These essays on European economic history serve two functions: one, they describe economic systems in fairly static terms because many people either know little about how pre-industrial economic systems work or else what they know is incorrect. Two, these essays indicate what changed in the 16th and 17th centuries. In some respects, the changes were minor but were nevertheless interesting, while in other respects the changes were dramatic.
The two most important developments in the European economy during the Reformation were the rise in prices and the shift from trade centered on the Mediterranean to one centered on the Atlantic. Also significant was the creation of money markets and in general an increasing sophistication in business practices, a solidification in the divide between eastern and western European agricultural systems, the emergence of a handful of economically dominant cities, and a strong development of rural industry. We'll be taking a look at all these.
None of these trends progressed evenly, either across time or across region. They interacted with one another, and were also subject to external forces that themselves were uneven. Nevertheless, I'll make some general statements, with a constant reminder that these generalities might not apply to any specific place at any particular time.
Population and the Economy
One of the most fundamental variables in any economic system is population growth. The most important event in the late Middle Ages was the demographic crisis of the 14th century. This crisis encompassed more than just the Black Death of 1347-1351 and in fact lasted well into the 15th century. Only from around 1470 did Europe's population really recover the ground it had lost. What followed was growth that lasted into the middle of the 17th century, though the strongest period was in the first three quarters of the 16th.
Growing population fueled a growing economy. When population growth flattened out in the later 1600s, so did the economic growth. The correlation isn't exact; there are, in fact, exceptions numerous enough that historians have struggled to find additional factors. Population alone isn't enough to account for either the growth or the decline; but it was certainly a major factor.
The direction of overall growth is worth knowing, but perhaps equally important are the complex movements within the general trend; most especially, the general movement from the countryside to the city, and from small towns into very large cities. Quite a number of towns actually declined in population, but some cities grew tremendously. This was a steady trend right through our period; by 1700, Europe had forty-three cities with populations over 40,000, and a handful of these were genuinely large. London, for example, had a population in 1500 of about 33,000. By 1700 it had ballooned to half a million. Given that cities in themselves tend to have negative growth (more die than are born), you can see that the boom cities were virtual demographic whirlpools, pulling people in from villages and small towns. Big cities grow only through immigration.
I'll talk about this more later. Here I'll simply indicate that prices were profoundly affected by the supply of bullion (approximately 90% of all mercantile transactions were still by coin), and that this supply was extremely volatile in the 16th century. In the first decades it was driven by the output of silver mines in Germany and Hungary. These began to play out in the 1540s, right about the time that silver in vastly greater quantities began to arrive from the New World. So, for all of the 16th century, and into the first decades of the 17th century, Europe experienced a significant inflation. This in turn affected just about every aspect of economic life.
Why Capitalism Isn't Bread
An old model for the economic history of the early modern period can be summed up in a single phrase: the Rise of Capitalism (invariably done in capital letters). This model has been rejected by historians for at least a couple of generations now, but seemingly with little impact on popular understanding. People still insist on viewing the past in terms of the present, on regarding capitalism as the inevitable culmination of economic evolution, and on seeing every stock exchange or merchant company as evidence of the shedding of medieval economic baggage.
Not only does the evidence not support this model, even trying to make it work isn't productive. To speak of the "rise" of capitalism, as if it were a bowl of dough left in the sun, is to abandon explanation in favor of fate. In any case, capitalism cannot be said to have done much of anything until the concept at least had some legitimacy, and we don't find the word until the mid-17th century at earliest. Capitalism belongs to a later era.
Most of our chronological divisions of the past derive from politics, and the rest derive from the arts and intellectual history. Economic developments rarely coincide with these divisions, with the result that discussions of economics never line up neatly with the semester. So it is in the case of the Reformation. There is a unity to the period from around 1450 to the early 1600s (which itself divides into two movements), and another era from around 1630 to about 1750. I'll try to take note of these rhythms at the appropriate places in these essays; here, I want to make some very broad generalizations.
The Late Middle Ages
Climate change and demographic disaster combined to define the late medieval economy in fundamental ways. The period extends roughly from 1300 to 1450. As always, local conditions could vary significantly, but one must regard this period as one of retrenchment at best, or even retreat (whether there was a "recession" is a question that's been debated among medieval economic historians for some time).
There was little new during this period. The 1200s had been a time of significant economic innovations, and you can view the late Middle Ages as the time that those innovations became securely and widely embedded.
Starting in different decades, but generally around mid-century and after, we see population levels recovering and the economy expanding. The crises of the late medieval period had shuffled the economic deck in significant ways, leaving some social and economic groups with winning hands and others with losing hands. These groups now were trying to come to terms with the new economic realities. I'll speak directly to this in my essays on social history.
The economic recovery was also fueled by an expansion of bullion, generated by a combination of discovery of new silver mines in Germany and more efficient exploitation of existing mines (copper as well as silver) elsewhere. Road transportation improved significantly. Methods of finance and banking facilitated the expansion of commerce in ways that would have been inconceivable in earlier centuries.
While it's true that new trade routes were being opened up from the 1490s onward, these did not have much of an impact yet. The expansion of the European economy during these years was more of a traditional recovery, done within the confines and context of traditional Europe. Even the focal point of trade was still traditional: the Mediterranean.
A New World: 1540-1660
The specific decades can be argued, and I don't mind shifting it forward or back a decade or two. I chose the 1540s because that's the decade with the great silver mines in Bolivia came into production (though they wouldn't have their big impact for a while yet). It's not so much that something happened in the 1540s as that something was happening all during this century.
Henry Kamen called this the Iron Century. He paints a relentlessly grim picture and I don't disagree with any of it in detail. It would also be possible, however, to describe this stretch of times wholly in terms of new and exciting developments: joint stock companies, money markets, stock exchanges, new crops, new business models. That's the stuff of the old "Rise of Capitalism" story.
Both are true, and the one is the necessary accompaniment of the other. There were swift and dramatic, even extreme, changes in the economy of Europe, both at regional levels and across the whole system. There was also endemic poverty, underemployment, and dislocations everywhere. The comparison that comes to mind is the 19th century, which also saw monumental developments in industry along with terrible social suffering. Not all of the suffering of the Iron Century can be laid at the door of economic change, for plague continued to ravage the continent and constant war took a terrible toll. The economic changes, though, penetrated much further, causing radical change in how governments worked, how the ruling class ruled, how the working class worked, and even how the poor stayed poor.
In short, this of this century as the century of dislocation in general, and of roller-coaster shifts between inflation and recession at more local levels, with profound effects on just about every aspect of European economy and society.
What about the New World? Oh yeah, that.
Silver wasn't the only thing discovered. The Portuguese and then the Dutch pushed into the Indian Ocean and on to the Pacific, bringing back all sorts of exotic spices, tea, coffee, and so on. These tended to be and to remain import items.
The trans-Atlantic lands yielded treasures more ordinary yet more important. I've already spoken of silver (yes there was gold, but was never as important), but the New World imports that had lasting effects were crops: the tomato, potato, corn (maize), tobacco, and so on. These and many others were brought back to Europe and planted there, changing both farming and diet.
Into the Future Passed: 1650 and after
One would expect this section to talk about how the economy settled down and Europe entered into a brave future, but that's not how it worked at all. Rather, much of Europe was afflicted by chronic recession for another hundred years. By the later 18th century this had gone on for so long and was so obvious that even the economists noticed it, and writers from Thomas Malthus onward spun theories as to why the European economy more or less topped out.
Many factors played a part, but at the root of them all was agriculture (pun intended). Put simply, with the techniques of the day, Europeans couldn't support any more Europeans. The economy had expanded about as far as it could and until there was radical change in farming techniques it wasn't going to go much further. That change, of course, started happening in the second half of the 18th century, and in the 1780s was joined by equally significant developments in industry, and the world was about to change forever. It changed so profoundly, in fact, that it's fair to say there are only two major economic systems on the planet: industrial and pre-industrial. Everything else is a variation on one of those two. Further discussion, however, is well beyond the scope of this essay!
To recap: the early years of our course were an extension of the economic recovery of the later 15th century. The period 1550 to 1660 was a period of extreme dislocation and major change, within which saw periods boom and bust in various regions across Europe. This was followed by a much quieter period in the later 17th century (and on into the 18th) that most economic historians would call recessionary.