450 AD - 1497 AD
With the decline and fall of the Roman Empire, northwest Europe descended into a dark period of economic recession.
The axis of world economic activity shifted to China and in particular to the Islamic world in the 7th century. The Prophet Mohammed favoured both trade and learning and his followers were told to seek knowledge however far they had to travel to find it.
Islamic scholars preserved the best ideas of Greece and Rome at Universities such as the Al Azhar in Cairo. Islamic conquests also gave Arabs control of the gateways to the world's most valuable trade routes.
It was here that the notion of risk-taking in pursuit of profit - the basic relationship between what you put in and what you take out - first took shape. It was developed by Arab and Jewish merchants, both of whom traded freely under Islam.
It was a concept that was later adopted by Italian entrepreneurs, some of whom became the first modern-style tycoons. The Europe of the Middle Ages favoured trade and commerce too. Eventually it eclipsed Islam due to basic improvements in agriculture, which allowed the development of towns and cities.
The Islamic world sits on the crossroads between Europe and the East, so it was well-placed to take the lead in trade at this time.
Islam united into one the civilisations of the vast expanse which lies between the borders of China and the Atlantic. Trade stretched even further - as far north as Scandinavia and Russia, to the west of Africa, south to Zanzibar and east to China and Japan.
It was via Islamic trade routes that great Chinese developments and products such as gunpowder, paper and silk found their way to the West.
Islam nurtured and developed mathematics, science, astronomy and navigational technology. Perhaps one of the most important contributions of the Islamic world was the introduction of the Indian system of counting, using the nine Arabic numerals and a point for zero. This replaced the Roman numbering system which had no zero and no fractions.
Islam encouraged learning and religious tolerance, and allowed merchants of all creeds to trade freely. The centre of Islamic trade from about 950 - 1500 was Cairo.
Documents recovered from the Ben Ezra synagogue in Cairo give a fascinating insight to the methods of Jewish traders from as early as 800 AD.
They had been stuffed into a hole in the wall of the synagogue, its "genizah", where they remained until recovered by orientalists in the middle of the last century. They show the risks that merchants took - one lost 10 out of 11 of his ships on a single trip, but still came out ahead - as well as sophisticated banking techniques including accounts and cheques.
Banks with headquarters in Baghdad and branches in other cities are mentioned in Arabic sources.
But by the 13th and 14th centuries Islamic trade as a whole was waning, outpaced by Italian entrepreneurs, and their maritime and industrial technology.
At the turn of the last millennium, crucial developments in agriculture allowed northwest Europe to emerge from a dark age.
From the 9th and 10th centuries steady and sustained growth began to take place, both in towns and the countryside. By around 1300 one fifth of the population in England, and northwest Europe was living in towns, coins had come back into circulation and the whole economy had commercialised.
Key developments in farming enabled this to happen. Land and production began to be organised systematically to produce more food. This created a surplus with which to feed the towns, which freed town dwellers to specialise in other, non-agricultural, trades.
The towns and the countryside began to energise each other. The political make-up of towns was at the heart of a new entrepreneurial dynamism. The competing authorities of monarchy, state and church effectively allowed a loophole in which there is scope for individual initiative and enterprise.
In agriculture, farmers moved from using oxen to horses. Oxen were hardy - but horses were better at ploughing and helped to produce a greater yield. Horses however need much more food and could only be used once agriculture had progressed enough to be able to provide large amounts of fodder. This leap forward was assisted by developments in harnesses that allowed a horse to be yoked to a plough.
By the end of the 13th century Venice had become the dominant maritime trading state of the Eastern Mediterranean. It was helped by new ship designs including round-hulled vessels, which carried more cargo, and sleek fighting galleys, which provided protection on the high seas.
The Venetian state understood the need to help business ply its trade. While the round ships were privately owned, galleys were state owned from the beginning of the 14th Century.
The Venetians, and entrepreneurs of other northern Italian city-states, made great strides in banking and accountancy.
Risk-spreading became a feature of business conducted in this period. Insurance could be bought by merchants in Venice.
The bankers who congregated on the Rialto in Venice (where Shylock, the Jewish moneylender in Shakespeare's A Merchant of Venice plied his trade) were responsible for developing the modern current account.
The very word 'bank' comes from the Italian, 'bancos', meaning the benches where money-changers laid out their business.
The northern Italian city-states also bred a new type of business: the super-company. These were family based conglomerates, each of which had interests spanning banking, wool, grain, manufacturing, and general commerce.
The main families were the Bardi, Peruzzi and Acciaiuoli. They were fantastically wealthy: in 1318 the Bardi had assets of 875,000 florins, equivalent to the annual income of the English King Edward III.
Although the companies began as family concerns, some developed into companies with outside shareholders. They had sophisticated systems of accounting and were the first to employ double entry book-keeping. This system allowed businesses to keep track of their true financial position for the first time.
These super-companies collapsed in the 1340s after suffering a run of bad luck, a decade of disruptive wars and intermittently bad grain harvests.
There was no separation of the various interests within each super-company so when disaster hit, all the businesses went down together. As a result, later Italian entrepreneurs learnt to set up separate organisations for each deal.
The Black Death meant that the grain trade was much diminished, so the super-companies never re-emerged. Even Italy's Medici Bank never matched their size and reach.
In 1347 the plague arrived in Venice, transported from the Black Sea by rats. Within 18 months half the city's population was dead, and the Black Death soon ravaged the rest of Europe.
But for a few there was a positive outcome. Because so many died, some survivors were able to increase their land holdings. The result was greater prosperity for those that remained.
The Black Death reduced the population of Europe by between a third and a half. As labour became scarcer it also became more powerful. As a result the feudal system began to weaken.
As Europe began to recover in the 15th century, new developments in navigation and exploration turned the oceans into the world's original superhighway and transformed international commerce; globalisation was here.
The East in the West, Jack Goody, Cambridge University Press 1996
ReOrient: Global Economy in the Asian Age, Andre Gunder Frank, 1998
The Commercialisation of English Society 1000-1500, Richard H. Britnell, Manchester University Press 1996
Village, Hamlet and Field, Carenza Lewis, Pattrick Mitchell-Fox and Christopher Dyer, Manchester University Press 1997
The Black Death, Philip Ziegler, Penguin 1998
Civilisation & Capitalism, Fernand Braudel, Fontana 1985
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20.00 hrs 30 July 2000