The Middle Ages (400-1300 A.D.) form a period of great significance in the economic, as in the general, history of Europe. They represent a vast transition, in which the germs of a new world were deposited, but in which little was fully elaborated. There is scarcely anything in the later movement of European society which we do not find there. Though as yet, for the most part, crude and undeveloped. The mediaeval period was the object of contemptuous depreciation on the part of the liberal schools of the last century, principally because it contributed so little to literature; and the great men of the Middle Ages had enough to do in other fields to occupy their utmost energies. The development of the Catholic institutions and the gradual establishment and maintenance of a settled order after the dissolution of the Western empire absorbed the powers of the thinkers and practical men of several centuries. The first mediaeval phase, from the commencement of the 5th century to the end of the 7th, was occupied with the painful and stormy struggle towards the foundation of the new ecclesiastical and civil system; three more centuries were filled with the work of its consolidation and defence against the assaults of nomad populations; only in the final phase, during the 11th, 12th, and 13th centuries, when the unity of the West was founded by the collective action against impending Moslem invasion, did it enjoy a sufficiently secure and stable existence to exhibit its essential character, and produce its noblest personal types. The elaboration of feudalism was, indeed, in progress during the whole period, showing itself in the decomposition of power and the hierarchical subordination of its several grades, the movement being only temporarily suspended during the second phase by the necessary defensive concentration under Charlemagne. But not before the first century of the last phase was the feudal system fully constituted. In like manner, only in the final phase could the effort of Catholicism after a universal discipline be carried out on the great scalean effort for ever admirable, though necessarily on the whole unsuccessful.
No large or varied economic activity was possible under the ascendancy of feudalism. That organization, as has been abundantly shown by philosophical historians, was indispensable for the preservation of order and for public defence, and contributed important elements to general civilization. But, whilst recognizing it as opportune and relatively beneficent, we must not expect from it advantages inconsistent with its essential nature and historical office. The class which predominated in it was not sympathetic with industry, and held the handicrafts in contempt, except those subservient to war or rural sports. The whole practical life of the society was founded on territorial property; the wealth of the lord consisted in the produce of his lands and the dues paid to him in kind; this wealth was spent in supporting a body of retainers whose service were repaid by their maintenance. There could be little room for manufacturers, and less for commerce; and agriculture was carried on with a view to the wants of the family, or at most of the immediate neighbourhood, not to those of a wider market. The economy of the period was therefore simple, and, in the absence of special motors from without, unprogressive.
In the latter portion of the Middle Ages several circumstances came into action which greatly modified these conditions. The crusades undoubtedly produced a powerful economic effect by transferring in many cases the possessions of the feudal chiefs to the industrious classes, whilst by bringing different nations and races into contact, by enlarging the horizon and widening the conceptions of the populations, as well as by affording a special stimulus to navigations, they tended to give a new activity to international trade. The independence of the towns and the rising importance of the burgher class supplied a counterpoise to the power of the land aristocracy; and the strength of these new social elements was increased by the corporate constitution given to the urban industries, the police of the towns being also founded on the trade guilds, as that of the country districts was on the feudal relations. The increasing demand of the towns for the products of agriculture gave to the prosecution of that art a more extended and speculative character; and this again led to improved methods of transport and communication. But the range of commercial enterprise continued everywhere narrow, except in some favoured centres, such as the Italian republics, in which, however, the growth of the normal habits of industrial life was impeded or perverted by military ambition, which was not, in the case of those communities, checked as it was elsewhere by the pressure of an aristocratic class.
Every great change of opinion on the destinies of man and the guiding principles of conduct must react on the sphere of material interests; and the Catholic religion had a powerful influence on the economic life of the Middle Ages. Christianity inculcates, perhaps, no more effectively than the older religions the special economic virtues of industry, thrift, fidelity to engagements, obedience to lawful authority; but it brought out more forcibly and presented more persistently the higher aims of life, and so produced a more elevated way of viewing the different social relations. It purified domestic life, a reform which has the most important economic results. It taught the doctrine of fundamental human equality, heightened the dignity of labour, and preached with quite a new emphasis the obligations of love, compassion, and forgiveness, and the claims of the poor. The constant presentation to the general mind and conscience of these ideas, the dogmatic bases of which were scarcely as yet assailed by skepticism, must have had a powerful effect in moralizing life. But to the influence of Christianity as a moral doctrine was added that of the church as an organization, charged with the application of that doctrine to mens daily transactions. Besides the teaching of the sacred books, there was a mass of ecclesiastical legislation providing specific prescriptions for the conduct of the faithful. And this legislation dealt with the economic as with other provinces of social activity. In the Corpus Juris Canonici, which condenses the result of centuries of study and effort, along with much else is set out what we may call the Catholic economic theory, if we understand by theory, not a reasoned explanation of phenomena, but a body of ideas leading to prescriptions for the guidance of conduct. Life is here looked at from the point of view of spiritual interests; the aim is to establish and maintain amongst men a true kingdom of God.
The canonists are friendly to the notion of a community of goods from the side of sentiment ("Dulcissima rerum possession communis est"), though they regard the distinction of meum and tuum as an institution necessitated by the fallen state of man. In cases of need the public authority is justified in re-establishing pro hac vice the primitive community. The care of the poor is not a matter of free choice; the relief of their necessities is debitum legale. Avaritia is idolatry; cupiditas, even when it does not grasp at what is anothers, is the root of all evil, and ought to be not merely regulated but eradicated. Agriculture and handiwork are viewed as legitimate modes of earning food and clothing; but trade is regarded with disfavour, because it was held almost certainly to lead to fraud; of agriculture it was said, "Duo non displicet"; but of the merchant, "Deo placere non potest." The seller was bound to fix the price of his wares, not according to the market rate, as determined by supply and demand, but according to their intrinsic value (justum pretium). He must not conceal the faults of his merchandise, nor take advantage of the need or ignorance of the buyer to obtain from him more than the fair price. Interest on money is forbidden; the prohibition of usury is, indeed, as Roscher says , the centre of the whole canonistic system of economy, as well as the foundation of a great part of the ecclesiastical jurisdiction. The question whether a transaction was or was not usurious turning mainly on the intentions of the parties; the innocence of blameworthiness of dealings in which money was lent became rightfully a subject of determination for the church, either by her casuists or in her courts.
The foregoing principles point towards a noble ideal, but by their ascetic exaggeration they worked in some directions as an impediment to industrial progress. Thus, whilst, with the increase of production, a greater division of labour and a larger employment of borrowed capital naturally followed, the laws on usury tended to hinder this expansion. Hence they were undermined by various exceptions, or evaded by fictitious transactions. These laws were in fact dictated by, and adapted to, early conditionsto a state of society in which money loans were commonly sought either with a view to wasteful pleasures or for the relief of such urgent distress as sought rather to have been the object of Christian beneficence. But they were quite unsuited to a period in which capital was borrowed for ends useful to the public, for the extension of enterprise and the employment of labour. The absolute theological spirit in this, as in other instances, could not admit the modification in rules of conduct demanded by a new social situation; and vulgar good sense better understood what were the fundamental conditions of industrial life.
When the intellectual activity previously repressed by the more urgent claims of social preoccupations tended to revive towards the close of the mediaeval period, the want of a rational appreciation of the whole of human affairs was felt, and was temporarily met by the adoption of the results of the bets Greek speculation. Hence we find in the writings of St Thomas Aquinas the political and economic doctrines of Aristotle reproduced with a partial infusion of Christian elements. His adherence to his masters point of view is strikingly shown by the fact that he accepts (at least if he is the author of the De Regimine Principum) his theory of slavery, though by the action of the forces of his own time the last relics of that institution were being eliminated from European society.
This great changethe enfranchisement of the working classeswas the most important practical outcome of the Middle Ages. The first step in this movement was the transformation of slavery, properly so called, into serfdom. The latter is, by its nature, a transitory condition. The serf was bound to the soil, had fixed domestic relations, and participated in the religious life of the society; and the tendency of all his circumstances, as well as of the opinions and sentiments of the time, was in the direction of liberation. This issue was, indeed, not so speedily reached by the rural as by the urban workman. Already in the second phase serfdom is abolished in the cities and towns, whilst agriculture serfdom does not disappear before the kind. The latter revolution is attributed by Adam Smith to the operation of selfish interests, that of the proprietor on the one hand, who discovered the superior productiveness of cultivation by free tenants, and that of the sovereign on the other, who, jealous of the great lords, encouraged the encroachments of the villains on their authority. But that the church deserves a share of the merit seems beyond doubtmoral impulses, as often happens, conspiring with political and economic motives. The serfs were treated best on the ecclesiastical estates, and the members of the priesthood, both by their doctrine and by their situation since the Northern conquests, were constituted patrons and guardians of the oppressed or subject classes.
Out of the liberation of the serfs rose the first lineaments of the hierarchical constitution of modern industry in the separation between the entrepreneurs and the workers. The personal enfranchisement of the latter, stimulating activity and developing initiative, led to accumulations, which were further promoted by the establishment of order and good government by the civic corporations, which grew out of the enfranchisement. Thus an active capitalists class came into existence. It appeared first in commerce, the inhabitants of the trading cities importing expensive luxuries form foreign countries, or the improved manufacturers of richer communities, for which the great proprietors gladly exchanged the raw produce of their lands. In performing the office of carriers, too, between different countries, these cities had an increasing filed for commercial enterprise. At a later periods, as Adam Smith has shown, commerce promoted the growth of manufacturers, which were either produced for foreign sale, or made from foreign materials, or imitated from the work of foreign artificers. But the first important development of handicrafts in modern Europe belongs to the 14th and 15th centuries, and the rise of manufacturing entrepreneurs is not conspicuous within the Middle Ages properly so called. Agriculture, of course, lags behinds; though the feudal lords tends to transform themselves into directors of agricultural enterprise, their habits and prejudices retard such a movement, and the advance of rural industry proceeds slowly. It does, however, proceed, partly by the stimulation arising from the desire to procure the finer objects of manufacture imported form abroad or produced by increased skill at home, partly by the expenditure on the hand of capital amassed in the prosecution of urban industries.
Some of the trade corporations in the cities appear to have been of great antiquity; but it was in the 13th century that they rose to importance by being legally recognized and regulated. These corporations have been much too absolutely condemned by most of the economists, who insists on applying to the Middle Ages the ideas of the 18th and 19th centuries. They were, it is true, unfitted for modern times, and it was necessary that they should disappear; their existence indeed was quite unduly prolonged. But they were at first in several respects highly beneficial. They were a valuable rallying point for the new industrial forces, which were strengthened by the rise of the esprit de corps which they fostered. They improved technical skill by the precautions which were taken for the solidity and finished execution of the wares produced in each locality, and it was with a view to the advancement of the industrial arts that St Louis undertook the better organization of the trades of Paris. The corporations also encouraged good moral habits through the sort of spontaneous surveillance which they exercised, and they tended to develop the social sentiment within the limits of each profession, in times when a larger public spirit could scarcely yet be looked for.
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