review 1 - The first joint stock companies and stock market...

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The first joint stock companies and stock market trading first developed in the Netherlands (Holland) in the early 1600s. Global trading companies (i.e. English East India Company; Dutch East India Company) during the 1600-1800 period owed their overseas success largely to government chartered monopoly trading rights. The system of modern credit originated in the Italian city-states during the 14th and 15th centuries. The first stock market crash in history, engineered by John Law during 1718-1720, resulted in a speculative bubble in the shares of the Mississippi Company. Globalization began in 1820 through 1850. Mercantilism: (1500-1800) involved the economy’s subservience to the needs of the state. Under mercantilism, nations strove to run a positive trade balance and accumulate gold and silver. Assumption that trade is a zero-sum game. One nation’s gain is another nation’s loss. Before the 19th Century trade involved mainly high value-to-volume products (tea, spices, metals) Trade was not free, competitive, capitalistic, or market-base. There are three requirements for globalization to take place: o Capitalism: system of private property and pursuit of profits. Individuals depend on the market for the basic necessities of life. o Global Market Integration: prices for the same commodity in different markets approach each other = commodity price convergence o Fossil-fueled Energy: harnessing stored energy to stimulate and sustain global market integration. Two Eras of Globalization o 1850-1914- First Era of Globalization (began to form around 1820) o 1980-2010- Second Era of Globalization (began to form around 1945) Market Revolution In England o Early industrial development in England was driven by domestic market transformations and protection from foreign competition. o The beginning of industrial revolution: cotton textiles industry o Newcomen Steam Engine, 1712- being used to power the textile mills. o Productivity Increase in Cotton Spinning: English mechanized, steam-powered spinning in 1825 – 135 hours per 100 lbs. cotton compared to 50,000 hours in India. Steamships- revolutionized global transportation of cargo. Suez Canal- dramatically cut distance between Europe and Asia. 2 years to 2 weeks with steamships. Completed in 1869 in Egypt.
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The innovations in 19th oceanic transportation and communication (steamship technologies, submarine telegraph, Suez Canal) led to mass trade in basic commodities. Hegemony: dominance with the consent of the dominated Repeal of the Corn Laws (1846) o Corn Laws: Tariffs on important grains o Manufactures in Britain were in favor of the repeal of the Corn Laws because if the food was cheaper, they could pay the laborers less. Movement against mercantilism in England began with Henry Martyn with
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This note was uploaded on 10/10/2011 for the course INTB 3351 taught by Professor Priest during the Fall '08 term at University of Houston.

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review 1 - The first joint stock companies and stock market...

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