The Trans-Atlantic economy in 1800


Copyright 1998 by Jim Jones
All rights reserved

Introduction

By 1800, the trans-Atlantic economy was in a state of flux. The beginning of industrialization had already begun to change the price of labor and the distribution of wealth that defined markets. Technological innovations further altered the price of labor and goods, and also changed the cost of trade by reducing geographical distance. Governments in Europe faced extraordinary pressures to finance military operations, so they sought ways to intervene in trade without stifling it. Finally, Enlightenment religious thought in Europe, coupled with changes in the economy of slave raiding, brought about interest in the abolition of the Atlantic slave trade.

The Terms of Trade

The "Terms of Trade" refers to all of the factors that determine the relative value of goods exchanged in trade. As a simple example, consider the exchange of apples for oranges. One might be tempted to argue that since each is about the same size, and each offers roughly equivalent food value, then one apple should be worth the same as one orange. However, the question becomes much more complex when one considers the location where the exchange takes place, the time of the year when it occurs, and the relationship of the traders to the product. Think about it for a minute, and then look
here for an explanation of each idea.

The terms of trade are also influenced by a number of costs that are unrelated to the actual commodities that are traded. Trade also involves transportation, warehousing, brokerage fees, and insurance against accidental losses. All of these involve costs that must be paid for from the final purchase price of the good. Whoever controls shipping, warehousing, and the rest is in a position to earn additional income from the exchange of goods. That was the case with the Atlantic Triangular Trade in the 16th- 18th centuries, when European nations and investors owned the firms that provided all of these additional services. As a result, the European economy received wealth, not only from providing goods for trade, but also by providing services needed for trade.

Industrialization and Legitimate Commerce

There is no precise date for the beginning of the Industrial Revolution, but several major innovations occurred in the 18th century. One was the invention of practical steam engines in England. Another was the development of joint-stock companies that allowed investors to pool their capital into larger business enterprises. Other significant events included the invention of a system of manufacture using interchangeable parts, the invention of machinery that mechanized textile manufacturing, and and the growth of the world population which provided the market for increased production.

All of this had several major impacts on the Atlantic economy. First, mechanization reduced the cost of human labor, making slave labor transported from Africa to the Americas relatively more expensive. That alone was not enough to end the slave Atlantic trade, but it encouraged entrepreneurs to find ways to use African slave labor in Africa, and it provided an incentive for slave owners in the Americas to increase birthrates among their slaves.

Second, as European manufacturing output increased, there was an even greater search for markets to purchase the new goods. Since slaves did not have disposable income, but wage laborers did, there was further incentive for European traders to find something in Africa to purchase, rather than purchasing the people themselves. If Africans could be induced into producing something of value for export, then the money they earned would allow them to become a market for an increasing volume of European export goods.

Third, the creation of modern financial institutions, including joint-stock companies, credit systems and the like, made it possible to produce larger commercial enterprises than ever before. This was already true prior to 1800 when, for instance, a company like the Companhia General do Grao Para e Maranhao, which held the monopoly over slave trading in Bisseau and Cacheu from 1755-1778, also owned salt works and plantations in Brazil, and manufacturing facilities in Portugal.

But the new financial institutions made it easier for more people to create companies, and reduced the cost of forming a company. The best known example of the 19th century was probably the Compagnie du Suez, founded by the Frenchman Ferdinand de Lessups to build the Suez Canal, using capital raised from the Egyptian government and thousands of individual French invesotrs.

Finally, the growth of the world population contributed to the change in a number of ways. Not only did it provide more workers and consumers, but it also created conditions of rural overcrowding that forced large numbers of people to move to new locations. In the Atlantic economy, that meant an increase in the number of Europeans who were willing to travel overseas as traders or colonists. It also meant an increase in European exports of foodstuffs to feed the growing urban populations.

Technological innovation

There is a long list of inventions in the 18th century that affected the Atlantic economy. First, the invention of reliable compact steam engines made it possible to operate mines at deeper levels than ever before. (Later, after 1815, steam engines began to reduce the cost of sea transportation to all parts of the world, and by the 1830s they began to reduce the cost of land transportation as well.)

Innovations in ship design--notably the "clipper ship"--sped up sea transportation around the world. That made it possible to trade in more fragile goods, and allowed traders to make more transactions within a given time period.

As of 1800, the major medical advances that allowed Europeans to go inland in Africa had not yet been made. Nevertheless, some progress had been made on the understanding of the relationship between nutrition and disease that made it possible for sailors to survive long sea voyages.

The invention of the system of maufacturing with interchangeable parts greatly reduced the cost of maufactured goods for the Atlantic trade. In particular, the price of cloth and guns made in Europe dropped dramatically, making them even more profitable for traders who dealt with non-Europeans.

As new manufacturing processes became popular, they increased the demand for raw materials. In particular, vegetable oils were used to lubricate machinery and as ingredients in cosmetics and other consumer goods. Natural fibers, especially cotton, were needed to satisfy the demand of newly mechanized textile factories.

Free trade and protectionism

With all of the growth in trade, government trade policies changed as well. For both European and African governments, long distance trade provided a fragile source of revenue, since too much government interference could lead to a reduction in trade. But European governments felt a great deal of pressure to intervene in trade, thanks to the costly wars of the 17th-18th centuries and the increased demand for social services that resulted from rural migration to the cities. African governments felt the same kind of pressures thanks to the threat of invasion by neighboring slaving states (equipped with guns made in Europe) and from challenges to their authority issued by renegade nobility, religious reform movements, and increasingly powerful local traders.

During the 17th-18th century, European governments generally attempted to organize the Atlantic trade by granting royal charters to their citizens that guaranteed them a monopoly on trade within a region, in exchange for a payment to the government. These chartered companies left behind a large quantity of documents that suggest that despite frequent bankruptcies, they enriched their members and occasionally the government as well. However, chartered companies provoked resistance from those who were not allowed to participate--notably African merchants, foreign European merchants, and the offspring of Afro-European unions who operated as "middlemen" in the trade. By 1800, the successful charter companies operated as mini- governments, complete with their own armies and bureaucracies, while the unsuccessful ones faced widespread encroachment on their monopolies.

The Slave Trade and Abolition

On of the byproducts of the European Enlightenment was a new wave of religious innovation. It took many forms, but one was the search for universal spiritual truths. In the course of that search, a number of Europeans deduced that African slaves were just as human as Europeans, and consequently, slavery was an immoral act.

This line of thought had several practical consequences. First, missionary societies made efforts to educate Africans in European Christinaity so that they too might be "saved." Second, anti-slavery activists (called "Abolitionists") pressured their governments to end the slave trade. Many books, pamphlets and speaking tours by former slaves and Christian missionaries popularized these ideas, especially in England.

None of this was sufficient to convince governments to cease their support for an enormously lucrative form of trade, but it prepared the way by encouraging a debate on slavery. The abolition of slavery came about after governments found it to be in their interest.