Most people - historians not excepted - are tempted to think of economic and cultural progress as being continuous: in every century people are better off than in the one preceding. This comforting assumption had to be given up quite early when the Dark Ages ensued after the collapse of the Roman Empire. But it was generally held that after the 'renaissance' of the eleventh century, progress in western Europe was pretty well linear and continuous
from that point to the present day.
secular decline in most of western Europe from approximately 1300 to the
middle of the fifteenth century; a period which might be called the Late
Middle Ages or the Early Renaissance. This secular decline, mistitled a
'depression', permeated most parts of western Europe with the exception of a
few Italian city-states.
The economic decline was marked by a severe drop in population. Since
the eleventh century, economic growth and prosperity had pulled up population
figures. Total population in western Europe, estimated at
24 million in
the year 1000 AD, had vaulted to 54 million by the year 1340. In little over a
century, from 1340 to 1450, however, the western European population fell
from 54 million to 37 million, a 31 per cent drop in only a century.
The successful battle to establish the fact of the great decline has done
little, however, to establish the cause or causes of this debacle. Focus on the
devastation caused by outbreaks of the Black Death in the mid-fourteenth
century is partially correct, but superficial, for these outbreaks were themselves
partly caused by an economic breakdown and fall in living standards
which began earlier in the century. The causes of the great depression of
western Europe can be summed up in one stark phrase: the newly imposed
domination of the state. During the medieval synthesis of the High Middle
Ages there was a balance between the power of Church and state, with the
Church slightly more powerful. In the fourteenth century that balance was
broken, and the nation-state came to hold sway, breaking the power of the
Church, taxing, regulating, controlling and wreaking devastation through
virtually continuous war for over a century (the Hundred Years' War, from
1337 to 1453).1
The first and critically most important step in the rise in the power of the
state at the expense of crippling the economy was the destruction of the fairs
of Champagne. During the High Middle Ages, the fairs of Champagne were
the main mart for international trade, and the hub of local and international
commerce. These fairs had been carefully nurtured by being made free zones,
untaxed or unregulated by the French kings or nobles, while justice was
swiftly and efficiently meted out by competing private and merchants' courts.
68 Economic thought before Adam Smith
The fairs of Champagne reached their peak during the thirteenth century, and
provided the centre for land-based trade over the Alps from northern Italy,
bearing goods from afar.
Then, in the early fourteenth century, Philip IV, the Fair, king of France
(1285-1314), moved to tax, plunder, and effectively destroy the vitally important
fairs of Champagne. To finance his perpetual dynastic wars, Philip
levied a stiff sales tax on the Champagne fairs. He also destroyed domestic
capital and finance by repeated confiscatory levies on groups or organizations
with money. In 1308, he destroyed the wealthy Order of the Templars, confiscating
their funds for the royal treasury. Philip then turned to impose a series
of crippling levies and confiscations on Jews and northern Italians ('Lombards')
prominent at the fairs: in 1306, 1311, 1315, 1320 and 1321. Furthermore, at
war with the Flemings, Philip broke the long-time custom that all merchants
were welcome at the fairs, and decreed the exclusion of the Flemings. The
result of these measures was a rapid and permanent decline of the fairs of
Champagne and of the trading route over the Alps. Desperately, the Italian
city-states began to reconstitute trade routes and sail around the Straits of
Gibraltar to Bruges, which began to flourish even though the rest of Flanders
was in decay.
It was particularly fateful that Philip the Fair inaugurated the system of
regular taxation in France. Before then, there were no regular taxes. In the
medieval era, while the king was supposed to be all-powerful in his own
sphere, that sphere was restricted by the sanctity of private property. The king
was supposed to be an armed enforcer and upholder of the law, and his
revenues were supposed to derive from rents on royal lands, feudal dues and
tolls. There was nothing that we would call regular taxation. In an emergency,
such as an invasion or the launching of a crusade, the prince, in
addition to invoking the feudal duty of fighting on his behalf, might ask his
vassals for a subsidy; but that aid would be requested rather than ordered, and
be limited in duration to the emergency period.
The perpetual wars of the fourteenth and the first half of the fifteenth
centuries began in the 1290s, when Philip the Fair, taking advantage of King
Edward I of England's war with Scotland and Wales, seized the province of
Gascony from England. This launched a continuing warfare between England
and Flanders on the one side, and France on the other, and led to a
desperate need for funds by both the English and the French Crowns.
The merchants and capitalists at the fairs of Champagne might have money,
but the largest and most tempting source for royal plunder was the Catholic
Church. Both the English and French monarchs proceeded to tax the Church,
which brought them into a collision course with the pope. Pope Boniface VIII
(1294-1303) stoutly resisted this new form of pillage, and prohibited the
monarchs from taxing the Church. King Edward reacted by denying justice in
From Middle Ages to Renaissance 69
the royal courts to the Church, while Philip was more militant by prohibiting
the transfer of Church revenue from France to Rome. Boniface was forced to
retreat and to allow the tax, but his bull
Unam Sanctam (1302) insisted that
temporal authority must be subordinate to the spiritual. That was enough for
Philip, who boldly seized the pope in Italy and prepared to try him for heresy,
a trial only cut off by the death of the aged Boniface. At this point Philip the
Fair seized the papacy itself, and brought the seat of the Roman Catholic
Church from Rome to Avignon, where he proceeded to designate the pope
himself. For virtually the entire fourteenth century, the pope, in his 'Babylonian
captivity', was an abject tool of the French king; the pope only returned to
Italy in the early fifteenth century.
In this way, the once mighty Catholic Church, dominant power and spiritual
authority during the High Middle Ages, had been brought low and made
a virtual vassal of the royal plunderer of France.
The decline of Church authority, then, was matched by the rise in the
power of the absolute state. Not content with confiscating, plundering, taxing,
crushing the fairs of Champagne, and bringing the Catholic Church
under his heel, Philip the Fair also obtained revenue for his eternal wars by
debasement of the coinage and thereby generated a secular inflation.
The wars of the fourteenth century did not cause a great deal of
direct
devastation: armies were small and hostilities were intermittent. The main
devastation came from the heavy taxes and from the monetary inflation and
borrowing to finance the eternal royal adventures. The enormous increase of
taxation was the most crippling aspect of the wars. The expenses of war:
recruitment of the modestly sized army; payments of its wages; supplies; and
fortifications - all cost from two- to fourfold the ordinary expenses of the
Crown. Add to that the' high costs of tax assessment and enforcement and the
cost of the loans, and the crippling burden of war taxation becomes all too
clear.
The new taxes were everywhere. We have seen the grave effect of taxes on
the Church; on a large monastic farm, they often absorbed over 40 per cent of
the net profits of the farm. A uniform poll tax of one shilling, levied by the
English Crown in 1380, inflicted great hardship on peasants and craftsmen.
The tax amounted to one month's wages for agricultural workers and one
week's wages for urban labourers; moreover, since many poor workers and
peasants were paid in kind rather than money, amassing the money to pay the
tax was particularly difficult.
Other new taxes levied were
ad valorem on all transactions; taxes on
wholesale and retail beverages; and levies on salt and wool. To combat
evasion of the tax, the governments established monopoly markets for the
sale of salt in France and 'staple points' for English wool. The taxes restricted
supply and raised prices, crippling the critical English wool trade.
70 Economic thought before Adam Smith
Production and trade were hampered further by massive requisitions levied
by the kings, thus causing a drastic fall of income and wealth, as well as
bankruptcies among the producers. In short, consumers suffered from artificially
high prices and producers from low returns, with the king bleeding the
economy of the differential. Government borrowing was scarcely more helpful,
leading to repeated defaults by the kings and consequent heavy losses
and bankruptcies among the private bankers unwise enough to lend to the
government.
Originating as a response to wartime 'emergency', the new taxes tended to
become permanent: not only because the warfare lasted for over a century,
but because the state, always on the lookout for an increase in its income and
power, seized upon the golden opportunity to convert wartime taxes into a
permanent part of the national heritage.
From the middle to the end of the fourteenth century, Europe was struck
with the devastating pandemic of the Black Death - the bubonic plague which
in the short span of
1348-50 wiped out fully one-third of the population.
The Black Death was largely the consequence of people's lowered
living standards caused by the great depression and the resulting ··loss of
resistance to disease. The plague continued to recur, though not in such
virulent form, in every decade of the century.
Such are the great recuperative powers of the human race that this enormous
tragedy caused virtually no lasting catastrophic social or psychological
effects among the European population. In a sense, the longest-lasting ill
effect from the Black Death was the response of the English Crown in
imposing permanent maximum wage control and compulsory labour rationing
upon English society. The sudden decline of population and consequent
doubling of wage rates was met by the government's severe imposition of
maximum wage control in the Ordinance of
1349 and the Statue of Labourers
of 1351. Maximum wage control was established at the behest of the employing
classes: large, middle and small landlords, and master craftsmen, the
former groups in particular alarmed at the rise of agricultural wage rates. The
ordinance and the statute defied economic law by attempting to enforce
maximum wage control at the old pre-plague levels. The inevitable result,
however, was a grave shortage of labour, since at the statutory maximum
wage the demand for labour was enormously greater than the newly scarce
supply.
Every government intervention creates new problems in the course of vain
attempts to solve the old. The government is then confronted with the choice:
pile on new interventions to solve the inexplicable new problems, or repeal
the original intervention. Government's instinct, of course, is to maximize its
wealth and power by adding new interventions. So did the English Statute of
Labourers, which imposed forced labour at the old wage rates for all men in
From Middle Ages to Renaissance 71
England under the age of 60; restricted the mobility of labour, declaring that
the lord of a particular territory had first claim on a man's labour; and made it
a criminal offence for an employer to hire a worker who had left a former
master. In that way, the English government engaged in labour rationing to
try to freeze labourers at their pre-plague occupations at pre-plague wages.
This forced rationing of labour cut against the natural inclination of men to
leave for more employment at better wages, and so the inevitable rise of
black markets for labour made enforcement of the statutes difficult. The
desperate English Crown tried once again, in the Cambridge Statute of 1388,
to make the rationing more rigorous. Labour mobility of any sort was prohibited
without written permission from local justices, and compulsory child
labour was imposed in agriculture. But there was continual evasion of this
compulsory buyers' cartel, especially by large employers, who were particularly
eager and able to pay higher wage rates. The cumbersome English
judicial machinery was totally ineffective in enforcing the legislation, although
the monopolistic urban guilds (monopolies enforced by government)
were able to partially enforce wage control in the cities.
3.2 Absolutism and nominalism: the break-up of Thomism
Along with the rise of the absolute state, theories of absolutism arose and
began to throw natural law doctrines into the shade. The adoption of natural
law theory, after all, meant that the state was bound to limit itself to the
dictates of the natural or the divine law. But new political theorists arose,
asserting the dominance of the temporal over the spiritual, and of the state's
positive law over the natural or divine order.
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