How did the breakdown of the feudal economy of the Middle Ages lead to the emergence of capitalism?

Answer 1

There were a number of medieval mercantile operations that ultimately gave rise to both capitalism and the middle class.

One was the guilds, which seem to date to the seventh century, or perhaps earlier, and functioned to promote trade and craftsmanship, and to discourage competition from outside the guild. At first, they were opposed by the church, but by the twelfth century were common organizations for tradesmen and merchants all over Europe. As the economies expanded in the thirteenth century, the numbers of guilds expanded by the score. (See link below.)

The guilds united in their interests, both within cities, and among cities, producing far flung organizations that controlled economies of whole areas, and protected trade routes. The best known and most powerful of these was the Hanseatic League, which was had its origins in the twelfth century, and by the end of Middle Ages was the dominant economic power in the North Sea and Baltic Sea area. This was not a feudal organization, but was entirely mercantile. Nevertheless, it rivaled nations for power. (See link below.)

Another organization that produced similar results was the Knights Templar, which, though nominally part of the Church, was a power unto itself. The knights were fighting monks and intimately tied to the Crusades. Apart from that, however, they introduced a series of innovations that produce an extensive banking system, moving money through southern and Western Europe as needed. For example, became possible to deposit money with the order in London and withdraw it in Jerusalem. When the order was disbanded in 1307, an economic power vacuum was created that quickly filled with mercantile operations that evolved into a rather modern banking system. (See link below).

The banks rising in the fourteenth Century were run by powerful families such as the Peruzzi family of Florence, which arose from wealthy merchants. These families were able to rival the nobility and had power all over Europe because of their economic connections. The de Medici family, which was later so important in European politics, did not rise from the nobility, but were bankers whose early sign of success was the opening of their very famous bank in 1397. (see links below).

Such organizations powerfully influence trade, crossing the borders of feudal nations to produce a uniting influence in Europe that was dominated neither by the Church, nor by any one state, and rivaled both as a complex, pervasive, separate mercantile power.

The rise of mercantilism did not end the privileges of the nobility. It did, however, make it much more commonly possible for people to rise in status through their own efforts.

Answer 2

The breakdown of the feudal system did not lead to capitalism, but it was the industrial revolution that led to capitalism.