Middle Ages Economy Essay, Research Paper

Middle Age Economy

The economy mostly seen in the early middle ages was feudalism, Europe?s form of government

in the Middle Ages, was developed in the fifth century to meet the changing needs of the time. It

was based heavily on the honor system. The king had overall power, then the lord, then the

vassals, or landowners, and finally down to the peasants, known then as the villeins. The fiefs, or

estates, could be rented out to one vassal who would then rent portions of the fief to three more,

and so on. Each person would give their peer a fee (called the guild) and goods in return for

protection. As an old medieval saying states, "No land without the lord, no lord without the

land." The system became outdated in the 1400s.

During the eleventh and twelfth centuries, Europe enjoyed an economic and

agricultural boom. A slight warming of the climate and improved agricultural techniques allowed

lands that had previously been marginal or even infertile to become fully productive. In the late

twelfth and early thirteenth centuries, however, the climate once again began to cool and

agricultural innovations could not maintain the productivity of frontier lands that again became

marginal or were abandoned entirely. The decreased agricultural output could no longer support

the same level of economic activity and, as early as the middle of the thirteenth century, the

economy was beginning to weaken. By early in the fourteenth century and continuing well into

that century, a declining population, shrinking markets, a decrease in arable land and a general

mood of pessimism were evidence of deteriorating economic conditions. This trend was far from

universal and it was certainly less severe in northern Italy. Also, north of the Alps, some

communities quickly rebounded and thrived on their commercial and manufacturing ventures.

Coventry, England, for example, flourished with its woolen cloth industry while Bruges, in

modern-day Belgium, was one of the major commercial centers of the North. In the early

fourteenth century, Florence’s textile industry and banking catapulted the city-state into the

forefront of European enterprise and, eventually, into the Italian Renaissance. Significant private

international banking and commercial ventures provided the foundation for many fortunes but

even they succumbed to the recession that began in the fourteenth century

With the increased economic activity of the Middle Ages, there was a growing need for money

exchange and the conversion of coins. Money changers were soon holding and transferring large

sums of money and extending loans to merchants. As the demand increased, so did the number

of services. Common financial activities came to include granting loans, investing, as well as

most of the deposit, credit and transfer functions of a modern bank.

A major obstacle to the growth of banks in the Middle Ages was the Church’s prohibition of

usury, the charging of interest on loans. As economic activity expanded, however, the papacy

became one of the first to insist that interest should be paid on investments made at a risk.

Because they were forbidden to hold land or engage in more "acceptable" sources of economic

enterprise, money changers in the Middle Ages were typically Jews. After the shift in Church

policy regarding usury, it became more acceptable to be a financier and attempts were made to

expel Jews from their commercial role.

The international luxury trade was centered in Rome during the Middle Ages. By the end of the

thirteenth century, Florentines, as papal treasurers and tax collectors, spurred Florence to become

the banking centre of Europe. Large numbers of families invested capital in commercial and

industrial developments. In the 1290’s, the Bardi and Peruzzi families had established branches

in England and were the main European bankers by the 1320’s. By 1338, there were more than

eighty banking houses in Florence with operations across Europe. The financial success of

Florentine banking activities led others to break the monopoly. During the fifteenth century,

municipal banks became established, including one at Barcelona in 1401 and one a few years

later at Valencia. One of the longest and most stable banks was the Bank of Saint George in

Genoa, established in 1407 by state creditors and run by a board of directors.

The greatest danger to Medieval banking was in granting loans to European monarchs to finance

wars. The use of mercenary armies and field artillery increased the costs of mounting military

operations. To finance these activities, rulers were often willing to repay loans at extremely high

rates of interest sometimes as high as 45 to 60 percent. Yet if they were unable to repay the

loans, they simply did not. Most of the bank failures of the late Middle Ages and Renaissance

were the result of large loans to rulers who refused to pay their debts. The Bardi and Peruzzi

banks suffered greatly when England’s monarchs refused to pay for loans acquired to finance the

Hundred Years’ War.

The first half of the fourteenth century saw Europe burdened by overpopulation and the

agricultural enterprises of northern Europe had reached the limits of their productivity. A

lowered standard of living for the peasantry resulted from the ongoing subdivision of their land

holdings or expansion into marginally productive areas. Poor weather in the early 1300’s created

meager harvests and mass starvation was the result in some areas, eliminating as much as 15

percent of the population. Warfare had been virtually continuous and pauses in major

international conflicts, such as the hundred year?s war were replaced with local confrontations.

The expansion of long-distance trade and commerce seen in the twelfth and thirteenth centuries

also began to dwindle at the end of the Middle Ages although some trade links, especially those

in the Mediterranean and in northern Europe, had become sufficiently well established to resist

shrinking markets. Trade continued across the Mediterranean from Venice, Florence and Genoa.

Italian trade diasporas also existed in the Byzantine Empire as well as dotting North Africa and

the Middle East. In northern Europe, the Hanseatic league dominated trade around the Baltic

and North Seas from the late fourteenth century. Innovations in commercial accounting also

continued to develop and double-entry bookkeeping spread from Genoa in the early fourteenth

century. While the arrival of the Black Death through ports and major trade centres tended to

restrict commercial contacts, trade links were not entirely severed.

The first sweep of the black death struck in 1347-1349, eliminating between one-third

and one-half of Europe’s population. Economic and social institutions were crippled by the

severe depopulation. The immense loss of life cut across all levels of society and had a profound

emotional effect on the survivors as outbreaks continued well into the seventeenth century.

The devastation wrought by the Black Death on the people of Europe created a severe shortage

of labour. Where land had previously been overworked in order to support large populations,

there was now an abundance of land for the survivors. The peasant and working classes were no

longer populous and were able to demand higher wages. Landlords, faced with the prospect of

crops rotting in the fields or idle machinery, had no choice but to pay the increased prices.

Caught between rising production costs and falling grain prices, many landlords rented out their

lands and, as more serfs became tenant farmers, manorialism came to an end. In the cities of

Europe, urban populations tended to recover more quickly from the plague than rural

communities. This led to large migrations into cities after plague outbreaks but many of these

immigrants remained unemployed. The gap between the rich and the poor widened as the elite

closed ranks to protect their holdings and positions. Close-knit and exclusive guilds were

organized by occupation to regulate workers and eliminate outside competition.

Attempts by the nobility and mercantile elite to legislate the wages and services of the

peasantry and to protect their market monopolies led to violent revolts that were often ruthlessly

suppressed. The French Jaquerie of 1358 was followed by the Florentine Ciompi revolt in 1378

and the English peasant?s revolt in 1381. Similar popular uprisings occurred in Germany, Spain

and the Netherlands. Still, the ruling classes managed to maintain their power. Slowly, the

economy began to recover from the devastations of the late 1300’s and early 1400’s, and by 1500,

the economic crisis had passed, setting the stage for the flourishing of the Renaissance.

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