7. the Development of Commerce

12/3/14 1 7. THE DEVELOPMENT OF COMMERCE In Chapter 6, we saw how commerce first organized itself during the Commercial Revolution to meet the challenges of mediating long-distance exchange. In this chapter, we will see how commerce, like production, continued to develop in ways that increased its productivity. What drove this development was the pressure of competition. Both the Crisis of the Long Fourteenth Century and the subsequent expansion of the Long Sixteenth Century put pressure on the organization of commerce to increase efficiency and lower trading costs. During the Crisis, it was shrinking markets and the resulting intense competition among merchants for the remaining business.1 In the expansion that followed, it was competition for the growing trade in price-sensitive mass-market goods. The expansion in trade expanded the market for the services of commerce. This had the same effects on commerce as did market expansion on production. It induced reorganization, including an increasing division of labor. It stimulated technological progress, making profitable new forms of social technology—particularly, as we will see, in organized markets. It also justified extensive investment in infrastructure—of commerce itself and of transportation. As commerce responded to the pressure of competition and to the opportunities presented by an expanding volume of trade, the direction of its development was shaped by the need to address its own internal problems. The organization of commerce that had emerged during the Commercial Revolution was rudimentary, and it suffered from a number of serious failings. As commerce developed, all three components of its structure were transformed—the enterprise, the association, and the market. We begin with the market.