The pattern of continuities amid change that characterized agriculture and production in Europe in the seventeenth and eighteenth centuries also extended to commerce and banking. Many merchants continued to operate through family fi rms and hired associates, while others developed new forms of business organization, including commissioned agents who took a percentage of whatever deal they negotiated but were not permanent employees. There were few international laws that applied to business matters, so merchants had to rely on their agents to be both effective and trustworthy. Commercial agents guarded their reputations carefully; deceit or open theft might provide a profi t in the short run, but could ruin an agent’s chances of gaining future contracts. Advice manuals for merchants and would-be merchants include long discussions of honor, honesty, and reliability along with practical concerns, for access to credit or to partners depended as much on reputation as on skill. Local and national laws regarding personal or business bankruptcy, which were fi rst issued in the sixteenth century, also viewed commerce as a moral issue of honor and trust. They couched bankruptcy in terms of fraud, rather than simply bad decisions or mismanagement. An English bankruptcy law of 1571, for example, spoke about merchants who “craftily obtaining into their hands great substance of other men’s goods, do suddenly fl ee to parts unknown,” or use the money obtained on credit “for their own pleasure and delicate living, against all reason, equity, and good conscience.” Such laws did not prevent waves of bankruptcies, however, often precipitated by government defaults on loans, especially in Spain and France; lenders to these governments generally had little recourse when this happened, although the 1575 Spanish bankruptcy led Genoese bankers – the major creditors of the Spanish throne – to suspend all commercial credit to Spain. This suspension meant Spain could not pay its army, and in frustration soldiers sacked the city of Antwerp, sharpening the revolt of the Netherlands against Spain. The Spanish crown did get its Genoese bankers to agree to terms several years later, but they in turn called in other loans, and a series of business and personal bankruptcies resulted. Private and public fi nance were interwoven in banks as well as bankruptcies. In the fi fteenth and sixteenth centuries the most important banks were private international merchant banks such as those run by various families in Florence and by the Fuggers of Augsburg. Their practice of extending large loans and keeping only some of their money on reserve led to frequent bank failures, and some cities, including Barcelona, Genoa, and Naples, responded by opening public banks. In 1609, Amsterdam opened the Wisselbank, a public bank that gained a monopoly of major transactions in gold and silver, took in deposits, and loaned money to the government and to the large Dutch trading companies. During the seventeenth century in London, goldsmiths began operating as deposit banks, keeping coinage and valuables for the government and private fi rms and issuing deposit receipts; in 1694 they were joined in this function by the Bank of England, a public institution. Northern merchants in Antwerp, Amsterdam, Hamburg, and London gradually transformed receipts of deposit into more fl exible fi scal devices; depositors could assign them to others instead of having to redeem them themselves, so that they grew into modern banknotes. Such notes were not always backed up by adequate deposits, however; in 1664, the Bank of Stockholm failed when too many depositors demanded coinage, and in 1720 a similar scenario led to a bank collapse in France. This left many people in France distrustful of banks, and a central public bank was not founded there until 1800. Along with banks, stock exchanges slowly evolved out of less formal arrangements. Like any other commodity, stock – shares in a private or public enterprise that can be bought and sold easily – requires sellers and buyers. The earliest sellers were Italian city-states, who sold shares in the public debt to wealthy merchants and nobles. (These shares were similar to the bonds sold by municipal and national governments today; the buyers did not become owners the way they would if they had purchased stock, but creditors whose investment the cities promised to pay back with interest at a later date.) In 1602, merchants in various cities in the Netherlands joined together to form the Dutch East India Company, and offered shares to individuals who wished to invest in its overseas ventures. Specialists who bought and sold these shares began to meet at the Bourse in Amsterdam, the general wholesale market for all types of commodities, and also began to trade shares in other public and private ventures, listing prices regularly in the new Dutch newspapers. After 1688, traders in London also bought and sold public debt and shares in companies such as the British East India Company and the Bank of England; in 1773, they formed an organization to increase public confi dence in their services and guarantee to investors that they would follow certain rules, and in 1801 they established themselves formally as the London Stock Exchange. Trade in stock and government debt was often intertwined by brokers in complicated schemes that led to speculation and rapid price spikes, usually called “bubbles.” There were two dramatic bubbles in 1720, the Mississippi Bubble in France and the South Sea Bubble in England. In France, Scottish businessman John Law (1671–1729) set up a national bank with much of its capital in government debt, along with several companies that gained monopolies of trade with French territories in North America and the West Indies. Law then merged the companies with the national bank, and traded company shares for the entire national debt, making France theoretically debt-free. Speculation by investors eager to cash in on possible New World profi ts drove the price of a share from 500 livres to 15,000 livres in a few months. People of all social classes bought shares, and some became “millionaires” (a word fi rst invented during this speculative mania) – at least on paper; the national bank issued more banknotes to keep up with the demand for money. When it became clear that the possibility of returns was much lower than predicted, the price tumbled back down to 500 livres. Many investors had bought their shares with borrowed money and now defl ated banknotes, so there was a wave of bankruptcies and the French national bank collapsed. Law fl ed from France. In Britain, the founders of the South Sea Company similarly purchased government debt in return for exclusive trading rights to the Spanish colonies in the Americas. The company bribed government offi cials and other infl uential people, lied about the rights it had been granted to land in Spanish ports, opened lavish offi ces, and spread stories in newspapers and coffeehouses about how much profi t trade would bring. Owning stock became fashionable, and the price of a share rose from £100 in January of 1720 to nearly £1,000 in June. Other companies suddenly appeared, offering shares in various overseas enterprises, some as vague as “a company for carrying on an undertaking of great advantage, but nobody to know what it is.” The directors of the South Sea Company realized the stock was dramatically overvalued and began selling; when word of this leaked out, other investors started selling, and the price dropped to £135 per share by September. Panicked investors sold their stock in other companies as well, which led to a general stock market crash and numerous bankruptcies. Sir Isaac Newton lost over £20,000, and later commented, “I can calculate the motions of heavenly bodies, but not the madness of people.” Crowds in London demanded government action, but the directors fl ed the country, carrying their fortunes and the records of their bribes. Robert Walpole was brought back in as First Lord of the Treasury to deal with the mess, and he succeeded in slowly restoring public confi dence in Britain’s fi nancial institutions. This cemented his political power, and he served as prime minister in all but name for twenty years. Though banknotes became increasingly important for major transactions in Europe, most buying and selling still involved coins. The expansion in the amount of gold and silver available for coins – and the infl ation caused by that expansion – led to steep increases in the number of coins produced in the sixteenth century, and mint masters tried to make their coins more uniform in thickness, size, and markings. Water-powered rolling mills, cutting presses, and coin stamps slowly replaced handheld hammers and dies, and in 1797 the fi rst steam-driven coin press was introduced for making copper pennies. Machines also made marks around the edges of coins – called mill-marks – to prevent people from clipping or trimming off these edges, through which they slowly acquired gold or silver shavings that could be melted together and sold. Governments continued to debase coinage when they needed money for war – requiring people to turn in their old coins and accept new coins with less silver, and then keeping the difference – but currencies slowly grew more stable. Changes in banking and business organization occurred throughout Europe in the seventeenth and eighteenth centuries, but in general the lead shifted from cities in Italy to those of northwestern Europe. In 1500 the center of European banking was Genoa, while in 1700 it was Amsterdam and in 1800 London. CHAPTER SUMMARY The shift in the economic center of Europe from Italy to northwestern Europe was the result not only of innovations in banking, but also of changes in agriculture, production, and transportation. In the Netherlands and England, new crops and crop rotation patterns, improved livestock breeding, draining of marshes, and other developments led to signifi cant growth in agricultural productivity, though they were also socially disruptive, and the increase in the food supply contributed to a growth in population. Many people combined agricultural work with handicraft production, or migrated to cities in search of work. First in England and then elsewhere, work increasingly involved the use of machines powered by hand, water, and by the end of the eighteenth century, by steam. Movement of agricultural and manufactured goods and of people was facilitated by a network of canals, and by improvements in ship design. Urbanization, dense networks of exchange, technological advances, demand for consumer goods, institutions that promoted capital accumulation, and relatively high levels of literacy all promoted economic expansion in northwestern Europe. The lack of all these made eastern Europe the least prosperous part of the continent. The cities of northern Italy had initially led the way in economic development, for this was where banking, organized business procedures, and large-scale cloth production began in Europe. By the seventeenth and even more the eighteenth century, however, Genoa and Venice had been eclipsed by Amsterdam and London. The shift in the economic center from Italy to England and the Netherlands was the outcome of processes that were not limited to Europe, but extended far beyond its borders. In the fi fteenth and sixteenth centuries, Portuguese and Spanish voyages and colonization brought products into the harbors of western Europe, especially Lisbon, Seville, and Antwerp. Trade routes centered on the Mediterranean gradually lost volume and value when compared with those centered on the Atlantic. In the seventeenth and eighteenth centuries, Dutch, French, and British trading voyages and colonial ventures made Amsterdam and London the centers of this new Atlantic economy. These global processes enhanced the connections between Europe and the rest of the world in ways that went far beyond the economic. QUESTIONS 1 What were the social, economic, and environmental effects of changes in agricultural practices in the Netherlands and England? Why were these changes adopted more slowly elsewhere in Europe? 2 What factors contributed to population growth in early modern Europe? 3 How did more intensive production processes, such as proto-industrialization and the establishment of manufactories, alter workplace hierarchies and family and gender structures? 4 How did machinery change the techniques and organization of the production of cloth in the eighteenth century? What aspects of cloth production remained the same despite the introduction of machinery? 5 What technological, organizational, and legal innovations were important in the process of industrialization, and how did these interact? 6 How did investment in private companies and in public debt fuel economic growth, and what were the risks involved? Can you identify contemporary parallels to the stock bubbles and government defaults of the early modern era? FURTHER READING General surveys of economic developments in this era include Jan de Vries , The Economy of Europe in an Age of Crisis, 1600–1750 ( Cambridge: Cambridge University Press , 1976); Fernand Braudel, Civilization and Capitalism, 15th–18th Century, trans. Sian Reynolds, 3 vols. ( New York : Harper and Row , 1982); Robert Duplessis, Transitions to Capitalism in Early Modern Europe ( Cambridge: Cambridge University Press , 1997); KeithWrightson , Earthly Necessities: Economic Lives in Early Modern Britain ( New Haven : Yale University Press , 2000); Jan Luiten van Zanden, The Long Road to the Industrial Revolution: The European Economy in Global Perspective ( Leiden: Brill, 2009); Joel Mokyr , The Enlightened Economy: An Economic History of Britain ( New Haven : Yale University Press , 2010). On the “industrious revolution,” see Jan de Vries , The Industrious Revolution: Consumer Behavior and the Household Economy, 1650 to the Present ( New York : Cambridge University Press , 2008), and Craig Muldrew , Food, Energy, and the Creation of Industriousness: Work and Material Culture in Agrarian England, 1550–1780 ( Cambridge: Cambridge University Press , 2011). For consumer goods, see Carole Shammas, The Pre-Industrial Consumer in England and America (Oxford : Clarendon Press , 1990); Beverly Lemire , Fashion’s Favorite: The Cotton Trade and the Consumer in Britain, 1660–1800 ( Oxford : Oxford University Press , 1991);Wolfgang Schivelbusch, Tastes of Paradise: A Social History of Spices, Stimulants, and Intoxicants ( New York : Vintage , 1992); John Brewer and Roy Porter , eds., Consumption and the World of Goods ( London: Routledge, 1993); Lisa Jardine , Worldly Goods: A New History of the Renaissance ( New York : Norton, 1998); Maxine Berg and Helen Clifford , eds., Consumers and Luxury: Consumer Culture in Europe, 1650–1850 ( Manchester: Manchester University Press , 1999); John Styles, The Dress of the People: Everyday Fashion in Eighteenth-Century England ( New Haven : Yale University Press , 2008). For changes in agriculture and the social dislocations these caused, see Robert C. Allen, Enclosure and the Yeoman: The Agricultural Development of the South Midlands, 1450–1850 (Oxford : Clarendon Press , 1992); Cynthia A. Bouton, The Flour War: Gender, Class, and Community in Late Ancien Régime French Society ( University Park, PA : Penn State University Press , 1993); Liana Vardi , The Land and the Loom: Peasants and Profi t in Northern France 1680–1800 ( Durham, NC : Duke University Press , 1993); Mark Overton, Agricultural Revolution in England: The Transformation of the Agrarian Economy 1500–1850 ( Cambridge: Cambridge University Press , 1996); Steven Laurence Kaplan, The Bakers of Paris and the Bread Question, 1700–1775 ( Durham, NC : Duke University Press , 1996); Govind P. Sreenivasan , The Peasants of Ottobeuren, 1487–1726: A Rural Society in Early Modern Europe ( Cambridge: Cambridge University Press , 2004); John Bohstedt, The Politics of Provisions: Food Riots, Moral Economy, and the Market Transition in England, c. 1550–1850 ( Burlington, VT : Ashgate, 2010). For changes in the pre-industrial workplace, see Thomas Safl ey and Leonard Rosenband, eds., The Workplace before the Factory: Artisans and Proletarians, 1500–1800 ( Ithaca, NY : Cornell University Press , 1993); Daryl Hafter , ed., European Women and Pre-industrial Craft ( Bloomington: Indiana University Press , 1995); James R. Farr , Artisans in Europe, 1300–1914 ( Cambridge: Cambridge University Press , 2000); S. R. Epstein and Maarten Prak, eds., Guilds, Innovation, and the European Economy, 1400–1800 ( Cambridge: Cambridge University Press , 2010). For early manufacturing, see John Rule, The Experience of Labour in Eighteenth-Century Industry ( London: Croom Helm , 1981); Myron Gutmann, Toward the Modern Economy: Early Industry in Europe, 1500–1800 ( Philadelphia: Knopf, 1988); Maxine Berg, The Age of Manufactures, 1700–1820, 2nd edn ( Oxford : Oxford University Press , 1994); Sheilagh Ogilvie and Markus Cerman, European Proto-Industrialization ( Cambridge: Cambridge University Press , 1996); Maria Ågren , ed., Iron Making Societies: Early Industrial Development in Sweden and Russia, 1600–1900 ( London: Berghahn Books , 1998); Giorgio Riello and Prasannan Parthasarathi, eds., The Spinning World: A Global History of Cotton Textiles, 1200–1850 ( New York : Oxford University Press , 2010); E. A. Wrigley , Energy and the English Industrial Revolution (Cambridge: Cambridge University Press , 2010). Arlette Farge, Fragile Lives: Violence, Power, and Solidarity in Eighteenth-Century Paris ( Cambridge, MA : Harvard University Press , 1993), explores the impact of economic and social changes on the residents of one of Europe’s largest cities. For banking and money, see Carlo Cipolla, Money, Prices, and Civilization in the Mediterranean ( Princeton: Princeton University Press , 1956); Eric Kerridge, Trade and Banking in Early Modern England ( Manchester, UK : Manchester University Press , 1988); Larry Neal, The Rise of Financial Capitalism: International Capital Markets in the Age of Reason (Cambridge: Cambridge University Press , 1990); Ann L. Murphy , The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble ( Cambridge: Cambridge University Press , 2009); Carl Wennerlind , Casualties of Credit: The English Financial Revolution, 1620–1720 ( Cambridge, MA : Harvard University Press , 2011). For more suggestions and links see the companion website www.cambridge.org/wiesnerhanks . NOTES 1 Glickl bas Judah Leib, Memoirs, trans. Marvin Lowenthal ( New York : Schocken, 1987), pp. 166, 179. 2 Gustav Schmoller , Die Strassburger Tucher- und Weberzunft: Urkunden und Darstellung, 2 vols. (Strasbourg: Karl J. Trübner , 1879), p. 519. My translation. 3 Hans Medick, “ The Proto-Industrial Family Economy: The Structural Function of Household and Family during the Transition from Peasant Society to Industrial Capitalism ,” Social History 1 (1976): 312. 4 French royal statutes, 1675, quoted in Cynthia M. Truant , “ The Guildswomen of Paris: Gender, Power, and Sociability in the Old Regime ,” Proceedings of the Annual Meeting of the Western Society for French History 15 ( 1988): 131. 5 Adam Smith, Inquiry into the Nature and Causes of the Wealth of Nations, book I, ch. 10, “Of Wages and Profi t in the Different Employments of Labour and Stock,” paragraph I.10.67.