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Commercial revolution
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In European history, the commercial

revolution saw the development of a
European economy – based on trade –
which began in the 11th century AD
and operated until the advent of the
Industrial Revolution in the mid-18th
century. Beginning c. 1100 with the
Crusades, Europeans rediscovered
spices, silks, and other commodities
then rare in Europe. Consumer
demand fostered more trade, and
trade expanded in the second half of
the Middle Ages (roughly 1000 to 1500
AD). Newly forming European states,
through voyages of discovery,
investigated alternative trade routes in
the 15th and 16th centuries, which
allowed European powers to build vast,
new international trade networks.
Nations also sought new sources of
wealth and practiced mercantilism and
colonialism. The Commercial
Revolution is marked by an increase in
general commerce, and in the growth
of financial services such as banking,
insurance, and investing.

Origins of the
commercial revolution

The term itself was used by Karl

Polanyi in his The Great
Transformation: "Politically, the
centralized state was a new creation
called forth by the Commercial
Revolution...".[1] Later the economic
historian Roberto Sabatino Lopez,[2]
used it to shift focus away from the
English Industrial Revolution.[3] In his
best-known book, The Commercial
Revolution of the Middle Ages (1971,
with numerous reprints), Lopez argued
that the key contribution of the
medieval period to European history
was the creation of a commercial
economy between the 11th and the
14th century, centered at first in the
Italo-Byzantine eastern
Mediterranean, but eventually
extending to the Italian city-states and
over the rest of Europe. This kind of
economy ran from approximately the
14th century through the 18th century.
[4] Walt Whitman Rostow placed the
beginning "arbitrarily" in 1488, the
year the first European sailed around
the Cape of Good Hope.[5] Most
historians, including scholars such as
Robert Sabatino Lopez, Angeliki Laiou,
Irving W. Raymond, and Peter Spufford
indicate that there was a commercial
revolution of the 11th through 13th
centuries, or that it began at this point,
rather than later.[6][7][8][9]

Maritime republics and

communes
See also: Maritime republics and Medieval
communes

The Venetian Empire

Italy first felt huge economic changes

in Europe from the 11th to the 13th
centuries. Typically there was:

a rise in population―the population

doubled in this period (the
demographic explosion)

an emergence of large cities (Venice,

Florence and Milan had over 100,000
inhabitants by the 13th century in
addition to many others such as
Genoa, Bologna and Verona, which had
over 50,000 inhabitants)

the rebuilding of the great cathedrals

substantial migration from country to

city (in Italy the rate of urbanization
reached 20%, making it the most
urbanized society in the world at that
time)

an agrarian revolution

the development of commerce

In recent writing on the city states,

American scholar Rodney Stark
emphasizes that they married
responsive government, Christianity
and the birth of capitalism.[10] He
argues that Italy consisted of mostly
independent towns, who prospered
through commerce based on early
capitalist principles and kept both
direct Church control and imperial
power at arm's length.

Cambridge University historian and

political philosopher Quentin
Skinner[11] has pointed out how Otto of
Freising, a German bishop who visited
central Italy during the 12th century,
commented that Italian towns had
appeared to have exited from
feudalism, so that their society was
based on merchants and commerce.
Even northern cities and states were
also notable for their maritime
republics, especially the Republic of
Venice and Genoa.[12] Compared to
absolutist monarchies or other more
centrally controlled states, the Italian
communes and commercial republics
enjoyed relative political freedom
conducive to academic and artistic
advancement. Geographically, and
because of trade, Italian cities such as
Venice became international trading
and banking hubs and intellectual
crossroads.

Harvard historian Niall Ferguson[13]

points out that Florence and Venice, as
well as several other Italian city-states,
played a crucial innovative role in
world financial developments, devising
the main instruments and practices of
banking and the emergence of new
forms of social and economic
organization.

It is estimated that the per capita

income of northern Italy nearly tripled
from the 11th century to the 15th
century. This was a highly mobile,
demographically expanding society,
fueled by the rapidly expanding
Renaissance commerce.

In the 14th century, just as the Italian

Renaissance was beginning, Italy was
the economic capital of Western
Europe: the Italian States were the top
manufacturers of finished woolen
products. However, with the Black
Death in 1348, the birth of the English
woolen industry and general warfare,
Italy temporarily lost its economic
advantage. However, by the late 15th
century Italy was again in control of
trade along the Mediterranean Sea. It
found a new niche in luxury items like
ceramics, glassware, lace and silk as
well as experiencing a temporary
rebirth in the woolen industry.

During the 11th century in northern

Italy a new political and social
structure emerged: the city-state or
commune. The civic culture which
arose from this urbs was remarkable.
In some places where communes
arose (e.g. Britain and France), they
were absorbed by the monarchical
state as it emerged. They survived in
northern and central Italy as in a
handful of other regions throughout
Europe to become independent and
powerful city-states. In Italy the
breakaway from their feudal overlords
occurred in the late 12th century and
13th century, during the Investiture
controversy between the Pope and the
Holy Roman Emperor: Milan led the
Lombard cities against the Holy
Roman Emperors and defeated them,
gaining independence (battles of
Legnano, 1176, and Parma, 1248; see
Lombard League).

Similar town revolts led to the

foundation of city-states throughout
medieval Europe, such as in Russia
(Novgorod Republic, 12th century), in
Flanders (Battle of Golden Spurs, 14th
century) in Switzerland (the towns of
the Old Swiss Confederacy, 14th
century), in Germany (the Hanseatic
League, 14th–15th century), and in
Prussia (Thirteen Years' War, 15th
century).

Some Italian city-states became great

military powers very early on. Venice
and Genoa acquired vast naval
empires in the Mediterranean and
Black Seas, some of which threatened
those of the growing Ottoman Empire.
During the Fourth Crusade (1204),
Venice conquered a quarter of the
Byzantine Empire.

The Maritime Republics were one of

the main products of this new civic
and social culture based on commerce
and exchange of knowledge with other
areas of the world outside western
Europe. The Republic of Ragusa and
the Republic of Venice, for example,
had important trade communications
with the Muslim and Hindu world and
this helped the initial development of
the Italian Renaissance.

By the late 12th century, a new and

remarkable society had emerged in
Northern Italy, rich, mobile, and
expanding, with a mixed aristocracy
and urban borghese (burgher) class,
interested in urban institutions and
republican government. But many of
the new city-states also housed
violent factions based on family,
confraternity and brotherhood, who
undermined their cohesion (for
instance the Guelphs and Ghibellines).

Italy in 1494, after the Peace of

Lodi

By 1300, most of these republics had

become princely states dominated by
a Signore. The exceptions were
Venice, Florence, Lucca, and a few
others, which remained republics in
the face of an increasingly monarchic
Europe. In many cases by 1400 the
Signori were able to found a stable
dynasty over their dominated city (or
group of regional cities), obtaining also
a nobility title of sovereignty by their
formal superior, for example in 1395
Gian Galeazzo Visconti bought for
100,000 gold florins the title of Duke
of Milan from the emperor
Wenceslaus.

In the fourteenth and fifteenth

centuries, Milan, Venice, and Florence
were able to conquer other city-states,
creating regional states. The 1454
Peace of Lodi ended their struggle for
hegemony in Italy, attaining a balance
of power and creating the conditions
for the artistic and intellectual
changes produced by the Italian
Renaissance.

Colonialism and
mercantilism

Further information: Mercantilism

Further information: Age of Discovery

Portuguese discoveries and explorations

from 1415 to 1543: first arrival places
and dates; main Portuguese spice trade
routes in the Indian Ocean (in blue);
territories of the Portuguese Empire
under the rule of King John III (1521–
1557) (in green).

The deterioration of the climate that

brought about the end of the medieval
warm period (or medieval weather
anomaly) caused an economic decline
at the beginning of the 14th century
(see Great Famine). However,
demographic expansion continued
until the arrival of the Black Death
epidemic in 1347, when ca. 50% of the
European population was killed by the
plague. The economic effects of a
labor shortage actually caused wages
to rise, while agricultural yields were
once again able to support a
diminished population. By the
beginning of the 15th century, the
economic expansion associated with
the commercial revolution in earlier
centuries returned in full force, aided
by improvements in navigation and
cartography.

Geopolitical, monetary, and

technological factors drove the Age of
Discovery. During this period (1450–
17th century), the European economic
center shifted from the Islamic
Mediterranean to Western Europe
(Portugal, Spain, France, the
Netherlands, and to some extent
England). This shift was caused by the
successful circumnavigation of Africa,
which opened up sea-trade with the
east: after Portugal's Vasco da Gama
rounded the Cape of Good Hope and
landed in Calicut, India in May 1498, a
new path of eastern trade was
possible, ending the monopoly of the
Ottoman Turks and the Italian city-
states.[14] The wealth of the Indies was
now open for the Europeans to
explore; the Portuguese Empire was
one of the early European empires to
grow from spice trade.[14] Following
this, Portugal became the controlling
state for trade between east and west,
followed later by the Dutch city of
Antwerp. Direct maritime trade
between Europe and China started in
the 16th century, after the Portuguese
established the settlement of Goa,
India in December 1510, and thereafter
that of Macau in southern China in
1557. Since the English came late to
the transatlantic trade,[15] their
commercial revolution was later as
well.

Geopolitical factors

In 1453, the Ottoman Turks took over

Constantinople, which cut off (or
significantly increased the cost of)
overland trade routes between Europe
and the Far East,[16] so alternative
routes had to be found. English laws
were changed to benefit the navy, but
had commercial implications in terms
of farming. These laws also
contributed to the demise of the
Hanseatic League, which traded in
northern Europe.[17] Because of the
Reconquista, the Spanish had a
warrior culture ready to conquer still
more people and places, so Spain was
perfectly positioned to develop their
vast overseas empire.[18] Rivalry
between the European powers
produced intense competition for the
creation of colonial empires, and
fueled the rush to sail out of Europe.
[19]

Monetary factors

The need for silver coinage also

affected the desire for expanded
exploration as silver and gold were
spent for trade to the Middle and Far
East. The Europeans had a constant
deficit in that silver and gold coin only
went one way: out of Europe, spent on
the very type of trade that they were
now cut off from by the Ottomans.

Another issue was that European

mines were exhausted of silver ore and
gold. What ore remained was too deep
to recover, as water would fill the mine,
and technology was not sufficiently
advanced enough to successfully
remove the water to get to the ore or
gold.[20]

A second argument is that trade

during the youth of the commercial
revolution blossomed not due to
explorations for bullion (gold and silver
coinings) but due to a newfound faith
in gold coinage. Italian city-states
such as Genoa and Florence (where
the first gold coins began to be minted
in 1252) and kingdoms such as the
Kingdom of Sicily routinely received
gold through such trading partners as
Tunisia and Senegal.[21] A new, stable
and universally accepted coinage that
was both compatible with traditional
European coinage systems and
serviced the increased demand for
currency to facilitate trade made it
even more lucrative to carry out trade
with the rest of the world.

Technological factors

In 1570 (May 20) Gilles Coppens

de Diest at Antwerp published 53
maps created by Abraham
Ortelius under the title Theatrum
Orbis Terrarum, considered the
"first modern atlas". Latin
editions, besides Dutch, French
and German editions appeared
before the end of 1572; the atlas
continued to be in demand until
about 1612. This is the world map
from this atlas.

From the 16th to 18th centuries,

Europeans made remarkable maritime
innovations. These innovations
enabled them to expand overseas and
set up colonies, most notably during
the 16th and 17th centuries. They
developed new sail arrangements for
ships, skeleton-based shipbuilding,[22]
the Western "galea" (at the end of the
11th century), sophisticated
navigational instruments, and detailed
charts and maps. After Isaac Newton
published the Principia, navigation
was transformed, because sailors
could predict the motion of the moon
and other celestial objects using