In the mid-15th century, the economy of late-medieval England took a turn for the worse. The result was decades of economic stagnation and a reversal of a paradigm that dated to the end of the Great Plague of the 1340s. To speak of economic recessions or depressions in a pre-modern period, especially those whose root causes were financial in nature, may seem strange. After all, wouldn’t economic fluctuation in an overwhelmingly agrarian economy be driven almost exclusively by the quality of harvests or some other natural factor? What role at all is there for money and finance to play?
Such thinking reflects a misunderstanding of the function of finance, which is conflated today with a particular economic sector. In reality, finance is not so much an industry or trade as it is a dimension of economic life, no matter how simple. Perhaps the most significant cause of the economic slump in 15th century England was a shortage of currency and this would have impacted anyone for whom the coinage played a part in their material life. In other words, it affected nearly everyone and could have very well been a source of economic trouble, even in an era seemingly far removed from the world of finance.
The 15th century, at the tail end of the House of Plantagenet’s rule over England, has been forgotten as the century obscured between the upheavals of the Great Plague before it and the 16th century English renaissance that followed. Indeed, the English economy in the early-1400s was still shaped by the changes set in motion by the plague more than half a century earlier. The disaster killed off perhaps half of the country’s population and caused the economic fortunes of those who lived to rise markedly.
The labor shortages that triggered rising wages also caused more widespread inflation. Prices for grain and other products rose as labor was scarce and the size of the monetary base grew relative to the reduced population. On balance, these developments were positive for workers whose real wages rose despite increased food prices. However, the trend hurt landowners as the value of their estates failed to keep up with inflation. Efforts to curtail their misfortune by regulating wages was among the causes of a peasants’ revolt in 1381 that killed over a thousand people. Nonetheless, beside these secular trends, crop yields were the usual determinant of economic fluctuation, as it would later be during three successive poor harvests in the 1430s.
Amidst this inflation, the Hundred Years’ War being fought against France was driving the fiscal largesse of the Plantagenet state under the infirm King Henry VI. Campaigns against the French had been on-and-off since the French seizure of Gascony from King Edward I of England while the latter was involved in a war against Scotland in the 1290s. However, the Hundred Years’ War itself began when a dispute over the succession to the French throne arose between Edward III of England and Philip of Valois. The 14th and 15th centuries saw an unremitting back-and-forth with neither side ultimately triumphing over the other. In England, this long war was funded by increased taxes levied on an increasingly resistant public.
In the late-14th century, a new attempt to finance the wars in France was introduced via a poll tax. The tax was levied at a minimum of four pence per person but the average rate to be collected by the graduated tax across the population was one schilling (or 12 pence) per capita. However, revenues came in less than expected, partially because of mounting volumes of delinquent tax bills. Efforts to step up collection did more than anything else to trigger the previously mentioned peasants’ revolt. Supplementing this income, the medieval English state also collected ad valorem taxes on movable property and taxes were also levied on trade in commodities like wool. To ease the collection of these charges, certain towns were designated as the only lawful places to trade in certain products.
Whatever the effect of injurious taxes and bad policies, other factors began to afflict the English economy at the start of the 15th century, ones that had external causes. Perhaps the most notable of these was a European coin shortage caused by a continent-wide scarcity of silver that became most severe in the 1400s. The shortage was caused by trade deficits with the East and declining production of the precious metals. Bullion became so dear that state mints were closing across Europe. It also reversed the monetary trend that started in the mid-14th century; inflation evaporated and the coin shortage ushered in at least a half century of deflation.
Statistics on mint output have survived well enough to chart the decline in the money supply wrought by the inadequacy of the precious metals. Whereas in the 1350s, it has been estimated that there were 56 pence in circulation per capita, by the 1420s, there was just 13 pence available per head of the English population. Obviously, this shortage of coin made even the logistics of paying a one-schilling per person poll tax a difficult hurdle to overcome.
At a larger scale, payments among merchants were eased by the use of bills of exchange or other credit instruments but these were not so easily transferred to third persons as coins and therefore were unsuitable for use by commoners. Widespread illiteracy and the consequent scarcity of financial sophistication meant these options were simply inaccessible to ordinary people anyway. A small recovery in mintage in the 1420s and 1430s was unsustainable and gave way to further stagnation in the money supply. Indeed, by the 1440s, English mint output was just 5% of what it was two decades earlier.
In an era before bank deposits, the physical currency in circulation constituted virtually the entirety of the money supply. True, there were other instruments that could be used in lieu of coins, like bills of exchange, but these carried credit risk and were less transferable than the metal coins themselves. As a result, the shortage of coins brought the wider medieval financial system to a standstill. Loans simply couldn’t be made when repayment in coin was so difficult to arrange.
Surviving records of debts reveal that lending terms became more friendly to the creditor, a sign of a credit crunch. Debts were increasingly payable on request, made to amortize, or carried punitively high penalties for non-payment. To get around usury restrictions, the latter was accomplished by having two face values to the loan, one that would apply to its repayment and a higher one that would trigger in the event of default.
Credit on these terms was not conductive to trade. In particular, the innovation of making loans payable on request made financing trade very difficult. A merchant could face demands for repayment of his debts as soon as there was even slight concern over his solvency or that of his lender. There were still other mounting barriers to trade, including the war in France and even protectionism as the Duchy of Burgundy implemented an embargo on English wool. The results for the English wool trade, among its largest industries, was catastrophic. Exports of cloth and wool fell 50% in terms of volume from 1440 to the early 1460s. Imports fell as well, with the volume of wine unloaded in English ports falling by two-thirds over a similar period.
Not only were trade volumes falling but so too were prices. As an example, average prices for a pound of wool fell from 2.7 pence in the 1440s to 2 pence in the 1450s and often dipped still lower. Prices for other agricultural commodities also fell, prompting some land to be abandoned and this in turn put pressure on rents and the incomes of existing landowners. Wages for agrarians may have taken a pause from the previous rise but falling prices for food meant real wages held up and cheaper land did allow for the emergence of a new class of small landowners. As one of England’s largest holders of land, the Catholic Church also felt the impact of this prolonged slump. Monasteries were forced to shrink and spending on new churches, monasteries, and cathedrals fell. A short-lived recovery in the 1460s did not last and a true end to the depression would not come until the end of the century.
Rebellion, War, and Recovery
The depression caused political disorder not seen since the peasants’ revolt of the previous century. In 1450, there was yet another uprising when a certain Jack Cade led a revolt of five thousand men in the southeast of England. The rebels were angered by the disorders of Henry VI’s reign for which they faulted his traitorous advisors who used their offices to obtain personal riches. The rebellion failed but the events were a precursor to the much larger political disorders to follow.
The Jack Cade Rebellion was followed by the War of the Roses, which began in 1455 when Richard of York acted on his claim to the throne and led an army that captured the King who went on to become York’s prisoner. The conflict eventually escalated into a civil war among rival branches of the House of Plantagenet, each bearing competing claims to the throne. This fighting continued for several decades.
By the time the House of Tudor took over control of England, a consequence of the War of the Roses, an economic renaissance was already underway. Trade had recovered to pre-depression levels by the early 1480s and tax revenues grew once more. Some prices began to rise though food prices remained low through to the end of the century, a trend that continued to benefit commoners.
Most importantly perhaps, the coin shortage that had afflicted all of Europe in the 15th century was dissipating. Imports to Europe of African gold in the late 1400s reversed the shortage of precious metals; this permitted an end to the depressed credit environment and the deflation of the middle of the century. Indeed, going into the 16th century, Europe was returning to the economic climate that characterized the 14th century, one of inflation and steady monetary growth.
While the financial system of late-medieval England may have been of negligible size or sophistication, its shortcomings were nonetheless damaging. In an era when money meant little more than the physical metal coins that held tangible value, an era when substitutes to coins were unavailable, a shortage of credit was bound to exacerbate any shortage of currency. This in turn brought trade and industry to a standstill. All this illustrates the important lesson that shortcoming in a financial system can hold back any economy, even pre-modern ones.
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6. Stevens, Matthew Frank. “How a Shortage of Coins Precipitated a Depression in 15th Century England.” LSE Business Review, 16 Jan. 2017.