ࡱ> RTQU@ YJbjbj .Z&>2444| | | |    |~~~~~~$R     | |$ Z:| |0 K r \ D   SEQ CHAPTER \h \r 1The Medieval Enterprise: Tools and Organization of Business in the Middle Ages It cannot be argued that modern society has been influenced heavily by the developments made during the High and Later Middle Ages. Many of the most important contributions of this period stem from the Commercial Revolution. Many of the concepts developed by the medieval business are still in use in the modern business environment, and for that reason the tools of business should be considered with the other important contributions of medieval Europe to the world at large. To that end, it can be argued that the tools of business and its organization are among the greatest legacies left by the people of Western Europe during this time. First of all, numerous technological advancements were made during this time. It is not, however, the purpose of this essay to discuss these developments, but since many changes in technology revolutionized the way industries such as agriculture worked, their impact should be noted. To explain this concept in the most basic terms possible, advances in agricultural tools and techniques increased the possible output of the typical farm. Families now could produce more product than they needed purely to survive, and this surplus gave them the freedom to sell the excess, granting them considerably more income than they previously had available. This expansion of income increased the desire for luxuries and other goods, resulting in a need for trade. Increased production led to an increased demand for labour.1 It became important to have standards for the payment of employees. There were no reliable means of keeping time by the hour, as mechanical clocks were still a new and largely undeveloped technology. For that reason, wages were payed on a daily basis. Employees were payed a varying wage based on the time of year. Since the length of the working day was determined by the amount of time between dawn and dusk, this wage was lower during the winter, but higher in the summer. The price of labour was also determined by factors such as demand, level of skill, difficulty of labour and value of a given position.2 This is very similar to modern measures of pay equity. Out of this growing demand for labour there arose a desire among some, particularly in artisanal crafts, to band together to pool their common skills and, in some ways, self-regulate their trade. These craft guilds served some of the same functions as a modern trade union. Specifically, both are made up of workers in more or less the same occupation, both are groups of skilled labourers, and both maintain a certain set of rules and standards which each member must follow. Unlike the unions, however, the craft guilds were also involved in improving standards of quality control and meeting rising local and foreign demands.3 It may come as a surprise to the modern consumer, but it is out of these medieval craft guilds that the first examples of branding, or name brands, occur. It has already been noted that the guilds regulated the quality of products produced by their members. Since each guild in each city had its own set of standards, products from a certain city could potentially become more valuable to merchants and consumers.4 On an even smaller scale, a certain craftsman, or a craftsmans shop, could develop a reputation for producing higher quality merchandise. This process can be very easily likened to the modern brand names in any given industry.5 Consumers looking to find a superior product could, as a result, easily seek out the logo or name of their preferred craftsman, demonstrating what a modern student of business would know as brand preference. While the craft guilds shared some characteristics with modern unions, a much better example of a medieval union would be the organization of masons. On any given construction site, the employed masons would construct a lodge, in which they would eat, converse and discuss working conditions.6 Together, workers in the trade could work to improve their conditions and their rights on the job. The only major way in which the medieval masons differed from a modern union is that there is no record of the masons ever trying to regulate their wages. This is a stark contrast to modern unions, which focus on improving member wages as a standard practice. As this newfound increase in both supply and demand for labour increased the income of the general population, certain demands began to arise. While Hunt and Murray argue that medieval business was driven from beginning to end by the continuous demands of the elite (Hunt & Murray 6),7 it should be noted that out of the demands of the upper class, mass markets appeared as well. As these markets continued to grow, the business environment was forced to adapt to meet the rising demands of the general public. Since the growing demand for luxuries and other goods could not entirely be met by domestic trade, international trade fairs became more and more common. In addition to expanding the medieval merchants possibilities for trade, they also served as clearing house for merchandise and currency exchanges between the Mediterranean and the North Sea basin.8 As international trade began to expand as a result of these fairs, the markets for money and credit became more and more complex.9 Of course, given the nature of these fairs, it was only natural that large purchases and sales would be made, and large amounts of currency had to be moved. As regional governments began to develop monetary policies, standard currencies began to emerge between many of the towns in any given area.10 It became extremely important, particularly for larger, more prominent merchants, to pay close attention to international exchange rates. Some of these merchants left the practice of trading merchandise and focussed entirely on changing currency. These money-changers were especially faced with tracking international economies,11 much like a modern-day bank. Other merchants took advantage in this need for cash in a different way. Taking to lending out their own resources to the prospective travelling merchant, they were faced with the interesting task of countering the Churchs views on lending at interest. One interesting method involved the parties involved to enter a contract such that the lender would be paid a specified fee for the service of being unable to spend their money during the time in which it was lent. Another technique was for the lender to specify in the agreement that they were to be repaid well before the borrower intended to repay the debt. Extra payment would then be given as compensation for damages.12 While both examples seem unnecessarily complicated and bizarre to the modern examiner, they were quite necessary for a money-lender to earn a profit. Extending the developing concept of the loan, some merchants entered into credit agreements as a result of their trade. This allowed a merchant to acquire merchandise at a trade fair and to meet payment at a later date. While credit was in some ways looked down upon in the Mediterranean region, it was largely encouraged in the Hanse. Gradually, credit became exceptionally common in the Hanse, but it eventually became distrusted and saw little use.13 Letters of credit also became available. These prepaid notes were an indication of the holders entitlement to repayment when redeemed, and can be compared to modern-day travellers cheques, although on a larger scale.14 Due to international trade, some merchants were able to advance beyond the means of others in their trade by leaps and bounds. In both the Mediterranean and the Hanse, it became important for the more successful merchants to establish foreign offices to handle trade in areas other than their own. Many historians would argue that the top-ranking Hanseatic merchants had become sedentary workers.15 Any businessman who desired to permanently expand their enterprise beyond the reaches of their own city would inevitably be faced with the establishment of permanent agencies or branches internationally.16 Setting up shop in more and more areas allowed for more in-depth management of the needs and demands of a specific area, and also allowed the merchants to conduct business abroad without having to personally accompany their goods. As larger, international businesses slowly started to develop, a few began to take an especially prestigious position among their peers. These super-companies were involved in every step of their trade, and in banking and finance as well. Having studied the structure of a large corporation, a modern student of business would be all too familiar with the concept of vertical integration, in which a company involved in retail, for example, purchases the manufacturers and suppliers of certain goods to better control the product and reduce costs.17 The set-up of the medieval conglomerate was no different from this process. Some of the larger international conglomerates did, in fact, purchase their suppliers to more effectively manage supplies, and they were not only involved in the direct sale, but also in regional distribution to maximize market coverage, even manipulating levels of production and market prices.18 Not only were the medieval conglomerates similar to the modern corporation in function, but also in structure. The concept of a partnership was very familiar to the medieval businessman long before the emergence of the conglomerate, but each of these companies started off in this way. The early contracts allowed two merchants to evenly split capital and profit evenly, while accepting equal amounts of risk and liability,19 or for a sedentary partner to put up most of the capital while a second partner accompanied the merchandise to its point of sale, splitting the eventual profits according to a predetermined ratio.20 This effectively allowed a merchant to take the role of the modern-day investor, providing capital and resources while the actual company carries out the business, providing the profit. It is out of this second form that the conglomerates developed. In fact, in order to reach a higher level of success, a medieval businessman had to be an associate in many partnerships linked together only through him21, much like a modern investor diversifying their portfolio. It can be said that the medieval conglomerates had shareholders of sorts, as they were funded by a very large number of individual partners, each providing the majority of the capital while clerks employed in the various local branches carried out the actual work. Also, the business would not dissolve at the death of one owner, or at the discontinuation of their family line.22 Unlike a shareholder, however, these partners faced joint-and-several liability, meaning that any debts incurred by the company would be extended to them until the debt had been repaid. The modern shareholder, on the other hand, is considered wholly separate from the corporation, so if the company falls into a debt which cannot be paid, they are not forced to make compensation to the creditors. Another similarity between the past and present super-companies is departmentalization. A modern corporation would contain a department for finance, human resources, production, marketing, sales, and every other area imaginable, while their medieval counterparts contained departments of accounting and finance, trading and logistics, and manufacturing and operations. Each company would, of course, have an internal hierarchy, in which the clerk in charge of a department in a local office would report back to the head of the regional department, then he to his superior in top management, who would in turn report to the partners.23 This corporate structure still exists today. The conglomerates never managed to make a major presence in the Hanse, but it had its own super-companies. These northern organizations, however, never achieved the immense international status of their Italian counterparts.24 This may have been in part due to the structure of the Hanse itself, which placed heavy restrictions on trade with non-member cities.25 Just as soon as the conglomerates had reached their peak, they reached the end of their reign. Eventually, the economic growth and expansion Western Europe had been enjoying reached its apex and then slowed to a crashing halt. With less resources and less room to expand, the large structure of these companies was no longer effective. As Hunt and Murray argue, the super-companies were a short-run reaction to a short-run phenomenon.26 While the super-companies were certainly short-lived, they did make one other crucial contribution to the business world. Arguably, one of the most revolutionary developments not just in the Middle Ages, but in the entire history of business is double-entry bookkeeping. Until the age of the conglomerates, business records were kept using a very primitive single-entry system, in which fiscal and personal affairs frequently became jumbled.27 This method was perfectly suited for the simple transactions of the local merchants ledger, but as enterprises grew steadily larger, a crafty, albeit unethical, clerk at a local branch of a large company could easily conceal fraud and embezzlement using this system.28 For this reason, the larger companies developed the double-entry system. By looking at various examples of medieval financial statements and ledgers, it becomes obvious that the modern means of accounting and balancing the books does in fact originate from these companies. Medieval income statements and balance sheets functioned in much the same way as the modern variety. Retained earnings, income and other assets were matched against expenses, and some ledgers even featured sections listing owners equity.29 A serious departure, however, from the medieval business has been in the way fixed assets are listed. On a medieval balance sheet, fixed assets such as buildings and land were not listed, nor was inventory. The businesses of this age chose to lease equipment and property rather than tie up assets in their purchase. Inventories were not listed, but were instead marked as a loss of capital if they were unsold at the end of a financial period.30 From a modern perspective, this seems especially strange, since under current practice a failure to list an inventory would likely cause the accounts to unbalance. As financial data became more and more diverse and the associated enterprises changed in structure and strategy, the financial statements involved took on an entirely new dimension. Companies began to balance their books on an annual or seasonal basis31, a practice which is still continued today. Prior to this, financial statements would only be prepared when necessary, or when a new partner entered into the company. Finally, companies also began to list fixed assets and inventories on their balance sheets, along with reserves, appreciation and depreciation of assets, and audits. In the Hanse, it also became common practice to list receipts and expenditures separately on the income statement,32 effectively inventing the departments of accounts receivable and payable. The tools of organization and operation of a business are indeed one of the most crucial achievements of Western Europe during the Middle Ages. Had the immense economic expansion of this time occurred, the modern-day business environment would not even resemble the complex and diverse structure it has formed. The merchants and businessmen of the Middle Ages certainly changed the shape of the world at large, and modern tools of the trade have only been conceived due to these developments. Without a doubt, the contributions to the world of business are among the most important of all of the medieval period. 1E.S. Hunt and J.M. Murray, A History of Business in Medieval Europe 1200-1550 (Cambridge, UK: Cambridge University Press, 1999) 6. 2Hunt and Murray 35. 3Hunt and Murray 34-35. 4Hunt and Murray 36. 5R.S. Lopez and I.W. Raymond, Medieval Trade in the Mediterranean World (New York: Columbia University Press, 1961) 123. 6Hunt and Murray 45. 7Hunt and Murray 6. 8Lopez and Raymond 80. 9Lopez and Raymond 147. 10Phillipe Dollinger, The German Hansa (Stanford, USA: Stanford University Press, 1970) 207. 11Hunt and Murray 55. 12Hunt and Murray 73. 13Dollinger 205. 14Hunt and Murray 66. 15Dollinger 164. 16Hunt and Murray 55. 17Hunt and Murray 38. 18Hunt and Murray 102. 19N.J.G. Pounds, An Economic History of Medieval Europe (London: Longman Group Limited, 1974) 385. 20Pounds 421. 21Dolliger 167. 22Hunt and Murray, 105-106. 23Hunt and Murray 106-107. 24Dollinger 159. 25Dollinger 200. 26Hunt and Murray 122. 27Hunt and Murray 34. 28Hunt and Murray 62-63. 29Hunt and Murray 110. 30Hunt and Murray 112. 31Hunt and Murray 157. 32Dollinger 165. d./67|}+-xz>"@"$$x%z% ' '''**^,`, . ...h0j0 2"2+6-6=7?777}99:;<;H<J<N>P> @@AAsCuC%F&F'F(FCFuFŽhSCJaJh*|hSCJH*aJmH sH hS>*CJaJmH sH hSCJaJmH sH jhSCJUaJmH sH J/ef 0~"{%(a,03\679_=@C&FFgdSdgdSgdS$a$gdS&FXJuFFFFFFFFFFFFFG8GiGkGlGGGGGGGGGGGGGGG#H%H'H:HHQHSHUHcHeHgHzH|H~HHHHHHHHHHHHHH I6I8I:IEIGIIIVIXIZIsIuIwIIIIIIIIIIIIhS>*CJaJmH sH hSCJH*aJmH sH hSCJaJhSCJaJmH sH SFFFFjGGGGG$H;HRHdH{HHHHH7IFIWItIIIIIIIJgdSIIIIIIIJJJJ,J.J0JDJFJHJVJWJXJYJh*|hShSCJaJhSCJaJmH sH hSCJH*aJmH sH J-JEJWJXJYJdgdSgdS,1h/ =!"#$% B`B SNormal 7$8$H$_HmH sH tH DA@D Default Paragraph FontRi@R  Table Normal4 l4a (k@(No List. 6|,y?y "_$ &&i(!*,.>//~1;3I4O689t;YBDZo,>Ug~ 1Nj|14YBZ/ef0 ~{ a$(+\./1_58;&>>>>>j?????$@;@R@d@{@@@@@7AFAWAtAAAAAAAB-BEBWBZB0000x0x0x0x0x0x0x0x00x0x0x0x0x0x0x0(0x0x000x0x@0x@0@0@0@0@@0@0@0x@0@0@0@0@0@0@0@0x@0@0@0x@0@0@0@0x@0@0@0@0@0@00@0x@0@0d/#1_58;ZB ;0 U ;0 ;0n ;0uFIYJ&)+FJYJ'*,XJ(YB 8@0(  B S  ? \,\ \l\\\4\$X\dX\\,\]B##'UkV0*<e>AZB  ---btd08<k> AZB 8 *urn:schemas-microsoft-com:office:smarttagsCity9 *urn:schemas-microsoft-com:office:smarttagsplace  (-  !&]b"..w/|/; ;&>????ZBY_ wzAF#*)*..2.@/D/00@2F26788r;u;D<J<=#=&>C>D>>>>>>i?k??????????%@:@<@Q@S@c@e@z@|@@@@@@@@@@8AEAGAVAAAAAAAAAABB,B.BDBFBVBZB3333333333333333333333333333333333333333333&>ZB Douglas Moore&%)U?.g0H0)Vc y2G5Ex@EKHJX_ bWfkorGq=vJ|r|*|r|D2tK95%jZXS0@>>=>>YB`@UnknownGz Times New Roman5Symbol3& z Arial"qh55F65FF 4pF 4p!4d>>3H ?ZThe Medieval Enterprise: Douglas Moore Douglas MooreOh+'0  $0 L X dpxThe Medieval Enterprise:.he Douglas Moorentougoug Normal.dotrDouglas Moorent1ugMicrosoft Word 10.0@F#@>q:@4:F 4՜.+,0 hp   DHK Studiosp>{ The Medieval Enterprise: Title  !"#$%&'()*+,-/012345789:;<=>?@BCDEFGHJKLMNOPSRoot Entry FIi:UData .1Table6WordDocument.ZSummaryInformation(ADocumentSummaryInformation8ICompObjj  FMicrosoft Word Document MSWordDocWord.Document.89q