The Renaissance and the Reformation were accompanied by fundamental economic changes. The series of economic changes, making the transition from the semistatic, localised, non-profit economy of the late Middle Ages to the dynamic, world- wide, capitalistic regime of the fourteenth and succeeding centuries is known as the Commercial Revolution. This Revolution was gradual.
The causes of the beginning of the Revolution were (a) the capture of Mediterranean trade by the Italian cities; (b) the development of a flourishing trade between Italian cities and the merchants of Hanseatic League (a merchant guild) in northern Europe; (c) introduction of coins such as the duca of Venice and the florin of Florence; the accumulation of surplus earned out of trading, shipping and mining enterprises; the demand for war materials and the encouragement given by the new monarchs to the development of commerce in order to create more taxable wealth. The combination of these factors along with the stimulus given by the voyages resulting in Spanish and Portuguese merchants to discover a new route to the Orient, independent of Italian control, paved the way for Commercial Revolution.
An important element of the Commercial Revolution was the growth of banking. Because of the strong religious disapproval of usury, banking was not a respectable business in the Middle Ages. But by the fourteenth century lending money for profit became an established business practice. The real founders of banking institutions were the great commercial houses of Italian cities. By the fifteenth century, the banking business had spread to southern Germany and France. The rise of private financial houses was followed by the establishment of government banks. The first was the Bank of Sweden (1657). The Bank of England was founded in 1694.
New industries like mining and smelting had sprung up and these enterprises were stimulated by technical advances. There was also change in business organisation. Regulated companies came to be formed. The regulated company was an association of merchants for a common venture. A leading example of this type was an English company known as the Merchant Adventurers established for the purpose of trade with the Netherlands and Germany.
The system of manufacture developed by the craft guilds in the later Middle Ages became defunct. In the seventeenth century the regulated company was superseded by a new type of organisation called the joint-stock company. Joint stock company with limited liability was a Dutch innovation that made large scale investment possible by spreading out the risks (and profits) across large numbers of people.
In later stages, the Commercial Revolution was accompanied by the adoption of a new set of doctrines and practices known as mercantilism. Mercantilism is a system of government intervention to promote national prosperity and increase the power of the state. The purpose of intervention was not merely to expand the volume of manufacturing and trade, but also to bring more money into the treasury of the state.
Other significant results of the Commercial Revolution were the rise of the middle class to economic power. The middle class ranks included merchants, bankers, ship owners, principal investors and industrial entrepreneurs. Their rise to power was the result of increasing wealth and their support to the king against the feudal aristocracy.
The most negative result of the Commercial Revolution was the revival of slavery. Slavery had virtually disappeared from European society by the end of the first millennium. But the development of mining and plantation farming in the Spanish, Portuguese and English colonies led to the recruitment of slaves as unskilled labourers. The attempt to enslave native Americans ended in failure, as they proved too tough to manage. The problem was solved by importing Africans. This transatalantic slave trade that exported more than 11 million Africans to the Americas is a sordid story that is a shame on the making of the modern world.
Finally, the Commercial Revolution prepared the way for the Industrial Revolution. By creating a class of capitalists and pursuing the mercantilist policy, stimulus was provided to the growth of manufactures. The outstanding example of factory production was the manufacture of cotton textiles.