Debt (53 page)

John’s successor, Henry III (1216–1272 ad), was in the habit of turning over Jewish victims to his brother the Earl of Cornwall, so that, as another chronicler put it, “those whom one brother had flayed, the other might embowel.”
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Such stories about the extraction of Jewish teeth, skin, and intestines are, I think, important to bear in mind when thinking about Shakespeare’s imaginary Merchant of Venice demanding his “pound of flesh.”
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It all seems to have been a bit of a guilty projection of terrors that Jews had never really visited on Christians, but that had been directed the other way around.

The terror inflicted by kings carried in it a peculiar element of identification: the persecutions and appropriations were an extension of the logic whereby kings effectively treated debts owed to Jews as ultimately owed to themselves, even setting up a branch of the Treasury (“the Exchequer of the Jews”) to manage them.
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This was of course much in keeping with the popular English impression of their kings as themselves a group of rapacious Norman foreigners. But it also gave the kings the opportunity to periodically play the populist card, dramatically snubbing or humiliating their Jewish financiers, turning a blind eye or even encouraging pogroms by townsfolk who chose to take the Exception of Saint Ambrose literally, and treat moneylenders as enemies of Christ who could be murdered in cold blood. Particularly gruesome massacres occurred in Norwich in 1144 ad, and in France, in Blois in 1171. Before long, as Norman Cohn put it, “what had once been a flourishing Jewish culture had turned into a terrorized society locked in perpetual warfare with the greater society around it.”
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One mustn’t exaggerate the Jewish role in lending. Most Jews had nothing to do with the business, and those who did were typically bit players, making minor loans of grain or cloth for a return in kind. Others weren’t even really Jews. Already in the 1190s, preachers were complaining about lords who would work hand in glove with Christian moneylenders claiming they were “our Jews”—and thus under their special protection.
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By the 1100s, most Jewish moneylenders had long since been displaced by Lombards (from Northern Italy) and Cahorsins (from the French town of Cahors)—who established themselves across Western Europe, and became notorious rural usurers.
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The rise of rural usury was itself a sign of a growing free peasantry (there had been no point in making loans to serfs, since they had nothing to repossess). It accompanied the rise of commercial farming, urban craft guilds, and the “commercial revolution” of the High Middle Ages, all of which finally brought Western Europe to a level of economic activity comparable to that long since considered normal in other parts of the world. The Church quickly came under considerable popular pressure to do something about the problem, and at first, it did try to tighten the clamps. Existing loopholes in the usury laws were systematically closed, particularly the use of mortgages. These latter began as an expedient: as in Medieval Islam, those determined to dodge the law could simply present the money, claim to be buying the debtor’s house or field, and then “rent” it back to the debtor until the principal was repaid. In the case of a mortgage, the house was in theory not even purchased but pledged as security, but any income from it accrued to the lender. In the eleventh century this became a favorite trick of monasteries. In 1148 it was made illegal: henceforth, all income was to be subtracted from the principal. Similarly, in 1187 merchants were forbidden to charge higher prices when selling on credit—the Church thereby going much further than any school of Islamic law ever had. In 1179 usury was made a mortal sin and usurers were excommunicated and denied Christian burial.
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Before long, new orders of itinerant friars like the Franciscans and Dominicans organized preaching campaigns, traveling town to town, village to village, threatening moneylenders with the loss of their eternal souls if they did not make restitution to their victims.

All this was echoed by a heady intellectual debate in the newly founded universities, not so much as to whether usury was sinful and illegal, but precisely why. Some argued that it was theft of another’s material possessions; others that it constituted a theft of time, charging others for something that belonged only to God. Some held that it embodied the sin of Sloth, since like the Confucians, Catholic thinkers
usually held that a merchant’s profit could only be justified as payment for his labor (i.e., in transporting goods to wherever they were needed), whereas interest accrued even if the lender did nothing at all. Soon the rediscovery of Aristotle, who returned in Arabic translation (and the influence of Muslim sources like Ghazali and Ibn Sina), added new arguments: that treating money as an end in itself defied its true purpose; that charging interest was unnatural, in that it treated mere metal as if it were a living thing that could breed or bear fruit.
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But as the Church authorities soon discovered, when one starts something like this, it’s very hard to keep a lid on it. Soon, new popular religious movements were appearing everywhere, and many took up the same direction so many had in late Antiquity, not only challenging commerce but questioning the very legitimacy of private property. Most were labeled heresies and violently suppressed, but many of the same arguments were taken up amongst the mendicant orders themselves. By the thirteenth century, the great intellectual debate was between the Franciscans and the Dominicans over “apostolic poverty”—basically, over whether Christianity could be reconciled with property of any sort.

At the same time, the revival of Roman law—which, as we’ve seen, began from the assumption of absolute private property—put new intellectual weapons in the hands of those who wished to argue that, at least in the case of commercial loans, usury laws should be relaxed. The great discovery in this case was the notion of
interesse
, which is where our word “interest” originally comes from: a compensation for loss suffered because of late payment.
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The argument soon became that if a merchant made a commercial loan even for some minimal period (say, a month), it was not usurious for him to charge a percentage for each month afterward, since this was a penalty, not rental for the money, and it was justified as compensation for the profit he
would
have made, had he placed it in some profitable investment, as any merchant would ordinarily be expected to do.
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The reader may be wondering how it could have been possible for usury laws to move in two opposite directions simultaneously. The answer would seem to be that politically, the situation in Western Europe was remarkably chaotic. Most kings were weak, their holdings fractured and uncertain; the Continent was a checkerboard of baronies, principalities, urban communes, manors, and church estates. Jurisdictions were constantly being renegotiated—usually by war. Merchant
capitalism of the sort long familiar in the Muslim Near West only really managed to establish itself—quite late, compared with the situation in the rest of the Medieval world—when merchant capitalists managed to secure a political foothold in the independent city-states of northern Italy—most famously, Venice, Florence, Genoa, and Milan—followed by the German cities of the Hanseatic League.
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Italian bankers ultimately managed to free themselves from the threat of expropriation by themselves taking over governments, and by doing so, acquiring their own court systems (capable of enforcing contracts) and even more critically, their own armies.
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What jumps out, in comparison with the Muslim world, are these links of finance, trade, and violence. Whereas Persian and Arab thinkers assumed that the market emerged as an extension of mutual aid, Christians never completely overcame the suspicion that commerce was really an extension of usury, a form of fraud only truly legitimate when directed against one’s mortal enemies. Debt was, indeed, sin—on the part of both parties to the transaction. Competition was essential to the nature of the market, but competition was (usually) nonviolent warfare. There was a reason why, as I’ve already observed, the words for “truck and barter” in almost all European languages were derived from terms meaning “swindle,” “bamboozle,” or “deceive.” Some disdained commerce for that reason. Others embraced it. Few would have denied that the connection was there.

One need only examine the way that Islamic credit instruments—or for that matter, the Islamic ideal of the merchant adventurer—were eventually adopted to see just how intimate this connection really was.

It is often held that the first pioneers of modern banking were the Military Order of the Knights of the Temple of Solomon, commonly known as the Knights Templar. A fighting order of monks, they played a key role in financing the Crusades. Through the Templars, a lord in southern France might take out a mortgage on one of his tenements and receive a “draft” (a bill of exchange, modeled on the Muslim
suftaja
, but written in a secret code) redeemable for cash from the Temple in Jerusalem. In other words, Christians appear to have first adopted Islamic financial techniques to finance attacks against Islam.

The Templars lasted from 1118 to 1307, but they finally went the way of so many Medieval trading minorities: King Phillip IV, deep in debt to the order, turned on them, accusing them of unspeakable crimes; their leaders were tortured and ultimately killed, and their wealth was expropriated.
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Much of the problem was that they lacked a powerful home base. Italian banking houses such as the Bardi, Peruzzi, and Medici did much better. In banking history, the Italians are
most famous for their complex joint-stock organization and for spearheading the use of Islamic-style bills of exchange.
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At first these were simple enough: basically just a form of long-distance money-changing. A merchant could present a certain amount in florins to a banker in Italy and receive a notarized bill registering the equivalent in the international money of account (Carolingian derniers), due in, say, three months’ time, and then after it came due, either he or his agent could cash it for an equivalent amount of local currency in the Champagne fairs, which were both the great yearly commercial emporia, and great financial clearing houses, of the European High Middle Ages. But they quickly morphed into a plethora of new, creative forms, mainly a way of navigating—or even profiting from—the endlessly complicated European currency situation.
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Most of the capital for these banking enterprises derived from the Mediterranean trade in Indian Ocean spices and Eastern luxuries. Yet unlike the Indian Ocean, the Mediterranean was a constant war zone. Venetian galleys doubled as both merchant vessels and warships, replete with cannon and marines, and the differences between trade, crusade, and piracy often depended on the balance of forces at any given moment.
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The same was true on land: where Asian empires tended to separate the sphere of warriors and merchants, in Europe they often overlapped:

The Venetians were only the most famous in this regard. They created a veritable mercantile empire over the course of the eleventh century, seizing islands like Crete and Cyprus and establishing sugar plantations that eventually—anticipating a pattern eventually to become all too familiar in the New World—came to be staffed largely by African slaves.
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Genoa soon followed suit; one of their most lucrative businesses was raiding and trading along the Black Sea to acquire slaves to sell to the Mamluks in Egypt or to work mines leased from
the Turks.
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The Genoese republic was also the inventor of a unique mode of military financing, which might be known as war by subscription, whereby those planning expeditions sold shares to investors in exchange for the rights to an equivalent percentage of the spoils. It was precisely the same galleys, with the same “merchant adventurers” aboard, who would eventually pass through the pillars of Hercules to follow the Atlantic coast to Flanders or the Champagne fairs, carrying cargoes of nutmeg or cayenne, silks and woolen goods—along with the inevitable bills of exchange.
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