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MGMT 1030 Final: Final Exam Study Sheet

Course Code
MGMT 1030
Andrew Thomson
Study Guide

of 20
Global Early Economies & Great Divergence
Capitalism Types Merchant capitalism – an economic system to increase a nation's wealth by government regulation
of all of the nation's commercial interests
Industrial capitalism – economic system in which trade, industry and capital are privately controlled
and operated for a profit
Financial capitalism – predominance of profit from purchase and sale of, or investment in,
currencies and financial products such as bonds, stocks, futures
Greece Mining - access to gold, iron and lead; mined by large contingent of slaves
Agriculture – 80% of pop worked in agriculture, but poor land quality limited supply
Trading - around Mediterranean & into Africa/Middle East; coastal due to limited navigation skills
oExports - olive oil/wine/metals / Imports – wheat, pork, glass ivory
Market economy didn’t develop because of cultural norms; survival of family was economic core +
social pressure to work for public good – WE KNOW BECAUSE THEY WROTE HISTORY DOWN
Rome Based on agriculture, mining, trade; supported by powerful military and mass salves
oStrong – not industrial – empire
Rising population limited food = imperial expansion across Europe, Northern Africa, Middle East
oUsed coin as universal medium of exchange; spread as far as China
oExpansion of road, sea networks, political control over wide areas
Large-scale agriculture/mining became possible; economic growth/development
China Agricultural society
Han Dynasty – technological/territorial expansion; 1st “Silk Road,” trade into central Asia/Europe
Song Dynasty – result of turmoil; development of compass/gunpowder, woodblock printing
oLarger scale enterprise in mining, agriculture, manufacturing of silk/pottery; trade into Sicily,
Africa and across Asia
oDynasty fell to Khan clan of Mongols, led by Kublai Khan
Ming Dynasty – arose after economic disputes/ethnic tension overthrew Khan
oInconsistent economic record; expansion of agriculture (supervised by bureaucrats),
mining/industrial expansion in south + integration of market for products across China
oChina had become largest/wealthiest global nation; + growth in population and technology
Venice Well positioned geographically/politically to benefit from Roman collapse; allied with Byzantium
oLocation allowed transport/supply crusaders (for a price); opened new market (China trade)
Advantage: strong navy/merchant fleet + sailing knowledge
Colleganza – joint stock partnership spread risk between merchant/investors in Venice with
travelling merchants; allowed travellers with less resources to participate in trade
Fell because couldn’t compete with Spain economy and rise of Arab control in Middle East
European Middle
Ages Manorial system - breakdown of European political structures forced creation of self-sufficient
manorial estates; peasants tired to land/owed service to manor lord for protection
Feudal society based on tradition and custom with an absence of money transactions
Market Society
Prerequisites New attitude toward economy – people need to be free of constraints/traditions
Monetization of economic life – cash transactions need to be common at all levels of society
Pressures of market demand dictate economy regulation - market must replace tradition/custom to
determine production and distribution of goods in society
Great Divergence;
theories of
emergence, lesson
Great Divergence – (1800) period of income inequality in Western Europe compared to world
Max Weber: Cultural superiority – Calvinism encouraged to be thrifty/rational/concerned with
material gain; Britain invented freedom which + values didn’t exist worldwide
James Blaut: Colonialism – grew raw materials, currency, labour while holding back from world
Jared Diamond – environmental – had domesticable plants/animal + population more disease
immune = higher productivity/population density; cities, bureaucracies caused economic growth
oEnvironmental determinism accusation – climatic factors fully responsible for human behaviour
Addition to environmental factors was that development of "open science" spread of
economically useful ideas central to country's economic development (Joel Mokyr,
Northwestern University)
Joel Mokry - believed causes "overdetermined” and caused by many factors acting together
oGregory Clark - as disease picked off Britain's poorer residents population became more
competent and productive, leading to the self-sustaining growth of Industrial Revolution
oDaron Acemoglu - Britain’s Glorious Revolution in 1680s, reduced monarch’s power, made
people less worried profits to be seized by crown; + Western affection of capitalism and
colonialism lead to economic development
Lesson: country's culture ≠ economic success; historically proven to be invalid
oGreece economic downfall allocated to citizens laziness; OECD shows Greeks work harder
than most rich countries
oIndia's economic growth faltering despite population's unbeatable work ethic
Trade Development, Trading Companies & Failure of New France Trade
Early Trade Route;
developments for
World demand for spices, porcelain, silk; trade along “Silk Road” into Venice (many Italians/Arab)
Portugal, England, Dutch wanted to conduct trade with middlemen, but didn’t have technology
oNavigation: compass, astrolabe, timekeeping, detailed charts made non-coastal sail possible
oShip Design: ships needed more masts for faster speed + smoother/solid hulls
“Carrack” & “Caravel” key vessels; large, 3 masted, cargo capacity – practical for ocean
voyages (size good for cargo and carrying large pops)
Exploration For
Spices Portuguese 1st to sail around Africa and establish route to spice regions (China/India); other
countries wanted easier Pacific access
Columbus launched the Spanish domination of South/Central America
John Cabot tried going west; reaches Newfoundland and cod before returning to Europe
oTalks about Cipengo – island spices/gold from; Britain gives money to find but turns back when
son’s ship damaged; never heard from again
Jacque Cartier – sailed west for China; traded fur with natives (1st trip), quartz/fools gold (2nd trip)
Risk of small/individual voyages mitigated by joining investors; forms VOC and BEIC
Dutch East India
Company: set up,
growth, fall
Dutch sent expeditions to Pacific seeking spice
o1595: expedition to Banten – pepper port of West Java; clashed with Portuguese/Indonesians
but returned with enough pepper to make profit
o1599: first Dutch fleet to reach Maluku “Spice Islands” – source of pepper; makes 400% profit
Company set up for voyage and liquidated when fleet retuned; high-risk due piracy, disease,
shipwreck, unstable prices – cartel’s formed to control supply and manage risk
1602: Dutch East India Co (VOC) formed; first company to offer stock to sell/trade
oMade investors less liable for business
Monopoly/government protection grew quickly; conquered territory for cinnamon, pepper, spices
oGranted exclusive right to trade with Japan at Nagasaki under 1850s
oCreated massive spice plantations worked by slaves; defended by armies
Corrupt employees with problem; profit not sent back to Holland
1669: VOC richest global private company; over 150 merchant ships, 40 warships, 50,000
employees, private army of 10,000 soldiers, and dividend payment of 40% on original investment
oFell due to local/internal conflict; gave up Nagasaki to America (couldn’t keep up with demand)
oDutch fought with British = BEIC rose power = VOC fell and absorbed by Dutch government
British East India
Company: set up,
Dutch competition,
growth, fall
Originally called Governor & Company of Merchants of London trading into East Indies (1600)
Early voyages single investment sponsored by group; joint stock status replaced model
oGranted 15 year monopoly on trade between Straits of Magellan and Cape of Good Hope;
extended indefinitely and granted limited liability
Early Dutch competition minimized by success in India, rather than Spice Islands
oBuilt “factories” in India through alliance with local leaders; 15% of British imports from India
China alliance – sold opium into China for tea
1670: given right to autonomous territorial acquisitions, mint money, command fortresses/troops,
form alliances, make war/peace, exercise civil/criminal jurisdiction in acquired area
1700s: more powerful/aggressive; collected taxes, had wars, took over local governments (Bengal)
oBritain divided; liked economic success but not excess of colonial control
oFell due to Indian Mutiny 1857 – Indian rebellion against BEIC control
Virginia Company (1606) as joint stock company to create settlements along North American coast
Began in Jamestown, Virginia; natives conflict + no economically viable survival method = failure
Rise to power through tobacco; import of African slaves; continued with emergence of cotton
New France Trade
Failure Theories Why did some merchant succeed in trading of New France and France, while others fail?
Decadence: Jacques Savary = failure because lavish spending on houses, servants, food, clothing
Lack of education: inheriting business, removes apprenticeship; lack of experience/education
Wartime loss: merchants faulted wartime losses of ships, rather than spending as weakness
oShips taken by wartime enemies; premium on insurance policies failed to compensate lost
Travel Risks: wrecks common on French/Canadian costs, bad weather, piracy and fire
Economic conditions: volatile markets = unstable commodity price; first to port = highest prices
Debts: dishonest debtors = bankruptcy, losses domino as merchants lend to eachother
Government: government postponed/stopped paying merchants during wartime because of
financial difficulties (War of the Spanish Succession)
Crediting system: Creditors assessed merchant as risk and if their confidence decreased, creditors
made formal claim to payment (no cash reserves = claim bankruptcy); confidence based on
1st Industrial Revolution
Why Britain First? Government: Emerged as stable political entity; English Civil War (1642 – 1648) and Glorious
Revolution (1688) enable strong Parliament dominated by economic interested control government
Factors of production: Enclosure movement enables use of common fields for productive purposes
Population Growth: increase from 6.5 million to 11 million (1700 – 1801)
oDecline infant mortality and increase in fertility because of increase in good food
Domestic industry: domestic industry emerge in households; highly competitive environment
oContract labour/putting-out system enable business owners to pay others to produce goods;
Technology: Newcomen Steam Engine – pump cleared water from mines (deeper mine deposits)
oImproved to power cotton mills (waterwheel unnecessary); profits bankrolled British empire,
changed nature of power
oCoke used instead of charcoal to refine iron; cleaner heat source for better oil in large quantity
oEarly factories – began in silk sector with John Lombe’s 5-storeymill in Derby (1721)
Floors separated by circular silk-throwing machines and winding machines; everything
powered by horizontal/vertical shafting by water wheel
Richard Arkwright – created factories that spun cotton with 1st “horse powered” water
Efficient as spun raw into usable cotton thread; steam power = mechanically spun cloth
Banking/Finance; Bank of England and 1st provincial bank created (1694); monetary polic allowed
borrowing of money to create factories
oWealth of Nations changes economic thought; market forces dictate people economic
Revolution; 4
Agricultural improvements: open field system = inefficient and non-scientific
oRising prices = experimentation incentive to increase efficiency; new root crop (turnips,
potatoes) and scientific animal breeding practices (increase in enclosures)
Transportation improvements: response to increased need to move food around
oCanal improvements = movement of goods along barrages (1760)
oRoad improvements = turnpike trusts; pay to use road with money used for its upkeep
Technological improvement: increase production levels – raw cotton brought from India, Britain
processed, returned finished product; dominated global cotton industry (1830 = 347 million yards)
Early Social Welfare Reform: parish – supported by local tax payers and tasked with caring for
poor; distaste for paying municipalities sparked national response
o1834 Poor Law Amendment Act – workhouses created for poor; did remedial work