Trade required credit which led to banking which led to accounting. By 1100AD, spices, cinnamon, pepper, ginger, saffron, alum, sulphur, camphor, incense, myrrh, velvet, sandalwood, dyes, perfumes and tafetta from the Muslims were traded by Italians towns for woollen cloth, salt and salt meat, slaves, grains and iron – in wrought or pig form. An investing merchant who stayed at home (called the stans) would make a contract called commenda* with a travelling partner called the tractator* who invested nothing himself but went on the trading voyage, with three quarters of the profits going to the stans. In another contract type called the societas maris*, the stans provided two-thirds of the capital, the travelling partner a third, and the profits were shared equally. The contracts defined the limits of partner’s liabilities in cases of loss, except in the contract type called compagnia* in which case there was no limit to the partner’s liability in case of a loss. Although this contract type gave us the term company*, the related term shareholding* in a company as we know it today is traced to sea-trade ventures in which each shipping vessel set in was too big for an individual to own. Several investors therefore joined together to own it, each holding shares* in English (partes* in French or loca navis* in Italian).Money lending or credit lending against interest payment was held back by church condemnation of the practice which it called usury. Muslim banks still charge no interest on loans today, but instead agree to share in the profit or loss resulting from the specific venture. Since Jews had no objection to usury, credit lending concentrated into their hands. Economists justify interest charges with the argument of opportunity cost*, or lucrum cessans* in the time of Thomas Aquinas, quite apart from the deprivation called damnum emergens* suffered by the lender if repayment of the loan came too late. Pawnbroking – lending against the deposit of a surety, and other banking practices reached Italy from Byzantine and earlier Greek and Roman traditions.
The earliest banker* called bancherius was essentially a money changer around 1100 AD. Financial record keeping for joint ventures, for loan settlements and for trading on credit called for merchants to keep tallies* or to record debits next to credits in bank accounts, which in turn ushered in the practice of double-entry* book-keeping in Italy by the middle of the 14th century. Accounting ledgers* emerged from a practice as early as 1281 in Siena, of noting down receipts besides the expenditures covered. Money changers accounts ad usum banchi* were laid out in tavole* which gave us the word tables* or tabular records by 1327 in Genoa – medieval forerunners of today’s spread sheets. By the way, the first spread sheet program was Visicalc developed for the Apple computer. Six centuries earlier, Trial balances* were used in Milan, Genoa and Venice, while bills of lading*, bills of exchange* and insurance* forms were already common.
Firms in medieval Siena, Florence, Genoa and Lucca which prospered as banks included Salimbeni, and Buonsignori, with Bardi, Alberti, Scala, Rocci, Scotti and Peruzzi among the famous mercantile companies operating as widely as Bruges, Avignon, Sardinia, London, Venice, Naples, Tunis and Cyprus before the Medici emerged in the 15th century. The first public bank was St George bank established in Genoa 1408, but dissolved by 1444. If the purpose of record keeping in trade was to reduce disputes, it could not eliminate it entirely. Judicial administrative systems evolved whose personnel sitting on benches gave us today’s term of the bench* as a judicial hierarchy of law experts.
By 1238, Italian merchants from same towns organised themselves into gilds called universitas* – which later gave us the term university*. The earliest universities were teacher’s cooperative organisations – studia generalia - around specific visions of knowledge called schools of thought. Each gild or universitas was headed by a rector* or capiteneus*. Towns like Venice had permanent consulates to protect the interests of their merchants in specific major trading centres. Such joint cooperation created the hanse* for example for cloth-selling French and Flemish towns aiming at monopoly of trade in their commodities. Hansa* as term initially in the 1360’s referred to merchants right to form associations, essentially German traders from Cologne in London seeking protection from Anglo-Flemish domination of commerce, but also in Bruges and Novgorod where German factories* and their Kontor (origin of the Dutch word kantoor) featured a hof* or yard with hostels and warehouses for their merchants. Hanseatic* war of 1360 to 1369 on conflicts between Denmark and Flanders united towns more closely into the league called the Hanseatic League.
- While Vikings from Denmark and Norway were invading the Atlantic board of western Europe, the Swedes or Rhos or Rus as they were called (origin of the name Russia) opened up an eastward trade route through the bay of Riga, up the Dvina river to Plotsk (Vitesbsk), up the Dnieper river at Smolensk to the Black Sea – a route called the Varangian route because they called themselves Varangians. This brought them to intermingle with the Khazars, Tartars and other Turkish folks, but they earned a name as Varangian guards of the Byzantine emperors. Their trade consisted of furs, timber, wax and slaves from the north for south eastern goods. Oriental goods from the crusades added citrus fruits, figs, dates, cane sugar, cotton clothes, lacquer and fine leather to European tastes which made Pisa, Genoa important centres of trade in goods from Aleppo, Damascus, Antioch and even Jaffa in the Levant in the 13th century.
Mongol expansion between Peking and Poland by 1241 intensified trade along some routes as Ghengis Khan’s dynasty made longer travel safer. This opened up European access to products across the Gobi desert, Korea, Arabia and Singapore, Malacca, Ceylon and Hormuz in the far east. This followed by Tamerlane’s rule over India, Persia and Russia allowed trade along overland routes to Asia to intensify. Weeks-long trade fairs became famous events at major towns, including the Champagne Fair of 1114, and the great Fair of St Denis just north of Paris in 1070.
To protect trade and property, towns were fortified with walls, the enclosed space within this being the burhs* in Anglo Saxon or burg*, a continuation of an ancient Celtic practice. Trading quarters (portus in Latin) at the ports of the town walls were a district called the suburbia*. Among the towns so created were Genoa, Florence, Venice, Harwich, New Windsor as plantation by the Norsemen, Portsmouth by king Richard I, and Liverpool by John, but also Maidenhead, Richmond and Flemish towns. In a town, the mercatus was the weekly market*, and the forum* was the site for craftsmen often supplying the countryside. Expansion of supplies beyond the usual fish market often created the so-called Neumarkt. As expansion called for more land, it became necessary to open up forest land and waste land in a wave of new towns, as still evident in place names that end in -rode (e.g. Nijenrode) in Dutch and -sart in French.
Free tenants as non-serfs (hospites or manentes in Latin, commendati in Italian, horigen in German) as well as serfs (case servile in Francia, Leibeigenen in German) who worked as labourers on some of these lands faced restrictions in disposing of their goods. Some of these tenants were dependent as such and were thus still subject to restrictions of movements, marital choice and disposal of their holdings – all of which fell under the jurisdiction or districtus* of the manorial lord. Peasants even had to pay formariage or leywite – a levy for permission to allow their sons to take Holy Orders.
Tenant land holding was often tied to a tenure of many years. By the 12th to 13th century, some tenant class – the castellani – emerged who were viable and independent enough to put up small fortified towns called castella (our word castle*, typified by a surrounding moat). These castellani combined being a knight with being a peasant, and eventually became burgesses. Many of these landholding forms are documented in the Doomsday* Book and in the Hundred Rolls* in England. In a later age when career freedom became more common and gilds were formed, long apprenticeship* often as long as seven years was used to extract free labour from the trainee even when mastery of the work was easy to acquire within just two years. (see Transportation Roads Sailing Flying)
Tags: accounting, banking, economics, finance, history, study, trade