The greater complexity of the goods and services exchanged in Europe during the thirteenth century naturally evoked major changes in commercial techniques and credit mechanisms. Until the eleventh century most borrowing was by the rural nobility and kings. ‘There were practically no financial mechanisms to facilitate the transformation of saving into investment.’21 But the need for credit was much broader in the urban economy, given the need for orders in advance for goods and the costs of ships to transport them. Deferred credit thus became normal, furthering both expansion of consumption and pooling resources through investment.
Church doctrine hindered investment. The term ‘usury’* was applied in the Deuteronomic sense of any guaranteed interest on a loan, whatever the circumstances, but it was applied before the late twelfth century only to loans between Christians. The Jews were still a major source of commercial credit in the twelfth century, but persecutions of them during the early crusades were accelerated by royal policies in France and England, and they gradually lost their importance.
The Jews were replaced by the growth of moneylending among Christians. Various south Europeans extended casual credit, notably the ‘Cahorsins’ (named after Cahors in southern France) and ‘Lombards’, who were involved mainly in small-scale operations, often through pawnbroking. As they were joined by natives of the cities in which they operated, ‘Lombard’ and ‘Cahorsin’ came to mean anyone who openly charged interest on loans. Some princes began establishing legal rates of interest that they might charge: 2 pence per pound per week uncompounded, or 43.5 per cent annually, was common in the north. North Italian bankers in the early thirteenth century were charging 20 per cent per year and up, on both commercial and personal loans. At that time there were perhaps 150-200 Lombards at the fairs of Champagne and a comparable number at Paris, probably the same persons. Philip IV in 1294 confined the Cahorsins and Lombards to four cities and the Champagne fairs, then levied taxes and forced loans from them and confiscated their property, using usury as the pretext. Many of them thus emigrated to Bruges and Avignon, which were more receptive to them and lay beyond French royal control.22
The commenda contract appeared in the tenth century, and somewhat later the colleganzia, the version of it used at Venice. In its pure form it involved two partners investing unequal amounts of money in an enterprise but sharing profits and losses equally, since the lesser investor was the ‘working partner’ who accompanied the goods and did the actual work. These arrangements were not considered usurious; for, although guaranteed interest was forbidden, the Church was satisfied when there was a chance of loss as well as gain—for example, through loss of a cargo.
There were hundreds of such partnerships. They were initially made for short terms, usually for a single voyage, and involved a few persons. The more investing partners who could be found, however, the greater were the potential profits and the more diffused the risks. Thus in the thirteenth century some businessmen who had international connections developed partnerships that amounted to joint-stock companies. They were made for a long term, usually several years, after which time the arrangement could be liquidated or
A. Derville, L'Economie frangaise au Moyen age (Paris, 1995), 201.
Renewed. These ‘super-companies’41 are associated with the Italian interior cities, whose business linked the Mediterranean towns with north-western Europe through participation in the Champagne fairs; then, after the beginning of direct voyages from the Mediterranean to the North Sea ports in the late thirteenth century, they maintained resident colonies in the major cities. Since the greatest banks were based on merchant companies, a strong basis in exchange of goods was a prologue to banking. Much of the impulse for banking came from papal business, especially at Siena and Florence.
Most of the companies had investments mainly from powerful families and their clients (the corpo or ‘body’) during the twelfth century, but in the thirteenth they were transformed by taking deposits (the sopracorpo) from outsiders. When the Peruzzi Company was reorganized in 1300, 60 per cent of its capital was held by seven members of the Peruzzi family, the rest by other wealthy Florentines. The ‘super-companies’ bought wool, grain, oil, wine, and other necessities, sometimes paying the growers years in advance and thus getting an advantage over the competition. The Florentine companies controlled a huge grain trade from southern Italy, involving much more than was needed to feed Florence, and accordingly re-exported to other grain-poor regions of the Mediterranean. Southern Italy became a major market for cloth manufactured in Florence. The three greatest Florentine companies, the Bardi, Peruzzi, and Acciaiuoli, invested in overseas trade and merchandising at the fairs, but all except the Acciaiuoli also made loans to north European princes. Their security for the loan consisted of commercial concessions, such as the right to collect taxes and tolls and operate mints, export licences and monopolies. Before the fourteenth century most merchants accompanied their goods in transit or sent trusted agents, but the changes in commercial techniques made it possible for businessmen to become more sedentary.
The exchange of goods also made movement between coinages very important. Before the fourteenth century money-changing was more often done as a sideline by the great companies than by independent operators, but by the twelfth century in Genoa and other Italian cities money-changers were accepting deposits repayable on demand. Obligations were often handled simply by making book transfers between the accounts that debtor and creditor had at the same money-changing firm without transferring coin. The exchange banks usually kept about one-third of their deposits on hand to satisfy demand, investing the other two-thirds.
Piacenza, Genoa, Siena, and Florence were the earliest cities to use the contract of exchange, which was the dominant instrument of their transactions until around 1300. Exchange contracts were necessary for northerners at the fairs to buy spices from Italians and for Italians to buy northern wool and cloth. They could also disguise loans by concealing the interest in the exchange rate, which satisfied the Church’s criterion of risk, since it could move up or down. Occasionally interest was stated openly. A Genoese letter of exchange of 1252 was payable at Troyes in Champagne, then two months later repayable at Genoa, in both cases at a stated rate; the total interest in three months was 47.06 per cent.24
The successor of the exchange contract was the bill of exchange. The earliest surviving example is a Genoese notarial contract of the late twelfth century. Most users were Italians, although merchants from all regions except Germany and Scandinavia were drawn into the network through the Champagne fairs. The borrower could buy a bill that was repayable in another coin at a stated interval in the future, most often six months, and in another place, most often where the coin in which the bill would be paid was legal tender. The bill was addressed to a business partner or creditor of the buyer, and payment was made through a bank. Interest was concealed in the exchange rate, which could change unpredictably and thus involved risk. The bill was a very flexible instrument, for it could be used to lend money, to pay for goods, and also simply to speculate on the exchange rate.
In the late thirteenth century the companies at the Champagne fairs were permitting overdrafts on accounts, another means of extending credit and an important foundation of banking. By 1330 merchants doing business in the leading centres of international exchange, such as Florence, Barcelona, Avignon, and Bruges, had what we would call bank accounts at the local exchange. Such credit instruments, as fiduciary money, extended the available supply of
Case cited by Derville, VEconomie frangaise, 203.
Money even when, as happened in the fourteenth century, there was a dearth of coin.
The Italians pioneered other innovations in the thirteenth century that were in common use by 1330, including cheques and insurance contracts. Double-entry bookkeeping originated in Italy in the late thirteenth century: parallel columns, one each for assets and debits, were used instead of separate lists or ledgers for the two.
World History
