Early Economic History—The Formation of the World Economy from 1450 to 1800

The age of exploration led to the formation of a world economy around the Atlantic Ocean prior to 1800. While the countries in this world economy were still organized as classically conservative systems, the new structure enabled different interactions. Driven by mercantilist goals of accumulating gold and silver, Spain and Portugal led the exploration and colonization of the Americas. They succeeded in transferring massive amounts of gold and silver back to Europe, which led not to wealth but to inflation on the continent. The monetary stimulus led to some investment and growth in Britain, France, and the low countries, who became the core of the world economy. The world economy was the first step in globalization—an increase in connections and interactions across different societies. In the pre-industrial world, globalization made life worse for average people in the periphery, who were engaged in coerced labor to produce crops that were not amenable to feudal production systems. In the semi-periphery, little changed for average people, while in the core of the world economy early labor markets developed. These showcased the potential for mutually beneficial interactions among strangers and foreshadowed the institutional changes that would become foundational to the industrial revolution and the development of capitalism.