Middle Age Economy
vassals, or landowners, and finally down to the peasants, known then as the villeins. The fiefs, or
and so on. Each person would give their peer a fee (called the guild) and goods in return for
land." The system became outdated in the 1400s.
lands that had previously been marginal or even infertile to become fully productive. In the late
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
economy was beginning to weaken. By early in the fourteenth century and continuing well into
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
modern-day Belgium, was one of the major commercial centers of the North. In the early
international banking and commercial ventures provided the foundation for many fortunes but
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.
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
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.
the Middle East. In northern Europe, the Hanseatic league dominated trade around the Baltic
continued to develop and double-entry bookkeeping spread from Genoa in the early fourteenth
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
emotional effect on the survivors as outbreaks continued well into the seventeenth century.
there was now an abundance of land for the survivors. The peasant and working classes were no
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
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
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
suppressed. The French Jaquerie of 1358 was followed by the Florentine Ciompi revolt in 1378
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,