Diverse and plentiful resources stimulated trade in Europe from earliest times.
The hiking trails of modern Europe follow the pathways of ancient traders, herders, and pilgrims, while the continent’s waterways and seas have borne traders and adventurers over great distances since ancient times. A transalpine trade has existed for 5,000 years. In 700 B.C.E., the Celts exchanged products with the Greeks and later with the Romans. The Roman empire had a lively trade with all its provinces around the Mediterranean.
The village economies of medieval Europe were largely self-sufficient, but luxury items were traded over the continent. A northern trade route to Asia went through Russia. Scandinavian Vikings controlled this route from 1000 to 1300, when the Hanseatic League took over. Venetian traders had a monopoly on the southern trade route, which went through the Arab world, until seafaring nations, first Portugal, then Holland, and finally England, secured direct access by sailing around Africa. Large parts of the Iberian Peninsula belonged to the Arab world from the seventh century to the end of the fourteenth century. Agriculture was central for trade here, as profit was reinvested into new crops: rice, fruits, and vegetables were brought from Asia, while new irrigation technology increased production.
Luxury products from the Orient and the New World moved on trade routes connecting the continents. Grain would be shipped from Baltic seaports to Amsterdam or Antwerp and from there would be redistributed to western Europe. International trade fairs were held several times a year such as in Champagne near Paris. Merchants from the Mediterranean met traders from northern Europe to exchange perfume and spices for wool, linen, and fur. The master of a trade would participate in making a product as well as in selling it. The states, still weak, granted letters of privileges to cities. Guilds protected the interests of traders in a city and made it easier for merchants to travel through different jurisdictions. Northern Europe had successful national leagues. The mostly German Hanseatic League achieved a monopoly on almost all trade in Scandinavia, around the Baltic Sea and the North Sea. The merchant of the staple (an English merchant who traded wool) had a monopoly on wool export from England. In southern Europe, the national guilds were less important.
After the fifteenth century, the effects of intercontinental trade rattled the economical pattern of medieval feudalism. Portugal, Spain, Holland, and in turn England led the trade and exploitation with distant countries. The increased population and arrival of precious metals led to inflation.
Northern Europe focused on products for the masses, such as light and cheap textiles. An emerging merchant class took over mediating between the producer and the buyer. The effective textile manufacturing concentrated in Flanders had Europe and the colonies as markets. The second half of the sixteenth century brought production to the countryside where wages were low. The nations promoted trade through infrastructure such as roads and canals, gained control over trade under the ideology of mercantilism, and supported and financed companies for long-distance trading.
In the seventeenth century, development in southern Europe had fallen behind. Seafaring nations of the north took over the spice trade. Transatlantic trade and grain import from eastern Europe was mainly in Dutch and German hands. The Protestant ethic encouraged hard work, a frugal lifestyle, and reinvestment of profit.
Russia had a scattered population in self-sufficient villages. International trade was limited to furs and to grain that landowners sold to finance their lifestyle. Beginning in the thirteenth century large parts of southeastern Europe had fallen under Ottoman rule. The Muslim rulers would consume the surplus from agriculture instead of reinvesting it and the bureaucracy undermined commerce—any sector doing well could be put under state monopoly or preyed upon through the extraction of taxes. The Ottomans would successively lose control over the region until their empire finally collapsed in World War I.
England became a world power when the invention of the steam engine led to the Industrial Revolution. Industry became independent of wind and water as power sources. As a seafaring nation England promoted free trade, an ideology especially favorable for itself in the markets it dominated for the next century.
In the first half of the twentieth century, two world wars and the Great Depression were hardly compatible with free trade and a laissez-faire ideology. Instead, states protected their industries with tariffs and policies designed to improve one country’s economic situation at the expense of others. The result was a severe contraction of trade and an exacerbation of international tensions as countries sought to gain access to resources through conquest. During World War II, occupied countries were incorporated to the German economy by being forced to deliver raw materials and labor to Germany and to buy back what the militarized economy could offer.
Russia’s participation in the world economy was constrained. Once the Soviet Union came into existence, the country was put under a regime of central planning instead of a market economy, and state ownership instead of private enterprise. After the massive industrialization drive of the 1930s state enterprises showed impressive output, but always in accordance with state dictates rather than in response to the marketplace. A buyer had to take whatever the state had planned the seller to offer, regardless of price or quality.
After World War II, politicians of Western Europe started looking at trade as a means to prevent future wars. The coal and steel union of 1953 made this clear in its preamble, and cooperation over time would lead to the creation of the European Union, today a free-trade area for 400 million people. For consumer goods, there are no restrictions. In many European countries, services, especially within health care and with insurances for health and retirement, are protected with state monopolies.
Tommy Tobiassen
See also: Council for Mutual Economic Assistance; European Union; World War I; World War II.
Dudley, Dillard. “Economic Development of the North Atlantic Community.” In Historical Introduction to Modern Economics. Englewood Cliffs, NJ: Prentice-Hall, 1967.
Kriedte. Peter. Peasants, Landlords and Merchant Capitalists: Europe and the World Economy 1500–1800. Providence: Berg, 1990.