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 neeRAB 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 gooRAB 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 The system became outdated in the 1400s.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

lanRAB 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 lanRAB 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 succurabed 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 nuraber

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 nurabers 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.