India and China were the economic power houses of the medieval period. In fact , if we travel back into the past, we will find that the world of today is surprisingly similar to the ancient world, as explained in this post. So how did the situation reverse in the later centuries?How did the two countries became so poor in the later centuries? To answer this question, we need to travel to 16th century in time and to a small region in Europe known as Holland. Holland mind you, was not a country then, but a collection of city states who came under a rather crude constitution. If you peruse the history of world, you will notice that sometimes an idea germinates in one small region but ends up changing the entire face of humanity. Wheel, fire, language and so on.. come to my mind from the ancient time. An equally important idea seeded in Holland. For, in Holland of the medieval times, the seeds of what we now call as the modern economy, were sown. The idea of a highly skilled worker, the equivalent of a techie working in Facebook or Google today, became successful in Holland. If skills like big data and AI are the hottest skills of today, the skills of yonder time were more in the lines of deep sea fishing and tannery but the difference ended there. The highly skilled were paid according to the market just as today and more importantly, they had the freedom to chose their employer. Holland also popularized the concept of municipal bonds, where the government accepts money from public and returns it back with interest after a time. Interestingly,the money so collected was utilized to execute massive public infrastructure projects, instead of say, raise an army for invasion as was the norm at those times. A free labour market, a vibrant economy riding on the back of the fiscally solvent city administration , to top it all, Holland instituted transparent land registration. These steps enabled most people of Holland to rise above the hard ,hand to mouth existence carried out by the majority of medieval world population.
Almost every one in Holland had a surplus , which they invested into companies. The companies then increasingly looked for higher profits so they could provide a decent return on the investment made by the citizens. Naturally, these companies turned their sights on trade which is the only avenue that provided an opportunity to realize good profits, despite the equally potent risk and dangers involved. Specifically, one such trade caught the eye of the enterprising Holland merchants who formed a company to undertake an activity of this high importance.This was the trade with the orient or more specifically, trade with the "hind" and "chin" , or India and China as they are called now. So how did an obscure group of traders from a still more obscure land beat the might of China and India and reverse the trade flow? We will see about this in the next post. Until then.