Middle Ages Economy


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 The system became outdated in the 1400s.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