During the Late Middle Ages, the increasingly dominant position of the Ottoman Empire in the eastern Mediterranean presented an impediment to trade for the Christian nations of the west, who started looking for alternatives. Portuguese and Spanish explorers found new trade routes south of Africa to India, and across the Atlantic Ocean to America.

Start of the Commercial Revolution

In the late-13th and early-14th centuries, a process took place—primarily in Italy but partly also in the Holy Roman Empire—that historians have termed a "commercial revolution." Among the innovations of the period were new forms of partnership and the issuing of insurance, both of which contributed to reducing the risk of commercial ventures; the bill of exchange and other forms of credit that circumvented the canonical laws for gentiles against usury and eliminated the dangers of carrying bullion; and new forms of accounting, in particular double-entry bookkeeping, which allowed for better oversight and accuracy.

Guilds

With the financial expansion, trading rights were more jealously guarded by the commercial elite. Towns saw the growing power of guilds that arose in the 14th century as craftsmen uniting to protect their common interest. The appearance of the European guilds was tied to the emergent money economy and to urbanization. Before this time it was not possible to run a money-driven organization, as commodity money was the normal way of doing business. 

In medieval cities, craftsmen started to form associations based on their trades. Confraternities of textile workers, masons, carpenters, carvers, and glass workers, all controlled secrets of traditionally imparted technology—the "arts" or "mysteries" of their crafts. Usually the founders were free independent master craftsmen who hired apprentices. These guilds were organized in a manner similar to something between a professional association, a trade union, a cartel, and a secret society. They often depended on grants of letters patented by a monarch or other authority to enforce the flow of trade to their self-employed members, and to retain ownership of tools and the supply of materials. A lasting legacy of traditional guilds are the guildhalls constructed and used as meeting places.

Where guilds were in control, they shaped labor, production, and trade; they had strong controls over instructional capital, and the modern concepts of a lifetime progression of apprentice to craftsman, and then from journeyman eventually to widely recognized master and grandmaster, began to emerge. European guilds imposed long standardized periods of apprenticeship and made it difficult for those lacking the capital to set up for themselves or without the approval of their peers to gain access to materials or knowledge, or to sell into certain markets, an area that equally dominated the guilds' concerns. These are defining characteristics of mercantilism in economics, which dominated most European thinking about political economy until the rise of classical economics.

Hanseatic League

In cities linked to the North Sea and the Baltic Sea, the Hanseatic League developed as a trade monopoly. This facilitated the growth of trade among cities in close proximity to these two seas. Long-distance trade in the Baltic intensified as the major trading towns came together in the Hanseatic League under the leadership of Lübeck.

The Hanseatic League was a business alliance of trading cities and their guilds that dominated trade along the coast of Northern Europe and flourished from 1200–1500, and continued with lesser importance after that. The chief cities were Cologne on the Rhine River, Hamburg and Bremen on the North Sea, and Lübeck on the Baltic Sea. The Hanseatic cities each had their own legal system and a degree of political autonomy.

The league was founded for the purpose of joining forces for promoting mercantile interests, defensive strength, and political influence. By the 14th century, the Hanseatic League held a near-monopoly on trade in the Baltic, especially with Novgorod and Scandinavia.

English Economy

The crises caused by the Great Famine and the Black Death between 1290 and 1348, as well as subsequent epidemics, produced many challenges for the English economy. The Peasant's Revolt of 1381 had various causes, including the socio-economic and political tensions generated by the Black Death in the 1340s, the high taxes resulting from the conflict with France during the Hundred Years' War, and instability within the local leadership of London.

Although the revolt was suppressed, it undermined many of the vestiges of the feudal economic order and the countryside became dominated by estates organized as farms, frequently owned or rented by the new economic class of the gentry. The English agricultural economy remained depressed throughout the 15th century, with growth coming from the greatly increased English cloth trade and manufacturing.

Fairs

From the 12th century onwards, many English towns acquired a charter from the Crown allowing them to hold an annual fair, usually serving a regional or local customer base and lasting for two or three days. Fairs grew in popularity, reaching their heyday in the 13th century, as the international wool trade increased. The fairs allowed English wool producers and ports on the east coast to engage with visiting foreign merchants, circumnavigating those English merchants in London keen to make a profit as middlemen. At the same time, wealthy magnate consumers in England began to use the new fairs as a way to buy goods like spices, wax, preserved fish, and foreign cloth in bulk from the international merchants at the fairs, again bypassing the usual London merchants.

Bridgnorth marketplace

The market place at Bridgnorth, one of many medieval English towns to be granted the right to hold fairs, in this case annually on the feast of the Translation of St. Leonard. Photo taken by Pam Brophy.

Towards the end of the 14th century, the position of fairs started to decline. The larger merchants, particularly in London, had begun to establish direct links with the larger landowners such as the nobility and the church; rather than the landowner buying from a chartered fair, they would buy directly from the merchant. Nonetheless, the great fairs remained important well into the 15th century, as illustrated by their role in exchanging money, regional commerce, and providing choice for individual consumers.