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1 - Medieval and Renaissance Origins

Published online by Cambridge University Press:  22 March 2010

Jonathan Barron Baskin
Affiliation:
Baruch College, Connecticut
Paul J. Miranti, Jr
Affiliation:
Rutgers University, New Jersey
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Summary

Introduction

The influences that the perennial problems of information and risk have exerted on finance have been evident since the dawn of civilization. Beginning in Mesopotamia nearly five thousand years ago, the Sumerians and their Babylonian successors perfected rudimentary contracts for rationalizing commerce, finance and private property ownership. These basic and powerful ideas eventually spread far beyond the Fertile Crescent to become key elements in an intellectual diaspora carried by trade among the peoples of the Eastern Mediterranean. Later during the Greco-Roman era new financial institutions facilitated the expansion of economic activity. Coinage, bills of exchange and new modes of public finance were broadly transmitted through the expansion of the empires of Alexander and the Caesars.

These ideas, carefully preserved by ecclesiastics during the barbarian invasions of the seventh through ninth centuries A.D., again influenced Western thinking with the economic revival of the later Middle Ages. Economic recovery together with the formation of international trading linkages between Northern and Southern Europe gave rise to and was, in turn, facilitated by an expanding financial sector. A leading center for this development was the Italian city-states, which are the central focus of this chapter. Many of the practices emergent there were basic to what we know as modern international finance, including foreign exchange conversion, bills of exchange, specialized project financing, portfolio diversification and deposit acceptance. Improvements in the legal system also facilitated economic expansion. New contractual forms and financial instruments helped to reduce risk and to enhance the efficiency of international trade and finance.

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Publisher: Cambridge University Press
Print publication year: 1997

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