Finance MunroIHR2003FinancialRevolution
Finance MunroIHR2003FinancialRevolution
Finance MunroIHR2003FinancialRevolution
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JOHN H. MUNRO
Union), during the reign of William III (r. 1689-1702) and Mary II (r.
1689-94). Forrest Capie, in referring to these events, remarks that 'the
word revolutionhas perhaps been overused in economic historical stud-
ies, but perhaps this is an occasion when it is appropriate'; similarly,
Marjolein 't Hart remarks that 'currently the financial revolution in
England is being regarded as one of the hallmarks of the Modern
State, with England as the model country.'1 James Tracy, in contrast,
contends that the origins of the financial revolution are to be found in
the sixteenth-century Habsburg Netherlands, with its full fruition in
seventeenth-century Holland. Hamilton, and before him, Paul Cawes,
had made virtually the same claim for sixteenth-century France.2
That national debts arose from the sale of annuities or rentesis their
most striking feature: for they were not loans. Thus, they differed
markedly from the forms of national public finance, notably bonds and
debentures, common in medieval Europe and again in twentieth-cen-
tury Europe and North America. To explain the anomaly, one must
understand first the late medieval origins of the renteitself, and second,
the origins and evolution of fully fledged negotiability for all instru-
ments of credit. The foundations of the financial revolution are to be
found in the responses of thirteenth-century municipalities and mer-
chants to the increasingly severe obstacles that Church and State
were placing in the way of borrowing and international financial
transactions.
1 P. G. M. Dickson, The Financial Revolutionin England: A Study in the Developmentof Public Credit,
1688-1756(London, 1967); F. Capie, 'The Origins and Development of Stable Fiscal and Monetary
Institutions in England', in TransferringWealthand Powerfrom the Old to the New World:Monetary and
Financial Institutionsin the ijth throughthe 19th Centuries,ed. M. Bordo and R. Cortes-Conde (Cam-
bridge, 2002), p. 43; M. 't Hart, '"The Devil or the Dutch": Holland's Impact on the Financial
Revolution in England, 1643-94', Parliaments,Estates, and Representatives,xi (June 1991), 40.
- J. D. Tracy, A Financial Revolutionin the HabsburgNetherlands:Renten and Renteniersin the County of
Holland, 1515-65(Berkeley, 1985); Hamilton, 'Origin and Growth', pp. 118-30; P. Cawes, 'Les com-
mencements du credit public en France: les rentes sur l'Hotel de Ville au XVIC siecle', Revue
d'economiepolitique, ix (1895), 97-123, 825-65; x (1896), 407-79.
3 C. Kindleberger, A Financial History of WesternEurope (London, 1984), p. 41. For other viewpoints
The Medieval Originsof the Financial Revolution 507
reached its apogee during the thirteenth century, not only was the
campaign against usury in western Europe vigorously renewed, but
most of the ecclesiastical tracts and fulminations against it also focused
primarily on commercial or investment loans.
Two newly established mendicant religious orders - the Franciscans
(Order of Friars Minor, founded in or just after 1206) and the Domin-
icans (Order of Friars Preacher, founded in 12 16) - were chiefly
responsible for the campaign, which began in the early thirteenth cen-
tury. They were aided by the Fourth Lateran Council, which, in 1215,
made annual confession obligatory, thus facilitating a more direct and
more frequent contact between the mendicant preachers and the laity.
It also issued a diatribe against Jews for 'treachery' and 'cruel oppres-
sion' in extorting 'oppressive and excessive interest', while engaging (as
non-Christians were allowed to do) in licensed pawnbroking.1 By so
associating usury with Jewish moneylenders, the Council turned it into
a more heinous mortal sin in the eyes of a largely anti-Semitic public.2
The friars found more ammunition in the Decretalesthat Pope Gregory
IX issued in 1234: after confirming the Third Lateran Council's decree
of 1179 that had excommunicated usurers and refused the unrepentant
burial in consecrated ground, the Decretalesrequired princes 'to expel
usurers from their territories and never to readmit them'.3 In addition,
the Franciscans and Dominicans contrived their own stories about the
ghastly fates awaiting usurers after death and, by their incessant in-
flammatory preaching, convinced most people that usurers were
'linked with the worst evildoers, the worst occupations, the worst sins,
and the worst vices'.4 By doing so, they helped to persuade many secu-
lar rulers to enforce the ban on usury during the later Middle Ages.
Thus, loan contracts that in an earlier era openly admitted the pay-
ment of interest are rarely encountered from the thirteenth century.3
that also question the medieval economic significance of the usury doctrine, contending that its ap-
plication varied with economic conditions, see R. B. Ekelund, R. F. Hebert, and R. D. Tollison, 'An
Economic Model of the Medieval Church: Usury as a Form of Rent Seeking', Journal of Laze,
Economics,and Organization, v (1989), 307-31; E. L. Glaeser and J. Scheinkman, 'Neither a Borrower
Nor a Lender Be: An Economic Analysis of Interest Restrictions and Usury Laws', Journal of Law
and Economics,xli (1998), 1-36.
1 See J. Gilchrist, The Church and EconomicActivity in the Middle Ages (New York, 1969), pp. 182-3
(translation of Fourth Lateran Constitution, no. 67).
- See J. Shatzmiller, Shylock Reconsidered:Jews, Moneylending,and Medieval Society (Berkeley, 1990).
3 See J. A. Brundage, 'Usury', in Dictionary of the Middle Ages, ed. J. R. Strayer et al. (New York,
1982-9), xii. 337.
4 For the role of the mendicant preachers in conducting the anti-usury campaign, see in particular
J. W. Baldwin, Masters, Princes, and Merchants: The Social Views of Peter the Chanter and His Circle
(Princeton, 1970), i. 296-311; ii. 190-205; J. F. McGovern, 'The Rise of New Economic Attitudes in
Canon and Civil Law, ad 1200-1550', The Jurist, xxxii (1972), 39-50; J. Le Goff, 'The Usurer and
Purgatory', in The Dawn of Modern Banking, ed. Center for Medieval and Renaissance Studies,
UCLA (New Haven, 1979), pp. 29-34; O. Langholm, Economics in the Medieval Schools: Wealth,
Exchange, Value, Money, and Usury According to the Paris Theological Tradition, 1200-1350 (Leiden,
1992), pp. 52,88-97.
5 For Genoese examples, see Medieval Trade in the MediterraneanWorld:IllustrativeDocuments Trans-
lated with Introductionsand Notes, ed. R. Lopez and I. Raymond (New York, 1955), pp. 158-9.
508 John H. Munro
To be sure, the early Middle Ages had been familiar with Aristotle's
ideas, which had reappeared in the fifth- or sixth-century palea Ejiciens,
itself incorporated between 1130 and 1140 into the earliest compilation
of canon law, the Concordiadiscordantiumcanonum, commonly known
as Gratian's Decretum.2But the first genuine and complete Aristotelian
treatise to be received in medieval western Europe was the Nicomach-
ean Ethics^which the bishop of Lincoln, Robert Grosseteste, translated
from the original Greek into Latin in 1246-7. William of Moerbeke,
who revised this edition, also translated Aristotle's Politics into Latin
during the 1260s. Both works had a profound influence on the writings
of St Thomas Aquinas (1225-74), himself a Dominican, as did the
Aristotelian commentaries produced by his mentor and fellow Domin-
ican St Albert the Great, or Albertus Magnus (c.1200-80).3
Odd Langholm has strongly reasserted the view that Aristotle's
natural law concept of the sterility of money formed the core of Scho-
lastic usury doctrine. John Noonan has contended, however, that many
late medieval Scholastics did not fully accept this argument, even
though they readily employed it, because of its popular appeal, to but-
tress their revived campaign against usury. Even before Aristotle's
views were widely disseminated, no ingenuity was needed to find simi-
lar powerful arguments, beyond those emphasizing issues of charity. As
early as the fourth century, St Ambrose of Milan (339-97) had stated:
'if someone takes usury, he commits violent robbery (rapina), and he
shall not live,' a stricture quoted (along with the palea Ejiciens) in the
Decretum.4The assumption that usury is theft runs throughout Scho-
lastic literature, because if money transferred in a loan is deemed to be
sterile, unable 'to bear fruit', the exaction of more money for its use is
obviously iniquitous, a form of robbery, as Aquinas contends.5 A
closely related Scholastic argument states that, because usury was cal-
1 The Politicsof Aristotle:TranslatedInto English, ed. B. Jowett (Oxford, 1885), i. 19: Politics, book 1.10.
1258b.
2 O. Langholm, TheAristotelianAnalysis of Usury (Bergen, 1984), pp. 71-2.
3 See Noonan, ScholasticAnalysis of Usury, pp. 38-9, 52-3; R. Mclnery, 'Aquinas, St Thomas , in Dic-
tionaryof the MiddleAges, ed. Strayer et al., i. 353-66.
4 Quoted in O. Langholm, The Legacy of Scholasticismin Economic Thought:Antecedentsof Choice and
Power (Cambridge, 1998), p. 59.
5 See Noonan, ScholasticAnalysis of Usury, pp. 38-9, 52-3.
The Medieval Originsof the Financial Revolution 509
1 See, e.g., William of Auxerre (c.1220) cited in Langholm, AristotelianAnalysis of Usury, pp. 112-13.
For Peter the Chanter's (d. 1197) development of the argument, see Baldwin, Masters, Princes, and
Merchants,i. 296-311; ii. 191-202.
2 Noonan, ScholasticAnalysis of Usury, pp. 38-41, 53-7,80-1.
3 Ibid., pp. 22-33, 39~4O>51-81, noting that canon lawyers used only those parts of Roman law on the
mutuum that supported the usury ban, while ignoring other aspects; see also Langholm, Economicsin
the Medieval Schools, p. 37.
4 See Langholm, Economicsin the Medieval Schools, pp. 39"49>52-6, 67-87, 163-5, 196-246, 344"73>
510-90; Langholm, Legacy of Scholasticism,pp. 63-70; Langholm, ScholasticAnalysis of Usury, pp. 23-
510 John H. Munro
Long before the publication of these later works, at the latest from
the era of Aquinas' Summa Theologiae(1266-73), both theologians and
jurists regarded interest on a loan as a sin not only against charity but
also against commutative justice and natural law, and thus a mortal
sin. It was even a mortal sin for the lender to hope for any payment in
excess of the principal. The campaign against usury culminated in
1311-12 with the council of Vienne's decree of excommunication for all
'magistrates, rulers, consuls, judges, lawyers, and similar officials' who
'draw up statutes' permitting usury or 'knowingly decide that usury
may be paid'. The council added that, 'if anyone falls into the error of
believing and affirming that it is not a sin to practise usury, we decree
that he be punished as a heretic.'1 At this moment, Dante Alighieri
(1265-1321) was writing his Divine Comedy,in which he placed usurers,
'the last class of sinners that are punished in the burning sands', in the
lower depths, the Seventh Circle, of Hell.2
Such dire strictures applied only to a predetermined return on
money lent in a mutuum, and certainly did not apply to other, licit
forms of capital investment. The distinction between licit rents and
profits and mortally sinful usury was based upon ownership. Anyone
who owned or invested in land, or other forms of real estate or physical
property, and who leased the use of the property to others was entitled
to receive a rental income on what remained his own property, even
though the return was predetermined. Furthermore, anyone who in-
vested money in a standard partnership contract (societas) or a com -
menda contract, drawn up for a single seafaring venture, was entitled to
receive a share of the profits, or dividends, according to the amount of
his investment of equitycapital; for he, too, retained ownership.3
To contemporaries unconvinced that retention of ownership sup-
plied the distinction between licit and sinful investments, Aquinas of-
fered a solution in his analysis of the transfer of fungible commodities
within a mutuum:those not distinguishable from others in its group by
a specific defining characteristic, such as sheaves of wheat, flagons of
wine, jars of olive oil, and coined money. Since, as Aquinas argued, the
borrower's use of such commodities ipso facto meant their transfer,
consumption, and thus either their complete destruction or disappear-
ance (in monetary circulation), repayment had to be made with other,
but identical units: that is, the same quantity of wheat, wine, oil, or
40; Noonan, ScholasticAnalysis of Usury, pp. 41-57; L. Armstrong, Usury and the PublicDebt in Early
Renaissance Florence:Lorenzo Ridolfi on the Monte Comune (Toronto, 2003), pp. 278-9, contending
that the only theologian to reject the 'transfer of ownership' argument was Gerard of Siena (d.
t.1336).
1 Gilchrist, Churchand EconomicActivity, p. 206 (translation of decree no. 29).
2 Canto XVII of Inferno, in Dante Alighieri, The Divine Comedy,trans. Carlyle, Okey, Wicksteed, ed.
C. H. Grandagent (New York, 1950), p. 93.
3 See Medieval Tradein the MediterraneanWorld,ed. Lopez and Raymond, pp. 174-21 1. If an investor
provided all the capital, but did not otherwise participate in the venture, his liability was limited to his
capital investment, which entitled him to receive 75 per cent of any profits.
The Medieval Originsof the Financial Revolution 511
1 Quotations from J. Kirshner, 'Reading Bernardino's Sermon on the Public Debt', in Atti del simposio
internazionalecateriniano-bernardiniano,Siena, 17-20 April 1980, ed. D. Maffei and P. Nardi (Siena,
1982), pp. 550-1. For Olivi's treatise and its influence, see J. Kirshner and K. Lo Prete, 'Peter John
Olivi's Treatises on Contracts of Sale, Usury, and Restitution: Minorite Economics or Minor
Works?', Quadernifiorentini per la storia del pensierogiuridico moderno,xiii (1984), 233-86; see also, R.
de Roover, San Bernardinoof Siena and San 'Antoninoof Florence:Two Great Economic Thinkersof the
Middle Ages (Boston, 1967), pp. 30-1.
2 Langholm, AristotelianAnalysis of Usury, pp. 25-6, 98-110; Langholm, Legacy of Scholasticism,p. 75.
3 See Noonan, ScholasticAnalysis of Usury, pp. 90-3; de Roover, San Bernardino,pp. 29-30, notes that
most fifteenth-century theologians remained suspicious of emptio-venditiocontracts with prices higher
for future goods than for current goods, as contracts in fraudem usurarum.
4 See, e.g., C. Wyffels, 'L'usure en Flandre au XIHe siecle', Revue beige de philologie et d'histoire/
Belgisch tijdschriftvoorfilologie en geschiedenis,lxix (1991), 855, 859-71, noting that such cloaking was
virtually impossible with demand loans (a manaie).
5 Noonan, ScholasticAnalysis of Usury, pp. 35-6; cf. LeGoff, 'Usurer and Purgatory', pp. 25-6.
The Medieval Originsof the Financial Revolution 513
1 Cited in J. Kirshner, 'Storm over the Monte Comune: Genesis of the Moral Controversy over the
Public Debt of Florence', Archivum FratrumPraedicatorum,liii (1983), 256; and in Kirshner, 'Reading
Bernardino's Sermon', p. 589.
2 H. Soloveitchik, 'Usury, Jewish Law', and S. Ward, 'Usury, Islamic Law', both in Dictionary of the
MiddleAges, ed. Strayer et al., xii. 339-41.
3 F. L. Galassi, 'Buying a Passport to Heaven: Usury, Restitution, and the Merchants of Medieval
Genoa', Religion,xxii (1992), 313-26.
4 R. Goldthwaite, 'Local Banking in Renaissance Florence', Journal of EuropeanEconomicHistory, xiv
(1985), 13-16, 31-7, noting also that interest paid on time deposits was always a discrezione; R.
Mueller, Money and Banking in Medieval and Renaissance Venice: II: The Venetian Money Market,
Banks, Panics, and the Public Debt, 1200-1500(Baltimore, 1997), p. 13. See also R. de Roover, The Rise
and Decline of the Medici Bank, 1397-1494(Cambridge, MA, 1963), pp. 77-141.
5 Goldthwaite, 'Local Banking', pp. 32-5.
6 L. Stone, The Crisisof the Aristocracy,1558-1641(Oxford, 1965), p. 529.
514 John H. Munro
1 See P. Jones, The Italian City-State: From Communeto Signoria (Oxford, 1997), pp. 382-401.
2 See J.-C. Hocquet, 'City-State and Market Economy', in EconomicSystemsand State Finance^ed. R.
Bonney (Oxford, 1995), pp. 89-91.
3 J.-C. Hocquet, 'Venice', in The Rise of the Fiscal State in Europe,c.i2oo-i8is> ed. R. Bonney (Oxford,
1999), PP- 395-6.
4 Mueller, VenetianMoney Market, p. 459; see also, Jones, Italian City State, p. 398, who states that
the first Italian evidence that he has found for a forced loan was at Pisa, in 1162.
5 See a detailed analysis in Mueller, Venetian Money Market, pp. 459-567; G. Luzzatto, // debito
pubblicodelta Repubblicadi Venezia, 1200-1500(Milan, 1963); and also F. C. Lane, 'The Funded Debt
of the Venetian Republic, 1262-1482', in Veniceand History: The CollectedPapers of FredericC. Lane
(Baltimore, 1966), pp. 87-108. Luzzatto, Lane, and Mueller agree that Venice lacked a permanently
funded public debt before 1262-4.
The Medieval Originsof the Financial Revolution 515
schedule, until the war of Chioggia in 1377-81, when the Venetian state
imposed a new series of forced loans and then, after temporarily sus-
pending interest payments, subjected them to withholding taxes, re-
ducing the effective rate to 4 or even 3 per cent.1
Elsewhere, in Tuscany, Siena exacted forced loans from 1287, while
continuing to solicit some voluntary loans.2 Florence soon followed
suit. Between 1343 and 1345, it, too, set up a consolidated fund (the
Monte Comune) for its public debt, composed largely of forced loans,
known as prestanze,on which the city paid an annual interest (paghe) of
5 per cent.3 Similarly, in 1340, Genoa consolidated all of its forced
loans, which had commenced in 1258 and became known as luoghi,
into a consolidated fund called a compera,and in 1407-8, while under
French rule, consolidated all subsequent loans in the compere nuova
regiminis Sancti Georgiaa state bank better known as the Casa di San
Giorgio, which Jacques Heers calls ia plus puissante institution finan-
ciere de l'Occident'.4 It lowered the interest rates on the luoghi from 10
5
per cent to 7 per cent in 1405, and finally to 5.25 per cent in 1420.
Lucca consolidated its public debt (Dovana Salis et Massa Creditorum)
derived from forced loans (proventus)only in 1370, the year after it had
regained its independence from Pisa.6
While also soliciting voluntary short-term loans, the Italian city
states levied their prestiti,prestanze, or luoghi according to the citizen's
ability to pay based on the value of his property and assets recorded in
the communal estimo or census registers. The interest payments,
financed by the salt tax and other indirect taxes (gabella), thereby
transferred income from the lower to the upper income strata. But not
all Italian cities resorted to forced loans: many of those ruled by signori
(for example, Milan) relied instead on a floating debt of voluntary
short-term loans. As Mueller has contended, most of the Italian city
states that resorted to forced loans and consolidated their long-term
debts had strong republican traditions.7
For such states, forced loans had three major advantages. First, they
demonstrated that every citizen had the duty to provide the state with
an equitable share of financial support - sub necessitateet pro militate
publica - if only to help to ensure its security and territorial integrity.
1 See Hocquet, 'Venice', pp. 395-6; Hocquet, 'City State', pp. 87-9.
2 W. Bowsky, The Finances of the Communeof Siena, 1287-1355(Oxford, 1970), pp. 166-88, app. 12, pp.
329-39.
3 B. Barbadoro, Lefinanze delta Repubblicafiorentina: Impostadirettae debitopubblicofino alVistituzione
del Monte (Florence, 1929), pp. 629-87; A. Molho, FlorentinePublic Finances in the Early Renaissance,
1400-33 (Cambridge, MA, 1971), pp. 63-74.
4 J. Heers, Genesau XVe siecle:activitie economiqueet problemessociaux (Paris, 1961), p. no.
5 Ibid., pp. 97-190; and the classic study by H. Sieveking, GenueserFinanzwesen mit besondererBeru'ck-
sichtigungder Casa Di S. Georgio (Freiburg, 1897-8). In 144 1, the rate was ostensibly reduced to 4.0
per cent; but with an additional payment of one florin, the real rate remained at 5.25 per cent.
6 C. Meek, Lucca, 1369-1400:Politics and Society in an Early RenaissanceCity State (New York, 1978),
PP- 53-76.
1 Mueller, VenetianMoney Market^pp. 454-8.
516 John H. Munro
1 The Florentine government, during war emergencies, temporarily and abortively restored the estimo
in 1328, 1342-3, 1352, 1355, and 1494. See Barbadoro, Finanze della repubblicafiorentina, pp. 73-215;
Molho, FlorentinePublic Finances, pp. 22-73; Bowsky, Siena, pp. 98-113, 310-15.
2 Kirshner, 'Bernardino's Sermon', pp. 553-60, 583-5; L. Armstrong, 'The Politics of Usury in
TrecentoFlorence: The Questio de Monte of Francesco da Empoli', Mediaeval Studies, lxi (1999), 1-44
and Usury and the Public Debt, pp. 72-84. For one exception, Alexander of Lombard (c. 1303-7), see J.
Kirshner, 'Conscience and Public Finance: A Quaestio Disputata of John of Legnano on the Public
Debt of Genoa', in Philosophyand Humanism: RenaissanceEssays in Honor of Paul Oskar Kristeller,ed.
E. Mahoney (New York, 1976), pp. 439-40.
The Medieval Originsof the Financial Revolution 517
'uneasy in his conscience' about the income earned from credits in the
Florentine monte, which accounted for 30 per cent of his assets, even
though they were solely 'on account of prestanze' that he and his
parents had been forced to pay. The will therefore stipulates that 'if a
declaration or decision is made by the Roman church or a general
council' determining that such income was illicit, his 'heirs shall act in
every respect in conformity with the decree, decision, determination,
or conclusion of the Roman church'.1
* * * * *
l L. Armstrong, 'Usury, Conscience, and Public Debt: Angelo Corbinelli's Testament of 1419', paper
delivered to the Centre for Medieval Studies, University of Toronto, Jan. 2002. Julius Kirschner,
having discovered the will in the Florentine archives, informed Armstrong about it.
2 R. Van Uytven, Stadsfinancien en stadsekonmiete Leuven: van de XIIe tot het einde der XVIe eeuw
(Brussels, 1961), p. 196. In the updated version of his source, that contention is not repeated: in M.
Van Haaften, 'Lijfrente', in Grote WinklerPrim, xii (Amsterdam, 1971), 351-2.
3 B. Kuske, Das Schuldenwesender deutschenStddte im Mittelalter (Tubingen, 1904), pp. 12-24 (whose
earliest example is for the Carolingian Abbey of St Gallen, in Hergau, 'urn 700'). See also A. P.
Usher, The Early History of Deposit Banking in MediterraneanEurope:I: The Structureand Functions of
the Early CreditSystem: Banking in Catalonia: 1240-1723(Cambridge, MA, 1943; reissued New York,
1967), p. 146; E. B. and M. M. Fryde, 'Public Credit, with Special Reference to North-Western
Europe', in The CambridgeEconomicHistory of Europe: III: Economic Organization in the Middle Ages,
ed. M. Postan, E. E. Rich, and E. Miller (Cambridge, 1963), p. 530 and especially n. 2.
4 See Noonan, ScholasticAnalysis of Usury, pp. 154-70 (quotation on p. 155).
The Medieval Originsof the Financial Revolution 519
1 B. Schnapper, Les rentesau XVIe siecle:histoired'un instrumentde credit(Paris, 1957), pp. 50-61.
2 See D. Herlihy, Medieval and Renaissance Pistoia, 1200-1430 (New Haven, 1967), pp. 136-45, and
table 18.
3 G. Bigwood, Le regimejuridiqueet economiquedu commercede Vargent dans la Belgique du moyen age
(Brussels, 1921-2), i. 120-3. Thus, in late thirteenth-century Flemish towns, the annuity rate on per-
petual rents {erfelijkrenten)was 10 per cent, falling to 6.25 per cent (1/16) in the fifteenth century; the
rate on lijfrentenin the late thirteenth century was typically 12.5 per cent (1/8), falling to 10 or even 8
per cent (1/12.5) in the fifteenth century. See also Tracy, Financial Revolution^p. 92 n. 57; and espe-
cially Fryde, 'Public Credit', pp. 531-2, noting that rates on life-rents in medieval eastern Germany
were 12.0 to 13.5 per cent, but only 8 per cent in Cologne.
4 Fryde, 'Public Credit', pp. 529 (quotation), 533-40, 542-7.
52O John H. Munro
their relationships with the French Crown.1 Louis IX (r. 1226-70), who
granted the chartered communes of the central and northern langue
d'oeil region an augmented status as corporate legal entities, thereby
enhanced their magistrates' authority to pledge both the revenues of
the towns and the property of all their citizens as surety for the new
rentes. In contrast, in the southern or languedoc regions under English
jurisdiction, towns were forcibly subjected, from about 1260, to a
much stronger royal control, while most towns in the south-east, under
French jurisdiction, had never been incorporated as communes, and
thus continued to be supervised by magistrates called consuls, whose
office dated from the Roman era.2 Both of these developments, how-
ever, occurred after the 1220s, when the earliest renteswere issued in
various northern towns.
Some evidence that the currently vigorous anti-usury campaign may
have played a role in their adoption of rentes can be found in Pierre
Desportes' account of the response of the Rheims bourgeoisie, when
threatened in 1234 with an ecclesiastical investigation of their 'usures':
subjected to a 'veritable terreur', they decided to purchase rentes
instead of making any further loans ('prets proprement dits').3 In 1254,
Pope Innocent IV (r. 1243-54) relieved the monks of Saint-Remi and
the commune of Beauvais of their obligation to pay interest owed to
their creditors.4 Similarly, David Nicholas, in discussing social atti-
tudes in medieval Flanders, northern France's most important county,
remarks that 'the Flemings seem to have been more concerned than
the Italians to avoid the imputation of usury.'5 Thus, he echoes
Georges Bigwood's assertion that, in thirteenth-century Flanders and
Artois, 'the struggle against usury was energetically and remorselessly
conducted' by Church, towns (Douai from 1247), and princes.6 To be
sure, from 1281, Guy de Dampierre (r. 1280-1305) and the successor
counts of Flanders licensed Italian 'Lombard' merchants to maintain
regulated pawnbroking 'tables'; but such pawnbroking could be inter-
preted as the discounted sale and repurchase of goods (venditio sub
dubio) rather than as usury. De Roover comments that, nevertheless,
'the Lombards in Flanders as elsewhere lived in constant fear of a sud-
den reversion to repressive methods and under the permanent threat of
expulsion and spoliation.'7
the early thirteenth century, just after the northern towns had resorted
to them, it did not augur well. In the first reference to such contracts,
in July 1218, the archbishop of Rheims refused, 'in the name of the
community', to approve the Hotel-Dieu's sale of a renteviagere, because
he suspected that the contract was usurious.1 In 1241-3, Geoffrey of
Trani contended that anyone who bought a rente harboured an 'im-
moral hope' of receiving a sum of annual payments that exceeded his
original investment, and was therefore guilty of usury. Around 1250,
William of Rennes, in a gloss on the Summa of Raymond de Penyafort,
concluded that, although the rente viagere was not in itself {ex forma)
usurious, it was nonetheless immoral and illegitimate, for reasons simi-
lar to those cited by Geoffrey of Trani. He declared illicit any rentethat
was not strictly tied to real estate.2
The following year (1251), however, Pope Innocent IV declared that
renteswere not usurious, and were legitimate contracts of sale, pro-
vided that the annual payments were based on 'real' properties.3 Fur-
thermore, in two treatises, one written around 1253 and the other
twenty years later, around 1270, Hostiensis (Henry Cardinal of Susa)
rejected all of Geoffrey of Trani's arguments and endorsed Innocent
IV's decree.4 In issuing his Quodlibetsin 1276, Henry of Ghent became
the last important theologian to reject the rente contract as usurious.
His arguments, echoing those of Geoffrey of Trani, that it involved
'the sale of money, which is non-vendible' and promoted immoral
hopes of gain, well in excess of the principal, immediately provoked
hostile reactions, even within his own University of Paris.5 Shortly
thereafter, in 1278, Giles of Lessines justified the return on censuscon-
tracts on the grounds that 'future things over a period are not esti-
mated to be of such value as things collected in an instant [in the
present].'6 By this date, almost every theologian regarded the census as
a contract of purchase and sale (emptioin forma) involving the licit pur-
chase of future streams of income or usufruct from property; and
others, such as the Dominican Roland of Cremona, argued that,
because the uncertainty of the buyer's date of death made the return
on a rente uncertain, the contract was not usurious. Most contended,
as had Innocent IV, that the legitimacy of such contracts should be
judged against the canon law on 'just price' rather than on usury, espe-
cially if the annual payments were made in kind rather than money.1 In
the late thirteenth and early fourteenth centuries, numerous Scholastic
treatises - written by Gervais de Mont Saint-Eloi, Matthew d'Aqua-
sparta, Godfrey of Fontaines, Richard of Middleton, and Alexander
Lombard, among others - endorsed both the census and the related
rentecontracts.2
The principle governing the theological discussion was that anyone
who purchased a rente was denied the right to demand repayment of
the principal sum, so long as the seller or debirentierhonoured the obli-
gation to make the annual annuity payments for which he had pledged
all of his assets. If credirentierswere given the right of redemption, their
rentesbecame merely a sinful device to cloak a usurious loan. Thus,
since the rente was not to be repaid, no loan was involved, and, to
quote the Leuven theologian Leonardius Lessius (d. 1623), 'where
there is no loan there is no usury' (ubi non est mutuum, ibi non est
usura)? A credirentierwho wished to regain some or all of the principal
had to find a third party willing to buy the rente, with its annual in-
come, often at a discount.4 Only when reliable, efficient secondary
markets developed, with untrammelled rights of negotiability and low
transaction costs, would the public find rentes to be an attractive
investment.
The more pressing issue in the later Middle Ages was the right of
redemption on the part of the seller, especially debirentiermunicipal-
ities. Their problems were aggravated during the Hundred Years War
(I337"I453)> with its economic contractions and periodic economic
crises, caused not only by the fighting but also by plague and other dis-
ruptions to the international economy, when many municipalities
found themselves without sufficient revenues to meet their annual rent
charges. Thus, they sought the legal right to redeem them. Goslar had
claimed that right as early as 1283, Ghent in 1288, Cologne around
1300, and subsequently so did a few other towns in France, Imperial
Germany, and the Low Countries: Vienne in 1360, Vienna in 1360,
Amiens in 1393, Tournai in 1410, Brussels in 1436, and Paris in 1441.
In most other municipalities, however, redemptions were difficult to
achieve without consent from the credirentiers,who were generally
reluctant to surrender this guaranteed source of income. In the later
1 Veraja, Origini della controversialpp. 106-11, 125-31; Schnapper, 'Les rentes chez les theologiens',
pp. 969-72; Langholm, Economicsin the Medieval Schools,pp. 249-73.
2 Veraja, Origini della controversia, pp. 69-73, 101-24, 131-95; Schnapper, 'Les rentes chez les
theologiens', pp. 969-72; Noonan, ScholasticAnalysis of Usury, pp. 154-70.
3 Quoted in R. de Roover, LeonardiusLessiusals economist:de economischeleerstellingenen van de latere
scholastiekin de ZuikdelijkeNederlanden(Brussels, 1969), p. 11; see also, p. 26.
4 See Schnapper, Les rentesau XVle siecle,pp. 50-61.
524 John H. Munro
1 See A. Derville, 'La finance Arrageoise: usure et banque', in Arras au moyenage: histoireet litterature,
ed. M.-M. Castellani and J.-P. Martin (Arras, 1994), pp. 40-1; but his calculations of the data differ
from mine, cited here, and taken from De rekeningenvan de stad Brugge, 1280-1319,ed. C. Wyffels and
J. de Smet (Ghent, 1965-71), 1: 1280-1302,509-67, doc. 10, for 14 Sept. 1297-23 Dec. 1298. See also
Fryde, 'Public Credit, pp. 476, 494-7, 538-9.
2 In the account for Sept. 1297 to Dec. 1298, the total payments made to holders of rentesviageresor
lijfrenten{redditusad vitam) amounted to £3,154. 5s- IJd- parisis (225 persons, including Robert and
Baldwin Crespin and Jehan Boinebroke); but payments for rentesheritables(reddituhereditarioor rente
yretaule) were only £99 (4 persons): Wyffels and De Smet, Rekeningenvan de stad Brugge, i. 551.
3 See Bigwood, Regimejuridique, i. 120-3, 578; ii. 299-300 (doc. no. 17); Schnapper, 'Les rentes chez
les theologiens', p. 972; Fryde, 'Public Credit', p. 538.
4 Nicholas, Medieval Flanders, pp. 186-202, 212-24; H. Nowe, La bataille des eperonsd'or (Brussels,
I945)> PP- 13-113; Fryde, 'Public Credit', pp. 496-7, noting that the Flemings paid the French king
£869,000 parisisbetween 1305 and 1330.
The Medieval Originsof the Financial Revolution 527
erfelijkrenten- until 1325, in the middle of another civil war, the Revolt
of Maritime Flanders (1323-8), in which it refused to take part.1 In
almost every year thereafter, until 1390, when the annual treasurer's
accounts cease to be available for a decade, Ghent sold small amounts
of renten. The annual revenues from these sales, from standard loans
and other debt contracts, and annual expenditures on annuity pay-
ments, renten redemptions, and loan payments are given in Tables 1
and 2.
The most remarkable event recorded in Ghent's fourteenth-century
municipal accounts took place in the fiscal year 1346-7, on the eve of
the Black Death: the issue of lijfrenten worth £21,295 parisis, almost
thirty times the value of erfelijkrentensold that year; but these lijfrenten
were an involuntary conversion of short-term loans.2 During the 'Arte-
velde era' (1335-49), when Ghent was ruled by a weaver-led guild
regime, it dominated Flanders, defying the count, Louis de Nevers (r.
1322-46), while antagonizing the other leading Flemish towns.3 These
circumstances may explain the other remarkable feature of this finan-
cial experiment: that almost all of the renten were sold outside
Flanders, in the Brabantine drapery towns of Brussels and Leuven.
Such sales posed, however, the risk that foreign creditors could, in
their native towns, seek the seizure of Ghent merchants and their
goods to enforce payment of annual rent charges, a privilege that
Ghent did not accord to its own citizens.4 Subsequently, in the four-
teenth century, Ghent sold only two more issues of lijfrenten,in more
modest amounts; £2,311 parisis in 1349-50 and £1,232 parisis in 1355-6.
Although a few sales are later recorded in Hainaut, there is no evi-
dence that, in normal years, Ghent was dependent on external sources
to finance its municipal debts. In the more peaceful period stretching
from 1350 through the early 1370s, the sale of erfelijkrenten provided,
on average, only 3.65 per cent of Ghent's municipal revenues.5 Late
1 Comptesde la ville d'Ypresde 1267 a 1329, ed. G. Des Marez and E. De Sagher (Brussels, 1909-13), i.
376 (1311-2), 397-403 (1312-3); and for arrears on rentesin 1309-10, see pp. 296, 304-6; see also
Fryde, 'Public Credit', p. 539. Since no other municipal accounts were published before the destruc-
tion of Ypres' archives in the First World War, no further accounts are available until 1408, when the
set of duplicate copies for the Chambre des Comptes, now housed in the national archives in Brus-
sels, commence. The published sources for Ghent's municipal accounts are provided in Tables 1 and
2; and so far I have analysed its accounts for only the fourteenth century. For the fifteenth century,
see M. Boone, Geld en macht: de Gentse stadsfinancienen de Bourgondischestaatsvorming (1384-1453)
(Ghent, 1990), pp. 60-7, 163, and Table 11 (sales of lijf- and erfrenten,but only for the years 1453-61).
This book regrettably pays almost no attention to this form of civic finances. But see also M. Boone,
'Plus deuil quejoie: Les ventes de rentes par la ville de Gand pendant la periode bourguignonne: entre
interets prives et finances publiques', CreditCommunal:bulletintrimestriel,clxxvi (1991-2), 3-24.
2 Van Werveke, GentscheStadsfinancien,pp. 282-90; Fryde, 'Public Credit', pp. 539-40.
3 See D. Nicholas, The Van Arteveldes of Ghent: The Varieties of Vendetta and the Hero in History
(Ithaca, 1988), pp. 19-98; Nicholas, Medieval Flanders,pp. 219-24.
4 See Fryde, 'Public Credit', pp. 528, 540.
5 De rekeningen der stad Gent: Tijdvak van Jacob Van Artevelde, 1336-49, ed. N. De Pauw and J.
Vuylsteke (Ghent, 1874-85), ii. 21-2, 190-6; iii. 397-445; Gentse stads- en baljuwsrekeningen(1351-64),
ed. A. Van Werveke (Brussels, 1970), pp. 26, 92, 140, 188, 226-42, 261, 317, 377, 453,497, 550, and
659; Van Werveke, De Gentschestadsfinancien,pp. 282-90.
528 John H. Munro
1 Van Uytven, Stadsfinancien, pp. 196-231; and for some annual lists of lijfrenten, see also Tables
XIVA and B (1377-8), PP- 209-10; XV (1389), p. 213; XVI (1391), pp. 217-18; XVII (1396 and 1407),
p. 221; XVIII (1429-30), p. 223; XDC (1492), pp. 225-7. The rates (Table XIII, pp. 199-200) were
from 10.00 to 14.29 per cent. See also the treasurer's accounts in Leuven, Stedelijk Archief, Archief
van het Oude Regime, stadsrekeningen 1345-1600, nos. 4986-5224.
2 Fryde, 'Public Credit', p. 436 (quotation), and p. 496.
3 See Fryde, 'Public Credit', pp. 436-9, 502-26, 540-53; Kuske, Schuldenwesender deutschenStadten,
p. 55; G. Parker, 'The Emergence of Modern Finance in Europe, 1500-1750', in The Fontana Eco-
nomicHistory of Europe:II: The Sixteenthand SeventeenthCenturies,ed. C. Cipolla (London, 1974), pp.
567-70; Hocquet, 'City State', pp. 91-2; Tracy, Financial Revolution,pp. 13-14.
4 Schnapper, Les rentesau XVIe siecle, pp. 132-3 (and n. 53); Van der Wee, 'Monetary, Credit, and
Banking Systems', p. 304; Fryde, 'Public Credit', pp. 542-53.
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Emperor, French kings, and princes in the Low Countries had all
affirmed their powers to regulate municipal public finances, especially
rentes, and the municipal taxes that were used to pay annual rent
charges. But this method of financing governments still remained
municipal, because only municipalities sold rentes,so that the national
institutions required for a funded, permanent public debt had yet to be
created. Despite the precocity of northern municipalities in utilizing
rentesfor their public finances, the first national monarchy to establish
a permanent, funded national debt based on rentes, by the early six-
teenth century, was in southern Europe: not Italy, of course, which
became unified as a national monarchy only in 1870, but the newly
unified Habsburg kingdom of Spain.
Sources:
r. -J2 C 2 fa
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The Medieval Originsof the Financial Revolution 533
Sources:
Gentse stads- en baljuwsrekeningen(1351-64), ed. A. Van Werveke, Koninklijke Academie voor Weten-
schappen, Letteren en Schone Kunsten van Belgie, Koninklijke Commissie voor Geschiedenis
(Brussels, 1970), with an introduction by H. Van Werveke.
million ducats in 1515 to one of 76.540 million ducats in 1598; and A. Castillo, 'Dette flottante et
dette consolidee en Espagne de 1557 a 1600', Annales: Economies,societes, civilisations, xviii (1963),
745-59 (especially graph II, p. 757), which provides a third set of figures: from 5 million ducats in
1515 to 83 million ducats in 1600.
1 R. T. Davies, The GoldenCenturyof Spain, 1501-1621(London, 1937; repr. New York, 1961), p. 181.
2 Elliott, Imperial Spain, pp. 198-9; Gelabert, 'Castile', pp. 207-12; Tortella and Comin, 'Fiscal and
Monetary Institutions', pp. 140-8.
3 See Hamilton, 'Origin and Growth', pp. 118-19; and Cawes, 'Les commencements du credit public
en France', pp. 97-123, 825-65; Revue d'economiepoltttque,x (1896), 407-79. See also Schnapper, Les
rentesau XVIe siecle,pp. 151-4; M. Wolfe, The Fiscal System of RenaissanceFrance (New Haven, 1972),
pp. 91-123.
The Medieval Originsof the Financial Revolution 537
1 Cf. Schnapper, Les rentesau XVIe siecle, pp. 62-3, 130-3, p. 281, that from 1548, in effect, all rentes
finally became redeemable at the will of the debirentierissuer.
2 Schnapper, Les rentesau XIVe siecle, pp. 284-5.
3 Wolfe, Fiscal System of RenaissanceFrance, p. 163; Tracy, Financial Revolution,pp. 109-10.
4 Wolfe, Fiscal System of RenaissanceFrance, pp. 91-3 (quotation on p. 93), 115-16; J. Dent, Crisis in
Finance: Crown, Financiers, and Society in Seventeenth-CenturyFrance (Newton Abbot, 1973), pp. 46-9.
5 Wolfe, Fiscal System, p. in. Under his successors, Francis II (r. 1559-60) and Charles IX (r. 1560-
74), rentesamounting to another £25.9 million tournoiswere sold, some of which were also compul-
sory purchases.
6 Cawes, 'Credit public en France' (1895), pp. 831-47; Wolfe, Fiscal System of RenaissanceFrance, pp.
109-13; Parker, 'Emergence of Modern Finance', pp. 570-2.
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540 John H. Munro
Hardly more successful was the next royal experiment, the contract
of Poissy of October 1561, by which Charles IX (r. 1560-74) compelled
the clergy to pay the Crown annually £1.6 million tournoisfrom their
lands for six years, to repay debts owing on the Grand Parti; and then,
during the next ten years, to pay an additional £1.3 million tournois
annually, to fund £7-56 million tournoisin rentes, including new issues
and arrears in annuity payments. Of the total sum demanded, £22.6
million tournoisover sixteen years, only small amounts were either paid
or redeemed. After the outbreak of the Wars of Religion in 1562, which
led many clergy to default on their annual payments, 'a cause de la
misere et calamite des guerres',1 Charles IX imposed a new series of
forced loans and also compelled wealthy Parisians to buy new issues of
rentes, on the grounds that previous loans had shown that 'they were
rich enough.'2
In 1598, when the Wars of Religion had ended in victory for Henry
IV (r. 1589-1610), rentes,valued at £157 million tournois,accounted for
over half of the royal debts: £297 million in total; and payments on
much of that debt were in arrears.3 From 1600, his chief minister,
Maximilien de Bethune, duke of Sully, cancelled renteslacking a veri-
fiable claim, ceased to pay off many of the arrears, spent budget sur-
pluses to redeem some rentes,and forced other rentiersand debt holders
of the Grand Parti to reduce their claims. In 1601, he reduced the
annuity payments on rentesfrom 8.33 per cent to 6.25 per cent; in 1634
the rate was reduced to 5.55 per cent.4 A comparison with interest rates
on short-term royal loans is instructive: from 163 1 to 1657, the annual
average rate was 25.88 per cent.5
The experiences of Spain and France buttresses Tracy's claim that the
birthplace of the modern financial revolution was instead the Habsburg
Netherlands. From at least 1482, the States of Holland, along with
other provinces of the Habsburg Netherlands, had sponsored the issue
of rentenagainst specific provincial tax revenues, even if, as in the past,
they were sold by each province's municipalities.6 A report to Charles
V's government on Holland's finances for the fiscal years 1521 to 1530
indicates that revenues from the sales of rentenaccounted for 6.73 per
cent of the province's total income, 67.0 per cent of which came from
subsidies, taxes voted by the States. The annuity rate on losrentenwas
still 6.25 per cent, the prevailing rate from the mid-fifteenth century.1
An important change took place in December 1542, on the outbreak
of war with France, when Lodewijk van Schore, president of the coun-
cil of state for the regent, Mary of Hungary (r. 1530-56), convinced the
States General to agree to new financial expedients (nieuwe middeleri):a
10 per cent tax on income from both real property (including renten)
and trade and a 1 per cent ad valorem tax on exports, to enable the
seventeen provinces to fund new issues of renten, while retaining the
existing excise taxes on consumption, on items such as beer, wine, and
cloth. Tracy shows that the States, as Mary predicted, 'took control of
the new revenues', which allowed them 'to create a new type of long-
term debt [in renten],resting on secure foundations and capable of vast
expansion'.2 So successful were the new renten(issued at 6.25 per cent)
and the taxes used to fund them, that by 1548 Holland's government
had redeemed the issues of 1542-4, to the relief of everyone con-
strained to buy them as a public duty in time of war. The success per-
suaded Mary, in October 1552, to forgo coercion in marketing renten
within Holland; elsewhere, at Bruges for example, rentenhad been sold
within a free market. In contrast to France's fiscal misfortunes, the
Habsburg States did not suspend payments on any of its rentenbefore
the outbreak of the revolt in the Netherlands in 1568, which led to the
creation of the Republic of the United Provinces, better known as the
Dutch Republic, with the Union of Utrecht in 1579.3 Subsequently, it
would establish a better claim for creating the foundations of a national
public debt, in the context of the modern financial revolution, since
the Habsburg Netherlands was not a national state, but a collection of
seventeen provinces.
The success of the rentenissued in the Habsburg Netherlands and of
the juros al quittarissued in Habsburg Spain rested upon the develop-
ment of secondary financial markets following the opening of the
Antwerp bourse in 1531. Trade there in juros and rentenbecame one of
the principal activities of South German merchant-banking houses led
by the Fuggers, Welsers, Hochstetters, Herwarts, Imhofs, and
Tuchers.4 As Herman Van der Wee comments, the sixteenth-century
1 Tracy, Financial Revolution, pp. 30-2. See table 4, p. 62, for the series of Holland's renten, labelled
series A to N, secured by the bedenfrom 1515 to 1534 (and issued by Amsterdam and five other lead-
ing cities).
2 Quotations from Tracy, Charles V, p. 267; and Tracy, Financial Revolution,pp. 74-5.
3 Tracy, Charles V, pp. 263-8; Tracy, Financial Revolution,pp. 71-94, 108-38. For rentenfunded by the
States of Holland in 1543, 1544, and 1549, see table 6, p. 89; for the subseqent renten from 1552 to
1565 (15 issues), with interest rates alternating between 6.25 and 8.33 per cent, see table 7, p. 94.
4 R. Ehrenberg, Capital and Finance in the Age of the Renaissance:A Study of the Fuggers and Their
Connections,trans, from the German by H. M. Lucas (New York, 1928; repr. New York, 1963), pp.
542 John H. Munro
'age of the Fuggers and [then] of the Genoese was one of spectacular
growth in public finances'.1 In 1608, a second bourse for international
trade in both commodities and securities was established in Amster-
dam, capital of the United Provinces in the northern Netherlands.
Such secondary markets depended in turn upon the adoption in the
Habsburg Netherlands between 1537 and 1543 of fully fledged negoti-
ability: legal sanctions to protect the property rights of third-party
creditors (assignees) and to permit discounting of bills without running
afoul of the usury laws.
*****
248-80.
l Van der Wee, 'Monetary, Credit, and Banking Systems', pp. 375-6; see also H. Van der Wee,
'European Banking in the Middle Ages and Early Modem Period (1476-1789)', in A History of Euro-
pean Banking, 2nd ed., ed. H. Van der Wee and G. Kurgan-Van Hentenrijk (Antwerp, 2000), pp.
152-80.
2 See, esp., R. de Roover, 'Le contrat de change depuis la fin du treizieme siecle jusqu'au debut du
dix-septieme', Revue beige de philologie et d'histoire, xxv (1946-7), 111-28; devolution de la lettre de
change, XlVe-XVllle siecles (Paris, 1953), pp. 1-76; 'New Interpretations of the History of Banking',
Journal of WorldHistory, ii (1954), 38-76; and 'Early Banking before 1500 and the Development of
Capitalism', Review of the History of Banking, iv (1971), 1-16.
3 R. de Roover, The Rise and Decline of the Medici Bank, 1397-1494(Cambridge, MA, 1963), p. 13. See
also J. H. Munro, 'Bullionism and the Bill of Exchange in England, 1272-1663: A Study in Monetary
Management and Popular Prejudice', in The Dawn of Modern Banking, ed. Center for Medieval and
Renaissance Studies, UCLA (New Haven, 1979), pp. 169-240.
4 For examples, see de Roover, Money, Banking, and Creditin Mediaeval Bruges,pp. 56, 72.
The Medieval Originsof the Financial Revolution 543
Manipulation in the Middle Ages: The Case of Louis de Male, Count of Flanders', Transactionsof the
Royal HistoricalSociety, 4th ser., xxxi (1949), 115-27.
1 Statutes of the Realm, i. 219. Earlier, in April 1275, the Statute of Westminster (3 Edwardi I, c. 15)
had banned the importation of all suspected counterfeit or other defective coins, requiring them to be
turned over and sold for their bullion contents to the office of the Royal Exchanger.
2 For an explanation of all these ordinances and statutes, see Munro, 'Bullionism and the Bill of
Exchange', pp. 187-205, 216-39 (tables, with a chronological list).
3 On this see Munro, Wool, Cloth, and Gold, pp. 11-64, 181-6; J. H. Munro, 'Billon - Billoen - Billio:
From Bullion to Base Coinage', Belgisch tijdschriftvoorfilologie en geschiedenislRevue beigede philologie
et d'histoire,lii (1974), 293-305.
4 TudorEconomicDocuments,ed. R. Tawney and E. Power (London, 1924), iii. 362 (doc. no. III.5).
546 John H. Munro
1 See E. Kerridge, Trade and Banking in Early Modern England (Manchester, 1988), p. 72. See also:
M. Postan, 'Credit in Medieval Trade', Economic History Review, 1st ser., i (1928), 234-61; M.
Postan, 'Private Financial Instruments in Medieval England', Vierteljahrschrift fur Sozial- und Wirt-
schaftsgeschichte,xxiii (1930), 26-75; F- Beutel, 'The Development of Negotiable Instruments in Early
English Law', Harvard Law Review, li (1938), 813-45; J- M. Holden, The History of Negotiable
Instrumentsin English Law (London, 1955), pp. 11-36.
2 Schnapper, Les rentesau XIVe siecle,pp. 284-5.
3 J. Kirshner, 'Encumbering Private Claims to Public Debt in Renaissance Florence', in The Growth
of the Bank as Institution and the Development of Money-Business Law, ed. V. Piergiovanni (Berlin,
I993)> PP- 19-75 (quotations from pp. 26, 29).
4 Kirshner, 'Encumbering Private Claims', pp. 58, 29, respectively; see also Molho, FlorentinePublic
Finances, pp. 141-52.
5 Heers, Genesau XVe siecle,pp. 97-110, 147-55, 180-1.
The Medieval Originsof the Financial Revolution 547
The first major step, though only a step, towards modern negotiability
took place in supposedly backward fifteenth-century England: in the
verdict of a London law court (1436) concerning the transfer of a
'bearer' bill of exchange. Strongly influencing the verdict were English
mercantile practices and related legal institutions that developed from
the thirteenth century in response to a third set of financial impedi-
ments: those that the Crown imposed upon money-changing and thus
deposit banking. As Raymond Bogaert contends, deposit banking with
lending developed in Greece during the early fourth century bc from
the activities of professional money-changers, known as trapezitesand
goldsmiths, known as argyropates (L. argentarius), who exchanged
'foreign' for domestic coins. The transition from money-changer and
coin dealer to banker is well known. Because money-changers and
goldsmiths had to be able to safeguard their valuable inventories, many
also offered the additional service of safeguarding the moneys, precious
metals, and valuables of their mercantile clients. They soon learned
that, by maintaining a sufficiently high reserve ratio (usually a third),
they could safely lend out the remainder, in short-term interest-bearing
loans. They could also allow clients who maintained deposit accounts
to make transfer payments, on verbal or by written instructions. By the
third century bc, Athenian bankers routinely provided giro transfers,
written orders of payment, and, in effect, cheques (documented by 254
bc).1 Such explanations for the role of money-changers in the origins
of medieval Italian deposit and transfer banking are familiar from the
works of de Roover, confirmed recently by Reinhold Mueller and Van
der Wee.2 From the mid- twelfth century in northern Italy - in Genoa,
and then in Lombard towns - money-changers were serving as private
bankers, in the same fashion, even if they had to obtain government
licences to practise their trade in exchanging foreign for domestic coins
and in selling bullion to the mints.3 Medieval debasements and fre-
quent scarcities of coinage promoted the growth of deposit banking in
Italy, because bank-transfer payments - monetadi banco, to the Italians
- economized on the use of coin and provided a better guarantee of
full payment, when so many coins were debased, counterfeit, or
clipped. By 1294, deposit and transfer banking can also be found in
Flanders, at Lille; and if Italians then predominated, indigenous Flem-
ish money-changer-bankers had become prominent by the 1360s.4
1 R. Bogaert, 'Banking in the Ancient World', in A History of EuropeanBankings 2nd ed., ed. H. Van
der Wee and G. Kurgan-Van Hentenrijk (Antwerp, 2000), pp. 27-31.
2 See de Roover, Medici Bank, pp. 77-141; de Roover, Money, Credit, and Banking in Mediaeval
Bruges, pp. 198-219, 247-92; Van der Wee, 'European Banking', pp. 74-87; R: Mueller, 'The Role of
Bank Money in Venice, 1300-1500', Studi Veneziani, new series, iii (1979), 47-96; Mueller, Venetian
Money Market, pp. 3-120.
3 On deposit banking and usury, see Noonan, Scholastic Analysis of Usury, pp. 171-5; de Roover,
Medici Bank, pp. 10-20.
4 See de Roover, Money, Credit, and Banking in Mediaeval Bruges, pp. 202-4; Van der Wee, 'Euro-
pean Banking', pp. 74-87; and J. M. Murray, 'Cloth, Banking, and Finance in Medieval Bruges', in
Textiles of the Low Countriesin European Economic History, ed. E. Aerts and J. H. Munro (Leuven,
548 John H. Munro
I99O)>pp. 24-31; E. Aerts, 'Money and Credit: Bruges as a Financial Centre', in Bruges and Europe,
ed. V. Vermeersch (Antwerp, 1992), pp. 57-71.
1 See Annals of the Coinage of Great Britain and Its Dependencies:From the Earliest Period of Authentic
History to the Reign of Victoria,ed. R. Ruding (London, 1840), ii. 138-9.
2 See P. Spufford, Monetary Problems and Policies in the Burgundian Netherlands, 1433-96 (Leiden,
I97O)>PP- i-io> 17-28, 31-46, 150-8; Munro, Wool, Cloth, and Gold, pp. 93-126.
3 De Roover, Money, Banking, and Credit in Mediaeval Bruges, pp. 236-46, 331-52. See also H. Van
der Wee, The Growthof the AntwerpMarket and the EuropeanEconomy, Fourteenth-SixteenthCenturies
(The Hague, 1963), ii. 85-7, 105-9, 355-8; Van der Wee, 'Monetary, Credit, and Banking Systems',
pp. 302, 312,323-4, 361-2.
4 De Roover, Money, Banking, and Creditin Mediaeval Bruges, p. 339 n. 51.
5 Ibid., pp. 339-40.
6 See Van der Wee, 'Monetary, Credit, and Banking Systems', pp. 323-4; for a similar verdict, see de
Roover, Money, Banking, and Creditin Mediaeval Bruges, pp. 340-1,351.
The Medieval Originsof the Financial Revolution 549
1 N. S. B. Gras, The Early English Customs System: A Documentary Study of the Institutional and
EconomicHistory of the Customsfrom the Thirteenthto the Sixteenth Century (Cambridge, MA, 1918),
pp. 260-1; Munimenta GildhallaeLondoniensis:LiberAlbus, Liber Custumarumet LiberHorn, ed. H. T.
Riley (London, 1859-62), II. i: Liber Custumarum,pp. 207-8; and Foedera, conventiones,literae, et acta
by EdwardiII, 8 Aug. 1328).
publica,ed. T. Rymer(London,1709-12),II. ii. 747-8 (reconfirmation
2 27 EdwardiIII stat. 2, in Statutesof theRealm,i. 332-43-
3 See Postan, 'PrivateFinancialInstruments',pp. 33-54;Nightingale,'MonetaryContractionand
MercantileCredit',pp. 560-7;J. H. Munro,'The InternationalLaw Merchantand the Evolutionof
Negotiable Credit in Late-MedievalEnglandand the Low Countries',in Banchipubblici,banchi
privati e monti dipietd nelVEuropapreindustriale:Amministrazione,tecnicheoperativee ruolieconomici,ed.
D. Puncuhand G. Felloni (Genoa, 1991), i. 49-80; Munro,'English"Backwardness" and Financial
Innovations',pp. 129-50.
4 For the textsof this case, see SelectCasesConcerning
theLawMerchant,ed. H. Hall (London,1908-
32), iii: 117-19(Latinand French,withEnglishtranslations).
552 John H. Munro
1 See J. S. Rogers, The Early History of the Law of Bills and Notes: A Study of the Origins of Anglo-
AmericanCommercial Law (Cambridge,1995), pp. xi-xiv, 1-11, 44-68, who presentsthese counter-
argumentsto refutethe significanceof Burtonv Davy. See furtherpoints in my rebuttalin Munro,
'English"Backwardness" and FinancialInnovations',pp. 145-50.For the legalproceduresto be fol-
lowedwith dishonouredor non-acceptedbills, see de Roover,Lettrede change,pp. 92-3; de Roover,
Medici Bank, p. 140; and G. Malynes, Consuetudovel Lex Mercatoria, or The Ancient Law Merchant
(London,1622), republishedin facsimileby WalterJohnsonandTheatrumOrbisTerrarum(Amster-
dam, 1979),pp. 398-404.
2 For an exaggeratedclaimthat Burtonv Davy did establishthe conditionsof modernnegotiability,
see Beutal,'NegotiableInstruments',p. 831;and for a moremodifiedviewthatBurtonv Davymet at
least two of the conditionsfor modernnegotiability,especiallythe abilityof the personholdingthe
bill protemporeto sue upon it, see Holden,Negotiable
Instruments,
pp. 24-5.
The Medieval Originsof the Financial Revolution 553
The real importance of Burton v Davy was its indirect but substantial
influence on the first European state legislation to establish the judicial
conditions for modern negotiability: in three major ordinances passed
by the States General of the Habsburg Netherlands, between 1537 and
1543. The route, however, was circuitous, possibly by way of Liibeck,
the hub of the Hanseatic League, whose merchants traded extensively
with London, Bruges, and Antwerp. In May I499> Liibeck's law-mer-
chant court rendered a verdict concerning the rights of the bearer in a
disputed bill in a case virtually identical to Burton v Davy; and in
March 1502, it confirmed the verdict.3 Five years later, in 1507, a law-
merchant court in Antwerp, after hearing a case involving a dis-
honoured bearer bill, known as letterobligatory,issued a turba or judge-
ment that, in Van der Wee's words, 'granted the bearer of writings
obligatory the same rights as the original creditor [payee] with regard
to the prosecution of an insolvent debtor'. Previously, Antwerp mer-
chants seeking to enforce payments on debts assigned to third parties
had been obliged, in their lawsuits, 'to obtain an explicit authority
from the original creditor', revocable at any time.4 The text, however,
does not indicate that the bearer had superiorrights, over those of the
payee, in suing for payment, a 'holder in due-course' condition for
modern negotiability; and of course the same observation may be made
about Burton v Davy. If the London verdict was not cited as a pre-
cedent in the Antwerp court, the plaintiff, an English cloth merchant,
should have been familiar with its provisions. The English cloth trade,
it should be noted, had played by far the most crucial role in the rise of
the Antwerp market in the fifteenth century; and by the early sixteenth
century, Antwerp (1511-15) was receiving about 70 per cent of all
1 See esp. A. Hanham, The Celys and Their World:An English Merchant Family of the FifteenthCentury
(Cambridge, 1985), pp. 187-202: with bills or drafts drawn on the Bruges wisselaers(money-changers)
Collard De May and John Newenton, in 1477-9; and various documents in The Cely Letters,1472-88,
ed. A. Hanham (London, 1975).
2 See Select Pleas in the Court of Admiralty, ed. R. Marsden (London, 1894-7), i. lvii, 38-41 (doc. 8),
62-3 (doc. 26); and ii. 73, 127; Beutel, 'Negotiable Instruments', pp. 833-4; Rogers, Early History of
the Law of Bills, pp. 54-68.
3 See P. Jeannin, 'De l'arithmetique commerciale a la pratique bancaire: l'escompte aux XVIe-XVII°
siecles', in Puncuh and Felloni, Banchi pubblici, banchiprivati, i. 95-116, and M. North, 'Banking and
Credit in Northern Germany in the Fifteenth and Sixteenth Centuries', in ibid., ii. 809-26.
4 Quotations from Van der Wee, 'Money, Credit, and Banking Systems', p. 325. See also H. Van der
Wee, 'Anvers et les innovations de la technique flnanciere aux XVIe et XVIIe siecles', Annales:
Economies,Societes, Civilisations, xxii (1967), 1067-89.
554 John H. Munro
1 See Van der Wee, Antwerp Market, ii. 45-9, 67-9, 73-83, 119-36, 183-6, 342-4; Munro, 'English
"Backwardness" and Financial Innovations', pp. 113-20, iso-6.
- Usher, Early History of DepositBanking, pp. 98-9.
3 For the text, see Recueildes ordonnancesdes Pays Bas, deuxiemeserie, i$o6-ijoo, ed. C. Laurent, M. J.
Lameere, and H. Simont (Brussels, 1907), iv. 15-17, 34-5, 330. See analyses in Van der Wee, Antwerp
Market, ii. 340-9; Van der Wee, 'Money, Credit, and Banking Systems', pp. 322-32.
4 Van der Wee, Growthof the AntwerpMarket, ii. 352: the ordinance was accompanied by an imperial
edict of Charles V.
5 Statute 37 Henrici VIII, c. 9 (1545) and Statute 5-6 Edwardi VI c. 20, in Statutes of the Realm, iii.
996; iv: 1. 155.
6 13 Elizabeth I, c. 8 (1571), in Statutes of the Realm, iv: 1. 542. Subsequently, with a gradual fall in the
real rate of interest, the 'usury ceiling' was lowered to 8 per cent in 1623, to 6 per cent in 1660, and
finally to 5 per cent in 1713, remaining at that low level until 1854: Richards, Early History of Banking
in England, pp. 19-20.
The Medieval Originsof the Financial Revolution 555
face value, to compensate for the interest forgone between the date of
sale and maturity. To discount bills openly would previously have ren-
dered the seller of the note subject to prosecution for usury, and would
have rendered the transaction unenforceable at law. Van der Wee, who
discovered the first documented example of discounting in Europe,
dated 1536, in an English merchant's letter obligatory drawn on the
Antwerp market, demonstrates that discounting evolved more slowly
than might have been expected. It became widespread only after
formal written assignments by endorsement on the back of bills be-
came customary in the late sixteenth century. According to Van der
Wee, endorsements brought the 'definitive solution', for they 'excluded
any arguments about the identification of the assigning debtor' and
thereby ensured that 'liability was no longer limited to the latter, but
extended to all previous endorsers'; and, furthermore, many preferred
endorsed bills to bearer bills, because the latter could readily fall into
the wrong hands, through loss or theft, and be cashed.1
In 1608, Antwerp's magistrates published an official compilation of
commercial customs, known as the Costuymen,which included all the
provisions on negotiability, endorsement, and discount that had
developed in the Netherlands over the sixteenth century.2 That influ-
enced the composition of the even more famous treatise Consuetudovel
Lex Mercatoria, or The Ancient Law Merchant, which Gerard Malynes
published in London, in 1622. In describing the commerce of the Mer-
chants Adventurers in Antwerp, Amsterdam, and Hamburg, he states
that they may use a bearer bill to 'buy other commodities therewith, as
if it were with readie money, the time onely considered'; or, if a
merchant 'will have readie money for these Bills, he may sell them to
other merchants that are moneyed men, and abating for the interest for
the time, and ... according to the rate, as they can agree'. In England,
however, 'this laudable custome [of discounting] is not practised'.3
Surprisingly, Malynes mentions endorsement only obliquely, a subject
that the English writer John Marius treats in great detail, along with
discounting and other aspects of negotiability, in his 1651 treatise on
Advice ConcerningBills of Exchange, which also analyses the use of 'in-
land bills' between English cities. According to Holden, many of
Marius's commentaries were applied in common law proceedings.4 In
1628, the chief justice, Sir Edward Coke, had declared that the law
merchant 'is part of the lawes of this realme'.5 Holden also contends
1 Quotation in Van der Wee, 'Antwerp Market', ii. 348, and p. 350, for the discounted English bill
(Kitson papers); see also pp. 346-53; Van der Wee, 'European Banking', pp. 185-95.
2 Van der Wee, 'Monetary, Credit, and Banking Systems', pp. 327-31.
3 Malynes, Lex Mercatoria,p. 99. See also Van der Wee, 'European Banking', pp. 180-97, 243-7.
4 See Malynes, Lex Mercatoria,p. 103, concerning assignments of 'Billes Obligatorie', when 'the law-
full assignee shall bee of Record, and registered also upon the Bill'. See also, Holden, Negotiable
Instruments,pp. 42-6, 73-80; Richards, Early History of Banking, pp. 44-7, esp. p. 45 n. 1, citing Chief
Justice Sir John Holt's comment in Wardv Evans (1702) that Marius's Advice is 'a very good book'.
5 Kerridge, Tradeand Banking, p. 72.
556 John H. Munro
1 Quotations from Holden, NegotiableInstruments,pp. 33, 36; see also pp. 73-80; Rogers, Early History
of the Law of Bills, pp. 125-50.
2 Holden, NegotiableInstruments,pp. 80-3.
3 Quotations in Rogers, Early History of the Law of Bills, pp. 183-4. See Malynes, Lex Mercatoria,p.
101: 'The Civile Law, and the Law Merchant, do require that the Bill shall declare for what the debt
groweth, either for Merchandize, or for Money, or any other lawfull consideration.'
4 'An Act for Giving Like Remedy Upon Promissory Notes as is Now Used Upon Bills of Exchange.
3^4 Anne c. 8 (1704), in Statutes of the Realm, viii. 355-6. See also, Holden, Negotiable Instruments,
pp. 55-6, 79-80; Rogers, Early History of the Law of Bills, pp. 177-86.
The Medieval Originsof the Financial Revolution 557
Weir, 'The Financial Market and Government Debt Policy in France, 1746-93', Journal of Economic
History, lii (1992), 1-39; Homer and Sylla, InterestRates, pp. 169-73 (and table 15, p. 172).
1 Hart, 'The Devil or the Dutch', pp. 46-9.
The Medieval Originsof the Financial Revolution 559
the new Consols, irredeemable until 1757, received 3.5 per cent from
Christmas 1750 and 3.0 per cent from Christmas 1757, at which time
the 4.0 per cent South Sea Stock was also converted.1 Consols were
fully transferable and negotiable, marketed on both the London Stock
Exchange and the Amsterdam bourse; along with Bank of England and
East India Company stock, they were the major securities traded on
the London Stock Exchange in the late eighteenth and early nineteenth
centuries. Though Consols were both perpetual but redeemable an-
nuities, thus identical to Dutch losrenten, their instant and long-
enduring popular success was attributable to the firmly held belief,
abroad as well as at home, that the government would not exercise its
option to redeem them. In fact, these Consols were not called until
1888, when the chancellor of the exchequer, Sir Edward Goschen,
taking advantage of a sustained fall in interest rates, converted them
into 2.75 per cent Consols, with the provision that they be converted
into 2.5 per cent Consols in 1903.2 Unchanged to this day, they con-
tinue to trade on the London Stock Exchange, with a value of £53.31
on 24 June 2003, and thus a yield of 4.69 per cent (the coupon divided
by the market price).
The result of the financial revolution was a remarkably stable and
continuously effective form of public finance, which achieved an un-
precedented reduction in the costs of government borrowing: from 14
per cent in 1693 to 3 per cent in 1757. Public finances based on rentes
had always been cheaper to maintain than interest-bearing loans, and
perpetual rentes cheaper than life rentes. Nor did perpetual rentes
permanently alienate the government's revenues as long as the
government had the right to redeem them at par. Many European
governments issued rentesrather than bonds with stipulated redemp-
tion dates because they were relieved of the obligation to redeem their
debts and thus to refinance them. They could redeem them when
changes in interest rates made it advantageous to do so.
Despite the seemingly low yields, both the affluent and those of
modest means came to see rentes or annuities as an attractive invest-
ment, readily available and readily negotiable. That Consols, or rentes
in general, were more marketable, with lower transaction costs, may
explain why so many preferred holding them to higher interest-bearing
loans, bonds, or debentures. For that reason, Consols and other nego-
tiable annuities provided the most important form of collateral for
1 See Dickson, Financial Revolution in England, pp. 39-75,90-121, 129-56, 177-98, 204-45, 522-33;
P. G. M. Dickson and J. Sperling, 'War Finance, 1689-1714', in The New CambridgeModern History:
VI: The Rise of Great Britain and Russia, 1699-1725,ed. J. S. Bromley (Cambridge, 1970), pp. 284-315;
E. V. Morgan and W. A. Thomas, The Stock Exchange:Its Historyand Functions (London, 1962), pp.
11-57; Neal, Rise of Financial Capitalism,pp. 14-19.
2 See Dickson, Financial Revolution,pp. 486-520; Morgan and Thomas, Stock Exchange, pp. 42-78; R.
Michie, The London Stock Exchange: A History (Oxford, 1999), pp. 1-69; C. K. Harley, 'Goschen's
Conversion of the National Debt and the Yield on Consols', EconomicHistory Review, 2nd ser., xxix
(1976), 101-6.
560 John H. Munro
1 Long-term interest rates consistently had a downward trend. See Homer and Sylla, InterestRates,
pp. 89-143, especially table n (pp. 137-8), and chart 2 (p. 140).
2 D. North and B. Weingast, 'Constitutions and Commitment: The Evolution of Institutional Public
Choice in Seventeenth-Century England', Journal of EconomicHistory, xlix (1989), 803-32.
3 G. Harkness, John Calvin: The Man and His Ethics (New York, 1958), p. 201; R. Bainton, The
Reformationof the SixteenthCentury(Boston, 1952), pp. 247-50.
The Medieval Originsof the Financial Revolution 561
1 Cited in R. Tawney, Religion and the Rise of Capitalism:A Historical Study (London, 1926), p. 94;
and Noonan, ScholasticAnalysis of Usury, pp. 365-7.
2 Parker, 'Emergence of Modern Finance', p. 538.
3 T. Wilson, A Discourseupon Usury by Way of Dialogue and Orations [1572], with an historical intro-
duction by R. H. Tawney (New York, 1925), pp. 106-34, esp. P- 117; Tawney, Religionand the Rise of
Capitalism, pp. 9i-ii5> 132-9, 178-89.
4 Statute 12 Charles II c. 13, in Statutes of the Realm, v. 327-8. See also Richards, Early History of
Banking, p. 17; Coquillette, 'From Usury to the Bank of England', pp. 94-9.
5 J. Schumpeter, Imperialismand Social Classes: Two Essays (New York, 1955), p. 65.
562 John H. Munro
Universityof Toronto