Knitting: a brief history
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In Europe in the high Middle Ages, knitting was a new and exciting art. It was probably first invented in the Islamic countries around the Mediterranean, and may have penetrated Europe by way of either imported products or the arrival of trained craftsmen. The earliest surviving pieces in the Islamic countries probably date to the 9th to 11th centuries (800s to 1000s), and in Europe to the late 13th and 14th (late 1200s and 1300s).
At first, knitting was largely a commercial craft done by professionals, who made mostly caps, stockings, carpets, and purses, in wool or fine silk. The idea of a "sweater" or knitted upper-body garment doesn't seem to appear until the 17th century, and it didn't become a common, ordinary garment until the early 20th. Lower-class and probably middle-class people also knitted caps and stockings in wool for sale, but knitting doesn't seem to have become a leisure-time recreation until well after 1600 (and perhaps not really till the 1800s).
The earliest pieces of knitting that survive are vivid multi-color designs, reminiscent of Oriental rugs or woven brocades. Most or all of them seem to have been knitted "in the round" -- several show the unmistakable "jog" in the pattern where a new round starts.
Back-and-forth knitting, the most common modern style, seems to be mostly a 20th-century phenomenon, started by designers who envisioned knitting flat pieces to the same shapes as cut pieces of cloth, then sewing them together to make a garment.
Circular needles are also a modern invention (and one I'm thankful for); I think the first ones date to about the 1930s. Before that, items were knitted in circular fashion on four or more double-pointed needles. If the piece got too large in diameter, the knitter simply added more needles -- eight ten, twelve -- to accommodate all the stitches.
We don't have a lot of information about what knitting needles were made of, since very few have been identified. Almost all of our knowledge about early knitting comes from surviving scraps of knitted fabric. Needles of bone, perhaps wood, and stiff metal wire for the smaller sizes seem likely.
STITCHES & TECHNIQUES
Early pieces all seem to have been done using just the knit stitch, which of course produces a "stockinette" pattern when worked in the round. A tubular piece was usually closed at the end by folding the piece flat and casting off the last rows on both sides together.
The first definite purl stitches found in a surviving piece of knitting, where they are used to form decorative patterns, date to about 1562, from the burial of Eleanora de Toledo, wife of Cosimo di Medici. Several people have published patterns that are adaptations of the red silk stockings she was buried in, although some have pattern inaccuracies, and most are knitted at a coarser gauge than the originals and use a modern heel turning. (The original gauge is about 22 sts/inch.)
The original stockings are also the first surviving pieces that show eyelets (yarn over, knit 2 together). Early purses apparently had their drawstrings just threaded in and out right through the top of the knitted fabric, with no special preparation.
There are not a lot of good books out there on historical knitting yet, and unfortunately there are a few pieces that are often cited, but in my opinion don't have the kind of solid information I'd like to see.
The outstanding GOOD book on the subject is Richard Rutt's A History of Hand Knitting (Interweave Press, 1987, reprinted 2003). In my not-so-humble opinion, the world of knitting history will be forever divided into two eras, B.R. (Before Rutt) and A.R. (After Rutt).
The book is a bit disorganized in places, since it first covers knitting history chronologically and then regionally, but the scholarship is excellent, many myths are busted, there are lots of good pictures, and the author not only gives you his conclusions but explains how he came to them.
For Islamic knitting especially, I also recommend -- with the caveat that almost everything in it is post-1600 -- Patricia Gibson-Roberts's Ethnic Socks & Stockings: A compendium of Eastern design & technique . (A Knitter's Magazine Book, 1995, XRX Inc., ISBN 0-9646391-0-6.) This gives detailed analysis of construction and design techniques of 26 examples from Bulgaria, Iran, Turkey etc., mostly 19th- and 20th-century except for two Egyptian stockings from the 12th or 13th century. Very helpful for cast-on, heel, and color techniques.
If you want to see examples of the original Islamic pieces, Paul André's Tissus d'Égypte: Témoins du monde arabe has about a dozen of them pictured, most in color. (Éditions de l Albaron, Société Présence du Livre, 1993, ISBN 2-908-528-525.) The book is in French, from a 1993-4 exhibition of the Bouvier Collection of Arabic textiles, now in Qatar.
A few Islamic pieces, and several European pieces from before 1600, are also pictured or charted in Rutt.
Historical knitting is more likely to be discussed by those interested in historical needlework than those whose focus is modern knitting. There is a historic knitting mailing list at Yahoo!groups, and it has over 1,000 people interested in one or another aspect of knitting before 1950. It's a good place to ask questions, and anyone interested is welcome.