Capitalism and the profit motive.

Portugal and the motive behind exploration

In December 1487 two Portuguese ships commanded by Bartolomeu Dias (Bartholomew Diaz) were sailing south along the African coast when a storm swept them out to sea. Portugal had been exploring the African coast since its capture of the Moorish North African port of Ceuta in 1415. Dias was under orders to find the Prassum Promontorium, the southernmost tip of Africa. It was commonly believed that once he had sailed past that point he would find the mythical kingdom of the Christian king Prester John. When the storm abated Dias' immediate goal was simply to find the African coast, where he could regain his bearings. He assumed that the Prassum Promontorium was still to the south and that he only needed to sail directly east to reach the coast. By the end of January he decided to sail north. On February 3, 1488 he made landfall in what is now Mossel Bay. Without realizing it, he had rounded what would be called the Cape of Good Hope.

Hopes of finding Prester John probably never disappeared completely, but Portugal began to turn its attention to other goals. It specifically began to think of a trade route to India. On July 8, 1497, Vasco da Gama sailed from Lisbon with four ships manned by 170 seamen. He was under orders to explore the Indian Ocean and, if possible, to find a sea-route to India. The voyage had been in the planning stage since 1495. On November 4 his fleet had reached the Cape of Good Hope. He then sailed north up the East coast of Africa to Malindi, and from there, across the Indian Ocean. He would reach India on May 18, 1498. The return voyage would begin in August. By March 1499 he reached the Cape of Good Hope and in August 1499, he was back in Lisbon, having sailed some 27,000 miles. The trip had taken a human toll. Of the original 170-member crew only 54 had survived.

Why had Portugal suddenly forsaken its search for the mythical Prester John and set its sights on India? It had to do with reports of the spice markets then-existing in India and the East African coast. In 1487 a Portuguese explorer named Pedro da Covilham was given orders by King John to explore an overland route to India through Egypt. His reports would not reach Lisbon until 1490, but they suggested an extremely lucrative trade, if only Portugal could find an alternative to the overland routes.

Capitalism would have little trouble explaining Portugal's motives. The desire to accumulate wealth or to make a profit was what motivated Portugal and its explorers. In capitalist eyes, the question of historical motivation was largely related to economic self-interest, i.e., the desire for wealth or resource acquisition. It was simply a part of human nature. Capitalist critics of the Soviet Union claimed that communism failed because its restrictions on private property did not take human nature into account. It sounded nice in theory to have everyone work for the common good; in practice, capitalism argued, people would be most productive if they were allowed to make money for themselves.

In Portugal, capitalism had a textbook example of the positive side of wealth, as motivator. In Spain and its conquistadors, capitalism would have to explain the negative side of human nature and the moral consequences of unchecked greed. Cortes in Mexico, and Pizarro in Peru, made no secret of their obsession with gold and silver. The capitalist defense was a pragmatic one: Better to harness the energy of greed for the productive good of society, than to dream up complex explanations or even apologies for it. Better to control the excesses of individuals than to deny human nature. Besides, history seemed to place a premium on honesty. Whatever their other sins might be, history took a more forgiving attitude toward those who openly acknowledged their ambition and greed. Cortes might be condemned for his murderous activities in Mexico, but he could never be accused of having a hidden economic agenda. Those who openly acted out of selfish motives came in for less criticism than those who suggested they were engaged in a noble cause.

Portugal seemingly emerged on the trading scene from nowhere. If Vasco da Gama had been extremely lucky, Portugal's trading fortunes were not entirely due to chance, nor had she suddenly succumbed to the unexpected temptations of wealth. Her interest in exploration and trade did not begin with da Gama's voyage to India. She had been methodically developing trade routes since the capture of Ceuta in 1415. Prince Henry the Navigator, from his base at Sagres, in southwestern Portugal, encouraged exploration to the south. Encouragement came in the form of economic incentives and profits. Henry would find his recruits, not so much among the nobility, as among the merchant traders who worked the regional ports. As the Portuguese established themselves in Africa, profits came from ivory, gold, and the slave trade.

In 1432 Goncalo Cabral discovered the Azores. In 1434, Gil Eannes, on a second voyage, would sail past Cape Bojador and into the "Sea of Darkness." Diogo Gomes would reach the Guinea Coast in 1458. (He would return to Lisbon with ships full of gold and slaves in 1459. Prince Henry would die in 1460.) In 1485, Diogo Cao had reached Cape Cross, in what is now Namibia. Bartolomeu Dias would complete his voyage around the Cape of Good Hope in 1488. Profits would continue to motivate Portugal. Not content with the Indian trade, she would expand her trade into what became the East Indies. In 1509, Deigo Lopes de Sequeira led an expedition to the Spice Islands (now Indonesia) and in 1511 captured Malacca (Malaysia).

Capitalism might draw another lesson from Portugal's exploration story. Capitalism values competition almost as much as it does private property and profits. Venice had effectively held a monopoly on trade with the East. Yet, the amount of traded goods reaching Europe was limited by the transport system and the distances involved. Camel caravans were slow and banditry was always a risk. Prices were inflated by the tariffs charged by local rulers along the trade routes. A new, cheaper, water route to the spice markets of India would increase the supply of goods while lowering prices. Even at that, Portugal would still profit.

A Hierarchy of Motives

There may be something to be said for the general power of wealth to motivate. Everyone would like to become rich, after all.  At the same time, the level of motivation seems higher for some activities than for others.  Gold has the power to inspire "gold fever," while iron or wood merely arouse interest.  Is it realistically possible to differentiate the profit motive from the underlying resource?  and does that effectively create a hierarchy of motives, rather than a single "profit motive?"  Additionally, is motivation the only, or even the most significant, ingredient in the profitability of an activity?

What role did the strength of demand play in profitability?  How did production or transport costs figure into the profit equation?  Some markets, such as precious metals, paid off handsomely, with seemingly little effort, while others required tremendous investments with little to show.  Iron, copper, or wood might rank below gold, in terms of motivation, but their markets were not inconsequential. Wood was in demand for the galleons to transport and protect Spanish gold, while privateers and pirates needed it to construct their own fleets for the attack. Wood was also in demand as a fuel.

The profit motive was something of a two edged sword.  Once turned on, it was not easily switched off.  Having unleashed the Conquistadors on the New World, Spain found itself the victim of other highly-motivated adventurers.  Francis Drake and John Hawkins, as well as Dutch admirals, and ordinary pirates found Spanish treasure an irresistible attraction.  Spain, having moved from exploration into mining and production, now found military attacks an added cost of manufacture.   Profitability was no longer just a function of the Conquistador's motivation, or the market price of gold.  The costs of mining, refining, transport, and military protection had to be factored in.   

Suggestions for Further Reading:

Canny, Nicholas, ed. "The Oxford History of the British Empire: Vol. I,  The Origins of Empire: British Overseas Enterprise to the Close of the Seventeenth Century." Oxford University Press, (Oxford, 1998)

Konstam, Angus, "Historical Atlas of Exploration: 1492-1600." Checkmark Books, (New York, 2000)

Muller, Jerry Z., "Adam Smith in his Time and Ours: Designing the Decent Society." Princeton University Press, (Princeton, 1993)

Norwich, John Julius, "A History of Venice." Alfred A. Knopf, (New York, 1982)

Smith, Adam, "An Inquiry Into the Nature and Causes of the Wealth of Nations" (1776)