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The Italians city-states developed politically when they gained effective independence for the Holy Roman Emperor in the early 12th century, which was preserved when the attempt to reassert imperial authority by Frederick I Barbarossa were foiled by the Lombard League later in that century. The cities could focus on their own interests, instead of being subordinated to the interests of the emperor. They turned to the political system of the republic of ancient Rome as a source of inspiration for the development of their systems of self-governance, modelling some of the aspects of their new institutions on aspects of those of the republic.

The importance of the Italian city-states was due to economic strength. In the following centuries Italy became the most urbanised and the richest and most advanced area in Europe. This started with the reopening of trade links with India and China which was spearheaded by the Sea Republics (Venice, Genoa and Pisa. The Italians monopolised the European trade of luxury goods from those parts of the world: silk and other premium textiles, spices, incense and perfumes. The Italians also developed banking systems which for those they were very advanced. Florence and Milan became major banking cities. The classes of bankers and merchants became very powerful.

A textile industry flourished, especially in Milan, Bologna and Florence. They worked wool and cotton. The production of the latter in Europe was reintroduced thanks to contacts with the cotton producing areas in the Arab world.

Other types of manufactures prospered in the Italian city states, such as stone cutting for the decoration of the walls of sumptuous buildings (e.g. lapis lazuli for blue and mother pearl for opaque white). Milan had a big arms industry. Weapons were very important because these city-states were often at war with each other.

An important class of layers (the notaries) who formed the backbone of the bureaucracy of these states developed. With wealth and the development of local bureaucracies education increased in importance. Bologna University was the first university in Europe and many of the oldest universities are in Italy, which had the largest number of universities in Europe. The universities of Bologna, Padua, Pisa and Florence attracted students from all over Europe.

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