Florence - "Cradle of Capitalism"

An interesting article in The Economist entitled “Cradle of Capitalism” (April, 2009) points to the potential roots of capitalism in the Florentine renaissance, drawing on the work of Richard Goldthwaite.  It points to the importance of innovative and enterprising merchants who led a transformation of the Florentine “wool industry into an international business” raising Florence’s status as a European industrial power. 

Carta della Catena - A depiction of 15th century Florence

Interestingly, the banking ‘industry’ flourished in Florence primarily due the introduction of bills of exchange.   This had several important benefits such as enabling the extension of credit, avoiding church rules on lending, and removing the need for individuals to carry cash for making debt payments.  The following quotation summarises the implications concisely, ““When the merchant extended his traffic in the exchange market to enter the credit market, he became a banker”—and a capitalist”.