For centuries Western Europe had been stagnant, but economic growth in the 11th, 12th

and 13th centuries would cause her to spring to life. Cities flourished along trading routes and in
these cities commerce was allowed to grow, not merely free from the restrictions of the medieval
manor, but with the help and support of a political infrastructure that was devote to growing its
power through. Conflict between urban powers and the lay rulers and clergy of the traditional
agrarian hierarchy would challenge the fabric of medieval society. This essay will show how the
growth of trade and commerce in Western Europe caused the decline of the middle ages by
creating an urban class that did not fit into the traditional social hierarchy.

Historiography
The two books that formed the basis of my research were Henri Pirennes Medieval Cities and
Robert Lopezs The Commercial Revolution of the Middle Ages. Both authors are pioneers in
medieval history, particularly in the areas of cities and trade. The Pirenne thesis says that Europe
did not enter into dark ages after the fall of the Western Roman Empire. Roman culture lasted
until the rise of Islam cut Europe out of the Mediterranean when Europeans were forced to live a
agrarian life of sustenance until the commercial revolution of the 12th and 13th centuries reopened
European markets. When this happened it was in cities that the great changes of the period
happened as the citizens of the city were outside the manorial system. I agree with his ideas of
trade and commerce being fostered in cities leading to the decline of the middle ages, I do not
believe that the cities were necessary for the social and political changes that are seen. The
population boom that was happening in the 11th and 12th centuries would have forced the same
kind of changes by putting upward pressure on the nobility and clergy. In Lopezs book he
discusses the use of credit in trade, but I believe he understates its importance to the growth of

trade and commerce. The use of credit is so important to financial activity because of its ability
to grow money. By using credit people can use a fraction of the cost of goods to pay up front,
allowing even the smallest of merchants to make big deals. Without using credit to leverage your
assets you are only using half of their value. The development of sophisticated financial
transactions allowed merchants to utilize their whole net worth.

In the 10th and 11th century Western Europe underwent vast agricultural changes. The
temperature of the earth rose about one degree Celsius, the introduction of the heavy wheeled
plow and the horse as a farm animal, as well as the development of the three crop rotation all
helped to double the production per acre of European farms1 which, along with the mass
cultivation of the wildernesses, meant that by the 11th century Europe was producing a reliable
surplus.2 This increase in available food allowed for an increase in population as families were
able to support more kids. As the economy expanded so too did trade. At first trade was restricted
to satisfying demand among the nobles and rich for luxury goods such as silk and rare spices that
came from the east, but over time it grew to incorporate manufactured goods such as cloth,
which in turn created an increased demand for raw materials. European trade had been restricted
by Muslims, but Genoa and Pisa attacks against Muslim centres of trade in the 9th century opened
up trade in the Western Mediterranean3. The conquests of Corsica, Sardinia, and Sicily opened up
1 Henri Pirenne, Medieval Cities: Their Origins and the Revival of Trade, (Princeton:
Princeton University Press, 1969) P.
2 Katie Lindeman. "Farming and Fuedalism: Socio-Economic and Military Structures
of Northern Europe." McMaster University. 15 Sept. 2015. Lecture.
3 Carl Troedsson, The Growth of the Western City During the Middle Ages.
(Gothenburg: Chalmers U of Technology, 1959) p. 17

the Mediterranean to European traders who had previously been restricted by the dominance of
their Muslim counterparts. With the Mediterranean opened, old trading towns such as Barcelona
and Marsellies.4 The opening of markets throughout Western Europe created growth that had not
been seen since the fall of Rome. Trade had grown so much that the Peruzzi trading family of
Florence was able make a good profit out of the grain trade in Italy with high sales volume and a
low profit margin, something that is not typically seen until modern companies5. The cloth
industry was also highly developed with wool from England being shipped to Flanders in the low
countries were it would be processed in to cloth and shipped all over Western Europe6. The
Peruzzi family for example would ship cloth to Florence where they would process it into higher
grade textiles and ship it back across Europe7. One of the most important commercial
developments was the use of credit in transactions. The giving of credit is vital to economic
growth as it allows a small amount of capital to be turned into a large amount of capital8. For
example, a merchant with 50florins can buy 100 rolls of cloth for 200florins with 50 up front and
the rest of credit, he then sells the rolls for 300florins, paying back 150 and keeping the rest. By
being able to buy rolls of credit he is able to turn his 50 florins into a profit of 100 florins, using
the same scenario without credit however, he would only be able make a profit of 25. The use of
credit had become so well developed that there are even transactions where the buyer gives
4 Ibid p. 18
5Edwin S. Hunt, The Medieval Super-companies: A Study of the Peruzzi Company of
Florence. (Cambridge: Cambridge UP, 1994) p.52
6Howard L. Adelson, Medieval Commerce. (Princeton: Van Nostrand, 1962) p. 80
7 Hunt, p.44
8 Richard Deaves, Canadian Finance: A Concise Introduction. (Burlington: DFS,
2009) p. 23

credit, it was not uncommon for Italian merchants in England to purchase a monasteries wool
production a year in advance, thereby fixing the price for the next year and shielding themselves
from potential market fluctuations9. The economic growth of the period triggered inflation as
coins were constantly being minted. Small, local transactions do not usually require coinage as
one person can trade their surplus wheat for their neighbours surplus cheese, but large scale
international transactions requires coins to pay for goods. The rapid growth of international
meant that more coins were constantly needed which, along with monarchs frequently debasing
currencies to fund wars, meant that inflation was high, so high in fact that prices in England
quadrupled from 1150-1325. While this may seem like a bad thing, it meant that there were more
low denomination coins meaning that a bake could sell individual loaves of bread instead of
being forced to bake for one noble, or mason could work for wages instead of for food and
board, there-by giving him more freedom in his career10. With the massive increase in the volume
of trade, more advanced techniques of tracking the movement of money such as double entry
book keeping, the precursor to modern accounting, were needed. An entry from a Catalan branch
of the Dugnano company shows double entry book keeping that strongly resembles journalized
accounting transaction of todays accounting journal11. All of this led to increasing quantities of
disposable funds whose cumulative nature began the open ended process of accumulation
capital, sowing the seeds of capitalism

9 M. M. Postan, Medieval Trade and Finance. (London: Cambridge UP, 1973)

10 Robert S. Lopez, the Commercial Revolution of the Middle Ages, 950-1350.
(Englewood Cliffs: Prentice-Hall, 1971) p.72
11 Zerbi, T. "Double Entry Bookkeeping." N.p.: n.p., n.d. N. pag. Rpt. in By Robert
Lopez. New York: Columbia UP, 1955. 372-73. Print

In western Europe cities formed all along major trade routes, in fact there were so many
cities being built that people started to distinguish between the old cities and the new cities12.
These old cities were cities that had survived from antiquity as ecclesiastical centres. Even after
all the merchants had fled the city, the church had maintained many cities as the seat of a Bishop.
These towns did not serve a commercial purpose and all of the local residents would have
supported the church. After time though, these cities would grow to become centres of trade. The
new cities on the other had formed for the purpose of trade. Some of these would have started as
a small village along a popular trade route that may have a had a small weekly markets, however
as trade increased, more and more people would have started attended the market until it became
permanent, eventually becoming big enough to support a sizable population of non-peasants13.
Other cities grew through manufacturing by specializing in a good that they produced
particularly well. Flanders grew as a specialist in processing rough wool into cloth that can be
turned into clothing in other industrial centres, but turned into one of the most powerful trading
centres outside of Italy due to its control of the wool trade14. These towns would start out as
small outposts for trade and commerce, islands in a sea of agriculture and manorialism, but
would grow to be some of the largest economic powerhouses in the world. Initially towns were
subject to the lord whose territory it was located in. Eventually though, as the prosperity of the
town grew, they began to assert their independence and push for more privileges such as freedom
to hold property, freedom of movement, self-governance, and a favourable tax positon. Some

12 Troedsson, p. 23
13 Pirenne, p. 102
14 Troedsson, p. 27

cities had to fight for their rights15. Other times landowners voluntarily gave charters of freedoms
willingly, seeing the benefit of a wealthy commercial hub in their territories. Some lay lords even
went so far as to build cities from scratch to create a source of revenue, attracting people by
issuing generous town charters.
Within cities the townsmen had much more say in their governance than any serf or free
peasant could hope to have while living on a manor. While not all self-governing, most cities
charters made them a semi-autonomous political entity that payed a tribute to have its own
government, court, and customs. Cities were communal and almost all citizens would play a role
in city governance16. However medieval cities were not bastions of freedom, and most cities
would be ruled by great merchants, many turning into oligarchies run by a few powerful
merchant families. While making these cities less democratic, it did create a government devoted
to commerce. This will go on to make a huge difference as cities like Venice that focus on trade
and commerce excelled. Because of the cities reliance on trade, the ruling class in Venice
comprised of great merchants and master craftsmen17. These cities actively that focused on trade
geared their foreign and domestic policies to protect commercial interests. For example, the wars
that Florence fought were almost all with the aim of securing trading routes, in 1108 the city
went to war with local feudal lords to open up the Arno River, and the rest of Florences history
in the 12th century would be dominated by wars to secure trading routes18. Cities policed their

15 Katie Lindeman, "Bright Lights, Big City." McMaster University. 3 November, 2015
Lecture.
16 Lopez, p.65
17 Ibid, p.63
18 Troedsson, p.89

territories to ensure that the roads were safe to travel and free from highwaymen and bandits.
They also took care to protect foreign merchants that were in the city for business to maintain
positive commercial relations and ensure the safety of their merchants abroad. An example of
this can be seen in a letter from medieval Como that describes how the municipal government of
Como paid a merchant an indemnity for goods that had been stolen by robbers even though the
robbers could not be identified19. While the level of freedom for the average urban dweller in the
12th or 13th century is nothing compared to what is seen in first world democracies today, it was
enough to allow an political and economic infrastructure that was focused increasing power
through trade and commerce.

Commercial activity inside the manorial system is a different story. The traditional social
hierarchy had consisted of those who fight, those who pray, and those who work. The role
of knights and lords was to fight, there job was to protect the people living in their realm from
external threats. Priests and the clergy were tasked with the salvation of mankind and it was
through their endless prayers that good Christians were saved from Gods wrath and allowed to
enter the kingdom of heaven. These two groups were the ruling classes and beneath them were
the serfs and peasants, those who worked the land, they were responsible for producing the food
and goods needed to support the two upper classes20. Notice that there is no those who trade in
this hierarchy. The social hierarchy of the middle ages did not have a place for merchants in the
12th century were looked down upon and scorned as ones who profited off the work of others.
19 Schulte, A. "Northern Italy Protects Foreign Merchants." n.p., n.d. Rpt. in
Medieval Trade in the Mediterranen World. By Robert Lopez. (New York: Columbia
UP, 1955). 324-325.
20 Lindeman, Farming and Fuedalism

Usury for example, the practice of charging interest on loans, was banned by the church and
considered as sin as it was seen as a way for the rich to exploit the poor. While this may seem to
protect potential debtors, it means that there is no incentive for anyone with excess liquid capital
to distribute it to those with a need for liquid capital. The use of debt financing, borrowing,
creates financial leverage and is one of the most powerful tools for start-up companies that need
liquid capital21. Without it any enterprising young peasant that wanted to try to make his fortune
in commercial activity would have been severely hampered by his inability to leverage his assets.
This did not mean loans were not present, but they had to be disguised so as not to raise the
suspicion of local authorities. Many loans were disguised as a sale and then resale of a good22,
for example a merchant might need liquid cash but all his equity is tied up in goods he has stored
in his warehouse so he would sell something to a money lender for 50 florins and then later on
buys it back for 60 florins. In this scenario the 10 florin difference in price acts as the profit on
the loan for the money lender, and the good that was sold in the transaction acts as the collateral
to ensure the merchant repays his debt. Disguised loans like this however were still highly illegal
and there are many examples of people being persecuted for usury. Conflict between urban and
rural elite was also fueled by peasants fleeing to towns in search of freedom. Anyone that lived in
a town for a year and one day became a free citizen of the town, and a common axiom in the 13th
century was town air makes for freedom23.Towns that were growing were always in need of
more citizens and many of them poached peasants and serfs from manors24. Urban powers were
21 Deaves, p. 52
22 Potsan, p. 11
23 Troedsson, p. 73
24 Lopez, p. 69

also stealing the role of those who fight. Cities began to hire mercenaries that could be bought
for coin, marginalizing the nobles who now found that they were no longer needed to defend the
population25. In manor life peasants still traded surplus goods at local markets for goods they
could not produce on their own, but they were never able to make enough to inspire a life of
trade26. The aristocracy pursued what Robert Lopez calls a golden mediocrity27. The goals of
the ruling classes were not progress but safety and security, and so the success of the merchants
infuriated them. Nobles hated to see merchants better supplied with capital and were humiliated
by having to rely on them for money in times of need. This difference in goals is the fundamental
reason why the changes economic and political changes of the late middle ages had to start in
urban settlements as only there would trade and commerce be allowed to flourish.
The evidence shows how after years of living under the manorial system, Western
Europeans were able to break out of the traditional social hierarchy. Economic growth in the 11th,
12th and 13th centuries would cause Europes to economy spring to life. Cities would flourish
along trading routes and in these cities commerce was allowed to grow, not merely free from the
restrictions of the medieval manor, but with the help and support of a political infrastructure that
was devote to growing its power through trade. This essay has shown how the growth of trade
and commerce in Western Europe caused the decline of the middle ages by creating an urban
class that did not fit into the traditional social hierarchy.

25 Katie Lindeman, "Political Consolidation and Expansion." McMaster University.

Lecture
26 Pirenne, p. 108
27 Lopez, p. 58

Works Cited

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Hunt, Edwin S. The Medieval Super-companies: A Study of the Peruzzi Company of Florence.
Cambridge: Cambridge UP, 1994. Print.
Hunt, Edwin S. The Medieval Super-companies: A Study of the Peruzzi Company of Florence.
Cambridge: Cambridge UP, 1994. Print.
Lindeman, Katie. "Bright Lights, Big City." McMaster University. Lecture.
Lindeman, Katie. "Farming and Fuedalism: Socio-Economic and Military Structures of Northern
Europe." McMaster University. 15 Sept. 2015. Lecture.
Lindeman, Katie. "Political Consolidation and Expansion." McMaster University. Lecture.

Lopez, Robert S. The Commercial Revolution of the Middle Ages, 950-1350. Englewood Cliffs:
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Pirenne, Henri. Medieval Cities: Their Origins and the Revival of Trade: (2. Printing). Trans.
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