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Background
Toward the end of the European
Middle Ages, the
Catholic Church launched a series of Holy Wars against
the Muslims in the Middle East. These wars were
known as the
Crusades, and while their original goals
were not achieved, they nevertheless, had long reaching
effects. As a result of the Crusades, trade
increased, which also increased
cultural diffusion
between the Islamic world and Europe. As this
trade flourished and grew, new practices in business
were developed, and a fundamental change in European
society took place. This time period is know as
the
Commercial Revolution. Resurgence of Trade
In the late 1300s,
Italian City States became the center
of the resurgence of trade.  Venice was the richest
and most powerful of these states. From Italy,
goods were shipped to large
trade fairs, which were
located on major trade route crossroads. The
larger of these trade fairs evolved into towns, with a
change in the way of life for their inhabitants. The
Black Plague
A result of the increased interaction between Europe and
the Middle East was the spread of the
Bubonic Plague,
also known as, the Black Death. Starting in the
1100s, the plague was spread along trade routes and had
an enormous impact on Europe, including the loss of 1/3
of the population, a decline in their economy, and a
weakening of feudalism. In China, 35 million
people died as a result of the plague, and in Cairo,
Egypt, 7,000 people a day died at the disease's height. Commercial
Revolution
Despite some setbacks due to the plague, the resurgence
of trade continued across Europe, with many new
innovations in business. Guilds: were trade
associations of craft workers and merchants. All
of one craft would form together to set standards on
prices and quality. Guilds dominated economic life
during this period and were the main mode of production. Capitalism:
emerged with the decline of feudalism. Capitalism is
based on trade and  capital,
which is money for investment. Higher demand for a product
means higher prices and higher profits. Capitalism
becomes the new economic system and resulted in the
development of new business practices to handle the
increase in trade.
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New
Business Practices |
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Partnerships
&
Joint Stock Company |
Used to raise capital for
larger projects. Less financial risk to
the individual |
|
Banks |
Provided money lending
services as well as issuing Bills of Exchange. |
|
Bills of
Exchange |
Worked like modern
checking account. Merchant would deposit
gold and receive a Bill of Exchange. Could
then turn that in for gold at other banks.
Easier and Safer than carrying gold along trade
routes |
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Insurance |
Paid a small fee to
insure goods during travel. If goods were
damaged or lost, insurance company pays
replacement costs. If arrive safely, insurance
company keeps the fee. |
The Commercial Revolution and the resurgence of trade
across Europe completely reshaped society. These
changes resulted in the decline of
feudalism, and a
revival of arts, literature, and science known as the
Renaissance. |
