Extract from, Hunt, E.K., History of Economic Thought: A Critical Perspective, 2nd ed. New York: HarperCollins, 1992, p.7-8.
PRECAPITALIST EUROPEAN ECONOMY
In order to trace the outlines of the historical evolution of capitalism, it is necessary first to say a few words about feudalism—the socioeconomic system that preceded capitalism in western Europe. The decline of the western part of the old Roman Empire left Europe without the laws and protection that the empire had provided. The vacuum was filled by the creation of a feudal hierarchy, in which the serf, or peasant, was protected by the lord of the manor, who in turn owed allegiance to and was protected by a higher overlord. So the system went, ending eventually with the king. The strong protected the weak, but they did so at a high price. In return for payments of money, food, labor, or military allegiance, overlords granted the fief, or feudalism—a hereditary right to use land—to their vassals. At the bottom was the serf, who tilled the land. The vast majority of the population raised crops for food or clothing or tended sheep for wool and clothing.'
Custom and tradition are the keys to understanding medieval relationships. In place of laws as we know them today, the custom of the manor governed. There was no strong central authority in the Middle Ages that could have enforced a system of laws. The entire medieval organization was based on a system of mutual obligations and services up and down the hierarchy. Possession or use of the land obligated one to certain customary services or payments in return for protection. The lord was as obligated to protect the serf as the serf was to turn over a portion of his crop to or perform extensive labor for the lord.
Customs were broken, of course; no system always operates in fact as it is designed to operate in theory. One should not, however, underestimate the strength of custom and tradition in determining the lives and ideas of medieval people. Disputes between serfs were decided in the lord's court according to both the special circumstances in each case and the general customs of the manor for such cases. Of course, a lord would usually decide in his own favor in a dispute between himself and a serf. Even in this circumstance, however, especially in England, an overlord would impose sanctions or punishments on a lord who, as the overlord's vassal, had persistently violated the customs in his treatment of serfs. This rule by the custom of the manor stands in sharp contrast to the legal and judicial system of capitalism. The capitalist system is based on the enforcement of contracts and universally binding laws, which are softened only rarely by mitigating circumstances and customs that often swayed the lord's judgment in medieval times.
The extent to which the lords could enforce their "rights" varied greatly from time to time and from place to place. It was the strengthening of these obligations and the nobleman's ability to enforce them through a long hierarchy of vassals over a wide area that eventually led to the emergence of modern nation-states. This process occurred during the period of transition from feudalism to capitalism. Throughout most of the Middle Ages, however, many of the lords' rights were very weak or uncertain because political control was fragmented.
The basic economic institution of medieval rural life was the manor, which contained within it two separate classes: noblemen, or lords of the manors, and serfs (from the Latin word serous, "slave"). Serfs were not really slaves. Unlike a slave, who was simply property to be bought and sold at will, the serf could not be parted from either his or her family or land. If the serf's lord transferred possession of the manor to another nobleman, the serf simply had another lord. In varying degrees, however, obligations were placed on the serfs that were sometimes very onerous and from which there was often no escape. Usually, they were far from being free. The lord lived off the labor of the serfs who farmed his fields and paid taxes in kind and money according to the custom of the manor. Similarly, the lord gave protection, supervision, and administration of justice according to the custom of the manor. It must be added that although the system did rest on reciprocal obligations, the concentration of economic and political power in the hands of the lord led to a system in which, by any standard, the serf was exploited in the extreme.