328 economy: Europe was taxed Every 15 years land was reappraised, and the tax on it was accordingly adjusted One of the most oppressive aspects of the tax was that if a landowner fled his or her land without paying the taxes owed, the neighbors of the land had to pay the taxes in addition to their own Further, the government imposed one tax on all the land in a village, including all farmlands All residents, rich or poor, were responsible for paying the tax, called the annona To avoid the annona, many freemen abandoned their farms to find work in cities, leaving much arable land uncultivated The imperial government aggravated the problem with pronoia, a practice used in the early years of the empire but mostly set aside until the 1100s Pronoia was a kind of land grant that freed people who had done service to the empire from paying taxes on their land during their lifetimes These privileged people often bought land to add to their holdings, tax free In 1261 the pronoia was made hereditary, taking land permanently out of taxation and increasing taxes for everyone else Annona and pronoia badly damaged the farming industry and, combined with trade concessions to Italian city-states, brought the empire’s economy near collapse Lacking sufficient funds in its coffers, the Byzantine Empire found it hard to prepare and provision the armies it needed to keep the Turks at bay Italian City-States The politics of Italy for most of the medieval era was chaotic, with invasions by Germanic, Byzantine, and Muslim armies as well as frequent wars among the Italians themselves disrupting economic life But Italy had three important economic advantages: It was located in the middle of the northern Mediterranean Sea and therefore in the middle of trade by water to both the East and West, it was the southern terminus for much of the trade from northern Europe, and its cities, even though badly depleted of their populations, retained some of the organization of ancient Roman times, helping them to control aspects of their economies By the 12th century cities in Italy were emerging as significant economic centers; one of the most important was Venice In 425 the Huns had sacked the city of Aquileia, an important glassmaking center Its people fled to islands in a lagoon, where they founded Venice Glass manufacturing became an important source of income for the city, helping its economy thrive while most of Italy suffered from a severe economic downturn At least two important factors led to Venice’s rise to power First, its laws forbade any citizen to own estates outside the city, cutting down opportunities to build farming estates and focusing the attention of citizens on trade as their primary source of income Second, Venice’s location in the northeast of Italy was ideal for trade with the Byzan- tine Empire, of which it became a part The traders of Venice were able to broker special deals with the Byzantine Empire that lowered their tariffs for moving goods into and through the empire In addition, in the 1260s Venice received special trade concessions from the Byzantine Empire as a reward for its aiding the empire in a war against its northern neighbors The result of these concessions was that Venice was able to draw trade, and therefore income, away from other parts of the empire, contributing to the significant economic decline that resulted in the empire’s death Venice also contributed to the eventual downfall of the Byzantine Empire by making deals with the Arabs that strengthened Arab armies During the medieval era Italian merchants extended their trade to China and deep into northern Africa The gold they brought north from Mali in Africa helped relieve a shortage of gold in Europe, which in turn made Italy an essential part of the overall European economy At the same time that trade was booming, Italian agriculture became productive enough that farmers could grow cash crops—that is, crops farmers grew solely to sell for money, not to contribute in any way to the farmers’ subsistence Thus both in urban areas and rural areas, cash was increasingly available for investing in economic endeavors such as building windmills to process grain and ships to carry goods to faraway lands To manage the cash that could be invested, Italian citystates invented the basics of modern banking It was probably Venice that developed the first modern-style banks Moneychangers had been around for centuries They exchanged one form of currency for another This meant that they were usually found in cities that saw a great deal of trade with foreign countries In the 13th century some moneychangers took the next step in their work: They began accepting cash on which they paid interest Then they invested the cash in business enterprises, hoping to realize profits after paying the interest they owed Particularly in Venice, Genoa, Florence, and Pisa, trade economies were booming, offering numerous opportunities for investment that resulted in financial gains With the large pools of money they amassed, cities financed armies and navies to project their authority across land and sea and invested in foreign economies to give them influence beyond the borders of Italy Further, the newly wealthy families of Italy believed they should help their people regain the glory of ancient Rome, as they imagined it to have been Thus the Italian city-states financed the Renaissance, giving employment to authors, artists, and architects and encouraging the boom in learning and the arts that would transform the culture of Europe Economics of the Church When the emperor Constantine the Great (r 306–37) made Christianity the official religion of the Roman Empire, the