More recently, historians have stressed the role of towns in this early form of industrial organization. Towns remained the centres from which the raw materials were distributed in the countryside. Moreover, urban entrepreneurs coordinated the efforts of the rural workers and marketed their finished products. Certain processes—usually the most highly skilled and the most remunerative—remained centred in cities. Not only the extension of industry into rural areas but also the greater integration of city and countryside in regional economies was the principal achievement of 16th-century industry.
This manner of organizing manufactures is known as the “putting-out system,” an awkward translation of the German Verlagssystem. The key to its operation was the entrepreneur, who purchased the raw materials, distributed them among the working families, passed the semifinished products from one artisan to another, and marketed the finished products. He was typically a great merchant resident in the town. As trade routes grew longer, the small artisan was placed at ever-greater distances from sources of supply and from markets. Typically, the small artisan would not have the knowledge of distant markets or of the preferences of distant purchasers and rarely had the money to purchase needed raw materials. The size of the trading networks and the volume of merchandise moving within them made the services of the entrepreneur indispensable and subordinated the workers to his authority.
The production of fabric remained everywhere the chief European industry, but two developments, both of them continuations of medieval changes, are noteworthy. In southern Europe the making of silk cloth, stimulated by the luxurious tastes of the age, gained unprecedented prominence. Lucca, Bologna, and Venice in Italy and Sevilla and Granada in Spain gained flourishing industries. Even more spectacular in its rise as a centre of silk manufacture was the city and region of Lyon in central France. Lyon was also a principal fair town, where goods of northern and southern Europe were exchanged. It was ideally placed to obtain silk cocoons or thread from the south and to market the finished cloth to northern purchasers. The silk industry is also notable in that most of the workers it employed were women.
Northern industry continued to concentrate on woolens but partially turned its efforts to producing a new type of cloth, worsteds. Unlike woolens, worsteds were woven from yarn spun from long-haired wool; moreover, the cloth is not fulled (that is, washed, mixed with fuller’s earth, and pounded in order to mat the weave). Worsteds were lighter and cheaper to make than woolens and did not require the services of a mill, which might have to be located near running water. Under the name of “new draperies,” worsteds had come to dominate the Flemish wool industry in the late Middle Ages. In the 16th century, several factors—the growth of population and of markets, the revolt of the Low Countries against Spain, and religious persecutions, which led many skilled Protestant workers to seek refuge among their coreligionists—stimulated the worsted industry in England. England had developed a vigorous woolens industry in the late Middle Ages, and the spread of worsted manufacture made it a European leader in fabric production.
Another major innovation in 16th-century industrial history was the growing use of coal as fuel. England, with rich coal mines located close to the sea, could take particular advantage of this cheap mineral fuel. The port of Newcastle in Northumbria emerged in the 16th century as a principal supplier of coal to London consumers. As yet, coal could not be used for the direct smelting of iron, but it found wide application in glassmaking, brick baking, brewing, and the heating of homes. The use of coal eased the demand on England’s rapidly diminishing forests and contributed to the growth of a coal technology that would make a crucial contribution to the later Industrial Revolution.
In industry, the 16th century was not so much an age of dramatic technological departures; rather, it witnessed the steady improvement of older technological traditions—in shipbuilding, mining and metallurgy, glassmaking, silk production, clock and instrument making, firearms, and others. Europe slowly widened its technological edge over non-European civilizations. Most economic historians further believe that protoindustrialization, and the commerce that supplied and sustained it, best explains the early accumulations of capital and the birth of a capitalist economy. Growth of banking and finance
Perhaps the most spectacular changes in the 16th-century economy were in the fields of international banking and finance. To be sure, medieval bankers such as the Florentine Bardi and Peruzzi in the 14th century and the Medici in the 15th had operated on an international scale, but the full development of an international money market with supporting institutions awaited the 16th century. Its earliest architects were South German banking houses, from Augsburg and Nürnberg in particular, who were well situated to serve as financial intermediaries between such southern capitals as Rome (or commercial centres such as Venice) and the northern financial centre at Antwerp. Through letters of exchange drawn on the various bourses that were growing throughout Europe, these bankers were able to mobilize capital in fabulous amounts. In 1519 Jakob II Fugger the Rich of Augsburg amassed nearly two million florins for the Habsburg king of Spain, Charles I, who used the money to bribe the imperial electors (he was successfully elected Holy Roman emperor as Charles V). Money was shaping the politics of Europe.
The subsequent bankruptcies of the Spanish crown injured the German bankers; from 1580 or even earlier, the Genoese became the chief financiers of the Spanish government and empire. Through the central fair at Lyon and through letters of exchange and a complex variant known as the asiento, the Genoese transferred great sums from Spain to the Low Countries to pay the soldiers of the Spanish armies. In the mid-16th century, dissatisfied with Lyon, the Genoese set up a fictional fair, known as Bisenzone (Besançon), as a centre of their fiscal operations. Changing sites several times, “Bisenzone” from 1579 settled at Piacenza in Italy. Political and cultural influences on the economy
The centralized state of the early modern age exerted a decisive influence on the development of financial institutions and in other economic sectors as well. To maintain its power both within its borders and within the international system, the state supported a large royal or princely court, a bureaucracy, and an army. It was the major purchaser of weapons and war matériel. Its authority affected class balances. Over the century’s course, the prince expanded his authority to make appointments and grant pensions. His control of resources softened the divisions among classes and facilitated social mobility. Several great merchants and bankers, the Fuggers among them, eventually were ennobled. Yet, in spending huge sums on war, the early modern state may also have injured the economy. The floating debt of the French crown came close to 10 million ecus (the ecu was worth slightly less than a gold florin), that of the Spanish, 20 million. These sums probably equaled the worth of the circulating coin in the two kingdoms. Only in England did the public debt remain at relatively modest proportions, about 200,000 gold ducats. Governments, with the exception of the English, were absorbing a huge part of the national wealth. The Spanish bankruptcies were also sure proof that Spain had insufficient resources to realize its ambitious imperial goals.
The effort to control the economy in the interest of enhancing state power is the essence of the political philosophy known as mercantilism. Many of the policies of 16th-century states affecting trade, manufactures, or money can be regarded as mercantilistic, but as yet they did not represent a coherent economic theory. The true age of mercantilism postdates 1650.