Early Modern Economic Shifts: Price Revolution, Colonial Trade, and Mercantilism

The Price Revolution (1500-1620)

The commercial and financial revival of these centuries, coupled with inflation caused by the influx of precious metals from America (controlled by the crown and individuals), significantly impacted European economies.

When these metals transformed into demand for goods and services, they exerted substantial pressure on prices, leading to an increase of 300-400% between 1500 and 1620. Despite this significant rise, the average annual inflation rate remained below 1%. This phenomenon was unprecedented, as medieval economies were typically deflationary.

Interpretations by Economic Historians

• Monetarist Theses: Argue that the arrival of precious metals, inflation, and the resulting price-salary gap (leading to expanded corporate profits) formed the basis for the origins of modern capitalism.

• Real Factor Theses: Advocate for the prevalence of real over monetary factors, suggesting that the causality stems from population expansion and increased demand, which in turn necessitated new means of payment.

Colonial Powers and Commerce Models

The Anglo-Dutch Colonial System

This system demonstrated superiority over the Iberian model. Key aspects of its success included:

• Specialized navigation techniques for bulky raw materials (e.g., the fluit-ship, which increased freight capacity and reduced crew requirements).

• Trade specialized in creating broad markets for new products with high growth potential, often linked to slave labor and the plantation system.

• Overseas companies operated with corporate structures allowing broad partner participation (ensuring risk coverage and strong fixed capital).

• Integration of European and colonial areas, compensating deficits with surpluses through the Triangular Trade.

Mercantilism: Economy and Economic Policies

Doctrinal Elements

Mercantilism laid the foundations for future political economy, offering a positive and non-normative vision of economic events. As a doctrine, it manifested in different streams:

• England: Emphasized the need to observe and quantify economic events (through censuses, cadastres, and statistics) to identify regularities and formulate economic laws. The direct identification of wealth with precious metals was questioned, with growth increasingly linked to trade. Consequently, the reduction of tariffs was advocated, rather than their prohibition.

• Spain: The School of Salamanca (16^th century) reflected on the causes of Spanish decline, formulating the quantitative theory of money. In the 17^th century, concerns shifted towards depopulation, fiscal pressure, Treasury debts, and the lack of domestic manufactures.