Sapiens: A Brief History of Humankind - Yuval Noah Harari Page 0,133
until merchants and bankers became the ruling elite. The European conquest of the world was increasingly financed through credit rather than taxes, and was increasingly directed by capitalists whose main ambition was to receive maximum returns on their investments. The empires built by bankers and merchants in frock coats and top hats defeated the empires built by kings and noblemen in gold clothes and shining armour. The mercantile empires were simply much shrewder in financing their conquests. Nobody wants to pay taxes, but everyone is happy to invest.
In 1484 Christopher Columbus approached the king of Portugal with the proposal that he finance a fleet that would sail westward to find a new trade route to East Asia. Such explorations were a very risky and costly business. A lot of money was needed in order to build ships, buy supplies, and pay sailors and soldiers – and there was no guarantee that the investment would yield a return. The king of Portugal declined.
Like a present-day start-up entrepreneur, Columbus did not give up. He pitched his idea to other potential investors in Italy, France, England, and again in Portugal. Each time he was rejected. He then tried his luck with Ferdinand and Isabella, rulers of newly united Spain. He took on some experienced lobbyists, and with their help he managed to convince Queen Isabella to invest. As every school-child knows, Isabella hit the jackpot. Columbus’ discoveries enabled the Spaniards to conquer America, where they established gold and silver mines as well as sugar and tobacco plantations that enriched the Spanish kings, bankers and merchants beyond their wildest dreams.
A hundred years later, princes and bankers were willing to extend far more credit to Columbus’ successors, and they had more capital at their disposal, thanks to the treasures reaped from America. Equally important, princes and bankers had far more trust in the potential of exploration, and were more willing to part with their money. This was the magic circle of imperial capitalism: credit financed new discoveries; discoveries led to colonies; colonies provided profits; profits built trust; and trust translated into more credit. Nurhaci and Nader Shah ran out of fuel after a few thousand kilometres. Capitalist entrepreneurs only increased their financial momentum from conquest to conquest.
But these expeditions remained chancy affairs, so credit markets nevertheless remained quite cautious. Many expeditions returned to Europe empty-handed, having discovered nothing of value. The English, for instance, wasted a lot of capital in fruitless attempts to discover a north-western passage to Asia through the Arctic. Many other expeditions didn’t return at all. Ships hit icebergs, foundered in tropical storms, or fell victim to pirates. In order to increase the number of potential investors and reduce the risk they incurred, Europeans turned to limited liability joint-stock companies. Instead of a single investor betting all his money on a single rickety ship, the joint-stock company collected money from a large number of investors, each risking only a small portion of his capital. The risks were thereby curtailed, but no cap was placed on the profits. Even a small investment in the right ship could turn you into a millionaire.
Decade by decade, western Europe witnessed the development of a sophisticated financial system that could raise large amounts of credit on short notice and put it at the disposal of private entrepreneurs and governments. This system could finance explorations and conquests far more efficiently than any kingdom or empire. The new-found power of credit can be seen in the bitter struggle between Spain and the Netherlands. In the sixteenth century, Spain was the most powerful state in Europe, holding sway over a vast global empire. It ruled much of Europe, huge chunks of North and South America, the Philippine Islands, and a string of bases along the coasts of Africa and Asia. Every year, fleets heavy with American and Asian treasures returned to the ports of Seville and Cadiz. The Netherlands was a small and windy swamp, devoid of natural resources, a small corner of the king of Spain’s dominions.
In 1568 the Dutch, who were mainly Protestant, revolted against their Catholic Spanish overlord. At first the rebels seemed to play the role of Don Quixote, courageously tilting at invincible windmills. Yet within eighty years the Dutch had not only secured their independence from Spain, but had managed to replace the Spaniards and their Portuguese allies as masters of the ocean highways, build a global Dutch empire, and become the richest state in Europe.
The secret of Dutch success was credit. The Dutch burghers,