic historians have argued and continue to argue whether there was a pan European outbreak of instability, or whether it was just short bursts in a very few localities. What is quite clear though is that Europe at this point, is an economy that is under going shifts in its structural make up. There is evidence that suggests that the European economy can be shown as an economy of stability because ‘Already by 1500 Europe was living in an economy of regional and international trade rather than mere subsistence’. However, Government policy of states in its many forms and perhaps more importantly the consequences of government policy, shows a Europe that is unstable as ‘the early modern state treated economic prosperity and economic development as subordinate to its other aims and purposes’.

Spain and Venice were the major actors in the trading of commodities in the early modern period, Spain, trading with Latin America for silver and exporting that silver amongst other items to northern Europe, whilst Venice traded with Asia. This trade brought much prosperity and provided much of the growth for both early modern states and southern Europe in general. Also, when the Dutch Republic started to overtake both Spain and Venice, this too provided much of the economic growth that was experienced by northern Europe. However, this shifting of economic emphasis happened for several reasons, one reason was that it was due to a greater adaptability of northern Europeans, and land reclamation schemes of the Dutch in order to produce more grain. There was also geographical fortune as ‘virtually the only sources of grain available in Europe in the 1590s were around the Baltic, in Sweden, Poland and Russia’, as a result of the global cooling experienced in this point in time and so grain prices increased and as a result of inflation, producing more profitable voyages for those involved from northern Europe. This reversal in trade however was sustained for the next 30 years, increasing the stability of the European economy, as Dutch Republic merchants founding the East India Company in 1602, were able to take more Venetian trade away. However, this was not just due to Dutch efficiency and technological improvements; it was also because the Venetian economy was unstable in the 1620s and 1630s as ‘its population and commerce were seriously affected by the plague outbreaks of the 1620s and 1630s’. This would often lead to ships being impounded for as long as the outbreak lasted or a suspension of trade altogether, the result being obvious, this allowed the Dutch ships into ports that would otherwise have been full with Venetian vessels, although it should be noted that by the 1650s Asia became a notoriously hard place for Europeans to trade.

However, it was not all plain sailing as government policy saw to disrupt the prosperity and stability of northern Europe. The English, as a result of the Dutch experience, became increasingly aware of the need to develop its own merchant fleet and to reduce the power of the Dutch. As this happened ‘a gradual erosion of the Dutch trading position was inevitable when England backed up its legislated wishes with military force’. The Anglo-Dutch wars, involving the French on the British side, started as a result of too many foreign ships coming into London harbours, the British government ordered that it should only be English vessels or ships carrying goods destined for England as a result there was a series of naval campaigns from 1652 until 1674. This caused a small amount of destabilisation of the European trade, however, it could be argued that the conflict merely displaced European trade, as some vessels’ cargo was to be handled at ports such as Hamburg and not Amsterdam, further confirmed by the idea that the Atlantic trading system did cause both ports and Liverpool to grow. Although this happened over a period of over 20 years, this never really threatened the destabilisation of the European economy.

There were however, events of enacted government policy that did wreak havoc on the European economy. This mainly took the format of war and happened in the period of about 1570 to 1650. For example, ‘after the Dutch Revolt the reimposition of Catholicism on the southern Low Countries led to many craftsmen to emigrate and plunged the [iron] industry into a terminal decline’. This though, did not really cause instability, other than for a brief period as those refugees took their valuable skills to the emerging economies of the north, in particular to the Dutch Republic and so this particular policy of Spain can be argued to have merely encouraged what was coming to be an inevitable trend in the reordering of European economic life. What government policy did however was to make the crisis of the first half of the seventeenth century, as not only did prices rise, but also there was a financial crisis, due to the huge debts that monarchs had built up. This was down to, amongst other factors, the Thirty Years War. Firstly, in France there were crops and villages destroyed and so price rises of grain would inevitably be raised due to demand, but production would fall as well. Also the Thirty Years War encouraged many European governments to borrow in order to offset the direct and indirect costs of war and diplomacy. As a result of the massive public debt burden, the states that were involved sought to reclaim money by taxation; this taxation was ‘soaring’. This hike in taxation would lead to a massive slump in demand of even basic goods.

However, the European economy even in the parts affected by unhelpful government policy did grow back after a while of stagnation and instability. Venice, after the 1670s did recover, but not back to its original dominant position of the sixteenth century, this too is true for Spain as well. Broadly speaking the European economy did stabilise to a degree not seen in the early modern period. It was this period after the end of the Thirty Years War up until the War of the Spanish Succession that was relatively peaceful in Europe. Also it is at this point that England starts to take the lead in European economic affairs and there is the establishment of stock holding firms as well as the rise of large-scale banks, such as the Bank of England in 1694.

However, as we have seen there has been a discussion about why was the European economy so unstable. It is fair to say that yes, it was unstable at a regional level with the problems of different government policies such as war, subjugation and taxation as well as factors outside the control of government, such as disease and climate change. However, there were some areas of growth that managed to escape this instability, this was mainly in trade and while trade did grow between 1550 and 1715, it tended to move about in terms of who dominated, first it was Spain and Venice, The Dutch Republic from Amsterdam and latterly England towards the end of the period. This happened because of greater flexibility of the northern economies, geographical coincidences and entrepreneurship creating efficiencies. So it is also fair to say that there was instability, but this was more present in some parts of Europe than in others and to some extent it was balanced out by gains in other places or sectors.