Let's say you found a tree with a spout that poured lemonade. Stick with me here. You go out hiking one day deep into the forest and you stumble across it. You give it a taste. It's delicious. Better than any lemonade you've ever had. You fill up your water bottle and bring some home. You let your friends and family taste some. They LOVE it. They offer you money to hike back into the forest and bring them some more. Every day, you hike back to the lemonade tree and bring back lemonade to sell. You decide not to tell anyone where this tree is so you can make all of the money. You're a little greedy. You have a monopoly, which means you are the only person who sells this drink and you also get all of the money. You also do all of the work. This isn't going to be easy . . . but the hard work just might pay off.
After a year, you get tired of hiking to the lemonade tree. You never have time to spend all of the money you make! You decide to hire a trusted friend to hike up to the tree for you. For doing this, you will pay her some of what you make. It works out for a while. But then one day, someone follows your friend and finds the lemonade tree! He starts selling the same lemonade for less, and everyone's buying from him instead! You have to lower your prices. Something is happening around this lemonade tree that wasn't happening before. An economy
is the system for all the things that are being traded, bought, and sold in a place. Right now, your economy is based around one lemonade tree and people walking up to the tree and selling it to their friends. In a country today, an economy includes millions of people and companies selling all kinds of things in many different ways. Oh no! Now you find out that the kid has found another lemonade tree! The lemonade tree economy is healthy, but you're not making as much money as you once were. What will you do?
Well, if you want to try to make a lot of money, you can do what some rich people in 17th century England did. You can team up with your friend and this other kid who found the tree and take turns walking up and then share the money you make. A chartered company
is a group of people who pool their money together in order explore, trade, or start a colony. It takes a lot of money to get started and it is very risky, but if you are successful you can become rich. You can all chip in money to buy more glasses to carry more lemonade and hire more people to carry the glasses for you. If someone drops a glass on the walk back and it breaks, you will only lose 1/3rd of the cost of the glass, because three people bought it. This is the same idea that people in England and other countries had. They knew they could make lots of money bringing things back to England from America and India. With all these people putting money into the company, one person would never lose all they had if one of the ships carrying goods back from India or America sinks. This is the safest way to colonize . . . and get tree lemonade.
Just as lemonade is coming out of the forest for you and your friends, good things were coming out of India and China in the 1600's. People all over the world wanted spices and silks. They wanted them very bad and would pay a lot of money for them. It was a very long trip over land to get these spices and silks, so people looked for an easier way. Some rich people in England, who had enough money, started a company together. Their goal was to sail to these far places and bring them back. The East India Company
was started in 1600 C.E. by rich traders in England, traded with parts of India and China, and was around for over 250 years. This company got so big, at one point they were responsible for half the trade in the world and they even ruled parts of India with their own armies. Now that you and your two friends have control over the lemonade tree, you are raking in money. What else can you and your friends do?
I will tell you what you can do. You can set up camps around the tree to make sure no one else finds it and steals your lemonade. In England, another group of traders wanted to make money off of America. They sent out ships of people to start living there and hoped to find gold. Life was very hard for these people, many of them died and they did not find gold. What they did find was tobacco. Once people back in Europe tried tobacco, they went crazy for it. The Virginia Company
was started in 1606 C.E. to start colonies in the New World, America, and bring back valuable things. After you pool your money together to buy new and better lemonade jars and pay people to hike up there, you can also start a colony of your own. I just hope the people who live around the tree really like lemonade . . .
Now that you have set up trade and camps around your lemonade trees, you have a little economy, a system for buying, selling, and trading things. You and your friends make a chartered company by putting your money together to do something bigger together. This is how the East India Company was made, when traders in Britain set up trade with India and China. It's also how the Virginia Company was made, when many people came together to start colonies in America. Good luck with your lemonade tree business! What do you mean lemonade trees aren't real? Well, people were shocked by India spices and silks when they were first introduced in the 1600's. You never know.
Mocomi. "East India Company" mocomi.com, 2012. <http://mocomi.com/east-india-company/
>About Education. "Colonization of the United States" economics.about.com,