Commerce

I

Introduction

Commerce, trade in goods, usually implying trade over a distance. The British economist Adam Smith wrote in The Wealth of Nations (1776) that “the propensity to truck, barter, and exchange one thing for another” is an intrinsic characteristic of human nature. Smith also observed that the expansion of commerce is a critical component of the process of modernization.

In ancient times, transporting goods over any significant distance was an expensive and risky enterprise. Thus, commerce was restricted mainly to local markets, and the most commonly traded articles were foodstuffs and clothing. Most people spent the bulk of their resources on food, and what they neither grew nor gathered themselves they obtained through trade. The same was true of clothing: garments were either produced and handed down within the family or acquired through trade. In addition to food, clothing, and shelter, the rich devoted their income to conspicuous attire, jewellery, and works of art. As a result, an important trade in luxury items developed.

II

The Silk Route

One of the most notable early examples of long-distance commerce was the Silk Route between China and imperial Rome, first established around 100 bc when the Han dynasty made much of Central Asia safe for travellers. Along the 6,000-km (3,700-mi) route, traders transported Chinese silk, Roman wool and precious metals, and many other high-value commodities from intermediate points in India and Arabia. Coastal sea trade in the Arabian Ocean, Indian Ocean, and North Pacific was also common. Because of the vast distances involved, traders concentrated on luxury items with a high ratio of value to weight, which were traded on through intermediaries rather than remaining with a single merchant. Political upheavals along the overland routes after the 5th century ad curtailed the trade, but it periodically revived during periods of peace.

III

Medieval Europe

After a decline following the break-up of the Roman Empire, European commerce expanded gradually during the Middle Ages, especially during the 12th and 13th centuries. Long-distance trade became safer once merchants began to form associations for the protection of travellers who journeyed abroad. The main long-distance trade routes were from the Baltic and the eastern Mediterranean to central and northern Europe. From the forests of the Baltic came raw materials: timber, tar, furs, and skins. From the East came luxury goods: spices, jewellery, and textiles. In exchange for these goods, western Europe exported raw materials and processed goods. The English sold woollen garments, the Dutch offered salted herring, Spain produced wool, and France exported salt; southern Europe was also rich in wine, fruit, and oil. The Italian and German cities straddling these routes promoted and financed the trade. Nonetheless, throughout the Middle Ages, commerce between Europe and Asia was limited, because overland transport was expensive and because Europe possessed little of value for export to the East.

IV

The Early Modern Period

The development of ocean-going warships and efficient merchant carriers in the 15th and 16th centuries led to a rapid expansion of commerce. As the cost of transporting bulky cargoes over long distances fell, grain was imported on a large scale from the Baltic to the Netherlands and other parts of Europe. New ocean routes between Europe and the East allowed imports from Asia at lower prices and in greater volume than had been possible by overland caravan. The discovery of the Americas created trade in such new commodities as tobacco and logwood.

Spanish exploitation of the rich gold and silver deposits in Mexico and Peru transformed the character of international commerce. Europe finally possessed a commodity—precious metal—for which ample demand existed in East Asia. In return for Asian imports, Europe exchanged silver coin minted in Mexico, Spain, Italy, and Holland. Using technology and skills developed in transoceanic navigation, the Europeans captured the Asian shipping trade. European vessels transported Japanese copper to China and India, Indian cotton textiles to southern Asia, and Persian carpets to India. Trade in certain staple commodities grew with incredible speed. Imports of tobacco into England from Virginia and Maryland, for example, increased more than a thousandfold in the 17th century.

As long-distance trade continued to grow, new forms of commercial organizations appeared. At first, informal associations gave way to legal partnership. In Holland, for example, it was not uncommon after 1500 that shareholders, rather than captains, be the proprietors of ships. Shareholding broke down the social barriers among different classes of merchants and enabled individuals to divide their goods among ships destined for different ports. No longer was international trade limited to those who could afford to travel. After the 16th century, the chartered company replaced the temporary partnership as the customary way for merchants to organize their affairs. These great companies, created by the state but privately owned and managed, held national monopolies over trade with certain regions.