In the cultural tradition of the West, the rich are not considered the best part of society, the author concludes. From Venetian merchants and Florentine magnates to Elon Musk and Donald Trump; from Antwerp, which became the economic capital of Europe in the first half of the 16th century, to New York of the 21st century: in a series of eras, states and political systems, Alfani sees through the same distrust of the rich and still the same problems with determining the social role suitable for them. Whatever the rich do, it causes criticism. If they consume too demonstratively, it arouses social envy, if they begin to save, they become even richer and contribute to the emergence of rich dynasties, causing discussions about how their heirs have earned their privileged status. If they don't make donations, they are considered soulless stingy, if they do, they are suspected of striving to optimize taxes. If they go into politics, they raise fears of excessive influence on the political system, if they do not, they raise suspicions of indifference to the problems of society.
In the Middle Ages, the rich were advised not to look rich, excessive accumulation was considered sinful and even socially harmful. The French philosopher of the 14th century, Nicholas Orem, called on "democratic cities" to expel the rich to prevent them from gaining access to political institutions because in this case the rich would enjoy overwhelming political power, acting "like gods among people".
Over time, the attitude towards the "sinfulness of wealth" changed, and huge fortunes opened up access to power. From "sinners" the rich turned into sponsors of kings and even "saviors of last resort" like Cosimo Medici in Florence of the 15th century, who was recalled from exile to save his country from financial collapse, or banker John Pierpont Morgan, who led a group of financiers to combat the banking crisis in 1907 in the United States. Perhaps the fact that in these times of frequent crises, the super-rich no longer perceive themselves as a "private repository of money" to which the public can turn in case of urgent need, and state institutions do not really encourage them to do so, and causes protests like "Occupy Wall Street" because of suspicions of the usurpation of the authorities by the rich to strengthen their privileges. And more than six centuries after Orem, his idea was actually repeated by the influential French economist, the author of the bestseller "Capital in the XXI Century" Tom Piketty, who noted that excessive concentration of wealth may be incompatible with the functioning of democratic institutions. By the way, Piketty praised Alfani's "History of Wealth in the West" for "a deep look into the past and important lessons for the future". Alfani himself, however, tried to describe the "history of wealth" without any ideological framework. This book is not "against" the rich and not "for" them - it is "about them".
About how throughout history, under the influence of various factors from wars and pandemics to geographical discoveries and technological progress, the socio-economic landscape and the relative representation of the rich have changed, the criteria of wealth and the way to it have changed, as well as the privileges of the rich to use social, economic and political resources and their social roles.
Throughout history, the ability to manage money wisely has always opened up great opportunities for personal enrichment for those who had high special skills. Bankers, financiers and investors occupy a prominent place among the rich of any era. Sometimes they purposefully dealt exclusively with finance in a narrow sense, but often worked in capital-intensive sectors of the real economy, such as international trade.
Although the boundaries of spheres of activity are often blurred, let's focus on finance as a special way to wealth - because throughout history they have invariably been considered the most problematic occupation: in many cases, people who have chosen commerce and money management as such as their main activity have faced social contempt.
From the medieval condemnation of usury (which meant lending money in all forms) to the 19th century disgust for speculators and ruthless financiers, up to the Occupy Wall Street movement and other protests against the growing inequality arising from an overly financialised economy - the world of financiers has always been treated with some suspicion, including those people who needed their services most. In fact, in Western societies, the claims of bankers and financiers to wealth have always been considered less justified compared to the claims of the nobility, whose right was determined by origin in accordance with deeply rooted social and cultural norms, as well as formal legislation. The claims of rationalizers and entrepreneurs, able to fruitfully introduce innovations into the economy thanks to their intuition, were also considered more justified. Paradoxically, this attitude persists even in most modern legal systems, which have made the ownership of large financial assets less vulnerable, including through taxation.
But in other respects for example, when women had the opportunity to act relatively freely in those social areas where their ability to act was previously limited, or when there was a need to remove religious barriers that interfered with economic interactions finance has always been a surprisingly open world. We will try to understand all these eye-catching paradoxes.
Money trading in the Middle Ages and the New Age Towards the end of the XIV century, Francesco di Marco Datini, a famous Tuscan merchant, whose ascent to the top of European international trade we meet in Chapter 4, informed several business partners of his intention to become a banker. This decision caused considerable concern in Datini's inner circle: counterparts feared that he might lose his good name. In particular, a friend and companion of Domenico di Cambio wrote to him in August 1398:
I have to inform you about the rumors that reach me. Many people told me: "So, Francesco di Marco wants to lose the good name of the largest merchant in Florence, to become a money changer [chambiatore], and there is no one among the money changers who would not conclude loan surious contracts." In your defense, I replied that you want to become a greater merchant than ever, and that if you are going to establish a bank [banco], you are not doing it for the sake of usury. And I was answered: "People will say otherwise: they will say that he is a loan shark [chaorsino]!" And I answered them: "He wouldn't do it to become a loan shark, because he bequeaths everything he has to the poor." And another replied: "Don't hope that he will ever be considered a great merchant again, and with such a good name [buona fama] as before.
Datini did not heed the warnings and opened his banco with a junior companion. However, just a couple of years later, the bank closed due to the premature death of a companion. Apparently, Datini's reputation has not suffered any irreparable damage, and it is likely that by that time the great businessman had already realized what he was risking by entering the field of a financier.
However, the concern of his friends and partners clearly illustrates the general disapproval of banking and other financial activities deeply rooted in the Middle Ages.
It came from two sources: first, the desire to accumulate wealth was condemned as greed that is, it was a mortal sin. In this, bankers and financiers faced the same problem and the same psychological pressure as rich merchants.
Secondly, they were under constant suspicion of usury, since any form of interest on debts was considered usury according to a certain interpretation of the Bible, reinforced by scholastic theologians, especially Thomas Aquinas. Based on the statements of the classic of Greek philosophy Aristotle, he argued that money does not generate money (nummus non parit nummos).
It was not the profit from economic transactions in general that was suspected, but the possibility of making a profit from simply lending money: "usury takes place where there is no production or material processing of real goods". Unlike the accumulation of wealth, which was considered very reprehensible, but still not forbidden, usury was formally prohibited (primarily by the Church) or strictly regulated, at least theoretically, which created many problems in the functioning of the increasingly complicated mechanism of the economy. The problem was partially solved by tolerance of usury, if it was done by Jews, since they were not members of the Christian community.
But more importantly, interest-bearing lending was able to become part of the economy thanks to the prosperity of a number of practices, the counteraction to which turned out to be useless in the end, which also testified to the practical importance of such services. A typical example was the concealment of interest behind the exchange rate.
As a result, at the beginning of the 13th century, the English Cardinal Robert Curson, who for some time held the post of rector of the University of Paris, in the treatise De usura ("On usury") argued that it should be considered the greatest evil of our time along with heresy. This point of view was shared by many people, if we take into account the many official condemnations of this practice and the growing harshness of such statements from the middle of the XII to the middle of the XIII century.
On the other hand, the very heat of this condemnation probably reflects the increasing spread of the money trade, which developed simultaneously with the commercial revolution that began in the Middle Ages. Large-scale banking was not born as a result of the growth of the scale of small money changers, but was the result of the development of large commercial companies that were looking for a way to easily reinvest their huge profits.
Over time, theology had to adapt to the realities of economic life. This was reflected primarily in the gradual accumulation of "exclusions" from the ban on lending at interest, which is clearly seen in the canon law of the XII and XIII centuries.
One of the very first exceptions was the establishment of a distinction between private and public usury aimed at maintaining the wealth of institutions.
For example, religious institutions (monasteries, monastic orders, such as the Templars, who provided financial services to the King of France, etc.) were allowed to engage in usury and conclude mortgage agreements.
This was only the first step towards the final recognition that some services of this kind are socially useful, and therefore permissible, at least in some forms, and especially if they are provided by the right people, that is, respected professionals, and not "outright loan sarks" (usurarii manifesti) who shamelessly and publicly carry out these activities, serving mainly the middle and lower strata of society.
In fact, such rehabilitation was part of a more general cultural process that ended by the 15th century, when the rich and the super-rich finally received a meaningful role in society: they accumulate wealth for the common good so that in times of crisis society could use their personal resources through loans.
Whatever the theory, in practice banking services became a thriving business no later than the end of the 13th century, especially in Italy, which played a key role in the field of finance in Europe.
The main tool that allowed to overcome the ban on usury was a bill of exchange issued in one place, and paid not only in another place, but also in another currency.
Although most of the major bankers of the late Middle Ages were highly respected (otherwise they would not have been able to stay in the market), many figures in the financial sector were still burdened by suspicions of usury, as evidenced by the fears of Datini's friends, as well as the persistent prejudices and public disapproval faced by Jews, who in the collective European imagination were considered typical loan sharks.
Florence was undoubtedly one of the main financial centers of Europe at the earliest stages of development; continental financial markets were dominated by a group of three families in the late 13th and early 14th centuries - Bardi, Peruzzi and Acciaioli.
Each of these families began its activities in the field of international trade, and then switched to banking, where they all managed to achieve exceptional success and accumulate enormous wealth by the standards of that time. Their operations were so large-scale and complex that, according to the definition of historian Edwin S. Hunt, they became the first "super companies" in Europe. To meet the financial needs of the princes of the whole continent, they often acted as a consortium.
It was in this risky business of lending to rulers that they eventually collapsed: if the Pope turned out to be a quite reliable borrower (and was also extremely useful in protecting bankers from any accusations of usury), this could not be said about the kings of France, Naples and other countries, especially England.
The Tuscan consortium initially financed the sovereigns of both England and France, but when the Hundred Years' War boiled (1337-1453), it had to choose to serve one; the consortium sided with Edward III of England not only because he was the largest borrower, but also to protect its own interests in order to preserve access to English wool, the raw material necessary for the consortium's activities in textile production.
This led to the loss of most of the French business and problems with the return of the amounts lent to the King of France. Edward III kindly offered to compensate for the losses, but this never happened, and a few years later the same king forced Bardi and Peruzzi to agree to a major reduction in their debt. The losses incurred as a result of deals with England were added to the losses suffered in the affairs with France and were aggravated by internal problems after the defeat of Florence in 1341 in an expensive war with a strong rival - Pisa; for control of the small town of Lucca.
All three families contributed to the financing of this campaign, and they had almost no hope of returning the investment in full. In the ensuing uncertainty, many depositors, especially foreign ones, began to withdraw their funds. As a result, in the early 1340s, all three banks went bankrupt and were liquidated. All this, along with the subsequent damage from the plague epidemic of 1348, led to the restructuring of the banking sector of Tuscany and the creation of conditions conducive to the rise of the Medici family.
The history of the Medici family serves as a perfect example of how to achieve both great wealth and political power through mainly financial activities.
The origin of the family is not fully clarified, but it is known that in the 13th century they were apparently engaged in textile trade, as well as activities related to their agricultural land in the Mugello area north of Florence.
There is no doubt that initially they had nothing to do with either large-scale banking or international finance. The first members of the family specializing in this field started as companions of their distant relative Vieri di Cambio, who had been considered one of the leading Florentine bankers since the 1370s. Francesco di Bicci de Medici was admitted to the firm in 1382 as a junior companion to Vieri. He proved to be very capable and after eight years of work rose to the position of senior companion. Bank Vieri and Francesco had branches in other cities of Italy, including Rome; the Roman branch since 1385 was headed by Giovanni, Francesco's younger brother. It was he who founded the Banco de' Medici in Florence around 1397 and joined the exchanger's guild (Arte del Cambio). Although by Tuscan standards the Medici were newcomers to the banking business, their company quickly achieved success. At first, the growth was slow but confident, as Giovanni was distinguished by caution undoubtedly a valuable quality in such a turbulent era full of epidemics and civil turmoil (the established social order was violated in 1378 by the uprising of chompi - wool combers and textile workers dissatisfied with the system of guilds).
When Giovanni retired from business in 1420, the initial capital of the bank of 10,000 florins managed to make a profit of more than 151,000 florins, three quarters of which were owed to Giovanni (after his death in 1429, the heirs got property worth almost 180,000 florins). Giovanni's characteristic desire not to interfere in politics, which he adhered to all his life, but not peculiar to some of his descendants, apparently influenced his son Cosimo, who eventually became the actual, but at the same time behind-the-scenes ruler of Florence and made every effort to remain in the shadows.
Cosimo de Medici (or Cosimo the Elder) was prepared for the position of the future head of the family bank from a young age, and his personal life was subordinated to the needs of the company. For these reasons, he married Countess de Bardy, the niece of one of his father's younger companions. The companion came from a Florentine family belonging to an old rich aristocracy, although significantly impoverished. This was only the beginning: over time, Cosimo entered into numerous and complex ties with the Florentine economic and political elite, united by kinship ties. This contributed to his elevation not only as an entrepreneur, but also as a politician. As for entrepreneurship, he brought the profits of the Medici Bank to an unprecedented level. In 1420-1435, the bank made a profit of more than 186,000 florins, that is, about 12,000 per year - almost twice the annual profit typical of Giovanni's time. In the following years, profit increased even more, so that in 1435-1450 it amounted to a total of 291,000 florins - more than 19,000 per year. Of this profit, two-thirds went to Cosimo and his brother Lorenzo, whose share has increased to three quarters since 1443.
By 1457, the Cosimo family was the richest in Florence (therefor, one of the richest in Europe). Judging by the catasto (property tax register) compiled that year, it was four times richer than the second richest family. Cosimo's father, Giovanni di Bicci, has never risen above the third place in this ranking. Cosimo owed much of his property to the Roman branch, which benefited from the privileged relations with the Pope, which lasted for most of the 15th century, since the manager of this branch also usually served as the general Treasurer at the papal court. Medici's business relations with the Church went much further, as many branches of the bank regularly provided loans to cardinals, bishops and other high-ranking prelates. As historian Raymond de Rover noted, the advantage for the Medici was the fact that clergymen were usually more reliable debtors than the laity, as they were more afraid of the threat of excommunication from the Church for debts, which the Medici constantly resorted to, with the support of the pope, who was also constantly in debt to them.
As for politics, Cosimo was initially considered a supporter of "new people", exclusively very rich, seeking to occupy a more prominent position in the city. Because of this, he was considered a threat to the established order in the oligarchic republic, and therefore in 1433 an attempt was made to expel him. The Florentine government, prompted by a coalition of powerful ancient families, mainly Albizzi, accused Cosimo of seeking to put himself above ordinary citizens and overthrow the republican government. On this charge, Cosimo was imprisoned for a while; some (the same Albizzi) demanded that he be executed; and in the end he was expelled.
Paradoxically, this served as a prologue to his rise to the status of the actual ruler of Florence (that is, exactly the one in which he was accused by his enemies), since the following year the city, ruined by another unsuccessful war against the Republic of Lucca, expelled Rinaldo Albizzi and called Cosimo. According to Niccolò Machiavelli, the great Florentine political philosopher of the Renaissance, at the entrance to the city of Cosimo "was greeted with welcoming cries as a benefactor of the people and the father of his country". This event is traditionally considered the beginning of the "secret domination" of the Medici in Florence; although Cosimo constantly tightly controlled the city government, he himself rarely held any official positions for a short time, and also refrained from making public speeches.
In 1434, Cosimo de Medici saved Florence from financial disaster. Since this year, his activities as a philanthropist and patron of the arts have expanded significantly, especially after the Florence Council of 1438-1439, which aimed to reconcile the Catholic and Orthodox churches in an attempt to protect the remnants of Byzantium from the expansion of the Ottoman Empire. Cosimo, who played an important role in organizing the cathedral in his city, became interested in the ideas of neoplatonism expressed at this event by representatives of Orthodoxy, which eventually prompted him to sponsor the creation of the Platonic Academy in Florence and found the Medici Library in the Dominican monastery of St. Mark (it is considered the first public library founded in Renaissance Europe), as well as other libraries.
However, this way of returning to society some of the enormous wealth he had accumulated (thanks to which he also strengthened his political influence in Florence) was not enough for him to make sure of the proper redemption for his sins; he himself understood that at least part of his income was obtained unjustly. Feeling that life was coming to an end (he died in 1464), Cosimo became more involved in charity, as was customary in the Middle Ages. In addition, he managed which was possible only for a person who maintained close business ties with the Church; to receive a papal bull on the absolution of sins, paid for by a donation to the monastery of St. Mark in Florence.
After Cosimo's death, the leadership of the Medici family and the management of the bank passed to his grandson Lorenzo the Magnificent, who showed a much greater interest in politics than in entrepreneurship, and completely moved away from the principle of Giovanni di Bicci, who preferred not to participate in public affairs. Like Cosimo, Lorenzo was not formally the ruler of Florence, but they were his descendants, who received the hereditary title of Dukes of Florence in 1532 with the support of Pope Clement VII (who himself came from the Medici family). Here it is necessary to express the final consideration: having acquired the highest noble title, the Medici family found a way to avoid the risks associated with granting loans to nobles, without which it was almost impossible to achieve a higher position in the international financial circles of Europe in the late Middle Ages. In Florence alone, lending to the highest nobility led to the collapse of the Bardi and Peruzzi banks, but European history is full of examples of this kind, and in Modern Times there were only more of them. Let's take German bankers from Augsburg, another outstanding financial center of Europe at that time, as an example. If the Medici cooperated with the Pope very favorably, the German bankers Fuggers and Welzers owed their achievements largely to ties with the Holy Roman Emperor and the Habsburg family. These bankers opened branches at key points of the vast possessions of the Habsburgs, in particular in Antwerp, which became the economic capital of Europe in the first half of the 16th century.
Antwerp, perhaps, benefited more than any other European city from the Atlantic trade in the early stages of its development partly due to the fact that it then belonged to Spain. Many spices from Africa and Asia (pepper and nutmeg), sugar from the Antilles, as well as non-colonial goods, including English cloth (finalized and dyed in Flanders), arrived in the city, as well as a large amount of gold and silver that the Spaniards delivered from the colonies in America to finance their European affairs and purchase goods for the development of the colonies. All this required large capital and flexible financial services to maintain the trade balance, move assets across the continent (and increasingly across the seas) and generally ensure the smooth growth of booming trade and industry in Flanders.
Fuggers and other German bankers played this game very successfully, especially during the reign of Emperor Charles V.
The situation changed under his son, King Philip II of Spain, who went bankrupt in 1557, causing significant damage to the financial sector of Antwerp (and Augsburg).
Soon after, King Henry II of France arbitrarily reduced and then temporarily suspended interest payments, which further complicated the situation for many Augsburg firms and led to a wave of bankruptcies. Things got even worse after the beginning of the uprising against Spanish rule, which broke out in the Lowland countries in 1566. The Fuggers, one might say, were lucky: they survived the crisis (although they suffered significant damage), but their case is an illustrative example of both the dangers and opportunities characteristic of the activities of bankers doing business with the top of the ruling nobility of Europe. The Fuggers moved to Augsburg in 1367 and were initially engaged in textile and goldsmithing. Gradually, they expanded their business; starting with the trade in gold and jewelry, in the second half of the 15th century they engaged in a profitable international business to deliver the papal court the proceeds from the sale of church benefits and indulgences. The family reached the greatest wealth under Jacob Bogat (1459-1525), who proved to be an exceptionally successful entrepreneur in the mining sector (he founded the largest mining center of that time in the copper-rich Neuzol in present-day Slovakia), and also made huge profits from international trade in spices and other goods. Mining was highly dependent on the favor of emperors (beging with Maximilian I) and other feudal lords, which was paid for by the provision of financial services. This close connection between financial and political power was once again manifested in the election of the Holy Roman Emperor, which was won by Charles V, defeating a very strong opponent (King Francis I of France) at a huge price: 852,000 guilders were spent on gifts (actually bribes) to seven electors-electors. Of this amount, 544,000 guilders were collected by Jacob Fugger, over time he was able to regain it in full, which was a real feat, given the current circumstances.
By the end of his life, in 1525, Jacob Fugger was undoubtedly one of the richest people in Europe and even, according to some of his contemporaries, the richest in the world. He also proved himself as an innovator in the field of charity, founding Fuggeray in Augsburg, which is considered the oldest social settlement in Europe. His nephew Anton, who headed the family business, lent even more money to the Habsburg dynasty and played a de facto key role in financing the wars of Charles V against the spread of Protestantism. Anton was also very successful in international trade (somewhat less in the mining industry) and by 1546 increased the company's assets to about 5.1 million guilders (inheriting two million from Jacob). However, shortly before his death, Anton faced a serious financial crisis: in 1557, the King of Spain defaulted on his debt. This confused the German bankers, including the Fuggers to some extent (Anton's nephew and business partner, Hans Jakob Fugger, was forced to declare personal bankruptcy). The family's losses exceeded one million guilders. By the time of Anton's death in 1560, the family's fortune had apparently decreased to about 260,000 guilders, an estimate obtained by deducting debts of 5.4 million from total assets of 5.66 million guilders. In addition, many assets consisted of Spanish and Dutch debt obligations, which were difficult to recover. The family company, however, survived and even continued to lend to Philip II, although after the crisis, Genoese bankers became the main providers of financial services to the Spanish crown. After Philip II's second default in 1575, the Fuggers (who this time were the only ones not affected by the suspension of payments) significantly reduced their relationship with the king, probably out of fear of continuing such a risky business.
The family got a noble title a long time ago: Emperor Maximilian I made Jacob the Rich count, this title was also received by Anton, who, in addition, married a representative of the old nobility. If deep down they still remained financiers and merchants, their descendants went the other way: they gradually invested the remnants of family wealth in the lands (the company was completely liquidated in 1658), divided into three branches, completely detraned and leading an aristocratic lifestyle.
Again, the new money became old, but what is even more interesting: the remains of the wealth acquired largely from financial activities were invested in land and other stable assets, which allowed them to survive to this day.
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