World History



























































Capitalism (Free Market)

The voyages of discovery shifted the focus of European trade from the Mediterranean Sea to the Atlantic coast. Venice declined as a major trade center, while port cities prospered in Portugal and Spain followed by England, France, and the Netherlands (the Dutch). To increase their income from taxes on foreign trade, European monarchs encouraged the formation of joint-stock companies. Stock (or shares) was sold to several investors who shared the expense and risk of expensive ocean trading voyages. If a ship went down, no single investor lost everything, but if a voyage was successful, all stockholders shared in the profits. Most voyages succeeded, and many investors made good money. The modern stock market operates in a similar way today.

Venice = a seaport in northeast Italy, built on numerous small islands, famous for its canals.

England = the largest of the four “countries” comprising the United Kingdom. It occupies most of the Island of Great Britain.

France = a large country in western Europe, between Spain and Germany. Its capital city is Paris.

Netherlands = a country in western Europe, on the North Sea; its capital city is Amsterdam. This country is sometimes known as Holland. The people here speak Dutch.

Dutch = relating to the Netherlands, its people, or their language.

Best known of these companies were the British East India Company that traded mostly with India, and the Dutch East India Company that operated in Southeast and East Asia. Both acted as extensions of their governments and even had their own armies. Joint stock companies promoted the rise of an economic system called capitalism (or the free market). Capital is wealth such as ships, factories, or money. Under capitalism, people are free to own capital and make their own decisions about how to use it. Since joint stock companies were chartered by governments, they were a form of state-sponsored capitalism.

East Indies = an old name for the lands of southeast Asia, including India, the Philippines, and Indonesia.

India = a country in southern Asia. Its capital city is New Delhi.

capitalism (free market) = an economic system based on private ownership of property and minimal government regulations.