The development of the Mohammedan Empire in the 7th century A.D. made great changes in the commercial world. The Moham medan religion favored commerce, and as its followers occupied most of the Mediterranean shore the effect upon commerce and industries was very great. Damascus, Bagdad, Alexan dria, Cairo and the cities of Spain became great centres of industry and trade, and the people of the Christian world learned from the Mohammedans many important lessons of in dustry and traffic. Even the Crusades, which were organized military movements against the Mohammedans in the Holy Land, taught the people of western Europe many valuable les sons in manufacturing through the opportuni ties thus offered to the Europeans of observing the superior industries of the Mohammedan world, in manner similar to that resulting from Alexander's invasions of the Orient, and these lessons resulted in the development of manu facturing industries in western Europe.
During the long period extending from the fall of the Western Roman Empire to the application of the compass to ocean navi gation, the period which is usually designated as the Middle Ages, new trade routes and com mercial centres were developed. Venice and other Italian cities became great trading and manufacturing centres, sending their ships to the eastern end of the Mediterranean and the Baltic Sea for the Oriental products of tropi cal Asia and the grains and wool of the Baltic Sea frontage, redistributing them with their own manufactures to northern and western Europe by land routes and coasting vessels and bringing back the woolens and linens and leather and other products of France and Great Britain and Germany and the Low Coun tries. Again it was the exchange of the prod ucts of different climatic areas and different civilizations. Venice became a great manu facturing, commercial and financial centre and sent its manufactures to Asia Minor, northern Africa and northern and western Europe. Its vessels were numbered by thousands, yet their operations were confined to the inland seas and the Atlantic Coast. It sent its consuls to report upon conditions of the countries vvith which it traded, built up a great banking and credit system with branch banks in these countries, and its example was followed by other Italian cities, especially Genoa and Florence. These commercial activities of the Italian cihes de veloped trading stations and cities in northern Europe. Antwerp, Amsterdam, Lcmdon, Co logne, Hamburg and Lubeck became active commercial centres, while fairs and markets were built up along the routes over vyluch this merchandise was carried, developing into trad ing towns and cities.
Commerce during this period of the Middle Ages was, however, subject to constant attack by brigands and petty feudal lords, and as a result the great trading cities and stations of northern Europe built up organized leagues for the protection of their trade. They sup plied armed guards to protect the commerce moving along the land routes, and this facili tated the establishment of new trading stations which developed into towns and cities. The Hanseatic and Rhenish leagues, organized in Germany, included nearly 100 towns in each, and their influence in the protection to anal development of trade was very great and was an important influence in developing orderly government and new political governments. Their activities extended over a term of nearly 250 years, and only ended when the use of the compaks turned the activities of trade to the oceans, greatly reducing the importance of the Italian cities and the trade systems which they had built up. The commercial and financial ac tivities of this long period, however, developed great commercial, financial, banking and credit systems, as well as organized governments, and fitted western Europe to begin trade with the Americas and eastern Asia when the applica tion of the compass to ocean navigation revo lutionized trade routes and commercial methods.
The period of the practical application of the compass to ocean navigation began about 1400, although its use was begun in a limited way about the year 1300. The eastern front ages of the Atlantic were explored and the islands off the coast of Africa occupied. Co lumbus, convinced that the earth was a globe, and that India could be reached by sailing westward, ventured boldly out on the Atlantic, discovering America in 1492. The circumnavi gation of Africa and the opening of the route to India occurred in 14%, the extension of the route to China in 1516 and the circumnaviga tion of the globe 1519-22. This developed new routes of commerce and also the true functions of commerce, the interchange of the products of different climatic areas and different types of civilization, the division of labor among the people of the world. The great masses of Oriental population were found possessed of certain products desired by those of Europe who were able to offer in exchange their own manufactures and the precious metals which they had begun to receive from America. Com merce then became truly international and intercontinental, exchanges between different climatic areas and civibzations. To develop this new form of commerce, the interchange of the products of the various quarters of the entire globe, new facilities were required, and large sums of money demanded, both in the transportation of merchandise and in the finan cial operations of the exchange. The govern ments of Europe, stimulated by the prospects of gaining additional territory as well as com mercial profits, entered the field. The Spanish, Portuguese, Danish, English and French govern ments chartered commercial companies for the development of trade and exploration and granted them liberal aid, and at the same time encouraged colonization, especially in America, where there were vast unoccupied areas. The Portuguese sent their trading ships around Africa and established a trading station at Goa, on the coast of India, and the commerce was conducted under the direction of the govern ment, but open to all Portuguese. Spain ex plored and conquered Mexico and the western coast of South America. and established come merce with those areas, with squadrons escorted by ships of war. Merchandise was sold to the natives and colonists, and large quantities of gold and silver transferred to Europe, stimulat ing manufactures and proving extremely use ful in the trade with the Orient. The English, who had been buying quantities of Oriental merchandise from the Portuguese, were ex cluded from that market by the Spanish govern ment, and so established the great East India Company in the year 1600. It developed import ant trading relations with the Indies and later with China, and with the co-operation of the government extended its control over parts of India, laying the foundations for the occupation of that country by the British. The Dutch also excluded from their large trade with the Portuguese, established the Dutch East India Company in 1602 and sent their ships to the Orient, taking possession of Java and develop ing a very large business in Oriental products, especially spices which were extremely popular in Europe at that time. Their business was highly successful and Holland became a great commercial, financial and banking country. The French government also established an East India trading company, also one for the West Indies, but they were less successful than those of Great Britain and Holland.