Before the conquests of the Vikings, Mores and Hungarians, Europe’s upper class, Kings, nobleman and their subordinate soldiers, had all the power. They would demand armor, tools, weapons and food from the poor and workingmen. The middle and lower class had no means to negotiate with the upper class. But after the invasions, the upper class was weak. The armies were smaller and the kings and nobleman were scarce, but the middle class stayed relatively the same size. The merchant class now had bargaining power for their goods and services.
As Adam Smith argued in, The Wealth of Nations, economic development of a nation is only achieved by increasing the standard of living of all, even the poor, citizens of the nation. Europe transitioned into the most powerful location early on because of this. The upper class still needed all of the lower classes good and services and the lower class had a reason to fight for a bigger piece of the pie. The merchant class could fight back. If the lower class didn’t give their stuff away for free the upper class couldn’t just fight them because the group was too big. This allowed for the rise of trading and selling for their goods and services.
At first, the merchants had free range to create and charge whatever they wanted. They earned great profits and the economies around Europe boomed. Later on city guilds were established to set specific rules on who can make what and how much they could charge for it. The free trade market turned into a regulated market, hurting the merchant. In order to operate freely outside of these guilds, the merchants began moving outside of the city walls, where the guild laws could no longer affect them.
As more and more merchants moved outside the city, communes began to emerge. Economies outside of the city were prospering from the free market. As economists, we know that with any free market, innovation drives future profits. With the merchant class advancing in these communes, traders needed to differentiate themselves from one another. Armor began to get lighter, weapons and tools began to get stronger and prices for distinguished goods elevated. The improvement of Europeans goods didn’t just come from competition with other merchants, Asian and Middle Eastern inventors helped too.
Another approach Europeans picked up was copying foreigner’s innovation. While the Middle Eastern and Asian traders traveled the world to show off their developments, the Europeans took notes. They were proud to present their creations, but also learned from their visitors. One aspect that made Europe more advanced than the other two was this strategy. They took the outsiders knowledge and technology and made it better formulating the basis for Europe to have the economy that it did.