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C O U R S E 
A Brief History of Humankind
Dr. Yuval Noah Harari, The Hebrew University of Jerusalem
C O U R S E   L E C T U R E 
How Capitalism Enabled Small European Countries to Explore and Conquer the World
Notes taken on March 8, 2014 by Edward Tanguay
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
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