Situated above Pisa, on the River Arno, and being without shipping facilities, the success and commercial importance of Florence were achieved in the direction of manufacturing, finance, literature and art, rather than maritime trade. Her weavers and goldsmiths were famed all over Europe for their fine products, and her silk and woolen cloths and articles of jewelry were exported to all the principal cities of the western world. Like the other Italian cities, Florence was vexed and retarded by internal revolutions and external strifes. In the latter part of the thirteenth century a republican form of government was established, which continued in modified forms for several hundred years. Notwithstanding the wars and strifes in which Florence engaged in common with her sister republics, her growth in wealth and population continued without abatement, until at one time she was not only the capital of Tuscany, but the chief city of all Italy.

In the fifteenth century the great family of Medici, Florentine bankers, succeeded in obtaining control of the government of Florence and changing it from a republic to an hereditary aristocracy, but while this was a blow to popular government, yet the remarkable character of the Medicis and their vigorous and enlightened rule were by no means discouraging to the commercial and artistic progress of the city. Indeed it was under the Medicis that Florence achieved its greatest glory. This celebrated family of bankers was founded by Giovanni de Medici, a merchant and afterwards a banker, about the middle of the fifteenth century, but the greatest of the family were Cosmos and Lorenzo, sons of Giovanni. The latter, surnamed the "Magnificent," so governed Florence that all Europe was filled with his fame. Richest of Italians that he was, he lavished his wealth on palaces, churches, hospitals and libraries. He made Florence the seat of every art and science and a seminary for all Europe. His court was ornamented with artists, poets and writers. Learned men from Greece and other portions of the East, who were flying from the sword of the Turks, taught the Greek language and literature in Florence; and under his rule, sculpture, painting and music began to unfold their choicest blossoms. Florence was called "The Athens of the West," and to this period of its history we are indebted for the names of Michael Angelo the sculptor, Dante the poet, Machiavelli the statesman, and Amerigo Vespucci, the discoverer of our western hemisphere.

The banking houses of Florence were the largest and wealthiest of Europe, and through them nearly every great loan made by the kings of central and western Europe to carry on their wars was negotiated. The houses of Bardi, Pitti, Medici and Peruzzi were the leaders in the financial world during the thirteenth and fourteenth centuries, and are said to have been "The pillars which sustained a great part of the commerce of Christendom." The customs of England were farmed to the Bardi in 1329 as a security for loans, and they probably had excellent bargains. In 1345 the Bardi and the Peruzzi failed. Edward III of England owed the Bardi 900,000 gold florins and the Peruzzi 600,000 florins, which he was unable to pay on account of his wars with France. The king of Sicily also owed each of these houses 100,000 florins which he was unable to pay. On the other hand the Bardi had deposits belonging to citizens and merchants to the amount of 550,000 florins, and the Peruzzi were carrying deposits to the amount of 350,000 florins in gold. Unable to collect from the kings the bankers were equally unable to pay their depositors. The failure of these two banks caused great distress to the city and injury to its commercial interests.