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During the 16th century, the Portuguese captured Melaka to dominate the lucrative spice trade; other city states such as Aceh, Banten, Brunei and Pegu also sprung up by exporting and trading spices. However, I don't quite understand why spice trading is such a profitable venture as spices are quite expensive when they reach their terminal buyer. There are sayings that compare spices to gold

How did the high price of spices allow such high demand? Were the demands from the aristocrats capable of upholding and sustaining such high volumes of trade that enriched South Asian city states?

Assumptions:

I was under the impression that the European population was predominantly serfs during 15 and 16th century. The abolition of serfdom wasn't until the 18th century for most European powers, except England and France. This is precisely why I was confused as to how European buyers were capable of sustaining a demand for something that wasn't a necessity.

Were the aristocrats of the European powers wealthy enough to buy spices at the price similar to that of gold? And where did that wealth come from? I understand that high demand results in high prices, but there must be some kind of wealth that is sustaining that demand or else the price will drop until the demand reaches the supply.

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    Because spices are expensive when they reach their destination. That is one of the best ways to be profitable, sell a good for which there is a small or restricted supply and a wealthy stable demand. Perhaps i do not understand the question? – Mark C. Wallace Jun 15 '14 at 6:37
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    So the assumption is that expensive items don't allow profit? I'm with @MarkC.Wallace C.Wallace- I don't think I understand the issue. – Rajib Jun 15 '14 at 6:58
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    I think OP's saying that something as expensive as spices shouldn't be in enough demand to be "so profitable". – Semaphore Jun 15 '14 at 14:14
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    Sorry for the confusion, I am looking for explanation that how a population that is predominately serfs are capable of sustaining large volume of spice trade – user4984 Jun 15 '14 at 16:43
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    @AvnerShahar-Kashtan in that case he's mistaken in believing it was a very poor society that was consuming those spices... – jwenting Jun 15 '14 at 16:53
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The question is a bit confusing. The way I read it, you're asking why something expensive has enough demand to sustain a profitable trade ("How did the high price of spices allow such high demand?").

The answer is that it wasn't that expensive. A pound of spices might cost several days' worth of wages for an average craftsman, but a pound of pepper is a lot of pepper. It was a luxury item, to be sure, but it wasn't completely out of reach for the average middle class professional. Furthermore, that is not at all a prohibitive sum for the wealthy, which includes the ranks of not only the aristocracy, but also the growing class of merchants and higher level professionals and other large land owners.

And no, Western Europe was not "mostly serfs" during this period.

The claim that spices were worth their weight in gold (quite an exaggeration to tell the truth, for all but saffron) also shows why the spices had a market. Gold and silver were expensive, and yet there was clearly a market for it. The Spanish shipped in shiploads of it from the New World, for instance. Spices, which were cheaper and yet consumables, would logically have a bigger market as long as Europeans have a demand for them as luxury goods.

Of course, highly priced luxury items by their nature are not traded in high volumes. Neither was spices: the supply, in Europe, was severely limited. Much later when the VOC gained its spice trade monopoly, the Dutch began shipping around 270 tons of cinnamon per year, which was at the time a vast quantity that outstripped local supplies. Contrast that with modern cinnamon production of ~35,000 tons. And as more and more trade routes were established and transplanted spices started to be growing in more places, supply enlarged and the value of spices fell.

Note that limited supplies in the late Medieval period didn't affect the profitability of the spice trade. The spice trade was "such a profitable venture" precisely because "spices are quite expensive when they reach their terminal buyer" - relative to their cost in Asia, which is something like 1/10 or 1/100 the sales price. And again, as supplies expanded, prices fell.

EDIT:

As luxury goods, The main consumers of spice were the wealthy, middle to upper class members of society. Religious and supposed medicinal uses aside, these people valued spices because it is expensive; it formed a social status symbol, desirable for showing off. The marriage of Duke Georg of Bavaria to Polish Princess Hedwigis was celebrated with a feast involving almost 1300 pounds of various spices, for example.

While the rich could afford the a wide variety of expensive spices in ridiculous amounts (i.e., Duke Georg), it wasn't beyond the means of the common folk either. As noted above, a pound of pepper might cost a craftsman several days work - enough to make it a luxury goods, but not so expensive that it was affordable. So even (well to-do) peasants could afford pepper, the cheapest of the common spices.

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    Thanks for the answer, would you mind explaining who were the major buyers of spices? In terms of country, and social class. From your response I feel that I have a wrong impression in the wealth of Europeans during 15th to 16th century. – user4984 Jun 15 '14 at 17:46
  • @user4984 I'm not sure you have the wrong idea per se; but perhaps you underestimated their numbers, purchasing power and demand. Spices were by and large bought by nobles, upper level clergies, affluent traders; upper class, and the wealthier upper middle classes. Basically anyone who could afford it. Oriental spices were regarded as medicinal, exotic, and most importantly status symbols - serving guests with spices was a non-optional social obligation. The other use for spices you might not have realised was "medicinal" - they were thought to have pharmaceutical benefits. – Semaphore Jun 15 '14 at 19:52
  • However, even the poor peasant could buy a bit of spice here and there. Try weighing your salt and pepper. You don't use that much in a typical meal; and pepper to the medieval peasants would have been a luxury like say truffles. – Semaphore Jun 15 '14 at 20:14
  • An interesting point Semaphore made is that the commodity was consumable. Hence, for those willing to buy it, a steady stream demand as they ate it. Spain's gold and silver on the other hand, disrupted the local economy until the wider volume of trade in Europe could benefit from the specie. – LateralFractal Dec 19 '15 at 1:08
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Spices were what we would nowadays call mass luxuries. These are luxury goods that the masses can afford in small quantities. They are desired because they are out of the ordinary, and offer a "change of pace." They are expensive on a per-unit basis, but it is the "smallness" of use that makes them affordable. Spices had both these qualities at the time. So the demand from aristocrats was supported by demand from "ordinary" people.

Other contemporary items that had similar qualities included chocolate, coffee and sugar. In some cases, where supply conditions were favorable, the "massification" of use created a "backup demand" that helped increase supplies so much that their prices dropped sharply and they were no longer luxuries, but became necessities. This occurred when the products moved from the "exploration" to the "exploitation" stage in global markets, because Europeans gained access to tropical lands where such products could be produced cheaply.

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It is pretty logical. Back in time there were no electronic, car and many industries, and the wealth - gold and silver - of the world arrived to Europe - mainly to nobles and kings. There was a big portion of extra wealth available to spend, and it was an interesting luxury item since those times the spices in foods were very limited in europe due to the climate.

On the other side spice was a perfect commodity to transport. You needed to calculate in grams, not tons. Therefore you didn't need a huge fleet of ships to make a good business out of it. The price was maintained simply because of the risk, the long trip, and the fact the nobles are willing to waste the extra wealth on it.

Also the prices were maintained by the big companies formed in these times: British East India company and the dutch one for similar purpose. The paid 40% dividend, and everybody was happy about it. And if I say everybody, I include customers too, spicing their food was a good sign if they are wealthy, which was obvious for their guests, when they learned they ate for example three spices from indonesian islands and india.

  • mind to comment why downvote? – CsBalazsHungary Jun 15 '14 at 11:26
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    maybe because (and it wasn't mine) it's such blatant nonsense as to be without any value at all. And unsourced as well, which might be ok if it can be verified but in fact the opposite of your statements can be easily verified. – jwenting Jun 15 '14 at 16:57
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I think previous answers miss the most important reason why spices were such a valuable good, and so expensive in Europe (or China, btw).

The main point is that spices were mostly consumed not for flaworing dishes, but for preventing and curing illness. If you were a rich noble or bourgeois during in the 15th century, you might be willing to spend some money for your porridge to taste better - but you sure will be ready to spend much more for products that were supposed to protect you and your loved ones from diseases.

From Unesco :

Travelling these long distances becomes understandable if one considers the fact that many of the important spices had ritual and medical values.

Medieval medical science was not quite perfect, and it did recommand the use of various spices. Sometimes for virtues that modern science kinda backs up ; most often according to concepts modern science considers rubbish.

Cloves would be used as painkiller and to cure your teeth. Nutmeg was the thing to buy if you don't want to die from the plague : isn't it worth spending a huge portion of your fortune ? From wiki:

In Elizabethan times, because nutmeg was believed to ward off the plague, demand increased and its price skyrocketed.

Saffron was no less vital:

The 14th-century Black Death caused demand for saffron-based medicaments to peak, and Europe imported large quantities of threads via Venetian and Genoan ships from southern and Mediterranean lands such as Rhodes.

Spices would be used for ointment, potion, or burnt to repel miasma and foul odors - thought by the time to be the main cause (or maybe the second cause after sin and lack of prayers) for the spreading of sicknesses.

Accessorily, it was also useful

as cooking ingredients (...) - not only to add flavour but also to make the food, which was often far from fresh, palatable, particularly in hot climates.

(Unesco again)

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"I was under the impression that the European population was predominantly serfs during 15 and 16th century."

Perhaps that impression is wrong? From the literature of the time, we see fairly ordinary people having some access to spices and other exotic foodstuffs. For instance, here's the son of a prosperous farmer going to market to buy supplies for a feast:

"Let me see; what am I to buy for our sheepshearing feast? Three pound of sugar, five pound of currants, rice – what will this sister of mine do with rice? But my father hath made her mistress of the feast, and she lays it on […] I must have saffron to color the warden pies; mace; dates? – none, that’s out of my note; nutmegs, seven; a race or two of ginger, but that I may beg; four pound of prunes, and as many raisins o’ th’ sun." (Shakespeare, The Winter’s Tale 4.3.36-48)

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