Western Civilization I
Notes from 6/21

Economic activity ground to a near standstill with the collapse of Roman authority.  As people sought safety from marauding barbarians by moving into the interior regions of Europe, the once teeming commercial centers of the Mediterranean became practically ghost towns.  The manorial system was designed first and foremost for self-sufficiency; everything that one could need, both materially and spiritually, was to be acquired within the confines of the landlord's estate.

Rome's collapse also meant that there was no centralized political authority to mint currency, no "coin of the realm" so to speak.  The amount of gold on hand had been seriously dissipated by the lavish spending of the Roman emperors, and in the crisis centuries that followed Rome's collapse, people began to hoard their precious gold.  Gold coin was melted down and made into baubles and  objets d'art, thus taking out of circulation, perhaps indefinitely, what little negotiable wealth remained in Europe during the early Middle Ages.  In the absence of significant coinage, a barter economy began to replace the cash economy of the Roman Empire.

The problem with barter is that it keeps economies limited and local.  Land was the most important basis of wealth, and obviously land was not something that could be moved from one place to another.  There's little way to invest in new enterprises (which requires the lending of money and the repayment with interest). Of course, there were always a handful of traders who were willing to risk highway robbery to sell their goods from town to town, but at least throughout the centuries immediately following Rome's collapse, these men were relatively few and far between.  In a mostly barter economy, it simply wasn't worth it for most people to take those kinds of risks.

The Christian Church also played an important role in limiting economic development.  For one thing, the Church prohibited lending money at interest (this is known as "usury"), citing the prohibitions against usury in the Old Testament books of Leviticus and Deuteronomy.  The Church's view was that the only honest way to make money was in exchange for work; money itself could not make money, and that is what the Church saw bankers doing.  The Church not only forbade usury, it also generally condemned profit-taking.  Christian theologians sought to establish a doctrine of "just prices" for products, which fairly rewarded the laborer for his toil, but did not unfairly burden the buyer.

The Christian ban on usury meant that Jews, who were prohibited from most other occupations, would become Europe's principal moneylenders during the Early and High Middle Ages (i.e., until around 1300).  Resentment of Jews as moneylenders was yet another source of anti-Semitism among medieval Europeans.  Persecution of Jews sometimes took the form of genocides, and other times led to the expulsion of Jews from Christian communities.  I showed two images from the later Middle Ages of Jews required to wear identifiable symbols that they were Jewish -- in one a yellow badge, in the other a conical hat.  Of course, the Nazi's would require similar identifications to be worn during the 20th century.

At any rate, the Church's prohibitions against usury and discouragement of profit significantly limited commerce, even after political stability began to return to Europe.  There were some groups, such as the Lombards of Italy, that engaged in usury despite the Church's prohibition.  However, through the Early Middle Ages commerce was greatly diminished.

As we discussed previously, European population grew steadily from the period beginning around the year 700 up until the mid-14th century (when the Bubonic Plague struck).  Increasing crop yields meant created surplus rural populations, and therefore permitted town life to re-emerge.  The Crusades of the High Middle Ages also fueled the growth of towns.  Since young nobles went off to the east to fight Islam, they were less likely to be able to cause trouble at home.  The resulting peace and stability allowed towns to redevelop with less interference.  Although the Crusades would ultimately fail to save Byzantium from Islam (or recapture the Holy Land), they did renew interest in trade with the east and spur commerce.  The Crusades also strengthened the positions of kings, who were likely to support towns as a source of revenue (thereby reducing their reliance on the feudal landed aristocracy).

As political authority became stronger, kings and other rulers began issuing more coin, and the re-introduction of currency also fueled commerce and the growth of towns, many of which developed around the sites of the trade fairs that would take place throughout Europe.

The Development of Banks

Slowly, the demand for goods from faraway places began to increase, and traveling merchants will begin to show up regularly at the big fairs that are scattered throughout Europe (see map, p. 349).  These fairs will become an important basis for European economic recovery.  Traders at the fairs would sell their goods for whatever the local coin happened to be -- florins, guilders, ducats, pounds, etc. -- and then go to a "specialist" who would assess the value of the coin (by determining how much precious metal it contained).  Specialists would exchange with the trader coinage from whatever realm he planned on going to next.  These money changers set themselves up on benches scattered throughout the fairgrounds, and the Italian word for bench was banco (the old French word for bench was banc).  Hence our English world, "bank."

When we think of how technology changes things, we often overlook important economic innovations, those practices, laws, instruments and institutions that make doing business easier, or even possible.  The bankers of the 12th and 13th centuries began to gradually offer more sophisticated services.  By the late 1300's, for example, "book transfers" had become commonplace; a depositor would pay a debt without using coin at all.  Instead, he would order his banker to transfer credit from his account to a creditor's.  At first, the depositor gave such an order orally (since literacy was limited), but by 1400 these orders were commonly written, thus making them immediate ancestors to our modern checks.

The bill of exchange was devised around the same time to get around the Church's proscription against usury.  A bill of exchange was essentially a loan, but one that required repayment at a specified time and in another place, another place with a more highly valued currency.  A Flemish merchant might borrow 100 pounds in Ghent, and agree to pay the loan three months later in Champagne, where the local duke has adopted more highly prized Florentine values.  The rate of exchange between the two coins thus conceals the substantial profit that the lender makes, even though technically he has not charged any interest.

I briefly described the emergence of guilds, associations of artisans and craftsmen which regulated their members and limited competition.  Initially guilds helped promote trade and commerce, by providing a mechanism by which individuals could become skilled artisans and by insisting the adoption of stable currencies.  However, guilds also exercised monopoly control and by the 17th and 18th centuries, may have served to limit innovation rather than encourage it.

More trade and commerce will facilitate the growth of towns, in which new forms of business activity will develop.  Eventually, these towns will challenge the traditional institutions of the Middle Ages, including feudalism and the Catholic Church.

Life in the growing towns and cities of the Middle Ages was anything but pleasant.  Medieval towns and cities were typically walled and gated, often using natural obstacles (rivers, mountains) for defense.  Such walled communities tended to be geographically small but densely populated, especially with the growth of towns during this period.  And people lived in close quarters, without adequate sanitation.  One consequence of this was that it was difficult for young men to establish households, since space was at such a premium.  Moreover the long periods of apprenticeship required by the guild system meant that most men would not be able to afford families until they were in their late 20's or 30's.  Later marriage and unhealthy living conditions meant that city populations would not grow naturally (i.e., through birth), but had to be replenished by a steady stream of peasants from the countryside.  This in turn further heightened competition between the urban commercial classes and the old rural aristocracy.

With people living in close quarters and without adequate sanitation, disease spread rapidly in medieval communities.  And in the era before the development of modern medicine or the germ theory of disease, outbreaks could have devastating consequences.  Meanwhile, increased trade meant that communities which had been relatively isolated for most of the Early Middle Ages were now coming into more frequent contact with foreign populations, and contagions to which they had not developed any resistance.  The Black Death itself is believed to have been carried by the fleas of infected rats, which traveled across the caravan routes of central Asia and arrived aboard a merchant vessel in Sicily in 1347.   This disease, also known as the Bubonic Plague, spread rapidly through most of Europe; by 1353 between one-third and one-half of Europe's population was dead.

Some saw the plague as some form of divine judgment; groups of flagellants would roam from town to town beating themselves in ritual penance.  Often, the panic and religious fervor led to even more violent episodes of anti-Semitism, as Jews were blamed for having poisoned the drinking water or otherwise caused the outbreak.  With death omnipresent, and people concerned about their afterlife, Pope Clement VII (r. 1342-52) proclaimed an infinite treasury of indulgences that could be dispensed at his discretion.  The abuse of the sale of indulgences (which shortened one's stay in Purgatory) would, of course, be a principal issue of the Protestant Reformation that begins in 1517.

Although some responded to the Plague by becoming more devout, others reacted by embracing a new materialism.  The omnipresence of death whetted their appetite for nice things, for the kinds of luxury goods that only skilled urban artisans could provide.  This of course would give new prestige to towns and cities, where such artisans worked.  Moreover, the sudden population drop placed upward pressure on money wages, making jobs in the towns and cities even more attractive to rural peasants.  As wage pressures mounted, feudal aristocracies passed laws to restrict peasant mobility, but to little avail.  Opposition to England's Statute of Laborers would lead to a Peasants' Revolt in 1381, the first popular uprising in English history (and certainly a sign of things to come).

The Plague also decimated the ranks of local clergymen, who dutifully ministered to the sick and dying.  As local priests died off, the surviving ones would be more highly valued, and lay people would have to become much more involved in their churches.  These factors, along with the sale of indulgences mentioned previously (and the growth of an urban middle class), would lead to the Protestant Reformation beginning in 1517.