A Comparative Economic History of Florence and Venice during the Italian Renaissance of the 14th Century
Korean Minjok Leadership Academy
Term Paper, AP European History Class, July 2008
Table of Contents
IV. Distribution of Power
IV.1 Florence ; the House of the Medici
IV.2 Venice : the Great Council
VI. Business Structure
Two of the most prominent cities in Renaissance Europe were Florence and Venice. Florence was the center and the starting point of the Renaissance and Venice was
the biggest trading center in Europe that connected the continent with the Eastern world. In both city-states, money and the economy were the main features that were
crucial to its society and culture and to the history of modern capitalism. This paper examines the main industries of banking and trade, the guilds and the business
structure of both Venice and Florence as well as the politics of the two cities.
In Renaissance Italy, it was the Florentines who dominated international finance in all major European banking centers, and it was the Venetians who, for the most part,
controlled trade and shipping. One of the biggest and most influential of the families that controlled banking in Florence of the time was indisputably, the House of the
Medici and its banking business.
The Medici were successful, largely in part, to a new innovative system of recording credits; the double entry system. It visually showed, in bilateral-format pages, the
economic relationship of the writer with a single person or company. This allowed for easier recording of credits and debts between the writer and another entity, while
precisely registering the flow of money going in and out. This form of accounting allowed merchants to open accounts between themselves and pass the credits to pay
each other rather than use coins or solid forms of money. The feature of the Medici Bank being involved in fund transfers and international trade allowed it to become
the leading banking institution in Northern Italy and throughout Europe in the time of the Renaissance.
Economic credit was thus a Florentine outgrowth of this advanced type of accounting. It served as a lubricant in the Florentine economy. It is said that a French satirist
of the fifteenth century had marveled at the ability of the Italians to do business without money. The Medici banking system allowed for the beginning of credit in economy
in modern history. This capacity to abolish hard money or a physical currency in the international exchange generated immense flexibility and liquidity within the Florentine
merchant-banking system. This liquidity of currency due to the advanced banking system was the reason for the Florentine competitive advantage over the other cities in
international banking. Florence became such a center of banking in Europe that even in the terms of solid money, the Florentine gold coin, known as the Florin, was the
standard coinage throughout Europe. The Medici Bank was the chief bank for the Curia, and it had branches in the major cities of Italy, as well as London, Geneva,
Avignon, and of course, Venice.
During the 12th century, Venetian merchants were given an exclusive trading privilege granted to them by the Byzantine Empire, which they used greatly to their advantage.
This continued into the late Middle Ages and the Renaissance as Venice stood as the first and biggest trading power in the world before the great expeditions in the fifteenth
and sixteenth century. It was chiefly occupied in importations from the Black Sea, the Levant, and Africa. It served as the center of trade between Europe and the Eastern
world. It traded a variety of raw products, including hides, minerals, salt, wax, sugar, borax, wool, spices, sile, guns, ivory, drugs, birds, and gold, among many others.
Rialto was the commercial center of Venice. While luxury goods would arrive from the East, raw materials would come from northern Europe.
Banking and trade went together. The Medici Bank was active in Venice as well as anywhere else in Europe of the time. The liquidity of currency invented by and practiced
by the Medici Bank and many other following banking systems helped to expand trade. Accounts were set up between traders, which made social and commercial exchange
between them easier and more convenient. This convenience in turn allowed traders to have a multitude of these relationships and to exchange frequently with his fellow traders,
thus encouraging trade. Banking and trade supplemented each other; banking allowed the expansion of trade to unheard of dimensions while trade made up a whole new sector
of banking that did not involve only lending and borrowing from the bank to an account-holder but to relationships and networks between different account-holders.
IV. Distribution of Power
IV.1 Florence : the House of the Medici
Florence was the center of Renaissance. It was also the center of the economy of the Western world for the industry of banking. Both the economy and the politics of Renaissance Florence
were run by great merchant families. The most famous of these was the Medici Family. This one family supplied four popes and two queens of France, and ran Florence, with a couple of
interruptions, for almost 400 years. Its power emanated originally from the family bank. The richest family in Renaissance Italy; the most famous members of this family were Cosimo di Medici
and Lorenzo di Medici.
They fostered economic patronage to many Renaissance artists and spent most of their large wealth on their great art collections they used to decorate the city of Florence, which virtually
fueled the artistic Italian Renaissance as we know today. Giovanni di Bicci de Medici, the first patron of the arts in the family, commissioned Masaccio and Brunelleschi to construct the
Basilica of San Lorenzo in 1419. Cosimo the Elder commissioned famous artists such as Donatello and Fra Andelico. Later, Michelangelo Buonarroti and Leonardo Da Vinci were commissioned
by Lorenzo the Magnificent. In architecture, prominent icons include the Uffizi Gallery, the Pitti Palace, the Boboli Gardens, the Belvedere, and the Palazzo Medici. Besides fostering art, the
Medici are also known to have been the patrons of Galileo Galilei. This fostering of the art of the Renaissance is why Medici is held in high esteem as one of the most outstanding families
in the history of Modern Western Europe.
However, Renaissance art was not the only thing the Medici sponsored. The banking system of the Medici, to be explained further in a latter section of this paper, utilized
a system known as the double entry bookkeeping system. This was first introduced to the Medici Bank by Giovanni Bicci de Medici.
The Medici also had a lucrative partnership with the Catholic Church. The Bank of the Medici would collect 10% of a registered person¡¯s earnings for the Church. Anybody
who refused faced excommunication, a one-way ticket to hell. This gave the Medici unprecedented power as they were viewed favorably by Rome. In Florence, the Medici
acted as virtual rulers.
But it is important to note that the Medici were not the only and unrivaled power controlling the city of Florence during this time. The guilds of Florence had a great say in
the governing of the city, and this is to be elaborated upon in a latter section of this paper.
IV.2 Venice : the Great Council
In Venice, there was not a single ruling head like the Medici in the governing of the city. There was the position of the doge, who was elected by the Great Council and
served for life but had no real power besides splendor and title. The Great Council, and most notably, the Council of Ten, severely limited the power of the doge by
passing legislation that prohibited his power from being spread to his blood relatives and family.
For example, in 1432, the Florentine doge Francesco Fosari ruled with excessive grandeur and exercised far greater power than had past doges by pursuing a policy of
western expansion. The Great Council looked upon this with disdain and tormented the doge. The Council of Ten falsely accused his son, Jacopo, of treason, and
repeatedly exiled, called back, tortured and exiled him while not allowing the doge to resign. Only when the Council of Ten had been satisfied that its message had
gotten across did it force Fosari to resign.
The city was thus governed by the Great Council, which was made up of the most influential families in Venice. It appointed all public officials and elected a Senate of
200 to 300 individuals and also chose the Council of Ten, a secretive group which held the most power, as demonstrated in the case of Fosari, in the administration of
the city. The Venetian nobility had a very strong commitment to oligarchy rather than to monarchy. In fact, the Council of Ten, though usually very corrupt and
self-serving, frequently worked to destroy ambitious political climbers who they judged would supersede the others in political power. The Venetian nobility believed
that though the general societal hierarchy was inevitable and necessary, that there should be equality among their own ranks.
The city was primarily concerned with commerce and finance, and never was a producer of artistic and literary talent; but instead, it imported. Renowned writers like
Peitro Aretino and painter Titian were attracted to the wealth of Venice. Artist guilds are supposed to have been originated from various cities of northern Italy that include
Venice, and individual wealthy merchant families often acted as patrons of artists who worked to build beautiful architecture and worked to satisfy their artistic desires.
Venice remains with Florence as one of the most beautiful cities in the world.
The guild was the center of economic activity in Florence, as was also in Venice. A guild was a medieval secular institution that exercised strict control over the art
and trade. The guild was a highly organized institution that protected the members from competition within and outside of the city. Artisans, craftsman, or merchants
who were not members of a guild was prohibited from legally selling products in the market within the city¡¯s boundaries.
To join a guild, it was necessary to be the legitimate son of or the son-in-law of a member, pay an entrance tax, and had to be competent in the craft. Masters of the
guilds owned the right to produce and sell in the city-state and the means to do so. They would take on apprentices who would work through a long career of
assistance and training without ever becoming a member.
Each of the guilds was ruled according its statues that had the force of law. It was led by a single leader, or capo, to manage all the business of the guild. The guild
could pass judgment in controversies among its members, and also made sure that over-competition did not occur internally and regulated outside competition.
In Florence, theoretically, every member of the city's several guilds, the arti, had its say in government. And actually, the government was mostly run by the merchant
class; the poor, or the Minuto Popolo, were excluded from the government and the nobles, or the Grandi, were similarly denied representation in the councils of
the Republic. However, it was so that the whole process of election was controlled by a few of the richest merchant families, like the Medici, who ensured that only
the names of reliable supporters were appointed to governmental offices. Members of the guilds, who were wealthy and held positions in government, were some
of Florence's most influential people in society and politics.
The Palazzo Vecchio was the home of the Florentine guilds. Constructed in 1299, it functions as the seat of municipal government and the heart of Florentine culture.
Here, the city's 5,000 guild members were able to vote, debate, and determine city issues. The guild members included masons, builders, sculptors, artists, lawyers,
A similar guild organizational system was also present in Venice, but the political influences it had on the city was slightly different. Venice had started as a small
self-governing community of refugees. It had a largely communal form of government. It was managed nominally by a leader called the doge, and was really
administered by a council of the most influential families. The doge was elected by the Great Council, and was usually the shrewdest elder in the city. He would
serve until he died, but at around the 12th century, Venice had worked to ensure that the doge does not evolve into that of a hereditary office. The doge, richly
attired and publicly honored, was actually a powerless figurehead at the center of the state administration. The system was devised so that the council of Venice,
the Great Council, had the real administrative powers, and prevented the doge's family from acquiring power. The doge was not allowed to engage in trade or
other financial activity, and his family may not hold office in government or serve on the councils.
It can be said that the nobility and aristocracy had a greater say in the politics of Venice compared to Florence, where only the rich had power. In 1315, the
Venetians had listed the names of the most influential families in the city in the Golden Book of Nobility, and this allowed membership of those listed seats in the
Great Council, while disenfranchising the others. It is to be noted however, that the Venetian nobility were more prone to be hard working and successful businessmen
than the nobility of other cities who were largely idle. Moreover, the political system of no one single aristocratic house having most of the power made it so that in
a way, the political system of Venice was actually more democratic than the one in Florence.
VI. Business Structure
In both Florence and Venice, similar economic business structures arose during the Renaissance.
In Florence in the late 14th century, a new organizational form called the sistema di aziende, or the ¡°business system,¡± was developed. It was a system that consisted
of legally autonomous companies being linked through one person or through a small set of controlling partners. It was virtually a system of a partnership as we know
it today. The system allowed for the owners of the individual corporations to function as a network of owners over various companies. With this set of legally separate
partnership contracts with branch managers in different locations and industries, the individual company owners were able to control the market and the economy.
This new organizational form of business in Florence was ground-breaking in the history of financial capitalism both because it protected owners against the unlimited
liability risk of complete financial ruin, and because it easily allowed diversification into multiple product markets. These networks also fostered acquaintances among
the merchants and created the atmosphere of mutual trust and coexistence that was different from the cutthroat competition of the capitalism witnessed later in the more
modern times. It was also in this atmosphere that credit banking was able to be born; in another ambience of mutual mistrust, it would have been impossible for the
participants in a credit-debit relationship to be engaged in the deal of paper and ink and trust.
In Venice, a similar atmosphere existed. All the Venetian merchant aristocracy knew each other, and there was a sense of mutual trust that in other cities seldom
extended outside the family circle. Consequently, this allowed for the Venetians to be unique for their capacity for quick, efficient business administration and
cooperation in the day-to-day affairs. Besides the overall similar atmosphere of both Florence and Venice, a similar business structure was also to be found in Venice.
Trading ventures, by nature, involved great sums of money carrying great risks that could be rendered in any way by the hours in the commercial center of Rialto of Venice.
Thus a system that enabled short-term partnerships to evolve through which any Venetian with a little money could have a share in the trade was made. Known as a
Colleganza, these agreements were a type of a primitive stock market. Though this differed slightly from the system of multiple owners over multiple companies
of Florence in that the system in Venice was more like a system of multiple owners over a single company, both demonstrate the similar spirit the two cities shared.
Florence and Venice were the most prominent economic centers of the Italian Renaissance. Florence acted as the center of banking while Venice was the focus of
commerce and trade. In both Florence and Venice, similar business structure models and guild functions arose. Each also had unique features with regard to their
major industries and functioning of the local government. All these characteristics of economy in Renaissance Venice and Florence, like the economic credit or the
cooperative business model, contributed greatly to the creation of the modern capitalistic system.
Note : websites quoted below were visited in July 2008.
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2. Cochrane, Eric. Florence in the Forgotten Centuries 1527-1800. Chicago: University of Chicago P, 1973.
3. Douglas, Forsyth J. The Crisis of Modern Italy. Cambridge: Cambridge UP, 1993.
4. Hibbert, Christopher. The House of the Medici: Its Rise and Fall. New York: Morrow Quill, 1980.
5. Marino, John A. Early Modern Italy 1550-1796. Oxford: Oxford UP, 2002.
6. Norman, Davies. Europe a History. New York: Oxford UP, 1998.
7. Norwich, John J. A History of Venice. New York: Vintage Books, 1989.
8. Padgett, John F., and Paul D. McLean. "Economic and Social Exhange in Renaissance Florence." Diss. University of Chicago, 2002. Abstract.
9. Padgett, John F., and Paul D. McLean. "Economic Credit and Elite Transformation in Renaissance Florence." Diss. University of Chicago, 2005.
Abstract. American Journal of Sociology (2006).
10. Article : "The House of Medici." The Catholic Encyclopedia.
3 July-Aug. 2008 .