Today, people around the world enjoy the benefits of modern civilization. Modern developments—including mass production and mass consumption based on capitalism, information and communication technologies, automobiles, trains, airplanes, and modern medicine—have greatly improved the quality of human life and connected the world more closely than ever before.
How, then, did modern civilization develop? One of its important starting points can be found in the European Age of Exploration. The Age of Exploration began in earnest in the 15th century, led primarily by Portugal in Southern Europe.
This raises an important question: "Why did the Age of Exploration begin in Europe rather than in Asia or the Middle East?"
One of the driving forces behind Europe's Age of Exploration was, paradoxically, its relative "poverty" and "desperation."
In the premodern era, Europe generally had relatively low agricultural productivity, and compared with the major agricultural regions of Asia, its capacity to support large populations was more limited. Northwestern Europe, in particular, was located at relatively high latitudes and had lower temperatures, resulting in shorter growing seasons. It was also difficult to achieve the high yields per unit of land associated with rice-based agriculture in parts of East and South Asia.
These environmental conditions were among the factors that constrained agricultural productivity and population growth in premodern Europe.
In addition, Europeans mainly cultivated field crops such as wheat and barley. Because continuous cultivation depleted soil fertility, it was difficult to farm the same land every year. Therefore, some farmland had to be left fallow for a certain period to restore soil fertility (Hamerow et al., 2025). This agricultural practice limited both the efficiency of land use and overall agricultural productivity.
Today, advances in agricultural technology have made European agriculture highly productive. In the past, however, agricultural productivity was relatively low due to technological limitations. As a result, the land had a limited capacity to support large populations, and Europe could sustain relatively fewer people than some of the densely populated agricultural regions of Asia.
These relatively unfavorable land and climatic conditions, combined with low agricultural productivity, intensified food shortages and population pressures in Europe. In particular, as Europe recovered from the demographic shock of the Black Death and its population began to grow again during the fifteenth century, the existing supply of limited agricultural land increasingly struggled to support the expanding population. These pressures became one of the factors that encouraged Europeans to expand overseas.
Europe Under Pressure from Islamic Powers
In the 14th and 15th centuries, Europe faced growing threats and pressure from Islamic powers. In the early 8th century, Muslim forces advanced through North Africa into the Iberian Peninsula and subsequently ruled large parts of the peninsula for centuries.
Over time, the Christian kingdoms of the Iberian Peninsula gradually pushed Muslim rule southward through the Reconquista. However, even in the 14th and 15th centuries, the Nasrid Kingdom of Granada, a Muslim kingdom, remained in southern Iberia. In 1492, Granada was conquered by the Catholic Monarchs of Spain, effectively bringing Muslim rule on the Iberian Peninsula to an end.
Meanwhile, from the east, the Ottoman Empire, which had expanded into the eastern Mediterranean and the Balkans, was placing increasing pressure on Europe. The Ottomans steadily expanded their territory by conquering various parts of the Balkan Peninsula, and finally captured Constantinople in 1453, bringing the Eastern Roman Empire (Byzantine Empire) to an end.
1453: The Fall of Constantinople
With the fall of the Eastern Roman Empire, which had served as a buffer zone defending Europe from Islamic powers in the east, Europe became more directly exposed to the military expansion of the Ottoman Empire.
However, an important driving force behind the beginning of the Age of Exploration in Europe was not so much the military threat posed by Islamic powers as the enormous economic profits that could be gained through trade with Asia.
For centuries, Europeans had obtained valuable Asian goods such as silk, porcelain, and spices—especially pepper—through trade centered on the eastern Mediterranean. Venetian merchants played a particularly important role in this eastern Mediterranean trade. From the 13th and 14th centuries onward, Venice and other Italian city-states prospered greatly through the expansion of Mediterranean trade and commerce. This economic prosperity became one of the important foundations for the development of the Renaissance in Italy.
The Prosperous Port of Venice During the Renaissance
At the time, Chinese silk was one of the most highly prized luxury goods among European royalty, nobles, and other members of the upper classes. Spices, including pepper, were also valuable commodities widely used to enhance the flavor and aroma of food and in the preparation of meat. In other words, Asian goods such as silk and pepper were in very high demand among Europeans.
The problem, however, was that these goods were extremely expensive. Spices produced in India and Southeast Asia, as well as silk produced in China and other parts of Asia, had to pass through numerous regional merchants and intermediary trade networks before reaching European markets. Transportation costs, customs duties, commercial risks, and the profits of middlemen were added at each stage of the journey, causing prices to rise significantly by the time these goods reached European markets.
Clothing of European Nobles: Mainly Made of Chinese Silk
In the past, refrigeration and freezing technologies did not exist, and meat-processing techniques were still underdeveloped. As a result, meat dishes could often have strong and unpleasant odors. For Europeans, who consumed relatively large amounts of meat, this was a significant problem. One of the most important spices used to mask and improve the unpleasant smell and flavor of meat was pepper.
Therefore, for European merchants, discovering a new maritime trade route that would allow them to trade directly with Asia without relying on intermediaries represented an opportunity to earn enormous economic profits. This economic motivation became one of the major driving forces behind Portugal and Spain's active efforts to discover new sea routes.
Portugal: The First European Country to Embark on Maritime Exploration
The first European country to seriously pursue a maritime route to Asia was Portugal, located at the western edge of the Iberian Peninsula. At the time, Portugal was a small country with a population of only about one million. However, its relatively stable political situation allowed it to concentrate on maritime exploration earlier than other European powers.
One of the most prominent figures who actively supported and promoted Portuguese maritime exploration during this period was Prince Henry the Navigator.
Prince Henry the Navigator of Portugal
On August 21, 1415, Prince Henry sent the Portuguese fleet southward to capture Ceuta in North Africa as an initial test of overseas expansion.
After the capture of Ceuta, which was then under Muslim rule, Prince Henry gained access to the advanced navigational techniques and geographical knowledge of the Islamic world.
Islamic Merchant Ship with Triangular Sails
As can be seen in the illustration above, Muslim merchant ships had a distinctive feature: triangular sails.
"When a triangular sail is positioned at an angle to the wind and curves outward, a difference in air pressure is created between the two sides of the sail. Air moves faster along the curved side of the sail, resulting in lower pressure, while pressure remains higher on the opposite side. This pressure difference generates a force that helps propel the vessel forward, allowing it to make progress even when sailing against the wind."
- Anderson, B. D. (2008)
Triangular sails used on Muslim merchant ships made it possible to sail at an angle to the wind and advance in a zigzag pattern even against headwinds, making them particularly advantageous for long-distance voyages.
In contrast, Portuguese vessels at the time relied primarily on square sails, which limited their ability to sail effectively against the wind. Portugal therefore actively adopted triangular sails and improved ship designs, enabling vessels to maneuver more freely under unfavorable wind conditions.
These technological developments later became an important foundation for Portugal's long-distance oceanic voyages.
The Portuguese Caravel, Developed with Influence from Islamic Merchant Ships
At the time, Muslims possessed more advanced navigational skills than Europeans, but they had little incentive to seek global maritime dominance. The Islamic world already had access to valuable goods such as pepper, silk, and porcelain and enjoyed prosperous trading networks, so it did not face the same degree of economic scarcity and urgency.
In contrast, driven by a greater sense of scarcity and urgency, Prince Henry of Portugal established a maritime research center (a kind of early think tank) in the Sagres region at the southern tip of Portugal.
Sagres Fortress: The Starting Point of Portugal’s Age of Exploration
Sagres, Located at the Southern Tip of Portugal
He recruited talented explorers, geographers, shipbuilders, civil engineers, navigators, and astronomers from various parts of the world to conduct maritime research. Experts were encouraged to freely exchange ideas and conduct research, and it is said that even when their efforts failed, they continued to receive support until they eventually succeeded.
With the help of these experts, the Portuguese further developed navigational technologies by making use of the Chinese compass and improving sailing vessels influenced by Islamic triangular sails. They also applied scientific knowledge from mathematics, astronomy, and geography, gradually developing increasingly sophisticated navigational techniques.
The Sagres Maritime Research Center in the 15th Century
As Portuguese navigational techniques became increasingly advanced, Portuguese explorers began to venture into the largely unknown waters of the South Atlantic and systematically explore the western coast of Africa. In 1434, the Portuguese explorer Gil Eanes successfully sailed beyond Cape Bojador on the West African coast, which had previously been regarded by many Europeans as a practical limit to navigation.
Portuguese explorers then continued southward along the West African coast and eventually reached the region around the Senegal River. By the mid-15th century, they had discovered the Cape Verde Islands. The islands subsequently developed into an important base for Portuguese Atlantic navigation and trade and later served as a strategic stepping stone for Portugal’s expansion across the Atlantic, including toward Brazil.
Portuguese explorers continued sailing southward along the west coast of Africa, eventually reaching the Gulf of Guinea. Through trade with this region, they gained access to a variety of valuable commodities, including ivory, gold, and spices.
After Prince Henry died in 1460, King John II of Portugal actively continued the country’s maritime exploration and promoted voyages toward the southern tip of Africa. During this period, the Portuguese explorer Bartolomeu Dias set sail with three ships toward the southern end of the African continent. Along the way, his fleet encountered a severe storm and was driven off course for nearly two weeks before finally reaching land.
Dias subsequently confirmed that it was possible to sail around the southern tip of Africa and called it the “Cape of Storms.” However, King John II of Portugal renamed it the “Cape of Good Hope,” expressing his hope that this route would open a new sea passage to India.
Spain’s Challenge
As Portugal discovered the Cape of Good Hope and began bringing valuable commodities such as ivory, gold, and spices from Africa, neighboring Spain began to envy Portugal’s growing wealth and maritime success.
When Spain decided to embark on maritime exploration in an effort to catch up with Portugal, one of the most ambitious figures to step forward was the Italian-born explorer Christopher Columbus.
Christopher Columbus (1451–1506)
Originally, Christopher Columbus first sought financial support from King John II of Portugal. He proposed reaching Asia by sailing westward across the Atlantic Ocean rather than following the route around the African continent.
However, Columbus not only underestimated the actual size of the Earth but also believed that the Asian continent extended much farther east than it actually did. As a result, he mistakenly concluded that by sailing westward from Europe, he could reach Asia within a relatively short distance.
Portugal, on the other hand, had been steadily accumulating knowledge of astronomy, cartography, and navigation, as well as practical data gathered from actual voyages, since the time of Prince Henry the Navigator, through Sagres and other maritime centers. Based on this accumulated knowledge and experience, Portuguese navigational experts had a more realistic understanding than Columbus of the Earth’s size and the distances involved in crossing the Atlantic.
Portuguese experts therefore concluded that Columbus had greatly underestimated the distance of his proposed westward route, and King John II considered the plan too risky and rejected his proposal.
Columbus then traveled to neighboring Spain and presented his plan to the Spanish Crown. However, because such an expedition required substantial resources and manpower, the Spanish monarchy did not immediately accept his proposal. Columbus spent years trying to persuade the Spanish court, and finally, in 1492, he secured the support of Queen Isabella I of Castile and King Ferdinand II of Aragon, enabling him to embark on his voyage across the Atlantic.
Under the Capitulations of Santa Fe, an agreement between Columbus and the Spanish Crown, Columbus was granted titles such as Admiral and Governor of the territories he would discover, along with the right to receive a share of the profits generated through trade in those regions.
With this agreement in place, Columbus’s historic voyage across the Atlantic began.
On August 3, 1492, with the support of the Spanish Crown, Christopher Columbus set sail westward across the Atlantic Ocean with three ships: the Santa María, Pinta, and Niña.
At the time, Europeans had considerable fear of the unknown Atlantic Ocean. However, it was not generally believed that the Earth was flat or shaped like a rectangular box and that ships sailing continuously westward would eventually fall off the edge of the world. Since the time of ancient Greece, the spherical shape of the Earth had been widely accepted among educated Europeans. The central disagreement between Columbus and contemporary scholars was therefore not about the shape of the Earth, but rather its size and the distance to Asia.
As Columbus’s fleet continued across the Atlantic without sighting land for an extended period, anxiety and dissatisfaction among the crew gradually increased. As the voyage lasted longer than expected, concerns grew over food and drinking water supplies and whether they would be able to return safely. Eventually, some crew members strongly urged Columbus to abandon the voyage and turn back.
According to historical accounts, Columbus persuaded his crew to continue the voyage, and at dawn on October 12, 1492, they finally sighted land.
The first land reached by Columbus and his crew is generally believed to have been an island in the Bahamas, located east of present-day Florida. Columbus named the island San Salvador.
Columbus believed that he had reached the Indies and therefore regarded the people living on the islands as Indians. However, he had not reached India or Asia; he had arrived in the Americas, and the people he encountered were Indigenous peoples of the Americas.
Columbus returned to Spain with several Indigenous people aboard his ships, and Queen Isabella I and King Ferdinand II of Spain reportedly welcomed his return with great enthusiasm and rewarded him for his achievement.
In fact, the lands Columbus had reached were not India, nor had he obtained the large quantities of spices he had originally hoped to find. Nevertheless, Spain subsequently conquered vast territories in the Americas and established colonies there, while Portugal gained control over the territory corresponding to present-day Brazil under the Treaty of Tordesillas (1494).
Spain later acquired enormous quantities of gold and silver from the Americas. Particularly during the 16th century, large amounts of precious metals extracted from mines in the New World, including those in Mexico and Peru, flowed into Spain, enabling the Spanish Empire to accumulate immense wealth.
Columbus’s Egg
However, some people began to belittle Columbus. They argued that he was receiving far too much praise simply for sailing west across the Atlantic and discovering the Americas by sheer luck.
In response, Columbus told those who mocked him, “I will show you how to make an egg stand upright.” Since an egg has a rounded shape, it is naturally difficult to make it stand on its end.
The people sarcastically remarked, “Perhaps Columbus learned some magic in the New World?” and watched closely to see what he would do.
Columbus then gently cracked one end of the egg and stood it upright. When the others saw this, they protested, “If that is how you do it, anyone could have done that.”
Columbus replied, “Anyone can imitate something after seeing how it is done, but being the first to attempt it is the difficult part.”
According to the famous story, the people were embarrassed by his response and stopped criticizing him.
Vasco da Gama of Portugal Finally Reaches India
In May 1498, a Portuguese fleet led by the explorer Vasco da Gama finally arrived at Calicut (present-day Kozhikode) in India. It had been approximately ten months since the fleet departed from Portugal.
1498: Vasco da Gama Arrives in Calicut, India
However, the people of Calicut did not give Vasco da Gama a particularly warm welcome. At the time, Muslim merchants already exercised considerable influence over Indian Ocean trade in the region, and they were wary of the arrival of the Portuguese as new competitors. In particular, opposition from Muslim merchants, combined with the limited value and quantity of the trade goods brought by the Portuguese, made it difficult for da Gama to purchase as many spices as he had hoped.
Eventually, Vasco da Gama stayed in Calicut for about three months before returning to Portugal with a relatively small quantity of spices and other goods. Although the amount of spices obtained during his first voyage was limited, spices commanded extremely high prices in European markets. The voyage therefore demonstrated the enormous economic potential of a direct maritime trade route between Europe and India.
According to Disney (2009, p. 125), when Vasco da Gama returned from his first voyage to India in 1499, the expedition generated returns amounting to approximately 60 times its total cost (6,000%).
As trade between Portugal and India expanded, Portuguese maritime expansion intensified as more merchants and adventurers sought enormous profits. The Portuguese sailed farther east from India into Southeast Asia, and in 1511, they captured Malacca, securing one of the most important strategic centers of maritime trade between East and West.
Portuguese expeditions then continued onward to the Moluccas (the Spice Islands), one of the world’s major sources of valuable spices. There, the Portuguese gained direct access to and began trading spices such as cloves and nutmeg.
The Portuguese later reached Japan in 1543, and in 1557, they secured an important base for trade with China after receiving permission from the Ming authorities to reside and conduct commercial activities in Macao. Through Portuguese merchants and missionaries, matchlock firearms and Christianity (Catholicism) were introduced to Japan, along with frying techniques that influenced Japanese culinary culture.
In particular, in 1543, Portuguese traders arrived on the Japanese island of Tanegashima, introducing matchlock firearms to Japan. The Japanese soon began copying these weapons and producing their own matchlock guns on a large scale.
The widespread adoption of firearms significantly transformed Japanese warfare. It also became an important factor that enabled Japanese forces to deploy large numbers of matchlock-armed troops during their invasions of Korea in the Imjin War (1592–1598).
Japanese Matchlock Infantry
Differences Between Spanish and Portuguese Colonial Expansion
After Spain and Portugal signed the Treaty of Tordesillas on June 7, 1494, Spain focused primarily on conquering and colonizing the Americas, while Portugal concentrated on expanding toward India and Asia via Africa.
In the New World, there was a significant technological gap in military capabilities compared with Europe, particularly in the use of iron weapons, gunpowder weapons, and horses. The Maya, Aztec, and Inca civilizations had highly developed cities and sophisticated political and social systems, but they did not use iron weapons or tools.
Although some regions made use of metals such as copper and bronze, they did not develop an iron-based weapons system comparable to that of contemporary Europe.
In addition to this technological gap in military capabilities, several other factors—including Eurasian diseases such as smallpox, political conflicts among Indigenous groups, and alliances between the Spanish and Indigenous forces—combined to enable Spain to conquer the Aztec and Inca Empires with relatively small numbers of Spanish troops and eventually colonize vast areas of the Americas.
Spain subsequently acquired enormous quantities of gold and silver through the development of mines in the New World. In particular, from the mid-16th century onward, large-scale silver mines such as Potosí were extensively developed, resulting in massive quantities of silver flowing into Spain and the broader European economy.
This influx of precious metals became an important economic foundation for Spain’s rise as one of the major European powers of the 16th century.
In contrast, Portugal expanded into the Old World, including Africa and Asia, where powerful states and well-established trade networks already existed. As a result, rather than directly colonizing vast territories, Portugal generally adopted a strategy of securing strategic ports and trading posts along major maritime trade routes.
Through important commercial centers such as Goa and Calicut in India, Macao in China, and Nagasaki in Japan, Portuguese merchants traded valuable commodities including spices, silver, porcelain, and silk, transporting them across their maritime networks and ultimately to European markets for substantial profits.
Based on this extensive maritime trading network, Portugal emerged as one of the world’s leading maritime powers in the 16th century.
One of the important reasons why Portugal and Spain were able to continue their maritime exploration was that overseas voyages, trade, and colonial expansion offered opportunities to generate enormous economic profits.
In contrast, the Ming Dynasty launched large-scale maritime expeditions earlier than the Europeans, but these voyages ultimately came to an end because they did not develop into a system that generated sustained economic returns for the state. Between 1405 and 1433, the seven voyages led by Zheng He mobilized fleets of extraordinary scale, even when compared with the European ocean-going fleets of the period.
Zheng He’s fleets included numerous large vessels. Compared with the ships used by Christopher Columbus for his Atlantic crossing in 1492, Zheng He’s expeditions were overwhelmingly larger in terms of the overall scale of the fleet.
Zheng He’s flagship, the Treasure Ship (Baochuan, 寶船), is traditionally described as an enormous sailing vessel measuring approximately 120 meters in length and 45 meters in width. However, the actual size of these massive treasure ships remains a subject of scholarly debate. Some modern studies estimate that the largest treasure ships may actually have been around 60–76 meters long, with a displacement of approximately 2,000–4,000 tons (Church, 2005). During Zheng He’s first voyage in 1405, numerous vessels were mobilized, including 62 large treasure ships, with a total expeditionary force of approximately 27,800 people.
In contrast, the Santa María, Christopher Columbus’s flagship during his Atlantic crossing, is estimated to have been approximately 20–30 meters long, with a displacement of around 100–150 tons. In 1492, Columbus’s fleet consisted of just three ships—the Santa María, Niña, and Pinta—and approximately 90 crew members.
Therefore, although the exact size of an individual treasure ship remains a matter of debate, there is little doubt that, in terms of the number of ships and personnel mobilized, Zheng He’s fleet was overwhelmingly larger than that of Columbus.
Zheng He’s fleet loaded vast quantities of food and drinking water aboard its ships for long-distance ocean voyages. Historical accounts suggest that the fleet carried beans that could be stored for long periods and sprouted them during the voyage to consume as bean sprouts (Loh, 2018). Consuming such fresh food may have helped replenish nutrients that were often lacking during prolonged voyages and may have contributed to the prevention of scurvy, a disease caused by vitamin C deficiency.
Beginning in 1405, approximately 80–90 years before Vasco da Gama’s voyages, Zheng He’s fleets sailed into the Indian Ocean, traveling through Southeast Asia and India and reaching the Persian Gulf, the Arabian Peninsula, and the coast of East Africa. During later expeditions, the fleets reached areas corresponding to present-day Somalia and Kenya, establishing contact with the extensive trading networks of the Indian Ocean.
.png)
However, the Ming Dynasty’s maritime expeditions did not continue for long. Zheng He’s large-scale voyages required enormous financial resources, while the economic returns they generated were not sufficient to continuously cover the costs of the expeditions. This was largely because Zheng He’s voyages were not primarily commercial expeditions aimed at maximizing economic profits. Rather, they had strong political and diplomatic objectives, including demonstrating the authority and prestige of the Ming emperor and expanding tributary and diplomatic relations with surrounding states.
At the time, the Ming Dynasty had a large population, vast territory, and considerable climatic diversity across its regions. It produced a wide variety of valuable goods domestically, including silk, porcelain, and tea, and already maintained active trade with Southeast Asia and other neighboring regions.
Therefore, unlike European states, the Ming Dynasty had relatively little economic need to discover entirely new long-distance maritime routes in order to obtain expensive Asian commodities.
In addition, China was already obtaining spices and various other foreign goods through the established trade networks of Southeast Asia and the Indian Ocean. From the perspective of the Ming court, therefore, there was limited economic incentive to continue investing enormous state resources in repeatedly dispatching large-scale fleets.
Ultimately, the Ming Dynasty’s decision to discontinue its maritime expeditions resulted from a combination of factors, including the enormous cost of the voyages, limited financial returns, the need to respond militarily to Mongol threats along the northern frontier, and political changes within the imperial court. Because the Ming Dynasty already possessed a vast domestic market and a strong productive base, it also faced relatively less economic urgency to discover new overseas trade routes than European states did.
In contrast, European powers such as Portugal and Spain had strong economic incentives to gain direct access to valuable Asian commodities such as spices and silk. If they could discover new maritime routes and trade directly with Asia without relying on intermediaries, they could potentially earn enormous profits. The expectation of such economic gains, combined with the perceived need to establish new trade routes, became one of the major driving forces behind European maritime expansion.
Later, northwestern European powers such as the Netherlands, England, and France followed Portugal and Spain in actively expanding overseas. They established trading posts and colonies around the world and expanded their maritime trade networks, gradually emerging as dominant powers in global maritime affairs.
The Age of Exploration Leads to the Development of Capitalism
The spice trade required enormous amounts of capital. Merchants needed multiple ships and large crews to operate them, while long-distance voyages involved substantial expenses for wages, ship construction and maintenance, provisions, and other supplies.
Royal families, nobles, and wealthy merchants could use their own capital to organize fleets for the spice trade, but ordinary merchants with limited financial resources found it difficult to participate independently in such costly long-distance ventures. If the enormous profits generated by commerce and overseas trade had been monopolized solely by royal families, nobles, and a small number of wealthy merchants, the broader accumulation of capital and the growth of commercial capitalism would have been more limited.
However, during the 16th century, European merchants increasingly began to pool their capital and invest jointly in maritime trade, sharing both the profits and the risks involved. These methods of joint investment and risk sharing helped lay the foundations for new forms of business organization, including joint-stock companies.
Together with the enormous amounts of commercial capital accumulated through the Age of Exploration, these institutional developments became an important foundation for the growth of modern capitalism.
Merchants had various choices. Hiring an experienced captain increased the likelihood of a successful spice-trading voyage, but the captain’s higher wages reduced the profits available to investors (Low Risk / Low Return). Hiring a less experienced captain lowered the chances of success, but the lower labor costs meant that investors could earn greater profits if the voyage succeeded (High Risk / High Return).
Once the captain and crew had been selected, investors could receive certificates representing their ownership shares according to the amount of capital they had invested. Because long-distance maritime trading voyages could take at least one to two years, the period before investors could recover their capital was often very long. As a result, if an investor died before the trading ship returned or suddenly needed cash, systems gradually developed that allowed investment shares to be transferred to another person or passed on through inheritance.
These practices of dividing and transferring investment shares and sharing financial risks among multiple investors later became one of the important foundations for the development of stocks and securities markets in Europe.
Securities Used During the Age of Exploration
This system of joint investment and divided ownership shares became one of the early foundations for the development of the modern joint-stock company. These investment practices later evolved further, eventually giving rise to large-scale joint-stock companies such as the Dutch East India Company and the English East India Company in the 17th century.
As joint-stock companies developed, they made it possible to combine even the relatively small amounts of capital held by ordinary people and small- and medium-sized merchants. This enabled European societies to raise enormous amounts of capital and contributed to the rapid growth of their economies and capital markets. In particular, the practice of pooling capital from large numbers of investors to finance major overseas trading ventures and businesses, while sharing both risks and profits, became an important institutional foundation for the development of modern capitalism.
Moreover, the spice trade required ships to cross stormy oceans and remain at sea for extended periods, creating considerable risks of shipwreck and cargo loss. If a ship sank, merchants could lose their entire investment at once. They therefore needed to develop new ways to spread and manage these risks.
At this point, some individuals began offering merchants an arrangement: if the merchant paid them 5% of the amount invested, they would compensate the merchant for the entire insured loss if the ship sank. This type of risk-sharing arrangement became one of the early foundations of marine insurance.
With the development of marine insurance, joint-stock companies were better able to manage the uncertainty and financial risks associated with shipwrecks. By reducing the possibility that a single maritime disaster could wipe out an entire investment, insurance helped companies undertake larger commercial ventures and expand the scale of their businesses.
Marine Insurance Policy Used During the Age of Exploration
Alongside these developments, banking also expanded. Early European banking began to develop primarily in the commercial cities of northern Italy, including Venice. At first, important banking activities included safely storing merchants’ money, exchanging currencies, and facilitating payments. As commerce expanded, however, a wider range of financial services gradually developed, including deposits, loans, money transfers, and bills of exchange.
With the beginning of the Age of Exploration, long-distance trade expanded dramatically, making financial institutions capable of raising and managing large amounts of capital increasingly important. Banks accepted deposits from merchants while lending these funds to other merchants and entrepreneurs in return for interest. The development of this financial system played an important role in the growth of commerce and capitalism in Europe.
There were two major ways in which the development of banking helped accelerate the growth of European capitalism.
First, as long-distance trade expanded, increasing numbers of merchants had to travel over great distances. Carrying large quantities of heavy gold and silver coins was both dangerous and inconvenient. Merchants could therefore deposit their money with a bank or financier at their point of departure and receive financial instruments such as bills of exchange. Upon reaching their destination, they could receive payment or settle transactions through local business partners or financiers. This reduced the risks associated with physically transporting large amounts of cash.
Second, loans made it easier for merchants to obtain the capital needed to conduct business. Even merchants who lacked sufficient capital of their own could borrow money based on their credit and invest it in commercial ventures. Established merchants could also use loans to expand the scale of their businesses.
As the raising and movement of capital became easier and more efficient, liquidity increased throughout the economy. This became an important foundation for the further development of European commerce and capitalism.
In this way, European capitalism was not deliberately designed by any single person or group. Rather, it developed gradually in response to changing historical circumstances and economic needs. Many of the institutions associated with capitalism—including securities, joint-stock companies, insurance companies, and banks—also evolved in response to the practical needs created by the expansion of commerce and trade. One of the major forces that accelerated this development of European capitalism was the Age of Exploration.
As Europe’s maritime trade networks expanded across the world during the Age of Exploration, enormous quantities of goods and capital flowed into Europe, while commerce and finance grew rapidly. These transformations laid an important foundation for the subsequent development of European capitalism and the modern economy.
At the time, East Asia and the Middle East also possessed highly sophisticated and advanced civilizations. However, their political and economic environments, as well as their motivations for overseas expansion, differed from those of Europe. As a result, they did not experience the same form of large-scale maritime expansion. In Europe, by contrast, the desire to obtain valuable Asian commodities such as spices and silk directly, combined with the limitations of existing trade routes and intense competition among European states, encouraged increasingly ambitious efforts to discover new overseas routes.
Beginning with Portugal and Spain, and later followed by the Netherlands, England, and France, European states became increasingly active in overseas trade. Once it became clear that maritime expansion could generate sustained economic profits, overseas expansion accelerated further. The commercial capital accumulated through this process, together with the development of increasingly sophisticated financial institutions, provided an important foundation for the later growth of modern capitalism and industrial society.
How, then, did the expansion of commerce and the economic profits generated by the Age of Exploration contribute to the development of modern civilization?
Through the Age of Exploration, Europeans established global trade networks and experienced what is often called the Commercial Revolution, accumulating enormous amounts of capital. At the same time, the expansion of long-distance voyages and global trade stimulated advances in science and technology, including astronomy, cartography, shipbuilding, and navigation, while also bringing new knowledge and information from around the world into Europe.
Meanwhile, the Scientific Revolution unfolded mainly during the 16th and 17th centuries. Through the work of figures such as Nicolaus Copernicus, Galileo Galilei, Johannes Kepler, and Isaac Newton, modern scientific thought and the natural sciences advanced dramatically.
Along with the accumulation of scientific knowledge, a combination of factors—including capital accumulated through commerce, the development of financial institutions, expanding markets, abundant labor, and access to resources—helped create the conditions for the Industrial Revolution, which began primarily in Britain in the late 18th century.
During the Industrial Revolution, new machinery and power technologies—including spinning machines, power looms, and improved steam engines—spread rapidly. By the 19th century, steam locomotives and steamships also developed on a large scale.
These technological innovations expanded mass production and the factory system while revolutionizing transportation and logistics, ultimately giving rise to modern industrial society.
Ultimately, this can be understood as a long-term historical process:
Age of Exploration → Expansion of Global Trade → Commercial Revolution and Capital Accumulation → Development of Finance and Markets → Advances in Science, Technology, and Industry → Industrial Revolution → Modern Industrial Civilization
Agricultural Revolution → Commercial Revolution → Scientific Revolution → Industrial Revolution
- Agricultural Revolution (increase in agricultural surpluses) ⇒
- Commercial Revolution (growth of entrepreneurs and capitalists and accumulation of capital) ⇒ - Scientific Revolution (development of modern science) ⇒
- Industrial Revolution (development of steam engines, factory machinery, railways, steamships, and the establishment of mass production)
Human societies went through these various stages of economic and social transformation, eventually developing into modern industrial societies and enabling people today to enjoy many of the benefits of modern civilization.
As advances in agriculture increased surplus production, people began exchanging or selling excess food and other goods, encouraging the development of commerce and markets. As commerce became increasingly sophisticated, long-distance trade and financial activities expanded, while entrepreneurs and capitalists grew in importance and accumulated substantial amounts of capital.
During the 16th and 17th centuries, Europe experienced the Scientific Revolution, marked by major advances in the natural sciences, particularly astronomy and physics. Scientific and technological knowledge continued to accumulate and spread, and when these developments combined with the growth of capital and productive activities, they became one of the important intellectual and technological foundations for the Industrial Revolution, which began in Britain in the late 18th century (Mokyr, 2002; Allen, 2009).
As technologies such as steam engines, spinning machines, and power looms were introduced into industry, productivity increased dramatically. During the 19th century, the development of railways, steam locomotives, and steamships further transformed transportation and commerce, ushering in an era of mass production and mass distribution.
Civilizations around the world developed agriculture and generated surplus production, which provided the foundation for the growth of cities, markets, and long-distance trade. China, India, the Middle East, and other regions also developed highly sophisticated systems of commerce, finance, science, and technology. However, transforming these developments into modern capitalism and ultimately an Industrial Revolution was by no means an easy or inevitable process.
In Europe, however, the Age of Exploration helped create global maritime trade networks, while long-distance commerce connecting Asia, the Americas, Africa, and Europe expanded rapidly. During this process, enormous amounts of commercial capital were accumulated, while financial institutions such as banks, insurance, joint-stock companies, and securities markets developed further. These changes helped accelerate the Commercial Revolution and the growth of modern capitalism.
These economic transformations, combined with a variety of other factors—including the Scientific Revolution, technological innovation, competition among states, property rights and financial institutions, and abundant energy resources—eventually helped create the conditions for the Industrial Revolution in Europe. In this sense, the Age of Exploration and the Commercial Revolution can be regarded as important links in Europe’s long-term transition toward modern capitalism and industrial society.
References
Allen, R. C. (2009). The British Industrial Revolution in Global Perspective. Cambridge University Press.
Anderson, B. D. (2008). “The Physics of Sailing.” Physics Today, 61(2), 38–43.
Disney, A. R. (2009). The Portuguese Empire, 1415–1825 (Vol. 1). Cambridge University Press.
Hamerow, H., Bogaard, A., Charles, M., et al. (2025). Feeding Medieval England: A Long ‘Agricultural Revolution’, 700–1300. Oxford University Press.
Loh, P. D. (2018, May 4). Sprouting ahead of trends. China Daily Europe.
Mokyr, J. (2002). The Gifts of Athena: Historical Origins of the Knowledge Economy. Princeton University Press.
.png)
.png)
.png)
Comments
Post a Comment