The unsatisfactory character of the transactions of medieval bankers reacted on the prosperity of their business, and eventually brought about their ruin. It was a constant difficulty for their debtors to scrape together money which would reimburse the Jew or the Lombard for wealth that had been unremuneratively expended; and it was natural enough that the capitalists should suffer in turn from defaulting creditors. The Jews were under such serious disabilities that it was only by special favour that they could recover their debts, and several of the Florentine and other Italian bankers were ruined by breaches of royal faith, about the middle of the fourteenth century: but the failure of the Templars, who had also organised an immense banking business, was due to political rather than economic causes. At that time very few opportunities existed of so using capital that it should not only bring in a return to the owner, but also increase the wealth of the community.
There was, however, all through the Middle Ages one such opening for the profitable employment of capital; and of this the great Italian houses took full advantage. The merchant who engaged in active trade and visited distant markets with a cargo of goods, was rendering a real service to the community. He was enabling the inhabitants of certain districts to enjoy the benefit of products which did not grow on their own soil, or of wares which they had not the skill to manufacture. So long as the merchant confined himself to such operations, no question was raised by the strictest moralist as to the legitimacy of his transactions or as to the lawfulness of gains thus derived; and capitalists, who joined together in taking the risks of useful business of this kind, were held to be perfectly justified in sharing the profits which accrued to them from their enterprise. While nearly all moneyed men were under suspicion of occasional unfairness, the medieval conscience clearly recognised that the capitalist was fully entitled to some gain, so long as he transported commodities without trying to bargain himself out of risks. Capital engaged in active commerce was employed in producing goods at the places where they were most wanted; and it was being applied to facilitate the production of wealth. The importing merchant neither increased the material objects nor altered their intrinsic qualities; but he gave them greater utility, by conveying them to places where they were largely required.
The economic revolution at the close of the Middle Ages was largely due to the discovery of new methods for the productive employment of capital. New lines of commerce were opened; and it was also found that various branches of industry could be prosecuted to greater advantage, when taken up and organised by capitalists. Success in these ventures enabled enterprising men to amass more wealth and to form additional capital, while it tempted those who had hoards lying idle to find means of employing them as capital; by so doing they brought large sums of money into circulation and moreover secured an income for themselves. The formation of new capital and the employment of hoards as capital for facilitating production went on apace in the fifteenth and sixteenth centuries; the lending of capital for purposes of unproductive consumption did not cease, but came to be an entirely subordinate, because it proved to be a less secure and less remunerative, method of employing wealth.
There was no apparent reason, so far as we can see in looking back to the beginning of the fourteenth century, why the material progress which had been steadily maintained for some generations should not have been continued. Medieval society, stereotyped as it was, had been capable of considerable readjustment, as circumstances had changed. It seems as if capital might have gradually found openings in new directions, so that the medieval system would have been slowly transformed without any serious rupture with the past. At Florence, in particular, capitalist organisation existed side by side with the older forms of industrial life at the beginning of the fourteenth century; and as money economy became increasingly prevalent, capitalistic enterprise might have taken advantage of the new fields which were ready for its operation. But circumstances combined to render this impossible; medieval society and its institutions suffered an especially severe blow from the terrible pestilence known as the Black Death, which ravaged Europe in the middle of the fourteenth century. From this shock the various countries of Europe only recovered slowly; and when material prosperity began to be restored, the old institutions were no longer suitable to the changed requirements of the times. The old industrial life had been so far disintegrated by the disturbed conditions of the fourteenth and fifteenth centuries that the change from the medieval to the modern was accomplished, not as a gradual transition but as a violent revolution.
Three principal causes combined to subject the social and economic system of medieval Europe to an overwhelming strain. Some uncertainty must necessarily attach to conclusions based on the statistics drawn from medieval sources; and there can be little doubt that the estimates of the mortality due to the Black Death, made by contemporary writers, were grossly exaggerated. Many records, however, exist of the deaths in particular places, or among a special class such as the parochial clergy; and these statements appear to be well worthy of credit. It seems to be generally agreed that at least half of the population was swept away by the successive visitations of this pestilence. While we cannot easily conceive what must have been the full effects of such wholesale destruction, we may at least conclude that considerable tracts of country were depopulated, so that the area devoted to tillage was necessarily reduced; we have also abundant evidence of labour agitation in many branches of industry. The whole system of regulated rates and prices was seriously undermined; under the new conditions the old payments had become unsatisfactory; changes of some kind, both as to the terms on which land was rented and as to those on which labour was employed, were inevitable.
The constant wars of the latter half of the fourteenth and the fifteenth centuries were another disruptive force and proved fatal to the maintenance of the highly organised system of medieval times. In the countries which were the scene of frequent warlike operations, immense mischief was done to agriculture; it is difficult to understand how a rural population should have survived in France at all, when we read of the ravages of the English armies, and the devastations caused by the factions. The chronic disorder not only affected tillage and the food-supply, but rendered internal trade so insecure that it was practically suspended altogether. What had been a prosperous kingdom, with many well-organised cities, and with fairs that were frequented by merchants from all parts of Europe, was reduced to utter desolation and ruin. Similar results attended the Hussite Wars in Bohemia, and, to a lesser degree, the Wars of the Roses in England; the Italian cities must also have found their intercivic hostilities a serious drain on their resources. Venice and Genoa had carried on a long-protracted struggle about Chioggia; Pisa was at length forced to succumb to Florence, and Milan gradually established her superiority over her neighbours. Doubtless, to many districts the wars brought profit as well as loss; Swiss and Italian mercenaries often engaged in fighting as a regular trade, in which much booty was to be obtained; and successful cities might recoup themselves for their outlay by securing new avenues of commerce at the expense of their rivals. Still the fact remains that war was a disturbing element; the instability introduced by it into all the relations of’ life was irreconcilable with the maintenance of the old industrial system or old trading connexions. The countries which for any considerable period enjoyed a relative immunity from external war, such as Flanders, the duchy of Burgundy, the Rhineland, and Bavaria, made rapid progress, while others failed to regain the prosperity they had enjoyed before the Black Death, or sank into deeper and deeper decay. The most obvious and important commercial result of the Wars in France was seen in the diversion of the traffic between Italy and Flanders from the Rhone valley, so as to increase the intercourse over the Alps and by the valley of the Inn. Augsburg, Nürnberg, and the cities of the Rhine-land came to be for a time on the great highway of Europe; while there was also increased maritime communication between the Mediterranean and the Low Countries by the Straits of Gibraltar and the English Channel.
Other political causes affected the more distant trading connexions of European cities. The union of the northern kingdoms of Denmark, Norway, and Sweden under Queen Margaret consolidated the opposition to the monopoly asserted by the Hanse League over the commerce of the North; while the rise of the power of Poland, and her successful contests with the Teutonic Order, interrupted the lines of its Eastern communications. When in 1477 Ivan, Czar of Russia, brought Novgorod into complete subjection and it ceased to be an independent city, the merchants of the Hanse League lost their footing at the point where they had established connexions with traders who were engaged in traffic with the East.
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