Antwerp, Netherlands, 1560 – Ludovico Guicciardini sets pen to paper and reflects on the rapid growth of his city in recent years. He finds much to be pleased with. The city is richer and more populous than ever before. Traders of all sorts are flocking to the expanding market at Antwerp. The opportunity for unrestricted trade is one large part of the reason.
The surge of growth started with the great annual fairs of the region, two of which now have permanent sites known as Exchanges. In these Exchanges, sellers and buyers buy and sell as they choose. The government sets no rules on business transactions and collects no tax.
The government does provide security against theft, assault, and broken contracts.
The flow of money from so many visiting foreign traders for food, shelter, entertainment, and personal comforts, increases the wealth of local merchants, craftsmen, hoteliers, and enterprises of all sorts, including government.
The second great reason began about a hundred years earlier when Portuguese sailors began shipping from the Indies silks, spices, metals, and rare minerals by the boatload. The port city of Antwerp was a naturally convenient depot. The advent of transport-by-sea as opposed to the long overland route changed everything. Goods once hard-to-get and costly, were now abundant and reasonably priced.
The city was booming. Manufactures and Artisans had so much business they were selling every-day items before the items were produced. It wasn’t quite mass-production, but it was a forerunner. Rising tides of wealth lifted everyone’s boat. The rich got richer and so did the poor.
Sellers and buyers came from all over the civilized world. Some from as far away as the new world. Ludovico writes that there were almost as many foreigners in Antwerp as locals, nearly doubling the population of forty years earlier. Many of the newcomers became permanent residents. This created an international atmosphere. Fluency in multiple languages was common, as was enthusiasm for the latest styles of foreign clothing, cuisine, and manners, and “because of the great numbers of foreigners, one always has news of the whole world”.
The swirl of free-market economic activity turned 1560 Antwerp into a city unlike any seen before, a cosmopolitan city, much like present day New York, London, Paris, Singapore, and Tokyo.
Overall, Ludovico Guicciardini was very proud of his hometown. He spends several pages just listing the dazzling array of goods, services, and opportunities available in the Antwerp of 1560. All was good except for one development that troubled him - a new twist to an old practice – usury. Lending money at interest was accepted, as necessary. The usual rate was 6½%. Lately, rates had risen as high as 12%. Ludovico worried about these rising rates, but it was a different development of usury that worried him more.
In the old days of the trade fairs, money was exchanged for goods directly. As the size of the trades increased, so too did the need for borrowing money. The Exchanges provided credit for large volume trades through “deposits” made with borrowed money. More and more traders needed larger and larger amounts of money – right now!
That’s what kept interest rates rising.
There were two main Exchanges in 1560 Antwerp:
The English Exchange, which dealt primarily in commodities; and The New Exchange, which dealt primarily in currency trading, so many crowns for so many ducats – just as today, so many dollars will buy so many euros.
The New Exchange was increasingly useful and necessary because of the increasing number of foreigners trading in Antwerp. A side effect of all this trade in money was
that buying and selling money began to replace buying and
selling goods.
Guicciardini wasn’t worried about the use of usury. He saw it as needed, useful, and perfectly alright - except that the rates were too damned high. (the modern definition of usury is not “lending money at interest”, but “leading money at a rate higher than proscribed by law”.
This is a fuzzy definition that makes a once clear word vague). Lodovico’s real worry was the easy wealth that came from making so much money through nothing but usury.
Too many of the rich were using money-lending as
a opportunity to avoid, labor, trouble, and risk.
Usury was becoming no longer a tool, but an unbalanced profession.
“Formerly gentlemen of means invested their money in land, properties, cultivation, and livestock, by which many were employed, and the country made bountiful.
The merchants sent out and brought in commodities in abundance and suppled them where they saw need required it, and in this great and abundant trade many men of all kinds were given gainful employment.
Thus, the land was filled with plenty and the cities supplied with every kind of merchandise.
Now too much land lies uncultivated, and without sufficient livestock a condition which results in scarcity of victuals and sometimes misery to the public. As for the merchants, the country is no longer sufficiently suppled. Scarcity causes prices to rise, all of which redounds to the damage of public welfare through disorders and bankruptcies”.
Ludovico was troubled by the trend of usury as a career in his Antwerp. He wondered if so many were solely in the business of usury, and so few were in the business of production, then who will borrow money when eventually there’s so little produced to buy.
He couldn’t imagine how a city comprised of nothing but money-lenders could survive.
Francois-Antoine Bossuet’s 1833 painting –
The Old Fish Market in Antwerp. Royal Museum of Fine Arts Antwerp (KMSKA) - Though painted 373 later
it portrays the Antwerp of 1560.