Old ideas like credit got a reboot in Era 5. Along with some other financial innovations, credit really changed the way the European economy worked. Building on ideas from the Islamic world and India, Europeans created new economic systems which allowed for efficient trade. These systems helped Europeans run new empires pretty much as businesses, which contributed to the rise of capitalism, the middle class, and even nationalism.
Driving Question: What new economic systems emerged in this era of globalization?
- Just as the Columbian Exchange impacted plants, animals, and people during this time period, goods, money, and services were flowing between societies like never before. In this era, the first global trading connections were made. These were connections that were bigger in scale ever before. Bigger also meant more expensive, because long-distance trade was risky, but it also paid off if successful.
- People started pooling their resources to help share the risk, and the result of this pooling was the first major global businesses. The most famous were the Dutch East India Company, and the British East India Company. The rise of these big businesses impacted the entire global economy and were really precursors to the large corporations that exist in the world today.
Word of the Day: Joint-stock company
- Definition: A company whose stock is owned jointly by the shareholders.
- Joint-stock companies are really important because they were the way long-distance trade was financed in this period. They really took off in this period, and the profits they made for their (mainly European) investors helped to pay for the empires that were being built.
- Read: “Overview of New Economic Systems” in Lesson 5.5 on Khan Academy
- Think about how these economic systems encouraged long-distance trade and how their effects can still be felt today.
Historian’s Journal Prompt
- How are big businesses positively contributing in the fight against COVID?
- In Era 5, large business began setting policy alongside governments. What large companies are out there today that might help influence policy, like companies that are making masks or donating money to help fight the pandemic?