AP European History

## Learning Outcomes

- Understand how Europe became more market-oriented between the 16th and 18th centuries
- Identify the main features of the **Commercial Revolution** and why it mattered
- Explain how **mercantilism** differed from a broader market economy
- Recall key examples including the **Bank of Amsterdam**, **Bank of England**, **VOC**, **Navigation Acts**, and **Colbert**
- Analyse continuity and change by showing what stayed agrarian and what became more commercial
- Compare Dutch and British economic development within Unit 3
- Apply this topic to AP European History causation, comparison, and continuity/change questions

## AP European History Syllabus

For the AP European History, you are expected to understand how Europe developed a market economy in the early modern period, with a focus on the following syllabus points:

- Know that Europe became increasingly market-oriented through expanding trade, finance, and production for sale
- Identify the role of the **Commercial Revolution** in changing European economic life
- Explain how **mercantilism** aimed to strengthen state power through trade regulation, bullion, and colonies
- Understand how the **Atlantic economy** shifted wealth toward Atlantic-facing states such as the Dutch Republic and Britain
- Identify the importance of **joint-stock companies**, banks, and credit in long-distance trade
- Explain how the **putting-out system** and **cottage industry** weakened guild control and expanded rural production
- Compare Dutch commercial leadership with British financial and agricultural development
- Distinguish clearly between change in economic practice and continuity in Europe’s still largely agrarian society

## Test Your Knowledge

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, look more closely at that area during your revision._

1. What is the difference between a market economy and mercantilism?
2. Why were the Dutch Republic and Britain especially important in Europe’s economic development?
3. How did the putting-out system change production before industrialization?
4. Name two financial institutions or companies that helped expand early modern trade.
5. What major continuities remained even as Europe became more commercial?

## Introduction

In Unit 3, AP European History asks you to track not just political change under absolutism and constitutionalism, but also economic change. One of the biggest developments was that Europe became more **market-oriented**. More goods were produced for sale, more people relied on trade and credit, and more rulers linked economic activity to state power.

This did not mean Europe suddenly became industrial or fully capitalist in the modern sense. Most people still farmed, most work was still done by hand, and governments heavily regulated trade. The key exam skill is to explain both sides at once: there was real economic change, but important older patterns remained.

> **Key Term: market economy**
> An economy in which production and exchange are increasingly shaped by trade, prices, profit, and supply and demand rather than only by local custom or feudal obligation.

### The Commercial Revolution and the shift toward market exchange

The broad background to this topic is the **Commercial Revolution**, roughly from the 16th to the 18th centuries. This was not one single event. It was a long expansion of trade, business methods, credit, and investment that made European economies more interconnected.

> **Key Term: Commercial Revolution**
> The expansion of European trade, banking, credit, and commercial activity from roughly the 16th to the 18th centuries.

Why did this matter? Because it changed the purpose of production. In a mainly subsistence system, families produced mainly to survive. In a more commercial system, producers increasingly aimed to sell goods for profit. That shift affected both town and countryside.

Population growth helped drive this change. More people meant more consumers. It also meant stronger demand for food, cloth, tools, and imported goods. Rising demand encouraged merchants and landowners to think in market terms: what can be sold, where, and at what profit? This is why commercialization often moved together with inflation. The **Price Revolution** raised the price of staple goods such as grain, which could hurt wage earners but often helped those who sold agricultural output.

A common exam mistake is to treat this as already being the Industrial Revolution. It was not. The Commercial Revolution came first. It created larger markets, more mobile capital, and wider habits of production for sale. Those conditions later helped industrialization.

The Atlantic economy was central here. European merchants traded manufactured goods outward and received silver, sugar, tobacco, coffee, and other raw materials from the Americas. Enslaved Africans were forced into this system, making Atlantic wealth inseparable from slavery. That point matters on the exam because AP European History rewards answers that connect prosperity to exploitation, not just innovation.

> **Key Term: Atlantic economy**
> The trade network linking Europe, Africa, and the Americas through the exchange of goods, enslaved people, and raw materials.

The effect was a shift in economic weight. Mediterranean centres remained important, but Atlantic-facing powers gained new advantages. The Dutch Republic, England/Britain, and France benefited more directly from oceanic trade than older inland systems did.

> **Test Tip:** For a continuity and change essay, do not write only about “more trade.” Add what changed in practice, such as banking, overseas companies, and rural manufacturing, and what stayed the same, such as peasant farming and state regulation.

### Mercantilism, state power, and the role of government

Students often blur together “market economy” and “mercantilism.” They are connected, but not identical. A market economy describes the broader spread of commercial exchange and profit-driven activity. **Mercantilism** describes a state policy used within that world.

> **Key Term: mercantilism**
> An early modern economic policy in which governments sought national power through a favorable balance of trade, regulation, tariffs, bullion, and colonial control.

Mercantilist rulers believed wealth and power were tied together. If a state exported more than it imported, it would gain bullion and become stronger. Colonies were useful because they could provide raw materials and buy finished goods from the mother country. Trade, therefore, was not seen as a free exchange among equals. It was part of interstate rivalry.

The French case under **Jean-Baptiste Colbert**, finance minister to **Louis XIV**, is one of the clearest examples. Colbert wanted France to rival the Dutch and English commercially. He supported domestic manufacturing, promoted luxury industries, created tariff barriers against foreign competition, and backed chartered trading companies such as the **French East India Company** in **1664**.

Colbert’s policies show both the strengths and limits of mercantilism. On the one hand, they reveal how seriously rulers took economic development. On the other hand, they show that state control could be excessive. The French East India Company never matched Dutch or English success. One reason was overregulation and limited enthusiasm from French elites for risky overseas enterprise.

England also followed mercantilist logic, especially through the **Navigation Acts** beginning in **1651**. These laws aimed to channel trade through English ships and merchants, especially at Dutch expense. This is a good AP comparison point: France used more central administrative direction under Colbert, while England combined state policy with stronger private commercial initiative.

> **Key Term: Navigation Acts**
> English laws beginning in 1651 designed to restrict trade to English ships and merchants and strengthen English commercial power.

Mercantilism also helps connect economics to Unit 3 politics. Stronger states wanted more revenue, more naval power, and more control over trade. In absolutist France, economic policy served royal centralization. In constitutional England after the **Glorious Revolution** of **1688**, Parliament and financial institutions helped create a more stable climate for investment. Same broad goal, different political framework.

This distinction matters in essays. You can argue that both absolutist and constitutional states promoted economic growth, but they often did so through different institutions.

### Dutch and British leadership in finance, trade, and production

The Dutch Republic became the leading commercial power of the 17th century. Its position in Baltic and Atlantic trade, its merchant marine, and its financial institutions made it the best example of advanced early modern commercial capitalism.

Amsterdam replaced Antwerp as the major commercial centre of northern Europe. The **Bank of Amsterdam**, founded in **1609**, helped stabilize exchange and increase commercial trust. Merchants could operate with more confidence because transactions were more reliable and capital more accessible.

> **Key Term: Bank of Amsterdam**
> A Dutch financial institution founded in 1609 that helped stabilize commercial exchange and made Amsterdam a major banking centre.

The Dutch also built powerful overseas companies. The **Dutch East India Company (VOC)**, founded in **1602**, pooled public and private investment for long-distance trade. That mattered because overseas commerce was risky and expensive. A single merchant might lose everything if a ship sank or cargo prices collapsed. A company with many investors spread risk across shareholders.

> **Key Term: joint-stock company**
> A business in which investors buy shares and share both the risks and profits of enterprise.
>
> **Key Term: Dutch East India Company (VOC)**
> A major Dutch joint-stock company founded in 1602 that became a leading vehicle for overseas trade and empire.

This is a strong causation chain for the exam:

- pooled investment created more capital
- more capital funded ships, warehouses, and trading posts
- larger commercial networks increased profits and reinvestment
- reinvestment strengthened the market economy further

The Dutch also adapted quickly. When spice profits fell because of oversupply, they turned to other goods such as tea, coffee, and textiles. That flexibility is a sign of commercial maturity.

Britain later overtook the Dutch. Why? One reason was finance tied more closely to state power. The **Bank of England**, founded in **1694**, helped the government manage public debt and borrow more effectively. This supported war, trade, and imperial competition.

> **Key Term: Bank of England**
> A central financial institution founded in 1694 that helped the British state manage debt and raise funds for war and commerce.

Britain also benefited from political stability after 1688. Lenders had more reason to trust a system in which Parliament had a stronger role and property rights seemed more secure. This is one of the best links between constitutionalism and economic development in Unit 3.

Agriculture also mattered. **Enclosure** consolidated land into private holdings and encouraged more commercial farming. It could increase efficiency and profits for landowners, but it also displaced smaller farmers.

> **Key Term: enclosure**
> The consolidation of common or small holdings into larger private farms, especially in Britain, promoting commercial agriculture while displacing some rural people.

That displacement mattered because it expanded wage labour and encouraged mobility. Some rural people entered domestic industry; later, many supplied labour to towns and factories. This is why enclosure belongs in both Unit 3 and later industrialization essays.

Production itself was also changing through the **putting-out system**.

> **Key Term: putting-out system**
> A system in which merchants supplied raw materials to rural households, collected finished goods, and sold them for profit.

This system, also called **cottage industry** or proto-industry, bypassed many guild restrictions. A merchant could deliver wool or flax to peasant households, pay them for spinning or textile work, then collect and market the finished cloth. That shifted control away from guild masters toward merchants.

> **Key Term: cottage industry**
> Home-based manufacturing by families, often producing goods for merchants and wider markets.

Why is this important? Because it shows that market development reached into the countryside. Peasant households were not only farming; many were now tied to wider commercial networks. But this did not automatically improve their lives. Merchants often gained more than producers, and rural families still faced insecurity, low pay, and dependence.

> **Test Tip:** If a question asks for comparison, Dutch examples should stress finance, Amsterdam, and the VOC. British examples should stress the Bank of England, Navigation Acts, enclosure, and the link between constitutional stability and investment.

### Continuities and changes: what AP examiners want you to show

The best AP answers do not describe this topic as a clean break from the past. Europe did develop a market economy, but unevenly and incompletely.

The biggest changes were clear:

- more production for sale rather than only subsistence
- wider use of banks, credit, and investment
- stronger Atlantic and overseas trade
- more powerful joint-stock and chartered companies
- declining relative power of guild-controlled urban production
- greater commercialization of agriculture and rural labour

But major continuities remained:

- most Europeans still lived in rural areas
- agriculture remained the main occupation
- family labour remained central
- states still intervened heavily in the economy
- manual labour still dominated production
- eastern Europe remained more tied to serfdom and manorial labour than western Europe

That last point is especially useful in high-level essays. “Europe developed a market economy” does not mean all regions changed equally. The Dutch Republic and Britain were especially commercialized. France was active but more state-directed. Eastern Europe retained stronger coercive rural systems.

A strong AP thesis might therefore argue something like this: Europe became more commercial and market-oriented through trade, finance, and new production systems, but the process remained uneven because most people still lived in agrarian societies and governments continued to regulate economic life heavily.

That kind of argument earns more than a simple statement that “trade increased.” It shows causation, comparison, and continuity/change over time.

## Key Point Checklist

_This article has covered the following key knowledge points:_

- Europe became more market-oriented between the 16th and 18th centuries through expanding trade, finance, and production for sale
- The Commercial Revolution increased trade, banking, credit, and investment across Europe
- A market economy is broader than mercantilism; mercantilism was a state policy within a growing commercial world
- Mercantilism aimed at a favorable balance of trade, bullion accumulation, and stronger state power
- Jean-Baptiste Colbert under Louis XIV is a major example of French mercantilism
- The Navigation Acts beginning in 1651 show English mercantilist policy
- The Dutch Republic led early modern commerce through Amsterdam, the Bank of Amsterdam, and the VOC
- Joint-stock companies spread risk and raised capital for long-distance trade
- Britain’s Bank of England, founded in 1694, helped link finance, public debt, and state power
- Enclosure promoted commercial agriculture in Britain but also displaced smaller farmers
- The putting-out system and cottage industry expanded rural manufacturing and weakened guild control
- Despite these changes, most Europeans still lived in agrarian societies and governments still regulated economies heavily

## Key Terms and Concepts

- market economy
- Commercial Revolution
- Atlantic economy
- mercantilism
- Navigation Acts
- Bank of Amsterdam
- joint-stock company
- Dutch East India Company (VOC)
- Bank of England
- enclosure
- putting-out system
- cottage industry


Continuities and Changes to Economic Practice and Development - Europe developed market economy