Before I discuss trade and Early Modern Europe, I think the connection to capitalism needs to be made. Economists stated it was the transformation of the European economy through investment in new, larger-scale processes of trade and production and termed this the rise of capitalism (Weisner-Hanks, 203).” It was viewed that trade was at the center of the development of the modern world. Adam Smith, in Inquiry into the Nature and Causes of the Wealth of Nations, identified the natural instinct of people to trade with each other. This led to a specialization of labor starting with individuals then expanding to groups, regions, and finally nations with an emphasis on products and tasks being completed faster and better than their neighbors (Weisner-Hanks, 203). Smith believed “the highest level of development, production, and innovation, the greatest wealth of nations, would best be achieved by allowing free trade and open competition in both products and labor, an economic system later called capitalism” (Weisner-Hanks, 203). The development of capitalism during this time period was considered to be slow and complicated, but the changes to the production of goods, the way goods were bought and sold, the increased growth in population, and the handling of money drove the European economy (Weisner-Hanks 204). All of these factors played an important role in the growth of the European economy and thus capitalism.
The economic growth of Europe after 1500 was a result of countries with access to the Atlantic establishing trade routes with the New World, Africa, and Asia. It was the growth of trade within these countries that created institutional change and enabled merchant groups to obtain protective rights (Acemoglu, Johnson, and Robinson 546). Trade during Early Modern Europe created wealth that had never been experienced before during this time period and created a migration among Europeans.
Trade had the greatest influence on countries with nonabsolutist institutions such as Britain and the Netherlands. Atlantic trade within these countries enriched and strengthened commercial interests outside of the circle of royalty and brought about a demand for institutional change for economic growth (Acemoglu, Johnson, and Robinson 550). Those profiting from the Atlantic trade became wealthy and in turn acquired political and social power without ties to the monarchy. With this newly earned wealth and power, they were able to demand institutional reforms and use their profits against the monarchy (Acemoglu, Johnson, and Robinson 563; Koot 9). This newly acquired wealth also allowed them to invest more and increase the level of international trade. The English Parliament prevented the British monarchs from creating trade monopolies, so most of the trade within this country was carried out by individuals and small partnerships (Acemoglu, Johnson, and Robinson 563).
The Portuguese fleets were the first to dominate the Asian trade routes, but the...