2.6: Economics

Italy lay at the center of the incredibly lucrative trade between Europe and the Middle East. From the Arab world, Italian merchants ultimately adopted a number of commercial practices and techniques that helped them (Italians) stay at the forefront of the European economy. For example, Italian accountants adopted double-entry bookkeeping (accounts payable and accounts receivable) and Italian merchants invented the commenda, a way of spreading out the risk associated with business ventures among several partners - an early form of insurance for expensive and risky business ventures. Italian banks had agents all over Europe, which provided reliable credit and bills of exchange, allowing merchants to travel around the entire Mediterranean region without having to literally cart chests full of coins to pay for new wares.

One other noteworthy innovation was the use of Arabic numerals instead of Roman numerals. Imagine trying to do complicated multiplication or division using Roman numerals like "CLXVIII multiplied by XXXVIII," meaning "168 multiplied by 38" in Arabic numerals.

During the era of the Babylonian Captivity and the Great Western Schism, Italian bankers started to charge interest on loans, becoming the first Christians to defy the church’s ban on “usury” in an ongoing, regular fashion. Bankers became so wealthy that social and religious stigma alone was not enough to prevent the spread of the practice. This action actually led to more anti-Semitism in Europe, since the social role played by Jews - money-lending - was increasingly usurped by Christians.

Much of the prosperity of northern Italy was based on the trade ties maintained with the Middle East, which by the fourteenth century meant both the remains of the Byzantine Empire in Constantinople as well as the Ottoman Turkish empire. From the Turks, Italians bought precious cargo like spices, silks, porcelain, and coffee, in return for European woolens, crafts, and bullion. The Italians were also the go-between linking Asia and Europe by way of the Middle East.

The Italian city-states were sites of manufacturing. Raw wool from England and Spain made its way to Italy to be processed into cloth, and Italian workshops produced luxury goods sought after everywhere else in Europe. Italian farms were prosperous and produced a significant and ongoing surplus, feeding the growing cities.

One result of the prosperity generated by Italian mercantile success was the rise of a culture of conspicuous consumption. Both members of the nobility and rich non-nobles spent lavishly to display wealth, culture, and learning. All of the famous Renaissance thinkers and artists were patronized by the rich. In turn, patrons expected “their” artists to serve as symbols of cultural achievement that reflected well on the patron. Mercantile and banking riches translated into social and political status through art, architecture, and scholarship.