Money lay in a potentially awkward relationship to Christendom. A monetary system placed value on precious metals, whereas Christendom’s belief-community was built around worth expressed as orthodoxy, genealogy, inheritance and knowledge. That awkwardness was mostly, however, unrealized. Money was not used in a lot of exchange (i.e. the economy was only partially monetized). In addition, money had a habit of turning into wealth of all sorts – noble patrimony, ecclesiastical benefice, royal office, peasant dues – thereby aligning itself with traditional values and established power structures. Scholastic theologians offered explanations for how, within reason, money could be squared with Christian beliefs. Yet something changed in the sixteenth and first half of the seventeenth centuries. Silver became available in unprecedented quantities. The prominence of money sustained a virtual community, a republic which traded in precious metals, held together by mutual bonds of credit and trust. Europe’s overseas merchant empires were created. Some people grew rich and others poor. Crucially Europe’s states benefited from the power that flowed from silver, giving them resources and stimulating their competitive energies to engage in destructive conflict with one another. Money was the dissolvent of Christendom. Aligning money with Christian values began from the notion that precious metal was part of God’s cornucopia, grown on earth by the influence of planets. In contemporary alchemical understanding, metals were represented by their signs (gold by the sun, silver by the moon, copper by Venus, and so on) and placed on earth by God’s beneficence for mankind.
Lucas Gassel was a Flemish painter and Breughel’s contemporary. In 1544 he signed a painting known as Coppermine, although it is probably the production of cast-iron in nearby Liège that is its subject. On the hillside is a polluted industrial landscape – mine-workings, wagon railways, adits and winding gear. In the foreground, ore is being raked and transported in wheelbarrows. A worker struggles to carry a crucible on his back, while another nearby hammers a casting out of its mould. Prominently depicted is the water-powered blast furnace that made it all possible. In the midst of the scene, a physician is pointing at a bowl of vomit from a worker suffering from exposure to toxicity. Meanwhile, a woman dressed in red carries a pitcher of wine, her demeanour suggesting that she provides more than liquid refreshment to the workers. Set against this scene, on an adjacent hillside the rural order remains intact. Gassel presents a Manichean world of ambiguous values.
Such ambivalence was common. The mining engineer Agricola (Georg Bauer) believed that mineral resources were part of God’s blessings: ‘in fact, one mine is often more beneficial to us than many fields’. Mining was more risky but it was more productive. You had to take greater risks and it polluted the atmosphere. But that mostly occurred in ‘otherwise unproductive [mountains], and in valleys invested in gloom’, doing ‘slight damage to the fields or none at all’. However, abundance came with a price tag. The more there was of something, the less it was worth. That challenged notions of an inherent value in nature as well as a just price for commodities. It was a ‘paradox’, understood in this period as a way of expounding views that were contrary to those of the common multitude. To the unorthodox potter Bernard Palissy the industrial production of glass buttons or cheap wood-block devotional prints inevitably made it harder for skilled artisans to make a living because they flooded the market. If alchemists were successful in turning base metal into gold ‘there would be such a great quantity of gold that people would scorn it to the point that no one would give bread or wine in exchange for it’.
For Palissy value came from artifice – from the hands of a skilled potter like himself – rather than nature. His contemporary Blaise de Vigenère replicated scholastic arguments against usury, saying that objects like metals were ‘sterile’ since they ‘produce nothing’ by themselves. Moralists regarded subterranean treasure as encouraging avarice and cupidity through materiality, a quest for novelty and a worship of fashion. Agricola thought this was beside the point. Subterranean treasure was essential: ‘if we remove metals from the service of man, all methods of protecting and sustaining health and more carefully preserving the course of life are done away with. If there were no metals, men would pass a horrible and wretched existence in the midst of wild beasts; they would return to the acorns and fruits and berries of the forest . . .’ The mining of alum, essential to the dyeing of cloth, substantiated his point. Supplies came from Phocea (inland from the gulf of Smyrna) until the Ottomans cut them off in the 1450s. In 1460, however, rich deposits which could be open-cast mined were discovered at Tolfa, north of Rome. The papacy greeted the discovery as providential and declared that the proceeds should be devoted to Crusade. In reality, they swelled the papal treasury and enriched the merchant bankers (the Medici; then, after 1520, Agostino Chigi), who handled the monopoly. Chigi employed 700 workers in the mine, built a village for them (Allumiere), and purchased a port from Siena to manage the exports. He also bankrolled the elections of Popes Julius II and Leo X and lent the money for their military campaigns. Merchant capitalists needed no lessons in wealth accumulation, enterprise management or protecting their investment by political means, but their outlook was opportunistic and short-term.
Around the Meuse valley, coal mining grew fourfold between 1500 and 1650. Slag-heaps rivalled church steeples. By 1600, ‘sea-coals’ were shipped from Newcastle to London and to continental ports in substantial quantities. Copper, tin, lead, arsenic, sulphur and mercury were mined and shipped in hitherto undreamed-of quantities. The search for raw materials was driven by the demand from more distant markets, and gold and silver were the transforming treasure of this period.
GOLD AND SILVER
It is difficult to overestimate the mystique attached to these substances. Gold thread was woven into cloth and tapestry giving them iridescence when caught in the light. Gold and silver animated statues and paintings. Gold and silver regalia, jewellery and tableware were statements about the innate virtues of aristocracy. The search for precious metals drove Europe’s overseas expansion. Jacques Cartier set out on his first expedition in 1534, as Columbus had done a generation before, with the aim of ‘discovering certain islands and lands where it is said that a great quantity of gold and other rich things might be discovered’. Martin Frobisher’s voyage to Newfoundland in 1576–8 was in search of precious metals. Sir Walter Raleigh understood that Philip II’s Spanish empire was not based on ‘the trade of sacks of Seville oranges . . . It is [with] his Indian Gold that he endangereth and disturbeth all the nations of Europe.’
In addition, gold and silver were money. Various coins were produced in local mints, franchised out to local enterprise. France had around twenty mints, Castile at least six. Almost every Italian principality and many German cities minted their own coins. Production involved striking them out manually, using a hammer and hand-held dies. The resulting coins had irregular edges, and their weight and thickness varied considerably from mint to mint. The possibilities for fraud through ‘sweating’ some of the metal off the coin or ‘clipping’ the edges were considerable. Even money-changers had difficulty in detecting variations in coinage alloy and weight. The Paris mint experimented with a rolling mill and a cutting press to add a milled edge but the invention was wasteful and expensive to install. Although its virtues as a means of preventing fraud were discussed, no European currency was milled before 1650.
Money based on more than one metal was complicated, and sixteenth-century Europe relied on three: gold, silver and billon. The value of coins was determined not just by their face value but by their weight and fineness. Billon coins were the least valuable, consisting of small amounts of silver, alloyed with less valuable metal (mainly copper) – in practice making them impossible to value intrinsically. Gold coins were the most valuable and used rarely. The majority of Europeans never spent a gold coin in their lives – one Venetian ducat purchased over 600 eggs or 240 herrings at the Antwerp market in the 1520s. They were coins that were easier to test for weight and fineness and used by bankers, courtiers and the wealthy. They were also symbols of power. In the early sixteenth century, Milan and Naples put portraits of their rulers on their coins, imitating classical precedents and turning coins into political advertisements. The French king Henry II allowed himself to be presented wearing the laurels of a conquering emperor on a teston, the silver coin whose name (from testa meaning ‘head’) reflected what was novel about it.
Silver coins, by contrast, were a common transaction medium. The expansion in silver coinage stimulated Europe’s monetization. Silver testoons, half-crowns, angels and crowns (the English silver coins up to the coinage reform of 1551), shillings, half-crowns and crowns (thereafter), Spanish réales (containing 3.19 grams of fine silver) and Dutch stuiver (containing .94 grams of fine silver) survive plentifully in coin collections. More prestigious were the ‘maxi-silver’ coins of the period, the heavier réales de a ocho (‘pieces of eight’, eight times heavier than a réale), or the silver Guldiner from central Europe which became the model for the Joachimstaler (28.7 grams of fine silver) – and, much later, the young American republic for its silver dollars (Talers).
The coin-producing mints functioned at the behest of bankers, money-changers and merchants who brought the metal to them. The mints then struck the coins, deducting operating costs and seigniorage, the state tax imposed for the privilege of operating a mint. Although the authorities monitored the quality of coins, the marketplace determined the quantity struck and in what metal. Providing an adequate circulating medium, especially for smaller-scale transactions, was particularly problematic. Billon coinage was vulnerable to being melted down for its silver content, especially in times of monetary instability and inflation. The ‘problem with small change’ in this period was that there was never enough of it, its quality was suspect, and it was not a profitable commodity for the mints to produce. There was a mass of blancas (Castilian copper coins containing only 7 grams of silver) of dubious worth in the Spanish peninsula. Milanese terline and sesine (nominally worth 3 pence and 6 pence) settled everyday transactions in northern Italy. French liards (farthings), deniers (pennies) and douzains (12 pence) or English groats (4 pence) paid a toll, bought a loaf or were left in a poor-box. But, like inferior wine, they did not travel well. Even the finest coins were alloyed with copper to harden the malleable precious metal. English ‘sterling’ silver, for example, had 7.5 per cent copper content in this period, the French equivalent (argent-le-roy) 4.17 per cent. Impecunious princes were tempted to increase the profits from the mints by adding more of this base metal alloy and reducing the silver (known as ‘debasement’). Alternatively, they could decrease the weight of the coin itself, thus minting more coins of the same ‘face’ value from the ‘pound’ (or marc) of fine silver or gold.
Public authorities provided a way of accounting for differing metals and coins of differing weights and fineness. They were known as ‘moneys of account’ and they were used for accounting purposes in all sorts of transactions. They represented a stable measure of value by which one set of coins could be compared with another. Throughout Italy, for example, all accounting was in lire, soldi and denari. Only the last unit corresponded to an actual coin. The others were imaginary units, of which there were 20 soldi or 240 denari to the lira (or notional ‘pound’ weight of coin). Similar moneys of account existed everywhere in Europe – the maravedí in Spain, the livre tournois in France, the Dutch gulden and the pound sterling in England, for example. Exchange rates existed between the physical coins and the moneys of account. Those exchange rates fluctuated in respect of the individual coins in question and in the differential value of one money of account in terms of another. The authorities set these exchange rates, which were then advertised at the mints as the purchase price for the bullion and coins presented by merchants. But the latter had the final say because if the rate was not realistic they refused to do business with the mints and traded at unofficial rates. Then, as now, there were only a small number of people who knew how the bullion and money markets worked, and an even smaller minority, clustered in Europe’s emerging financial centres, who knew how to play them to their best advantage.
Europe’s precious metal stocks were undergoing two transformations. First, in the 1470s, the Portuguese established their presence on the West African Guinea coast. In 1481, a fleet of eleven ships arrived and, in a matter of weeks, built the fortress at São Jorge da Mina (now Elmina, Ghana), at which they traded for ‘Sudanese’ gold which West Africans extracted from the Senegal, Niger and Volta river basins and carried to the coast. In 1509, the Guinea Office was founded to regulate the trade; from their account books we can determine the business’s scale (roughly 0.77 tons per annum between 1500 and 1520, the height of the trade). Then, new supplies of gold opened up in the American colonies. In under a generation, the Antilles were drained of the gold that was panned out of the river silt. By 1550, 64.4 tons of gold had been unloaded at Seville from New World sources, or the equivalent of 708.5 tons of silver at the going rate of conversion.
The impact of that substantial blood transfusion for Europe’s metal-starved monetary economy was less than it might seem. The imports from West Africa may have merely diverted gold that would have otherwise arrived in Europe by caravan across the Sahara to the ports of the Mediterranean. In addition, the Portuguese used some of it to underwrite their trade with India and Indonesia, for which it was an essential element. There was, however, a second, coterminous change in Europe’s supplies of precious metals – a bonanza in silver- and copper-mining in central Europe – which had begun at the same time (the 1460s) and reached its peak in the 1540s. In Thuringia, Bohemia, Hungary and the Tyrol copper and silver deposits, long known to exist, became economically feasible to extract thanks to two related technological innovations, whose implementation was in response to the rising commodity value of silver.
The first was a chemical process which used lead in the ore-smelting to separate out silver from copper. The second was drainage mechanisms, harnessing water and horse power for more efficient pumps to drain deep mines. Production peaked in the 1530s at around 88.18 tons of silver per annum. Eisleben, Annaberg, Marienberg (Saxony), Joachimsthal and Kutná Hora became silver-rush towns. The boom made the fortunes of the Fugger family from Augsburg. The Lutheran Reformation was cradled where Europe’s boom was most raw.
SILVER, TRADE AND WAR
Silver was complicated and expensive to mine and also heavy to transport. These obstacles explain why there were virtually no silver imports from the New World before 1530. Thereafter, however, it was a different story. After the Spanish implantation in southern Mexico in 1521, European expeditions ventured into the northern Chichimeca. On one of them in 1546 natives brought its leader (Juan de Tolosa, a Basque noble) pieces of local silver ore as a gift. That same year, a small mining settlement was founded over 8,000 feet above sea level at Zacatecas. Insensitive of local customs, the prospectors provoked a frontier war with the Zacatecos and Guachichile Indians in 1550. Prospectors found more around Guanajuato and Pachuca. Intrigued by the problem of decreasing silver yields from the ores, a Spanish merchant, Bartolomé de Medina, brought new smelting methods from Spain (their origins probably lay in Germany) in 1554. These involved the construction of a flat patio in which the ore was finely crushed and then mixed with mercury and a salt-water solution. The resulting slimy mixture was left in the sun for several weeks until the silver had amalgamated with the mercury. Mining and extracting silver in Mexico depended on imported European materials, skills and equipment. There were iron and steel tools, lamps and oil, crushing mills and horses. The mercury was brought over in leather bags from Almadén in southern Spain, where the Fuggers held the contract for its production from 1563 to 1645.
Meanwhile, another bonanza began in the Spanish settlement of Upper Peru (now Bolivia), 400 miles inland from the Pacific Ocean. Silver ore was discovered in the Cerro Rico (‘Rich Mountain’, as it now became known) over 13,000 feet in the Andes above the town of Potosí, in 1546. When the surface ores became exhausted in the late 1550s, the Spaniards turned to lower-grade ores with the patio process. In 1572 the first of over twenty artificial reservoirs was constructed in the hills around, storing millions of gallons of water to power hydraulic hammers for crushing the ore. By 1600, there were around 125 ore treatment works and the town had grown to over 100,000 inhabitants. No other mountain produced such fabulous wealth. There were 15,000 mineworkers in Mexico and Peru by 1570 – and three times that number were involved in the operation as muleteers, carters, salt producers, etc. The death-toll among miners and those working with lethal mercury was grim. In the period of peak silver production in central and southern America from 1590 to 1620, official annual production was at least 7 million ounces (220 metric tons), but there was substantial under-registration – perhaps by as much as two thirds. Contemporary seventeenth-century Dutch gazettes published figures of silver imports from Spanish America that cast doubt on the official ones, so much so that the apparent decline in production after about 1620 which appears in the official figures of what was received in Seville may not, in fact, reflect a weakening of silver imports into Europe, as was once thought. In any case, by 1600 around a quarter of Potosí’s output was probably traversing the Andes to the Río de la Plata and then to Brazil, Lisbon and the European market. Other large amounts were traded across the Pacific to Manila and thence to China. One of the first results of Europe’s overseas expansion was that Europeans became the dominant force in the global trade in silver.
The primary European beneficiary of this speculative operation was the Spanish monarchy. It contracted for the supplies of mercury that were shipped across the Atlantic, and profited from it. It collected a tax on each bar of silver produced (10 per cent in Mexico, 20 per cent in Peru) and charged a handling fee. There were additional duties collected at the colonial ports as it was transported, including when it arrived and was accounted for at the Colonial Office in Seville, and when it was exported from there to elsewhere in Europe. The growth of royal receipts enabled Charles V to fund his military campaigns in Italy, North Africa and the Mediterranean, Germany and Flanders. Charles V’s empire worked on the basis of contracts (asientos) with suppliers. They furnished everything from mercury, borrowing (asientos de dineros), down to all the supplies for military forces. The essential task of the Castilian treasury (Hacienda) was to match receipts to expenditures when the former were irregular and the latter immediate and imperative. In reality, the monarchy treated silver like a crop from a domain, one which could be harvested as and when it required. In times of difficulty, it seized privately owned silver on its arrival in Seville, compelling the owners to accept interest-bearing bonds in return (juros). It anticipated the receipts on its silver revenues by converting them into juros and, since they paid attractive rates of interest (5–7 per cent), there was no shortage of takers. When it could no longer honour its asientos, they too were converted into longer-term juros. The borrowing capacity of Castile’s treasury expanded with the influx of precious metals. Spanish Habsburg treasurers could rely not merely on Spanish merchant bankers but on others in Charles V’s empire in Europe (the Welser and Fugger from Augsburg, the Schetz from Antwerp, among others). Then, when the monarchy defaulted on its obligations and those banking houses suffered, merchant bankers from Genoa and Cremona in Spanish-influenced northern Italy took their place (among them the Spínola, Grillo, Doria, Affaitadi).
This sophisticated state borrowing became vertiginous in the second half of the sixteenth century under Philip II. The military costs of the Spanish Habsburg’s dynastic empire grew larger, especially in the western Mediterranean and in Flanders. The sale of government bonds was on such a scale that it threatened the liquidity of the state. Although Philip II declared a state bankruptcy three times (1557, 1575 and 1596), he ensured that interest payments were maintained to juro-holders, a promise that could be honoured only on the strength of the buoyancy of silver receipts from the New World. Despite repeated financial crises and declining silver receipts in the reign of Philip IV (1621–65), the silver from the Americas remained the means by which the Spanish Habsburgs were able to retain sufficient liquidity to fight the Thirty Years War. If anything, New World silver’s significance increased as revenues elsewhere faltered. Madrid authorized public celebrations when news of the fleet’s arrival reached court. Five million ducados of additional bonds were issued between 1621 and 1640 to cover the sequestrations of Seville merchant assets when the silver convoys failed to make it.
One might imagine American silver acting like an adrenalin surge through Europe’s polities, driving their appetites for war. American precious metals not only sustained the ambitions of the Habsburg dynastic empire, but they also bankrolled those of its enemies. The processes of precious metal extraction and transportation were merchant-, not state-led. The shipowners, captains and merchants of Seville became the core of a powerful American colonial trading consulate (known as the consulado). Seville’s merchants acted as the tax-farmers for the duties on silver. They contracted to supply the convoy ships and pay the wages of their crews. They became indispensable in the handling of imported goods into Seville and out again to the Americas, estimating what could be profitably sold in the colonies. The wares were then purchased on credit from foreign merchants with factors in Seville. These debts were settled from the silver receipts once the convoy arrived from the New World. American silver flowed into Seville, but then immediately out again – to the French, English and Flemish merchants whose grain, textiles, salt and manufactured goods found their way to the markets of the New World. By the early seventeenth century, Seville merchants were acting as front-men (prestanombres) for their counterparts from northern Europe.
In addition, the trade and silver networks to and from the New World came to resemble the pipe-work of an old water-supply: it was full of leaks, and the greater the pressure, the higher the wastage. Dutch and English smugglers (‘interlopers’) established bases from which to trade directly with the Spanish New World and disrupt its convoys. Silver percolated overland from Peru to what is now Argentina, and from there onto the European market. Smuggling became almost institutionalized, a means by which the creaking Spanish monopoly was rendered tolerable to colonial America. That trend was intensified by the precious metal transfers that resulted from the Habsburg military forces in Flanders. The mercenaries from Spain, Italy, Germany and the Netherlands itself were armed, fed and clothed by means of contracts with suppliers, all of which were honoured in New World silver (or gold that had been purchased with silver). The reality was that the silver diaspora to northwest Europe hastened that region’s monetization. It shifted the balance of Europe’s advanced North Italian–Rhineland axis northward. It furnished the wherewithal for Spain’s enemies who, by the close of the Thirty Years War, had brought it to its knees.
New World precious metals fed Europe’s growing military conflicts. They also had the potential to create social change by putting power in the hands of merchants. In certain places (the emerging Dutch Republic) that occurred. But that it did not do so on a wider scale was the consequence of European states investing so much of their monetarized wealth in conflict. The investment resulted in a socio-monetary transfer. Money became invested in something else: in military valour, in noble families and office-holding élites, and in the protection of religious orthodoxy. Silver went into the pockets of Spanish Habsburg generals and military contingents, and fed the lifestyles of its imperial administrators and their families, its diplomats and informants. Spanish élite society – its nobles and patricians, its ecclesiastical and charitable foundations – invested heavily in government bonds, the bond-holders providing an important element of political loyalty to the Habsburgs at difficult times. Similar processes of socio-monetary transfer were at work among Spain’s enemies too. In the state-like structure of the Dutch Republic, they resulted in the emergence of a patrician élite, ‘embarrassed’ by their riches in the sense that they did not want to flaunt them, devoted to another set of conservative values. In France, the emerging absolutist state became a powerful instrument for socio-monetary transfer, converting money into office-holding privilege and military service. The Bourbon monarchy legitimated the ostentatious display of wealth in buildings, apparel and aristocratic deportment of its nobilities, new and old.
TRADE AND CREDIT INFRASTRUCTURES
Some of the biggest transformations in Europe in this period were also the least publicized. Parts of western and central Europe grew financially more sophisticated. Attitudes to credit became more relaxed, and debt played a greater part in private and public life. Above all, the transactional costs of trade decreased. It became easier to shift goods, simpler to borrow money and cheaper to move it around. You could insure a ship and its cargo at major ports (1 per cent/month of the value of the ship and its cargo at Antwerp) and peacetime costs for doing so declined. Risks were reduced by information flows that were more broadly based and publicly available. By 1600, a merchant had access to published commodity prices and the exchange rates in many European trading centres. There was a ‘quiet revolution’ in interest rates. They fell wherever political conditions were stable enough to support the market. There were new financial instruments that enabled people to invest surplus wealth more broadly. Mercantile activity became more complex and diverse. Retailing, too, became more specialized, especially for luxury goods. In Europe’s major cities, there was a widening and deepening of consumption, supported by the development of distinctive retail space. This, in turn, meant a greater emphasis on the availability and delivery of goods to market and the credit relationships to match. Unpredictability – especially war and political instability – remained, however, the principal transactional cost.
It is difficult to document changing attitudes towards the lending and borrowing of money. Almost everyone needed a loan at some stage in their lives. Even in those places where the economy was not fully monetized, there was plenty of debt to be managed. Marriage portions created rural indebtedness, as did harvest failures. Trade recessions threw artisans out of work, placing burdens on local mechanisms for managing debt. Unpredicted risks generated mercantile debts of different sorts. In Rome, for example, about 6 per cent of the population found themselves imprisoned for debt in 1582 alone. Debt litigation dominated law cases in London in the century after 1550. The small-claims court in Venice (the Justicia Vecchia) saw many ordinary folk come before it to settle contested debts. Almost 40 per cent sued for not having been paid for work. Just over 20 per cent of cases involved retail debts, especially to vintners and apothecaries who allowed their customers to purchase on credit. A further 20 per cent related to debts for services of one kind of another. ‘When will you get rid of your debts?’ Pantagruel asked Panurge in Rabelais’s classic Gargantua and Pantagruel. ‘When hell freezes over, when the whole world is happy, and when you are your own inheritor,’ he replied.
The higher up you were socially, the more in debt you were likely to be. In Elizabethan England, the duke of Norfolk, the earls of Shrewsbury and Essex and other aristocrats regularly pledged their plate, jewels and occasional revenues to sustain their lifestyles. In 1642, the income of England’s peers has been estimated as about £730,000 – but their debts were double that figure. The palaces of Europe’s grandees were as much a tribute to their capacity for debt management as they were an acknowledgement of the importance of conspicuous consumption in upholding their social status. And they were led by Europe’s princes, more indebted by far than their predecessors.
Debt and credit were present in people’s lives because they had moral connotations. Bankruptcy was widely regarded as the consequence of fraud, and the volume of legislation about it seems to reflect its increasing incidence. Usury gave credit an even more ambivalent moral dimension. Everyone agreed that usury was a sin, and most people regarded it as a crime as well. They could not agree, however, on when it occurred. In canon and secular law, usury was defined as lending for a guaranteed return over and above the sum that you had lent out, and without risk to the lender. Humanists and theologians had begun to question that definition on both biblical and logical grounds. Should the Old Testament dispositions apply to Christians? If so, a sin was committed only where the action could be equated with an intention. In the case of an annuity (a sort of mortgage) on a property, for example, it could be argued that the money was actually buying the rights to the fruits produced by the money that had been borrowed. The annuity might look like a loan but it was the sale of a right, vested in land or assets whose values were real.
Typically these issues were discussed through the prism of religion, through which the real world was viewed, lived and judged. The debate cut across religious divisions with Protestant theologians as divided on the issue as their Catholic opponents. Luther tended to be conservative, suspicious of tendentious arguments about usury – he drew swords with the Catholic controversialist Johann Eck on it. But he accepted that there were circumstances when lending money at interest was legitimate (for example, in the case of student loans). Calvin was influenced by the clever French jurist Charles Dumoulin. The latter argued that usury should be judged by the circumstances in which money was lent, the question being the reasonableness of the amount of interest charged. There was nothing inherently wrong, he said, in lending at interest to people who would use the money productively. Calvin incorporated his views into a private letter in 1545, but asked its recipient not to let it circulate abroad.
Martin Bucer, the Protestant reformer from Strasbourg, found his views mocked in The Market, or Fayre of Usurers, a pamphlet published in England in 1550. It is presented as an imagined dialogue in which Pasquil and Usurer debate the issues, the latter (Bucer himself) offering to prove that usury was not necessarily a sin: ‘I speake not of very great usury, as thou thinkest, but of a reasonable and decent gayne.’ Pasquil’s reply reflected traditional thinking on these matters in this period. There are only two sorts of lending: that which is done ‘of Christian charitie’, freely and for God’s love, and that which is covetous. To charge interest on a loan was to commit theft. When it came to legislating on interest rates, these arguments had to be placed in the context of the world as it was. When the English Parliament did so in 1545, it allowed lending at up to 10 per cent. In the Dutch Republic, the state only controlled usury which was anti-social. But the Dutch Reformed Church decreed in 1581 that no money-lender (his servants and family included) should ever be admitted to the communion service until after they had publicly expressed their distaste for the banking profession.
The market for money was not fully in the open but it grew in complexity and sophistication. Annuities extended Europe’s credit lines. You could raise money on land by instituting a ‘perpetual’ (i.e. hereditable) mortgage on it. More attractive still were annuities on public revenues whereby a creditor provided a municipal or state government with a lump sum in return for a ‘perpetual’ annual payment or a ‘lifetime’ yearly sum. They were popular and suited both parties. In 1520 the papacy declared annuities exempt from usury laws and licit. That was prior to taking full advantage of them itself, as did many governments. By the first decade of the seventeenth century, the papal monarchy had 10 million scudi of outstanding annuity-based debts in various funds (monte), the annual interest payments of which absorbed about half its ordinary revenues. The city-state of Genoa had the equivalent of 391.65 tons of silver in outstanding annuities by 1600, a large charge on its modest resources.
In the Netherlands, the issuing of annuities opened the door to a financial revolution by which, first the cities of Holland (Amsterdam, Dordrecht, Gouda, Haarlem and Leiden) and then the province itself stood guarantor for the debts of its Habsburg overlords. That revolution redefined the relationship between ruler and ruled in the Netherlands and opened the door to the province’s financial independence which sustained it during the subsequent Dutch Revolt. By one estimate, the ordinary revenues of Castile (530 million maravedís in 1559) were carrying an annual 542.7 million maravedís in interest payments on juros at the time of Philip II’s bankruptcy in June 1557. Each bankruptcy resulted in an increased volume of juros as short-term debt was converted into long-term annuities as part of the settlement with creditors. With all the annual revenues available to the crown in Castile committed to discharging the interest payments on its juros, the only revenues available to it were the treasure from the Indies, occasional ecclesiastical subsidies and the grants every three years from the Castilian estates.
From 1522 onwards, the French monarchy also engaged in issuing annuities through the supposedly independent agency of the municipality of Paris (rentes sur l’hôtel de ville de Paris), serviced by interest payments on particular revenues. In the reign of Henry II (1547–59) about 6.8 million livres alone were sold. By 1600, they totalled 297 million livres, about fifteen times the annual crown revenues. The more rentes the French monarchy sold, the more frequently it did so at a discount, the greater the interest charges on crown revenues and therefore the arrears (in effect, a disguised bankruptcy). After the wars of the League, Henry IV’s finance minister Sully organized a selective default on interest payments. Those rentes which had been issued at a discount or during the Catholic League were unilaterally written off. After 1600, the issue in France was how, if at all, a sovereign king could be obliged to pay the debts he owed his subjects.
Those in cities who needed credit had a variety of professional and part-time pawn-brokers and money-lenders to whom they could turn. The growth in consumption increased the stock and range of goods to serve as deposit. In many places, goldsmiths, silversmiths and jewellers also acted as money-lenders. Outside the Italian peninsula, they became known as ‘lombards’ (reflected in the streets carrying that name) and, especially in Germany and eastern Europe, Jewish merchants offered a wide range of financial services. Increasingly, though, particularly in southern Europe, charitable institutions were established to keep the poor out of the hands of usurers. An outgrowth of movements for religious reform in the Italian peninsula, these pious foundations (Monti di Pietà) grew in scale and number as the century progressed. Most drew their capital from charitable donations, which sometimes determined that the sole function of the fund was to lend money to the poor at low rates of interest. The larger monti acquired impressive amounts of capital (well over half a million ducats at Rome, Verona or Turin) and offered deposit banking facilities. For reasons that are not entirely clear, poor-man’s banking like this spread only patchily north of the Alps. It certainly was not for want of trying on some people’s part. The English Parliament considered proposals in 1571 and the Flemish chronicler and entrepreneur Pieter van Oudegherste submitted a plan to Philip II in 1576 for banks and pawnshops throughout the Spanish empire. It never got off the ground, although there were some in Dutch towns – the most famous being the Amsterdam House of Lending (Huis van Lening), founded in 1614 – and rather more in the Spanish Netherlands after 1600.
Private deposit banks existed, too, run mainly by merchant bankers or their factors, their role confined to larger urban centres. Only very slowly did negotiable cheques (polizze) make their appearance in Italy in the 1570s, part of a limited development of giro-banks that would accept deposit transfers (girata). All these private banks generally worked on a fractional-reserve system of lending which ought to have guaranteed their stability. In fact, many of them failed, taking depositors’ savings with them and reinforcing the view that banks were simply ways of conning money out of gullible people.
Much more significant among mercantile élites was the widespread use of the bill of exchange. The latter was already an established instrument for enabling merchants to help one another remit funds at a distance. As it gained greater legal standing and market credibility, the bill of exchange became the means by which merchants transmitted funds from one currency to another, redeemed debts abroad and carried out trade. ‘One can no more trade without them,’ said an Antwerp merchant, ‘than sail without water.’ Shrewd merchants could make profits on the operation, since to transact bills of exchange took time, during which, if the exchange rate moved, one of the parties would realize a legitimate profit. Starting in common-law England but spreading through Europe, law courts accepted that bills of exchange could be reassigned and negotiated between different parties. That opened the door to merchants generating credit for themselves on a longer-term basis by re-scripting a bill back and forth, or trading it at various discounts. By 1650, the bill of exchange had become an essential part of a sophisticated system of multilateral commercial payments.
Trade and finance flourished on news, the ‘freshest advices’ from other trading centres being critical in making commercial decisions. The archives of Europe’s merchant élites are replete with newsletters and correspondence that mixed family gossip with commodity prices. The 16,000 newsletters for the years 1568 to 1605 in the archives of the Fugger family from Augsburg provide us with a glimpse of how one family with its finger on the pulse acquired its news. With factors based in commercial centres (Antwerp, Cologne, Venice and Rome) the manuscript newspapers provided a wide variety of news from across Europe as well as the New World, India and the Middle East. They supplied detailed accounts on matters ranging from kingly coronations to common street crimes. One issue includes the story of a debtor, playing the part of Christ in a pageant, who was arrested by his creditor, dressed up as Judas. In 1582, a sequence of newsletters was filled with descriptions of the fifty-one-day festival in Constantinople to celebrate the circumcision of the fifteen-year-old Mehmed, son of the reigning Sultan Murad. Commodity prices and exchange rates began to be regularly published, the earliest known examples being a glimpse of where Europe’s principal trading centres were by 1600.
By that date, these locations mostly also had an exchange, a building where merchants could trade yearlong, furnished with additional shop facilities. In Naples, the loggia was on the Piazza del Mercato. In Venice, its equivalent was on the Campo di Rialto, the heart of the city’s mercantile quarter. Hamburg’s 1558 exchange was modelled on that of Antwerp, which had opened its doors in 1531. Above the London exchange, constructed in 1569, were shops (some run by women). Shops coexisted with markets and fairs as part of the growing complexity of Europe’s retailing. London’s Cheapside was the city’s longest and widest thoroughfare in the sixteenth century as well as the heart of its market quarter. A food market ran along one half of the street while stationers and booksellers occupied the other half. Ground-floor shops in the buildings on the street were let out for rents. Thomas Platter, a medical student from Basel, window-gazed in 1599, marvelling at the ‘great treasures and vast amounts of money’ that he had seen in ‘The Naked Boy’, ‘The Frying Pan’ or ‘The Grasshopper’ (a selection of shop-names in Cheapside). Enclosed stores offered a theatrical retail experience. In Venice, the Fabbriche Nuove (1550–54) was a brand-new complex in the Rialto facing the Grand Canal. Small towns in northern Italy (Imola, Pomponesco, Carpi and Gazzuolo) still bear the imprint of central streets and squares, redesigned in this period and lined with shops. Book distribution illustrates broader trends. By 1600, printer-publishers had developed wholesaling techniques to bring their products to the market, involving advertisements, catalogues distributed at the international fairs, agents and stockists. Increasingly, however, book-sellers working from shops were the people who knew their local market best.
The word ‘capital’ in this period meant the funded wealth of a merchant or institution, although other terms were in more common parlance, meaning the same thing. Europe’s capitalism was not organized around the growth of financial structures (banks, letters of credit, etc.), industrial production and wage labour in this period. Credit, trade and transaction worked on personal agency, and Europe’s merchants were more inclined to invest in land, title, office or charitable enterprise than in industrial production. Their investments were therefore not fungible (not readily transferable into liquid wealth). Personal ties, the assessment of people’s credit-worthiness on an individual basis, were essential. Europe’s merchant firms were reticulations of family, with often ethnic or religious connections. These family firms provided a degree of stability to Europe’s commercial nexuses – although most of them were opportunistic, taking advantage of whatever trades seemed to offer the possibility of profits, and not outliving three generations.
Europe’s financial system prospered under a variety of circumstances. It did not require representative institutions, though stable states helped. It could survive governments not paying their debts, though their meddling with currencies through debasement could play havoc. It was not particularly price-sensitive to credit and it supplied ample opportunity for agents, factors and intermediaries to offer specialist services. By 1650, brokers were everywhere important, and as never before. With so many financiers and their agents, and such a lot of secrecy, there was fast practice; the set-up looked more secure than it was.
RIDING THE WAVE
Monetary inflation was a fact of life in the sixteenth and early seventeenth centuries. The average price of a setier (a sack of grain measuring 12 bushels) of best-quality wheat on the Paris market rose from just over a livre in 1500 to 4.15 in 1550, 8.65 in 1600 and 18 by 1650. On a yearly basis, that was modest. Cumulatively, it was the longest period of sustained and continuous inflation to that date. The phenomenon challenged Christendom’s notions of what constituted wealth and reward.
There was a lively debate in the sixteenth century about what caused the unparalleled ‘dearness’ of things. Sixteenth-century commentators made the connection between increasing monetary stocks and price rises, although they remained puzzled by the relationship between plenty and worth. The Polish astronomer Nicolaus Copernicus wrote extensively on the effects of the debasement of the country’s coinage, noting that ‘money can lose its value also through excessive abundance’. In his General History of the Indies (Historia General de las Indias, 1552), Francisco López de Gómara reckoned that the rising prices in America were ‘as a result of Incan wealth passing into Spanish hands’. The celebrated Augustinian professor at the University of Salamanca, Martín de Azpilcueta (called ‘Navarrus’ because he came from Navarre in the western Pyrenees), generalized that insight in his treatise on usury (1556): ‘Other things being equal, in countries where there is a great scarcity of money, all other saleable goods, and even the hands and labour of men, are given for far less money than where it is abundant.’ The problem, as he and his fellow professors of natural law and moral theology in Salamanca saw it, was how to reconcile these market forces with the imperatives of social justice, a fair price for goods and protecting the interests of the poor.
Was inflation caused by the imports of New World silver? The connection between recorded price rises and imports is not as close as was once thought. Inflation began in the sixteenth century before the imports started, and their under-recording post-1600 destabilizes the correlation later on. This does not disprove, however, the more general proposition, supported by sound economics, that inflation had a very great deal to do with changes in the money supply, which were massive. The relevant question becomes: what prevented these changes from creating runaway, rather than gradual, inflation? We can only reflect upon the remarkable and fortuitous conjunctures that allowed a significant proportion of Europe’s precious-metal windfalls to be siphoned off to stimulate trade with the Far East and with Russia. Without these safety valves, Europe’s ‘silver age’ would have quickly come to grief.
None of this, of course, was understood by Europe’s rulers. That much is evident from the coinage debasement operations carried out by various European princes, and which equally affected the money supply. The objective of a debasement was to reduce the weight of a coin or the amount of precious metal in it, and thus to increase the number of coins with a given face value that you could mint from a given amount of it. So alluring was the operation that it happened at regular intervals. The Burgundian-Habsburg administrations debased their silver coins in both fineness and weight twelve times between 1521 and 1644. The English coinage lost over 35 per cent of its silver content from c. 1520 to 1650, mostly in a decade of economic madness beginning late in the reign of Henry VIII and known as the ‘Great Debasement’ (1544–53). In France, successive debasements meant that the prevailing French silver coin in around 1650 (the écu blanc) contained less than half the silver of its equivalent in 1488. In German lands, mint-operators used their franchises to debase the coinage, creating a period of widespread popular hatred of the ‘counterfeits’ and ‘cheats’ (known as the Kipper- und Wipperzeit) that were widely believed to be behind it all, and which was believed to herald the coming of the End Time. Even the Spanish monarchy, which did not debase through the sixteenth century, resorted to a catastrophic debasement of small-value coins in 1607.
Debasement generated a contemporary debate all of its own. In England, Sir Thomas Smith, in his De Republica Anglorum (published in 1583, but written earlier), saw it as princely deception. Across the Channel, Jean Cherruyer (or Cherruyl), seigneur de Malestroit, a monetary specialist for the French crown, argued that, because of successive debasements, inflation was more ‘imaginary’ than real. It was a paradox (that is, a popular delusion) that goods had gone up in price. They had not. The same amount of silver still bought the same amount of grain, thanks to the effects of debasement. Two years later, he found his match in the up-and-coming French jurist Jean Bodin. His ‘Response’ to Malestroit’s ‘Paradox’ relied on empirical evidence to show that, contrary to what Malestroit asserted, monetary inflation had occurred on a large scale. Bodin was inclined to believe (at least in the second edition) that this was the result of American silver imports. He was even more insistent that it was a sign of tyranny when princes fiddled with currencies at the expense of the public weal. It would be better to have money that contained what it said on the coin by way of its precious metal content. Bodin understood that there was a fundamental relationship between coinage and good government, although in his lifetime the values of a commonwealth were beginning to be overlaid by the harsher and more authoritarian tones of obedience to the absolute will of a prince.
By the seventeenth century, mineral wealth was seen to be something of a poisoned chalice. ‘Columbus offered gold unto one of your Kings,’ wrote the English political thinker James Harrington, ‘through whose happy incredulity another prince hath drunk the poison, even unto the consumption of his own people.’ It was God himself, agreed the illustrious Spanish diplomat Diego de Saavedra Fajardo in his Political Maxims (1640), who had hidden precious metals in the ground precisely so that there would be no more of them used than was strictly required for commercial purposes. Unlimited wealth, such as that from the Mexican and Peruvian mines, had been ‘fool’s gold’. ‘Who would have believed,’ he continued, echoing a famous remark by Justus Lipsius, ‘that with the gold of that world this one would also be conquered?’
Underlying the debate about the worth of money, lay another, pursued by humanists on the basis of the ancients, about the proper relationship between business (negotium) and the quiet life (otium). Aristotle had taught that gathering wealth was a natural part of good housekeeping, but only so long as it was limited to the provision of necessities. In other circumstances, wealth corrupted those who accumulated it. However, some – the Dutch publicist Dirck Volckertszoon Coornhert, for example – argued that a merchant could be a good Christian by acquiring wealth in order to distribute it to good causes. In the seventeenth century, however, that debate went a stage further. French intellectuals in the 1630s and 40s ventured to argue that amour propre was a proper stimulus for moral behaviour, that friendship could be based on the pursuit of mutually shared but selfish interests, and that the pursuit of wealth for its own sake was not the slippery slope to corruption but in the interest of all. In the Netherlands, the Dutch jurist Hugo Grotius argued that the most fundamental law of nature was self-preservation, and that the next most natural human right was, therefore, self-interest. Pursuing self-interest (including the acquisition of personal wealth) was not, therefore, necessarily a bad thing. Not the mainstream, such ideas were nevertheless a sign of how far Europe by 1650 had come from the moral consensus which had dominated Christendom on the eve of the Reformation.
Thomas Hobbes, who had spent time in the company of French intellectuals, published his Leviathan in 1651. The title referred to the sea-monster, mentioned in the Bible and commonly taken as the hideous gatekeeper of Hell. In Hobbes’s account, the ‘Leviathan’ is a morally neutral sovereign, ruling over human individuals, each governed by their selfish appetites and desires. These latter are, says Hobbes, neither good nor evil ‘for these words . . . are ever used with relation to the person that useth them: there being nothing simply and absolutely so.’ In a state of nature, every man has a right to everything, ‘even to one another’s body’, which is why it was a competitive jungle in which the ‘life of man was solitary, poor, nasty, brutish and short’. In Hobbes’s formulation it was only the prudent pooling of self-interest which created the powers of the sovereign ruler, human beings agreeing to surrender some of their competitive instincts in order for the rule of law to frame a civil society. There was nothing, however, in Hobbes’s account which made the pursuit of wealth and profit inherently good or bad, beyond what the sovereign ruler dictated it to be, and contemporaries glimpsed within the pages of his book a political universe in which social morality had become what the prince said it was.