The development of towns in medieval Europe contributed greatly to the economic growth experienced in the high middle ages. They contributed to decentralization of European governments, which ultimately resulted in more and more liberties enjoyed by the towns and their people. The Increase in liberties lead to greater economic productivity in the middle ages.
During the invasions in the 9th and 10th centuries by the vikings and others, fortifications were built for protection. These fortifications formed some of the first towns. People behind these fortifications needed supplies, so merchants began moving in to supply this demand. Merchants and craftsmen came from a new class, which developed partially from the younger sons of wealthy landowners or nobility who could not inherit. They went into business as a new way to support themselves. Towns also formed around monasteries, cathedrals, and cathedral schools, which attracted merchants and craftsmen to sell their products. Commerce gravitated towards these areas, which was how the first towns came to be.
The towns gradually pushed for more and more liberties from the Lords whose land the towns were built on. In the late 11th century, merchants demanded charters that gave the towns more freedom. Towns began electing their own officials, and the old feudal and barbarian laws were gradually replaced with more reasonable systems. With the gradual dissolution of the feudal system, serfs were granted more freedoms in towns. For example, a serf that took refuge in a town for a year and a day would be free from all of his obligations as a serf, and would be a free man. The towns upheld the serfs’ rights, and on one occasion, when the count of Flanders tried to reclaim a serf who was legally free, he was run out of town. The Lords had incentive to grant the towns more freedoms, because more freedoms meant more citizens would be attracted to the towns, and more citizens would mean the Lord could collect more money from taxes.
The towns’ gradual independence contributed to greater and greater political decentralization. Power shifted away from monarchs and arbitrary rulers, and came into the hands of smaller political units and local nobility. With a less centralized government, there was much competition between towns to attract citizens by not levying outrageous taxes, and granting other liberties. In an enormous empire, like the Roman Empire, citizens could do little about unfair laws, but in small political units, citizens could simply move to another town. There were charters that limited the taxes that could be imposed, and even a Papal document, In Coena Domini, that imposed excommunication on monarchs who levied arbitrary tax increase.
This much freer system fostered economic growth by allowing the merchant class more opportunity to trade. With the decrease of taxes, trade was much easier and more profitable. The reason for the unprecedented economic growth of medieval Europe was due almost entirely to the development of towns and the subsequent political decentralization.