Middle Ages Economy
Middle Ages EconomyMiddle 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 The system became outdated in the 1400s.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...
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