Commerce, specifically international commerce, today, is at a higher scale than ever before. To sustain this, both morally and strategically, many institutions, such as the World Bank, the International Monetary Fund, and NASDAQ, control trade and other economic issues. These united organizations evolved out of establishments that controlled commerce similarly during the European Renaissance: religious powers, such as the Catholic Papacy and the Islamic Caliphate. Florence, known as the center of the European Renaissance, was the central headquarters of much of the banking in Europe during the Renaissance, and was under the jurisdiction of the Catholic Papacy. Istanbul, a wealthy, powerful, but unstable Middle Eastern trade center, was the main middleman of trade between Western Europe and the Orient during the Renaissance, and was controlled by the Islamic Caliphate. Both of these religions had unique views on trade, largely based on the political atmosphere at the time. While the Papacy enforced trade restrictions to boycott political enemies, the Caliphate, being the leadership of an empire as well, did not place restrictions (Jardine). Thus, though both of these Renaissance economies were initially very powerful, the Catholic Church and the Papacy confined economic growth while the Islamic Caliphate promoted it.
The powerful banking industry that was the core of Florence’s massive cultural influence evolved out of a mercantile economy based on commodity exchange (Annenberg). During the late medieval period, these commodities were mainly textiles, specifically silk and wool, and gold, which would come to, in a way, to define Florence’s standing in Europe. Silk became a dominant industry after the Medici family took in the “elite silk-weavers” (Jardine) of Lucca after a large political upheaval drove them out of their home. Silk was both sold as an individual material, known to be very high quality and in great demand, and in the form of “ornate brocades” (Jardine). Wool was Florence’s largest industry both during the late Medieval Period and during the Renaissance because of an innovative approach focusing on the sale of high-quality cloth made from imported material (Annenberg). Gold was in part an art form, but was also significant in Florence in the form of currency. The gold florin was the basis of monetary exchanges in all of Florence’s other industries, and thus required large scale production prior to the invention and prominence of bills of exchange (GoldAvenue). While all of these thrived and succeeded in deeming Florence one of the preeminent economic powers in Europe’s trade network, not all of them had the potential to create the commercial enterprise that would make Florence even more powerful: banking. The wool trade, however, did. It worked with large amounts of wealth which could easily be replaced with credit, and thus served as the perfect launching point for an industry which wasn’t based on material trade.
Immense European demand for fine wool after urbanization of middle Ages fueled rapid expansion of Florence’s trade (Annenberg). Elements such as the Black Plague pushed people from rural areas into cities, where an increasingly industrial economy depended on trade. The upper class thus grew to consist of merchants rather than landowners. This changing upper class created a large demand for luxury goods, specifically imported merchandise from the orient and the Middle East, and fine textiles, such as wool. Alongside other large wool producers located mainly in the Low Countries, specifically Flanders (Jotischky 78), Florence realized the sheer amount of demand for high-quality textiles across Europe. However, the approach that Florentine merchants took was one that was so unique that it put them in an entirely different position from other merchants involved in the same industry. This decision was to import a great amount of wool from Spain and England, producers of higher-quality wool than Florence, and use it to create what an anonymous writer for The Economist refers to as a “light worsted woolen cloth that was in demand all over Europe” (“Renaissance”). This was an intensive process that involved cleaning, carding, spinning, dyeing and weaving. Though this prominent trade allowed Florence to host a major economy during the late medieval era, it was quickly replaced by an even more prosperous industry at the beginning of the Renaissance.
Banking evolved out of a desire for an easier way to manage capital in trade (“Renaissance”). Throughout the late middle Ages, debt involving wool merchants was managed by the guild that controlled the industry, the Arte della Lana. In a commentary in Fordham University’s Medieval Sourcebook, Paul Halsall summarizes its purpose as, “to assess taxes for clearing the commune of debt” (Halsall).
To make the payment of this debt simpler, merchants began using a more innovative, organized and safer method, bills of exchange (“Renaissance”). According to InvesterWords.com, an investing glossary, a bill of exchange is “an unconditional order issued by a person or business which directs the recipient to pay a fixed sum of money to a third party at a future date.” While this
in itself reduced the difficulty of paying debts with cash, the merchants that were using it began to realize that it had a lot more potential than just that. It was quickly used to bypass the Catholic Church’s laws against usury, and thus began to become a significant way to make money in a way that was previously considered sinful and unethical. However, the change that really crossed the threshold of becoming an individual industry was the use of credit by these merchants (“Renaissance”). This idea of using more than actual money in trade allowed for expansion beyond what was possible without the trust that debt would eventually be paid off that credit was built on (Korean).
There were many big banks in Florence that used this banking strategy to earn the profit which funded the cultural development that now defines the Renaissance. Another key to banking during the Renaissance was a technique first officially published in 1544 by the merchant Lucas Pacioli. It is known as the Double Entry System of Bookkeeping, and is defined by Accounting for Management as “the system of recording transactions having two fundamental aspects – one involving the receiving of a benefit and the other to giving the benefit – in the same set of books” (Accounting). This was ultimately the factor that allowed the use of credit to be possible, especially internationally throughout Europe. Large banks, specifically the Medici Bank, which pioneered the use of this
approach, used this ledger system to track trade through the giant economic empire with centers all across Europe’s big cities: London, Geneva, Bruges, and of course, their hometown of Florence (Korean).
While the ideal advantage to the Medici was the large returns that they would receive, supplying gold to powerful political and religious figures at interest served to buy them immense political power and increasing trade dominance supplementary to their banking presence. The perfect example of this in the history of the Medici family is the alum industry. Alum is a mordant, a vital element in the process of dyeing cloth which seals the dye into the cloth, making the cloth “color-fast” (Jardine). Until 1465, the main supplier of alum was Phocaea in Anatolia. In 1460, an Italian trader by the name of Giovanni da Castro, who also happened to be a godson of the pope at the time, Pius II, discovered a store of alum at Tolfa, a town near Rome. While Pius II declared this church property and restricted access to it, his successor, Paul II, immediately realized the monetary potential of this resource. He commissioned one of the Papacy’s greatest economic allies, the Medici to manage the trade of the alum mined from Tolfa as long as they swore to pay a certain percentage of their profits to the Catholic Church’s coffers. Of course, the Medici nevertheless managed to use their immense resources from their banks to expand this business that within a rather short period of time, the trade of alum from Tolfa stretched all the way to the distant cities of London and Bruges (Jardine). This choice by the Catholic Church was one that reflec
ted the constantly changing ideals of the Papacy which continually changed hands. It was generally in favor of a political and economic dominance, but the techniques used to reach this were different between every pope. Overall, however, Florence’s banking industry was one that regenerated and reinvested in the material, specifically textile, industry that it was created from.
Due to its position at the mouth of the Bosphorus, Istanbul had the ability to regulate and tax the flow of goods through the main trade routes between Western Europe, especially Italy, and the East, specifically India (Jardine). The Ottoman Empire didn’t have any significant trade of its own goods in Europe, but it played a large part in the trade of spices and textiles that came exclusively from the Far East. Despite this reverse demand in Europe, the Ottomans sold their own products significantly in India, specifically the prominent trading port of Calicut. These commodities included metals, such as copper, tin, gold and silver, dyes,
specifically vermilion and madder, and various textiles, including carpets and velvets. In return, the Ottomans received goods which were in great demand in Europe: spices such as “pepper, ginger, cinnamon, cardamoms… tamarind [and] canafistula” (Jardine), nutmeg and mace, and other goods such as myrobalans, “amber, aloe-wood, doves… sandalwood, cottons and coconuts” (Jardine). When these commodities were brought back to the Ottoman headquarters, they were sold to Italian merchants, especially Venetians, at very high prices compared to what they were bought for. Istanbul was a primary location for this resale, along with certain other Ottoman cities: Alexandria, Beirut, Cairo and Antioch (Jardine). Unfortunately, these large taxes and duties restricting trade were what ultimately brought the downfall of this strategy for the Ottomans.
In his paper The Ottoman Empire’s Inability to Industrialize, Elvis S. states, “the Europeans improved on the compass and adapted the Middle Eastern ideas of ship and sail design. The next step was the Age of Exploration and the discovery of the new world” (S). Ultimately, as Europeans expanded their trade horizons, they eliminated the need for a middleman in trade with the Far East. Portugal’s Vasco de Gama discovered a direct trade route with India in May 1498, which circumvented the Cape of Good Hope, making use of the direct sea route from Portugal. Not only did this result in huge competition for the Italian, specifical
ly Venetian, merchants who sold the same goods all across Europe at extremely high prices, but this competition posed a much better deal to European consumers than Venetians could. Without the Ottoman duties that raised prices sometimes up to sixty times the original, a similar profit could be made with a much lower market price (Jardine). While this was obviously devastating to Italian merchants, their vast resources allowed them to recover to an extent and follow in the footsteps of the Portuguese to innovate and become self-reliant in trade with the Far East. On the other hand, the Ottomans, and Istanbul, lost their source for income, and were unable to continue gathering the resources they had become accustomed to. The main factor that kept the Ottoman Economy running for a period after this loss of industry was one that was the basis of its continuous growth: military expansion.
Military expansion was the key to the beginnings of the Ottoman Empire because military force and innovation wer
e what defended the early groups that would later form this empire during the Crusades. Ottoman expansion began with the taking of Byzantine areas, and soon contained areas along the Red Sea, Black Sea, and North Africa. Control of these strategic locations both gave the Ottomans access to the resources and money that was contained there, and allowed for great duties to be drawn from European merchants. These resources, rather than being controlled privately, as in Florence, where expanding resources contributed mainly to cultural growth and economic growth rather than military and territorial growth, filtered back into the Ottoman military, and funded further military expansion, especially into Europe during the fifteenth and sixteenth centuries, beginning with the capture of Istanbul, then Constantinople, in 1453. Thus, though the trade routes that the Ottoman Empire had controlled for a length of time were no longer important, the Empire’s vast territorial control generated enough money to fuel military ventures well into the sixteenth century. The end began to come at this point when the Ottomans reached Vienna, and their sieges and ventures began to fail (Strata). Just like the Florentines, the end of the Ottomans’ high period came due to the progression of the rest of the world, though both left behind a legacy that continues to affect life today: one in the financial sector, and one in military and transportation technology.
On threat of excommunication, the Catholic Papacy placed restricted trade between Catholic states and Islami
c states, a decision which both separated the Church from some of the most powerful states of the Renaissance, and served to confine the extent of trade and economic power of following states (Jardine). The Catholic Church feared the military power of the Middle East, specifically the Ottoman Empire. The powerful politicians and clergymen who controlled the Catholic Church saw the ultimate manifestation of the Ottoman courage and military potency when the Islamic empire took Constantinople. Though the Catholic Church refused to help the Byzantine Empire defend Constantinople, the violent capture they witnessed, along with the general knowledge of Ottoman power, sparked another set of Crusades. Of course, without the massive bloodlust and desperation that led the first Crusades to their victories, these failed to have any significant effect. Despite this failure, the Papacy still had enough control to harm the Ottoman Empire economically. A papal edict banning trade with Istanbul, Alexandria and Tripoli was issued, pertaining specifically to the supply of materials that could be used in war against Europe. This list of materials included many fairly obvious supplies, such as gunpowder, arms, horses, lead, pitch, copper, sail-cloth and sulfur, but also some less likely, but even more important to a warring country, materials: grain, cotton yarn, beeswax, morocco leather, and sheepskins. It may have seemed like a quite an
undertaking at the time, but the Catholic Church took it quite seriously. Soon after the edict was issued, Venice was excommunicated as a state for continuing trade relations with Istanbul. While this was obviously negative in the sense that it shunned Venice from the supportive religious community, it was also a large benefit because it allowed Venetian merchants to have an obvious trade benefit over its competition. A similar advantage resulted for England after the Anglican Reformation, when the nation was excommunicated from the Catholic Church for an entirely separate reason (Jardine).
On the other hand, for states that either depended on or profited heavily from relations with the Catholic Church, such as Florence, this edict diminished international economic opportunities. If Florence had had the opportunity to establish banks in the Middle East, especially Istanbul, their banking industry would have expanded even further, and could have potentially affected the Ottoman economy. Due to the fact that much of the Ottoman income came from duties and military capture of various areas, the economy wasn’t highly privatized. Thus, this income went directly into a continuation of the previous methods of economic expansion, though unfortunately this approach wasn’t sustainable in a continually privatized economy that was prevalent in the rest of the developed world. Having more European influence might have inspired larger scale privatization, and a longer survival, as well as a larger and more sustainable income for European economies.
s: trade routes (Strata). The Ottomans made it clear through their conquering of the Byzantine Empire that if they had the chance, they would use their military power and superiority in innovation in conjunction with the Islamic doctrine of religious war to wage war against Europe. In the words of the Islamic Holy Book, the Qur’an, Muslims should “fight those who do not believe until they all surrender, paying the protective tax in submission.” While this is an obvious basis for military expansion throughout Europe, it also provides the level of punishment that might have created the Ottoman Empire’s large economic source: taxes. The fact that their Holy Book urges them to collect a tax from those who they force to surrender in religious war is perfect religious backing for charging immense duties to non-Muslims. With this sort of focus, Islam ultimately never exert
ed the sort of restrictions on trade that the Catholic Church ended up exercising. In fact, the principles of Islam that directly applied to state affairs in the Ottoman Empire encouraged the sort of expansion and exploitation of resources that the Ottoman Empire used to initially grow its economy.
By restricting trade with certain parts of the world, specifically the Middle East, the Catholic Papacy put itself in a position of preventing economic growth in Catholic states, such as Florence, while, by sponsoring continuous military expansion, the Islamic Caliphate promoted economic growth. Florence had an innovative economy that relied and thrived on the banking industry. Istanbul had an economy that was similarly powerful, but which acted as a middleman rather than depending on merchants. The Catholic Church banned trade with the Middle East, specifically Istanbul, and thus limited the growth of European economies such as that of Florence, while the Islamic Caliphate, which simultaneously played a primary role as the leadership of the Ottoman Empire, promoted political expansion that strategically served to place the Ottoman Empire in the center of trade between Western Europe and the
East, and gave it the opportunity to prosper on taxes and duties. The effect of both of these institutions was ultimately to bring their subjects down. States that were out of the control of the Papacy gained an advantage over those that were, because of unregulated trade with the Middle East. The Ottoman Empire’s Islamic ideas of war and conquest as main societal focuses were overtaken by Europe’s developed and innovated economy. This innovation, especially during the Industrial Revolution, was what separated states from religion in matters of trade in more recent history, as the church’s beliefs began to be replaced by science and technology. Yet, just as Renaissance societies ended up regulating themselves, modern society also rejected free trade by using the governmen
t to control trade.
Accounting for Management. “Double Entry System of Bookkeeping:.” Double Entry System of Bookkeeping – Definition | Explanation | Advantages | Disadvantages. Accounting for Management, 2011. Web. 29 Feb. 2012.
Annenberg Foundation. “Renaissance — Focus on Florence.” Learner.org. Annenberg Foundation, 2012. Web. 03 Feb. 2012.
The Annenberg Foundation provides a website called Annenberg Learner, which is a multimedia resource for teacher
D., P. “Italian Renaissance Textiles.” LiveJournal. LiveJournal, Inc., 27 July 2006. Web. 29 Feb. 2012.s of many different disciplines to use in and for their classes. This specific page is the section of the Renaissance site that focuses on Florence. It talks of Florence’s guilds, especially its textile guilds. However, it concludes that Florence generally replaced trade with banking.
GoldAvenue. “Renaissance.” GoldAvenue Encyclopaedia. Gold Field Mineral Services. Web. 01 Mar. 2012.
Halsall, Paul. “Medieval Sourcebook: The Arte Della Lana & The Government of Florence, 1224.” Internet History Sourcebooks Project. Fordham University, Oct. 1998. Web. 29 Feb. 2012.
Investorwords.com. “Bill of Exchange.” What Is ? Definition and Meaning. WebFinance, Inc., 2012. Web. 29 Feb. 2012.
Jardine, Lisa. Worldly Goods: A New History of the Renaissance. New York: Doubleday, 1996. Print.
Jotischky, Andrew, and Caroline Hull. The Penguin Historical Atlas of the Medieval World. London: Penguin, 2005. Print.
Korean Minjok Leadership Academy OTH. “WHKMLA : The Economic History of Renaissance Italy : Florence, Venice, the Papal State.” ZUM.de. Korean Minjok Leadership Academy, 1 Dec. 2009. Web. 29 Feb. 2012.
“Renaissance Florence: Cradle of Capitalism.” The Economist. The Economist Newspaper Limited, 2012. Web. 03 Feb. 2012.
While this article from The Economist intends to talk about the unique views of the Renaissance in Florence of Richard Goldthwaite, a retired professor at the Johns Hopkins University of Baltimore, Maryland, it more importantly covers the dominance of capitalism, as well as its effect, in Florence. Furthermore, it speaks of how Florence became a banking capital. Banking was an extre
S, Elvis. “The Ottoman Empire’s Inability to Industrialize – All Empires.” All Empires. All Empires Online History Community, Mar. 2005. Web. 14 Feb. 2012.
Smith, Ray. “Renaissance Social, Economic and Religious Change in the Renaissance.” Renaissance Faires, Renaissance Fairs and Renaissance Festival. The Profit Advisor. Web. 15 Feb. 2012.
Strata Travel. “The Ottoman Empire – Turkey.” All Information About Ephesus & Private Tours… E-ephesusdaytours.com. Strata Travel / Co-operation Travel Agency, 2010. Web. 14 Feb. 201
 Between the 16th and 20th centuries, the title of Caliph was only used by Ottoman Sultans such as Mehmed II and Selim I to legitimize the annexation of other Islamic nations to the Ottoman Empire. This was not often.
 Defined by Dictionary.com as: “Noun: fabric woven with an elaborate design, especially one having a raised overall pattern.” Brocades were often woven with gold or silver thread, making them even more valuable.
 The Bing Dictionary defines worsted as “smooth woolen cloth: smooth closely-woven cloth without a nap, made from lightly twisted yarn.”
 “Noun: the process in which fibers, as cotton, worsted, or wool, are manipulated into sliver form
 This directly translates to “The Craft of Wool.”
 Until the mid-fifteenth century, Phocaea was controlled by Genoa. At that point, the Ottomans, who controlled much of Anatolia, began approaching Phocaea and the surrounding islands, such as Chios, which were vital to the Genoese trade of alum because they provided a place to offload the material mined in Phocaea. Genoa agreed to pay large amounts of money to the Ottomans for continued access to the mines.
 This tax was 2 florins for every fifty kilograms of alum (Jardine).
 Another commodity that was highly important to certain aristocratic families in Europe was horses.