•

credit and capitalism were not unique European inventions

•

early modern China, India and the Muslim world

•

some merchants and bankers thought along capitalist lines

•

however the kings and generals in the palaces and forts of Asia tended to despise merchants and their mercantile way of thinking

•

most non-European empires of the early modern era financed their wars and activities by taxing their subjects and plundering the enemy, they owed little to credit systems and cared little for the interests of bankers and investors

•

in Europe, on the other hand, kings and generals gradually adopted the capitalist way of thinking

•

eventually in the 19th century, kings and generals began to move aside, and merchants and bankers became the ruling elite in politics as well as economics

•

*** the European conquest of the world was increasingly financed through credit and not through taxation

•

it was increasingly directed by capitalists whose main ambition was to receive maximum returns on their investments

•

the empires built by bankers and investors managed to defeat the empires built by kings and noblemen because they had a must stronger financial base, because few people want to pay taxes, yet many people are happy to invest.

•

England, France, Spain and the Netherlands were much poorer and smaller countries than China, India, or the Ottoman Empire, but they did it by taking loans from bankers and investors in order to buy ships, cannons and to pay soldiers.

•

profits from the new trade routes and colonies which these ships, cannons and soldiers enabled them to establish, gave them profits which enabled them pay back their loans, build trust, and receive more credit

•

European empires were now run by states and governments but created and managed by private businesses, or more accurately, limited liability companies.

•

limited liability companies rose to power in early modern age

•

became a central player in history

•

exploring unknown oceans and conquering new countries was a very risky affair

•

this spread the risk of building an empire among many investors

•

to explore, you create a company, then the company sold shares on the stock market

•

each investor risked only a small portion of his capital

•

no need to tax anyone in order to do this

•

*** the stock exchange could finance campaigns of exploration and conquest much more easily than any kingdom or empire that taxed its subjects

•

this is how even small European nations such as England or the Netherlands could build giant empires much bigger than the Chinese or Ottoman empire

•

the Dutch empire was not built by the Dutch state but by Dutch private companies, the most famous was United East India Company (VOC) established in 1602

•

got money by selling shares in the Amsterdam Stock Exchange

•

began using the money to fund military actions against competitors and pirates

•

eventually this money financed the military conquest of Indonesia, the largest archipelago of islands in the world

•

at first, their aims were only commercial

•

began to fight wars against merchants which charged too much money

•

this private company ruled Indonesia for close to 200 years, in 1800 the Dutch state assumed control of Indonesia and made it a colony of the Dutch state and not of a company

•

Dutch West India Company

•

built a settlement at the entry of the Hudson River, called New Amsterdam

•

1664 the British captured New Amsterdam to New York

•

Wall Street was named after the wall of the Dutch West India Company which protected the settlement

•

British

•

early 17th century, many settlements established by companies, not the state

•

British East India Company worked the same was as VOC

•

ruled a giant Indian Empire for over a century

•

the army of the company (350,000 soldiers) was larger than the army of the British state

•

1858 British nationalized India and made India and the Indian army a possession of the state

•

19th century

•

link between states and companies grew stronger

•

the managers and stock holders became more powerful in the state

•

Opium War

•

1830s Chinese made drug traffiking illegal

•

British continued to export drugs to China

•

many members of parliament held stocks in the drug companies so they pressured the government to take action against the Chinese

•

-1840 British declared war on China in the name of free trade

•

British won a very easy and decisive victory over the Chinese

•

Chinese had no answer to the new technological weapons of the British

•

in peace treaty, Chinese agreed not to impede drug trade

•

British received Hong Kong as port

•

10% of Chinese became opium addicts

•

20th century

•

the success of a country depends much more on its credit ratings than on its resources

•

a country that is rich in oil but has a corrupt government, it will have a low credit rating

•

if it borrows money, the interest will be high

•

it will probably remain a poor country

•

a country that doesn't have many resources but peace, and a democratic government, can more easily get better credit and could e.g. create a good high tech industry

•

the relationship between political system and the capitalist system

•

hotly debated

•

people called capitalists tend to believe that capital should be able to influence politics but not the other way around

•

believe in the freedom of the markets

•

if you let the government have too much say in what companies can do, it will act in a way that is not economically sound

•

capitalists know where they can get the most profit, which will lead to fast economic growth, which will benefit everybody