This section is from the book "Introduction To Economics", by Frank O'Hara. Also available from Amazon: Introduction To Economics.
Through a long period of development the former self-sufficing household economy ceased to be self-sufficing and came to depend upon outsiders to supply many of its needs. This second stage is represented by the medieval town. The different trades grew up within the town and the right to trade within the town and in the surrounding country was monopolized by the townsmen. The products of artisans of other towns were admitted to the town market only under severe restrictions. The market of the town was for the craftsmen of the town. Here the peasant of the surrounding country brought his products and exchanged them for the products of the town craftsmen. The producer produced no longer exclusively for himself as in the household economy, but for the consumer whom he met face to face in the market. There was no middleman, no merchant who bought cheap and sold dear and thus made his living. The selling in the market was done by the people who produced the wares. Goods which could not be produced in the town might, of course, be introduced from other towns, but the general principle was observed, that nothing which could be produced in the town was to be imported from abroad.
But alongside the system of town economy, there was growing up another system. Merchant princes engaged in foreign trade, and brought the goods of the Orient to Europe. America was discovered and with the discovery the European supply of gold and silver was increased. Gunpowder was invented and with its invention and with money to pay standing armies, modern nations were developed. The special monopoly of the townsmen now stood in the way of the interest of the great traders and of the growing modern states. The town economy was gradually being overthrown and in its place was substituted the national economy.
 
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