Trade and Business
The major development in trade was the development of new sea routes. This goes right along with the shift from trade centered on the Mediterranean to trade centered on the Atlantic. Among numerous effects, the Atlantic trade both created and necessitated the development of new business models, in particular the joint stock company. The other important development was the inflation of the 16th century, which forced a number of adjustments, especially in the area of state finance.
Merchants and mercantile activity ruled this era. In the Middle Ages it had been landed interests, and in modern times it has been the industrialists, but the early modern era was the age of the merchant. This was in large part due to chronic shortage of, and consequent high demand for, liquid capital and credit. These were largely in the hands of merchants.
A few blankets laid at the intersection of a road. Local farmers spread their surplus, their wives bring vegetables from the kitchen garden. Mostly they buy from each other, though scattered among the goods might be a few crafted objects, bought from a peddlar or even made at home. At the end of the day, everyone folks up their stuff and the intersection is again merely a place where roads cross.
Thousands of such markets took place all over Europe every day. They were modest in scale, had no importance beyond the local villages, yet these were where a good deal of European commerce took place. In hundreds of cases, the market was a bit more: a few wagons, perhaps, and peasants from several villages, coming to a weekly market and bringing goods from a bit further afield.
We would barely call these markets, but in towns and large villages this activity became more formal and intensive. The market took place in town, with the vendors selling out of stalls that were numbered and leased. Peasants from the countryside (within a day's walk, so they could get home before nightfall) came here with their goods, because prices were generally better than in those rural ad hoc markets. The market also gave work to porters and carters. Day laborers came here, to shop for goods of course, but also to shop for work, as market day was a good opportunity for employers to hire on temporary labor. Here, too, were peddlars looking to buy what they would soon take on the road, bakers and other merchants supplying food and drink. Here came respectable folk and common folk and servants.
In larger towns, or in certain types of towns, we start to see specialization in the markets. Rather than an undifferentiated weekly market where everything and anything was sold, we see for example a fish market daily down on the docks, and a cattle market held in the town square once a month. There were grain markets and vegetable markets and wine markets even flower markets. It all depended on what the local specialties were.
Markets in the towns were taxed and regulated. Inspectors made their rounds, checking quality and quantity and price. Not only inspectors employed by the town but also guild inspectors, checking for the same things. In many places where guilds held seats on the city council, the two functions might be in the same official. Tax collectors were to be seen as well, for certain commodities (grain, salt) were taxed and this was often levied at the point of sale.
Market day was a social as well as a commercial event. Whether grand, bustling markets in Paris or Milan, or simple village exchanges, the market was a place communities assembled and told one another the latest news. Where the records permit us to see, they show that there were more formal agreements concluded on market days than on non-market days.
There were also a good many illegal markets; that is, markets that formed spontaneously out of pure economic demand. They were illegal because the vendors paid no one for their stalls, and no taxes were collected. Town authorities broke these up when they could, but in big cities it might be some time before officials even discovered them. And officials can be bribed.
Some markets were temporary, ad hoc. Ever winter in Moscow the river froze, and shops and booths were set up on the ice. Butchers could butcher an animal and simply leave it out to freeze. In London the Thames froze in 1677 and again in 1683. In the latter year, the river not only had shops but entertainments as well!
At the other extreme from these large but temporary markets were ones that were so important that cities build permanent structures—covered halls with stalls that could be shut and locked on non-market days. Markets were almost never daily in our period, as they needed time for resupply from the countryside or from artisan shops.
Every type of product had its own market dynamics of supply and distribution. A livestock market, for example, needed agents to go into the countryside to make purchases, needed drovers to bring the cattle to appointed pastures where the animals were kept and fattened. The large herd was then brought into the city where buyers could look them over. Then to a slaughtering ground, which itself created one of the chief biohazards of early modern urban life. More agents descended then: meat to the butcher, skins to the tanner. And workers to clean it all up.
Other markets were less gruesome but no less complex. The cloth merchants in Paris worked out of an enormous covered complex known simply as Les Halles. They had to gather cloth from innumerable peasant households, bring the cloth to Parisian craftsmen for finishing, store the cloth (where it was carefully inventoried), and then bring the right cloths on the right days to maximize profit. And I've oversimplified the real complexity.
Markets were fundamental to European economic life (indeed, markets are still far more common in European towns than in American towns). Fernand Braudel tells us there were about 800 towns in England that had a market, or about one market for every 7000 inhabitants. This ratio matches fairly closely to figures from Bavaria for the same time period.
Markets were not the only form of trade. Increasingly common in our period was the shop. Many artisans had long sold "from the window" in the intervals between market days. More and more shops, though, sold more often from the window, and there appeared more shops that were purely retail, with nothing being made but only sold. The shopkeeper bought from wholesalers and sold to customers.
Some things, moreover, never got sold at market. Goldsmiths dealt from their shop. A wholly new phenomenon in our period was the coffee shop and the tea house. These were new products and became quite a fad. In fact, for much of the 17th century, there were also cocoa shops, with hot cocoa being the primary drink.
Fairs were similar to markets in most respects, but had some unique characteristics. They were less frequent, being annual or held only seasonally. They tended to be bigger than any individual market and could virtually take over a town. Some concentrated on specific products, though others were more general. One of the more spectacular was at Medina del Campo, the site of the great Spanish wool fair, held three times a year. This fair took over the town, to the extent that mass was celebrated from an exterior balcony of the cathedral, so the people in the market below could continue with business.
Even more than at markets, fairs attraced an entire secondary economy: jugglers and acrobats, musicians, fortune-tellers, hawkers of charms and potions, prostitution, gambling, and actors. Fairs were grand enough to attract visits from high nobility, with their entourages. All this action in turn fueled the local economy by way of inns and taverns. It kept busy armies of notaries and provided employment for a host of supervisors, inspectors, and clerks. The February carnival in Venice is but a faint echo of the early modern event, which attracted as many as 100,000 people. In Bologna at the Porchetta fair, a temporary theatre was built on the Piazza Maggiore, a different design every year.
Despite all these advantages, fairs had a major disadvantage: they required people to attend them. This meant expenses, but it also meant that certain kinds of business could be conducted only at the time of the fair. As other instruments of business were developed, fairs declined in importance. By the end of our period, they were clearly in retreat, persisting only in certain specialized areas and commodities.
On land, the big innovation came in two improvements for carriages: iron tires, and a front steering wheel. Some primitive suspension was developed in the 17th century, using leather straps, but carriages were still terribly rough to ride in.
Improvements in carriages, plus increasing use of mules.
At the end of the 16th century was a severe climate change. Glaciers advanced, wiping out whole villages in the mountains. Passes closed earlier and opened later. Land trade between Italy and the Netherlands all but stopped, as sea travel was cheaper and year-round.
Fluyts were an innovation in ship-building. They could carry more, being essentially just one big hull. Cheap to build, comparatively, but more importantly they were cheaper to operate because they required a smaller crew, and crew size was one of the biggest costs in operating a ship. The big innovation in shipping was specialization. For the first time, we get a clear separation of commercial and military ships.
Dutch ships were cheaper. They used cheaper materials, built more quickly, and yet were more skilled. Their shipyards used cranes, sawmills, winches, all saving labor. And they were able to buy in bulk. They developed a number of specialized vessels, especially at smaller tonnages. In larger ships the Dutch led the pack in hull design with the fluyt which had a shallower draft and great length. It wasn't a pretty craft, but it was seaworthy and economical: cheap to produce and with a greater carrying capacity. They also sailed with no guns and used winches or tackles where possible, thus reducing the size of the crew. They were basically just floating hulls.
No great innovations in ocean navigation, nor in sails and rigging. Those belong to the 15th century, or to the 18th century.
Inland waterways were developed, though. The Dutch were leaders in designing craft for use in canals, small rivers, and around ports. The 17th century saw a boom in canal building. Locks were invented in the late 15th century and were in general use by 1600. The Languedoc Canal was 148 miles long and rose 620 feet via a system of 119 locks. It averaged 6.5 feet in depth. It was built in the reign of Louis XIV. Dutch inventions included the sprit-mainsail, balance-lug, jib, gaff-mainsail.
On land the big innovations were the iron tire, suspension via leather straps, and the fifth wheel for steering. But the roads weren't improved. Attempts were made, but werent' effective until the later 18thc.
Sea trade was cheaper for bulky goods. For example, grain from Poland to Venice was four times costlier overland than by sea.
The trade routes of the Mediterranean had been established for over a thousand years. Spices, silks, and other luxury goods came out of eastern Mediterranean ports, which were the termini of long trade routes stretching thousands of miles to India, China, and southeast Asia. Goods traveled almost exclusively by ship to Italy, southern France, and coastal Spain, and from there to northern destinations.
Not a lot went in the other direction. Mostly bullion, to pay for those goods, and this is what historians mean when they talk about a imbalance of trade between east and west. It was a very old imbalance, and was noted even at the time. Indeed, one motivating factor in the voyages of exploration was to find more direct routes to eastern markets, so as to by-pass the Arab and Turk middlemen.
The most important route for northern sea transport passed around the northern tip of Denmark. This was the famous Sound, a fairly narrow waterway controlled by our era by Denmark. The Sound tolls were a huge source of income for the Danish crown, and were a major point of concern for those who had to pay them.
The major trade items coming from the Baltic region were: timber, grain, furs, and fish. There was little cloth industry in northeastern Europe, so cloth was one of the major items going in the other direction.
One factor that made Baltic shipping different was winter: ports froze, stopping all commerce. Weather had an effect on shipping, even in the balmy Mediterranean, which gets not at all balmy in the winter, but ships can still travel if they need to. In the Baltic, however, once ice forms, that's it. The ports didn't necessarily freeze every winter or all winter, but this almost never happened in the North Sea and never happened along the Atlantic.
The greatest shipbuilding port on the Atlantic coast was Bilbao. Seville was second only because of the West Indies trade. Spanish plus Portuguese ships were as numerous as the Dutch. In the 17th century, the oak forests of Bilbao's hinterland depleted, and Biscay shipbuilding declined. Especially the huge oaks needed for keels and sternposts.
Spanish woold went through Burgos. Spanish wine went to England from Bilbao. Better Spanish wine came from the south, down the Guadalquivir River. French wine went through Bordeaux. Wine must travel overland in skins and spoils quickly. But by water it can be put in casks, which improves the taste. Sweet wine came from Oporto, and so was called port.
The other big Atlantic trade item was salt, from Bourgneuf Bay, and so was called bay salt. Sea salt also was farmed in Setúbal, in southern Portugal.
The main east-west routes ran through the middle part of Europe, because on the north the sea route along the Baltic and North Sea was faster and cheaper, while on the south the Mediterranean was likewise cheaper. The main southernmost road followed the Danube upriver, with Vienna and Augsburg being major cities along the route. It then crossed the Black Forest and reached the Rhine, where Strasbourg was a major entrepôt. If the destination. Roads from there ran on to Paris.
Further to the north, roads from Poland passed through Bohemia and Saxony, with Breslau and Leipzig being major stops and Frankfurt and Nuremberg major destinations. From there roads tended to converge on Cologne.
All along these east-west roads, goods tended to seek water. Thus, when the Vistula or the Elbe or the Rhine was reached, it was often cheaper for the goods to travel by river to the sea.
North-south overland traffic was by far more important in long distance trade than were the east-west routes. This is in part because of the wealth of the Mediterranean, which tended to flow northward in exchange for foodstuffs and cloth, and in part is because of the ready access to the Rhine River from Italy, the main nexus of Mediterranean trade.
From Italy, the main determinant for overland traffic was the Alpine passes. Goods crossed the Alps either from Venice, going over the Brenner Pass to Augsburg, or else when from Milan or Genoa over the St Gotthard pass to the Rhine River. A third route crossed the Alps to the west, heading for the Rhône River and thence northward to Paris.
Mechanisms of Trade
Local and Regional
Most trade in Europe was local. It was in the form of food grown within a couple of days' walk or wagon-ride from a town, or of the products of artisans going the other direction. This sort of buying and selling was often done directly by the craftsman or farmer, but there were also merchants who specialized in buying from the source and serving as a middleman.
Relations between a town and the surrounding countryside could at times be prickly. Some towns had direct political control over the villages, and even other towns, in the surrounding region (in Italy that region under urban control was known as the contado). They often sought to control what could be sold and by whom, mainly seeking to protect the interests of urban guilds at the expense of rural craftsmen. In Zwickau, for example, the city council was much concerned to make sure that the only beer being sold came from city brewers. The demand for grain in big cities like Paris was so great that it completely disrupted local grain markets, causing a good deal of resentment among the peasants in the region.
In addition, goods coming in from outside the city were normally taxed. This meant that a visiting merchant had to bring his goods to a certain market square or to a warehouse, where his goods were measured and the tax paid, before they could be offered for sale. In river towns, this extended to the boats carrying goods. At Strasbourg, for example, all boats had to stop in the city and their cargo had to be transferred to Strasbourg boats, which carried for only about twenty miles before they had to be transshipped again.
Regional trade of the sort described above was also of great importance. Not only merchants but sometimes even well-to-do craftsmen participated in this trade. For example, a smith might buy iron not only for himself but might also re-sell iron to others in town. Or, a butcher might buy more cattle than he could use, and re-sell not only the meat but also the leather to local craftsmen. These artisans had business contacts in their region (southern Germany, or northern Germany, or the Netherlands) but no further. They tended to stay within their language group and tended not to have factors or other employees located in the other cities. Very often, their dealings were not so much with other city merchants but with the suppliers out in the countryside, or with their middlemen.
It's long distance trade that gets most of the press, of course. We are always fascinated by great wealth. By "long distance" historians usually mean that the trade crossed national boundaries, linguistic divisions, and major economic zones. In modern terms we would speak of international trade, but this term is misleading when it comes to places like Italy or Germany. "Long-distance" says it better.
Long-distance trade could involve almost anything, except perishables such as bread. The most important long-distance goods were foodstuffs, luxury items, and raw materials such as timber or metal.
England was a major exporter of wool and increasingly in our period, of cloth. The English sold on the Continent only at selected and regulated towns, called staples, and forced buyers to come to them. Even then, buyers could look at goods only on "show days"—Monday, Wednesday, and Friday, usually—and the other days could buy only what had been inspected on a show day.
Flanders and Brabant took unfinished cloth from England, dyed it, finished it (fulling, etc), and sold it. In the 16th century, the Netherlands and Hamburg joined in this production. Lighter cloths such as bays and fustians gained in the 16th and 17th centuries, as did the famous "Dutch linens" which was sold from Antwerp and Amsterdam, but was bought from Flanders and bleached in Haarlem.
Spain was a big supplier of wool: merino. Leiden was the big Dutch cloth center. Production in the Low Countries and Italy was in the towns, but in England and Germany it was rural.
The Italian cloth making industry declined, though luxury items like brocades, satins and velvets held up longer. Especially in Venice, which mainly used Spanish wool.
Calico was a fashion craze in the late 17th century, and Indian textiles generally, including things like hosiery.
I feel obliged to say something on this topic for two reasons: one, because fairs still had a role to play in the early modern era; two, because of the modern invention of the "Renaissance Fair."
What was a fair? It could be almost anything, but at its essence it was a market that came into existence for a limited period of time and was governed by special rules. The archetype of the medieval fair were the fairs of Champagne, which enjoyed their heyday in the 13th century. By our period, the Champagne fairs were long in decline, as were general fairs all across Europe. Where they survived and thrived, they were specialty fairs, such as the book fair in Nuremberg.
For the most part, trade was conducted on a more or less continuous basis in the major cities. Fairs were less important exactly because they were in a particular place and were of limited duration. By 1500 and even more by 1600, the needs of trade were more constant and continual, with business being conducting on a daily basis.
The Renaissance fairs so favored by modern recreationists is almost completely illusory. Real fairs were conducted by wholesale businessmen who looked at samples, certainly, but who bought and sold in large lots. They did their business on paper, in account books, using bills of exchange, and the actual transfer of goods happened in locales far distant from the actual fair. Nor were there mummers or other performers, for the purpose of a fair was to do business and to get on with business. Even such pressing matters as the exchange of hard currency or the settling of disputes was deferred until the end of the fair period, so that the main order of the day could be devoted exclusively to buying and selling. If fairs circa 1500 resembled anything modern, it would be the stock exchange of the 20th century with its frantic pace and its single-minded pursuit of profit. It most certainly did not consist of artisans directly selling their wares to casual browsers.
The late Middle Ages invented a number of business practices that were of major importance. Among these were double-entry bookkeeping, marine insurance, partnerships with shares, and a variety of forms of contracts. These were all in fairly wide-spread use in the Mediterranean by 1500, and in a limited way had spread north of the Alps.
During the Reformation era, these practices spread all across Europe, supplanting all other methods. The fact that these techniques were widely adopted only in the 16th century is more evidence of just how much the economy of northern Europe was changing. Only the Italian/Catalan techniques were up to the task of handling large-scale commerce, and that level of commerce had not existed in the north except in a handful of centers. Even there, many of those who handled the transactions were Italian.
Beginning in the 15th century, but accelerating markedly in the 16th, north European commerce expanded significantly. Moreover, those handling the commerce were increasingly north Europeans: the Dutch, the English, even the French.
Chartered companies: self-governing, with a monopoly over some geographic regions
Joint-stock companies: both these and charters were mainly for dealing overseas.
Earlier 16th century was dominated by south German merchants. Merchants typically dealt in a wide variety, taking opportunities as they arose and specializing only rarely.
Even though we read of the expansion of trade and the "rise of capitalism" and of all these merchants with their bills of exchange, there was as yet nothing like a modern corporation. Merchants, great and small, were mostly individual entrepreneurs. If they operated on a large scale they increased their leverage through partnerships, mainly with members of their own family or by way of marriage. These were personal agreements even when formalized into contracts, and rarely lasted even one lifetime. Business was as much centered on family as was farming or noble estates.
Where a merchant had regular business in a foreign city, he might have employees. These might also be family members, but not necessarily. If it was an associate, he was a correspondent, basically a local merchant who dealt on behalf of the other merchant, receiving a percentage in return. Reciprocal relations were common. In other situations, the foreign representative was a actual employee; in this case he was called a "factor".
Nor should you picture a merchant dealing in only one type of partnership. For example, to bring goods by ship it was rare for a merchant to invest in a single, entire ship. Rather, an entrepreneur would sell shares in the ship (captain and even crew typically invested). A given merchant would have investments in several different ships in order to minimize risk. The same merchant might also have money invested in some local vineyards, a cattle market to buy hides for the tannery, perhaps some wool put out to local farmer for spinning, and maybe some investment in the public debt. It was of course always a temptation to over-invest in one particular market. Between that and vulnerability to fraud, businesses failed often, just as they do today. Business was risky, a form of gambling, and the common sentiment was that the wise man got out of it as soon as he could.