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The Spice Traders, the various "East India Companies," took over an existing system where the ruler of the country, e.g. Bandam, where the spice, e.g., nutmeg, grew already held the growers of the spice in economic peonage.  They replaced the ruler with themselves and kept the local system intact.

This resulted in the very nice, for the "East India Companies," situation where they sold the spice in Europe at a 1,000% to 4,000% percent mark-up over cost (purchase, shipping, etc.,) took some of the money and shipped it to, e.g., Bandam, where they paid themselves for the nutmegs they, effectively, stole from the growers.  

Part of the money was used to purchase tea, porcelain, lacquer ware, and other products from the Chinese merchants who arrived at Bandam to purchase nutmegs.  (For instance)  Of those goods, porcelain was the most lucrative; the upper crust went bananas over porcelain ware and would pay through the nose to acquire examples, an exact example of Veblen's conspicuous consumption for exactly the reasons he presented.

One reason the trading companies were able to do this because the European economy was on the up and up and able to support increased manufacturing of goods beyond local demand since the large trading companies could fill their ships with European manufactured goods and sell them in their colonies because the locals there weren't permitted to produce, as they had before, for their local market.

With European manufactured goods being shipped overseas and the steady increase of the amount of silver sloshing around in Europe due to the silver mining the Hartz mountains, the silver strike near Joachimsthal in Bohemia, and the silver flowing from the Spanish mines in the Latin and South Americas the total amount of silver being bid against a much slower rise in available goods led to a slow decline of the former versus the latter.

The supply of gold increased at a much slower rate and, thus, shared in the general price (in silver) rise.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Mon Apr 11th, 2011 at 02:57:55 PM EST
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