Wednesday, December 17, 2014

Revisiting Feudalism and Jacob Fugger

Reading Men of Wealth, an idea came to me. I dream to see both Catholics and Protestants in the country working together for the realization of economic freedom in the Philippines by spreading the ideas of economists from the Austrian School. Once increasing number of Filipinos are economically free or once the Philippine government abolished its anti-free market policies or while all these things are happening, members of faith-based organizations that personally believe that their primary duty is to spread the gospel, let them do so; it's for the betterment of the country.

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Meanwhile, here is an excerpt from the book pages 4 to 24:

A different way to see the age of feudalism:

"Perhaps European society could have done nothing better for itself than feudalism in all the circumstances of the time. But essentially feudalism did not represent an effort at growth. It might be described as a vast shelter, a refugee haven into which the harried and starving and disordered masses of the first centuries following the destruction of the Roman Empire fled for safety. It was an escape from violence and want."

"The terror of Europe in those early years was famine. Hallam records that in the seventy-three years in the reign of Hugh Capet and his two successors, forty-eight were years of famine and that from 1015 to 1020 the whole western world was almost destitute of bread—a frightful interregnum of barbarism when, as Hallam records, mothers ate their children and children their parents and human flesh was sold "with some pretense of concealment" in the market place. People sold themselves into slavery to escape hunger. In the presence of persistent hunger the outer crust of civilized morals crumbles and falls away, leaving only the unclothed savage man, pining for food. To him a precarious liberty seems a small price to pay for safety and meat."

"Meantime, many of the stronger chieftains took to brigandage. Not yet emancipated from the ethical concepts of their northern paganism and the worship of gods who were little more than divine gangsters and celestial thugs, they broke upon the weak with that strange outpouring of cruelty that has marked man's journey from the beginning. The only refuge for the weaker peasant was to sell himself into the servitude of a stronger feudal baron."

"In time, of course, this system became organized, strengthened, crystallized. And it was this system which was now dying. A new system that would symbolize not escape and flight but growth and development was to take its place."

p. 4
Jacob Fugger, the son of Hans Fugger, and the advent of capitalism and the banking industry: 
"It was about this time, in 1380, that a simple Swabian weaver named Hans Fugger left his small village of Graben to try his fortune in one of these growing towns—the free city of Augsburg. At the end of his life he was still a weaver, but he was more merchant than weaver, buying raw cotton for himself and his neighbors from Venice and selling his fustian and theirs to other cities" (p. 8).

"In his lifetime he was assailed with varying degrees of fury as a monopolist, an enemy of German interests, a selfish and greedy hunter after profits, a foe to the established morals of the church and the state. Luther denounced him upon numerous occasions. And it was, indeed, Fugger's fate to find himself mixed up in that fatal adventure in papal finances that precipitated Luther's revolt. But through all this he preserved the perfect composure of the man who believes himself to be the special child and instrument of the deity. Just as a laterday industrial saint, John D. Rockefeller, said, 'God gave me my money,' the pious and acquisitive Fugger said: 'Many in the world are hostile to me. They say I am rich. I am rich by God's grace without injury to any man.'"

"Beginning as a theologian and then as a merchant, he became in turn a banker, a promoter, an industrialist, a commercial statesman. He was a dynast. But he had no ambition to found a family of noble and unproductive rentiers. He looked with unmixed satisfaction upon the function of the entrepreneur and the profit by which he lives. He put aside the suggestion of retirement into tranquillity and ease with the observation that he "wished to make a profit as long as he could." His ambition was to create a rich and powerful dynasty of bankers and industrialists. He consorted with princes, emperors, and popes, but he never fawned upon them. He could write to an emperor who owed him money—the most powerful potentate in Europe—to remind him that he owed his crown to Fugger's financial backing, that his majesty owed him money, and he begged that he would "order that the money which I have paid out, together with the interest upon it, shall be reckoned up and paid, without further delay." He lived amid magnificence, surrounded by priceless objects of art and the greatest library in Europe and with a collection of estates which he deemed becoming to a great prince of trade."

"After his death the capital of the Fugger company, according to an inventory made in 1527, was 2,021,202 golden gulden. And twenty years later (1547) the firm, under the leadership of his nephew Anton, a man of ordinary abilities, had a capital of five million gulden" (pp. 9-10).

"Two great streams began to flow around Europe: one a stream of goods made up of every sort of product of every clime; the other a stream of money coined in the little mints of hundreds of petty princes. These fustian makers and wool weavers and tool mongers began to have a wider market for their wares and they began to produce more. Men flocked to the towns. The capitalist system, with its money and its freedoms, was becoming the reigning ism, even, though that word was unknown and the only isms men heard of were those which described the bloody and warring armies of religion" (p. 11).

"In the infant capitalist world of the fourteenth century the closest approach to big-business technique was the spice trade. Spice played the role that copper was to play in the fifteenth century and oil in the twentieth. There was not much variety in the foods of the time and the means of preserving them were even less developed. The palate took refuge from the monotony of a limited diet in a jolt of pepper or some other spice. Spices came into widespread demand and merchant captains roved the seas looking for spice supplies with something of the adventurousness of the modern wildcatter hunting for petroleum" (p. 13).
"The long struggle to break up the old feudal system and the primitive guild ethics of the towns and set in motion the capitalist society lengthened out into a series of steps. First there was the slow infiltration of money. Next came the shattering of public acceptance of the scholastic ethics. Then came the rise of free competition and the long retreat of the old guild trade monopolies. Next was the development of modern banking. Then came the rise of the large-scale industrial operator. It is because Fugger played a leading role in all these stages that he stands as the most important figure at the dawn of the capitalist era" (p. 21).

"In time the bankers became more than mere lenders of their own funds. They accepted the deposit of others' funds. These they were at liberty to lend out. Such deposits were treated as demand loans to the bankers. There were times, however, when the depositor came for some of his money only to find the banker did not have it available. Under these circumstances the banker would take his client to another banker with whom he had a deposit or enjoyed credit and thus honor the client's demand. After a while it became unnecessary for the banker to go in person to another banker to arrange this withdrawal. He would give his client a written order upon a neighboring banker for the funds he lacked. Thus checks came into use. And the next phase was for the client himself to give to another a written order upon his banker for funds. Thus the general use of checks came into vogue."

"All the time, the banker served to accommodate the kings and the petty princes and lords who needed money. When the king required funds on loan he might get them from a single usurer at first. But later he would be aided by a consortium of merchants who would subscribe to the loan, usually under the leadership of one of large means and influence among their number. Such a one was Fugger. And thus, we see the rise of the international banker" (p. 23).

"Double-entry bookkeeping was perfected at Venice, where Fugger served his apprenticeship. The Italians, chiefly the Florentine bankers, were inventing names for various instruments and transactions . . . which were to become the daily countinghousehold words the world over. Thus men were slowly forging the instruments, weapons, and the jargon of the modern capitalist state that would become in time the mold of society. These old bankers were leaving their names upon the institutions and streets of the cities of Europe. In Florence you will still find in the street names, the memory of the Bardi, Peruzzi, Albruzzi, Grecci, and others—bankers all."

"The Fugger family had followed this evolution—first weavers, then lenders of money around the fairs and market places, then international bankers—the greatest of their time. Jacob Fugger's firm had a web of branches and factories extending from Naples in the south and the Spanish peninsula to Hungary and Poland in the east and Scandinavia and England in the west" (pp. 23-24). 

Source: Flynn, J. T. (1941). Men of Wealth: The Story of Twelve Significant Fortunes from the Renaissance to the Present Day. Simon and Schuster, Inc.: New York, New York.