Medieval Business

Edwin S. Hunt and James M. Murray’s A History of Business in Medieval Europe 1200-1550 is an excellent history of medieval business. The business focus gives it an alertness to practicality which is not always a feature of writing on medieval history, even medieval economic history. Having a retired businessman as one of the authors (Hunt, Murray is an academic medievalist) seems to have helped.

Early on, however, I did note a surprising analytical lapse. Examining the economic relationship between peasant and lord, Hunt and Murray see it as having exploitative and cooperative elements, which is entirely fair enough. But what is startling about their discussion otherwise intelligent and informative discussion (pp18ff) is the complete absence of any mention of the protective role of lordship. Yet, when one considers the costs of weapons, warhorses, armour, training and castle-building, the resources consumed by military purposes were enormous. Its demands—the provision of well-equipped, skilled, effective mounted warriors and the consequences of doing so—were fundamental to the evolution of political structures. (Including, I would argue, the evolution of primogeniture.)

In a situation where trade had largely collapsed—one estimate, based on counting shipwrecks in the Western Mediterranean, is that trade in the period after the collapse of the Western Roman Empire was a mere fifth of the level at the height of the Roman Empire—the most important sources of (personal) wealth were labour-applied-to-land (which produced food and clothing) and violence (i.e. stealing from, or controlling and protecting, those who worked the land). Those who were best at violence came to dominate those who worked the land.

Commentators at the time were quite clear that the role of lordship was to fight: and not merely in the sense of supplying armies, but in enforcing local law and order. Indeed, given the scattered nature of the population and the extent of wilderness, the latter was much the most important role of the lord. Medieval lordship was first and foremost a warrior elite, a fighting elite. Even the Church had milites or bellatores (to simplify, knights) beholden to it.

A recent edition of Ramon Llull’s Book of Knighthood & Chivalry (published along with Ordene de Chevalerie: the poem of Saladin's "knighting", which is entertaining) brings out the hoped-for protective role quite clearly. Llull’s piety makes this at least as much a religious text as a chivalric one, yet there was a clear emphasis on the local social protection role of the knight. There is a tendency for modern historians to be rather too struck by the role of knights in armies. This is certainly easily the most historically dramatic and visible of their roles, but it was relatively minor compared to their much larger local social enforcement and protection role. When, for example, the French Crown sent commissioners around after the massacre of French knights by Flemish pikemen at Courtrai selling lordships, it was at least as much about maintaining domestic order as any issue of external military effectiveness. (See also my review of Bartlett's The Making of Europe.)

Hunt and Murray are not wrong to see cooperative elements in the relationship between peasants and lords. Nor to note the care and attention lords applied to the economic exploitation of their lands. But to pay no attention to the protective role (apart from a passing mention at the beginning of Chapter 2), and the resources consumed for military purposes, in relations between lords and peasants is Hamlet without the Prince.

Nevertheless, A History of Business in Medieval Europe is a very enlightening read. It is divided into two parts. The first deals with the last part of the “long boom” which started about 1000 before ending in the famines of the early C14th and then demographic disaster of the Great Pestilence, as it was known at the time. The second covers the period after that demographic disaster up to the creation of the global economy following the Spanish crossing of the Atlantic and the Portugese penetration of the Indian Ocean.
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The study is concerned with the traders and merchants—and, to some extent, the skilled craftsfolk—who operated between the lords who fought, the priests who prayed and the peasants who sowed and reaped. (Who made up, between them, over 90% of the population.) None of whom cared for business for its own sake but all of whom had reasons to appreciate what it provided.

Business had to deal with lordly exactions (taxes, tolls, rules, fines). Clever businessfolk could use what they offered to bargain for privileges (typically exemptions from said taxes, tolls, rules or fines). Business wanted liberty and security, and some of the bargains made with lords to get it turned out to be somewhat Faustian. But a learning process went on, leading to a range of innovations and developments. A key point is that, despite the amazing demographic disaster of the Black Death—the population of Europe crashed from probably about 74 million in 1300 to likely about 50 million in 1400—little in the ways of skills were lost. On the contrary, the circumstances encouraged even more innovation. One gets a very good picture of the sheer resilience of medieval society.

The first Part looks at the economics, culture and geography of early medieval trade, the forms of business organisation, traders and their tools, the politics of business and the “super-company” phenomena as business got bigger.

But it was not only lords that business had to deal with. Much of what they did was regulated by canon law, and thus Church doctrine. Interaction with the Church moulded medieval business in a creative tension between doctrine and practicality. Especially over the ban on usury. (See my review of Diana Wood’s Medieval Economic Thought.) The imposition of an Interdict on a city was particularly bad for business. It stopped church bells, which marked time, and released outsiders from moral obligations on contracts (p.96).

Cooperation and competition molded business. Folk had basically same reasons to cooperate across Latin Christendom, but the local context varied greatly (Pp77ff). English and French business took very different paths due to different institutional context. How much say business folk had, how much civic freedom, varied widely. Even areas with relatively powerful cities—Italy, Catalonia, Flanders, Germany—showed variations in patterns. Common patterns, local variations—very much how the medieval world operated.

Hunt and Murray are good at debunking glib simplifications—for example about the alleged "disappearance" of the fairs and firms misleadingly labelled “banks”. Business did become bigger and more complex (pp 72-73), leading to the growth of very large companies, what Hunt and Murray call the “super-companies” but are often referred to in the literature as “banks”. The latter is not an adequate description. They were more like commodity traders with a financing side.

It is striking how small medieval bureaucracies were (p.109). The largest, the Avignon Papacy, had 250 staff and most government administrations were considerably smaller. The later Medici Bank had 57 staff. Of the “super-companies” which collapsed in the 1340s, the Peruzzi had, in addition to working partners, 90 employees (48 in branches). The Acciaiuoli 43 factors in foreign branches. The Bardi in the vicinity of 120-150 employees.

Hunt and Murray deny that the collapse of the “super-companies” came from Edward III’s failure to pay back his loans. (He never defaulted, merely audited and reneged on parts of them, while the “super companies” were given advantageous positions in the highly profitable wool trade as part of the deals.) Nor did it come from shifts in relative prices of gold and silver. Rather, they argue, it resulted from the effects of prolonged famines in the 1340s, resulting in a dramatic drop in the international grain trade, leaving the “super-companies” with overheads their cash-flows could no longer support. They were an adaptation to particular trading circumstances and when it passed, so did they.

The book is full of enlightening asides and discussions. They note the Papacy’s intention to destroy the Hohenstaufen dynasty “root and branch” (p.92). That the Corpus iuris civilis of Justinian was rediscovered at the end of the C11th and gradually spread northwards from Italy during the C12th. That interest rates on productive loans were 8% then 7% pa. (Quite low by historical standards, suggesting relatively high levels of social trust.) That Genoese merchants were notably not cooperative with other Genoese, unlike merchants from other cities (p.116).

The “long boom”, the commercial expansion from 1000 to 1300, was brought to a halt, first by a series of particularly bad famines and then the Black Death, which wreaked havoc on an already weakened Europe. Post plague, Europe was richer per capita. (The disease killed people, not land, buildings, tools, machines or coins.) The elite splurge on “eat, drink and be merry, for tomorrow we die” and the increased labour costs encouraged business innovation in production, distribution, exchange and organisation. Recovery from demographic stagnation began in the mid C15th (we don’t know why) and steady growth of business innovation meant that Europe was well suited—both rulers and business—to take advantage of any new trading opportunities which turned up. (Such as crossing the Atlantic and finding a sea route to the Indian Ocean.)

That rulers (whether monarchs or towns) encouraged foreign specialists to settle, while invoking severe penalties for local experts who attempted to leave (pp 153-4), showing keen awareness of technological advantage. Adversity (in the form of the demographic crash) and competitive jurisdictions encouraged innovation.

The “race to the bottom” allegation (that competitive jurisdictions make public policy worse) anti-globalists are fond of alleging is a proposition very much not much supported by historical experience. On the contrary—provided a certain level of peacefulness is achieved—competitive jurisdictions do limit coercive control but that is precisely what encourages better public policy. (Though any group that feels that its qualities make it uniquely fitted to rule is going to find such constraints uncongenial.)

Hunt and Murray chart the new business environment after the Black Death, the business responses thereto, the burst of innovation in the C15th, the sources of capital and the beginnings of a global economy.

Who uses and how widely is more important than who originally invented something. Hunt and Murray note the adaptiveness of Latin Christendom (p.247), though they overestimate original inventiveness (windmills and improved account keeping came from Islam, printing from China). But, in all cases, the medievals improved considerably on the original versions.

Printing clearly spread with remarkable speed because there was already a demand for printed material (p.200). Printing books created new risk of unwanted merchandise (p.201). Business folk were keen book buyers—commercial centres, not religious/university ones, dominated printing (p.202).

Commercial taxes (such as those levied in England, Flanders) encouraged ruler attention to needs of commerce more than did the wealth tax (taille) of France (p.205), while forced loans often amounted to taxation (when they were not paid back: p. 206).

They keep returning to the importance of elite demand in driving business (a problem with neo-malthusian analyses of pre-Industrial Revolution economies).

There is a great deal more. Discussion of art and architecture being useful mechanisms for absorbing wealth; the way innovation tended to outpace control mechanisms (a continuing phenomena in our own day); the importance of innkeepers as financial brokers; the burst of silver production and importing of gold along with expanded credit that kicked off the Great Inflation before American silver arrived in substantial amounts; the steps the Portugese and Spanish crowns took to exploit their global trading opportunities; and so forth. All done in highly readable prose: a very useful text on the medieval period.