How the West Won: The Neglected Story of the Triumph of Modernity (23 page)

The phrase
complex commercial activities
implies the use of credit, some degree of diversification, and little reliance on direct producer-to-consumer transactions. The term
systematic
implies adequate accounting practices.
Indirect
investment in productive activities extends the definition to include bankers and passive stockholders. The definition excludes profit-seeking ventures assembled for short-term activities, such as an elite-backed voyage by privateers or a one-shot trade caravan. It also excludes commerce conducted directly by the state or under extensive
state control (or exclusive license), such as foreign trade in ancient China or tax farming in medieval Europe. Undertakings based on coerced labor such as Roman slave-based industries are excluded too. Most of all, this definition excludes simple commercial transactions—the buying and selling that has gone on among merchants, traders, and the producers of commodities through the centuries around the world.

Capitalism rests on free markets, secure property rights, and free (uncoerced) labor.
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Free markets are needed for firms to enter areas of opportunity, which is precluded when markets are closed or highly regulated by the state. Only if property rights are secure will people invest in pursuit of greater gains, rather than hide, hoard, or consume their wealth. Uncoerced labor is needed so firms can attract motivated workers or dismiss them in response to market conditions. Coerced labor not only lacks motivation but also may be difficult to obtain and hard to get rid of. The capacity to motivate work and the systematic reinvestment of profits account for the immense productivity of capitalism.

Christianity and the Rise of Capitalism

Why have so many scholars overlooked Christianity’s influence on the rise of capitalism? One reason may be that the Bible often condemns greed and wealth (“For the love of money is the root of all evil”).
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Similarly, many early church fathers—endorsing a view prevalent in the Greco-Roman world—believed commerce to be a degrading activity that involves great moral risk: it is difficult to avoid sin in the course of buying and selling.
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But note that the Bible does not directly condemn commerce or merchants. Moreover, soon after the conversion of Constantine (312 BC) the Church ceased to be dominated by ascetics, and attitudes toward commerce began to mellow. Augustine’s writings reflected this change. He taught that wickedness was not inherent in commerce but that, as with any occupation, it was up to the individual to live righteously.
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Augustine also gave legitimacy to free-trade practices when he ruled that price was a function not simply of the seller’s costs but also of the buyer’s desire for the item sold.

By the ninth century the Church was deeply involved in the earliest forms of capitalism.
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Throughout the medieval era the Church was by far the largest landowner in Europe, and its liquid assets and annual income far surpassed not only those of the wealthiest king but probably
those of all of Europe’s nobility added together.
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In addition to receiving many gifts of land, most monastic orders reinvested wealth in buying or reclaiming more land. Many monasteries established fifty or more outposts; by the eleventh century the huge monastic center at Cluny may have had a thousand priories.
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This period of great expansion was motivated in part by population growth and in even greater part by the immense increases in agricultural productivity.
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Until this era the monastic estates were subsistence operations—they produced their own food, drink, and fuel; they made their own cloth and tanned their own leather; they maintained a smithy and often even a pottery. But as productivity increased, they began to specialize in particular crops or products. Some estates produced only wine, others grew grains, some raised cattle or sheep—the Cistercians at Fossanova specialized in raising fine horses.
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The estates would engage in trade to secure their other needs. The rapid increase in agricultural surpluses also encouraged the founding and growth of towns and cities. Indeed, many of the monastic centers themselves became cities. Writing about the great monastery of St. Gall in Switzerland, Christopher Dawson noted that by 820 it was “no longer the simple religious community envisaged by the old monastic rules, but a vast complex of buildings, churches, workshops, store-houses, offices, schools and alms-houses, housing a whole population of dependents, workers and servants like the temple cities of antiquity.”
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When estates grew into small cities and sustained many scattered outposts, and as they became specialized and dependent on trade, three important developments occurred. First, they evolved more sophisticated and far-seeing management. Unlike the nobility, the monasteries did not leave their affairs to the vagaries of inherited leadership. The essential meritocracy built into the orders ensured a succession of talented and dedicated administrators having the capacity to pursue plans of long duration. As Georges Duby put it, the new era forced monastic “administrators to turn their attention to the domestic economy, to reckon up, to handle figures, to calculate profits and losses, to think about ways and means of expanding production.”
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Attendant to specialization was a second development, a shift from a barter to a cash economy. It simply was too complicated and unwieldy for a wine-making estate, say, to barter for its other needs, transporting goods hither and yon. It proved far more efficient to sell wine for cash and
then buy whatever was needed from the most convenient and economical sources. Beginning late in the ninth century, the reliance on cash spread, with the monks in Lucca (near Florence) perhaps the first to adopt a cash economy. The system was well established across Europe when, in 1247, a Franciscan chronicler wrote of his order’s estate in Burgundy that the monks “do not sow or reap, nor do they store anything in barns, but they send wine to Paris, because they have a river right at hand that goes to Paris, and they sell for a good price, from which they get all their food and all of the clothes they wear.”
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The third development was credit. Barter does not lend itself to credit. The value of a future payment of, say, three hundred chickens can easily be disputed: are these to be old hens, roosters, or pullets? But the precise meaning of owing someone two ounces of gold is not in doubt. The great church estates began to extend one another monetary credit. Beyond that, as their incomes mounted, many monasteries and bishops became banks, lending to the nobility at interest. During the eleventh and twelfth centuries Cluny lent large sums at interest to various Burgundian nobles,
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while in 1071 the Bishop of Liège lent the incredible sum of 100 pounds of gold and 175 marks of silver to the Countess of Flanders and subsequently lent 1,300 marks of silver and 3 marks of gold to the Duke of Lower Lorraine. In 1044 the Bishop of Worms lent 20 pounds of gold and a large (unspecified) amount of silver to Emperor Henry III.
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By the thirteenth century, monastic lending often took the form of a
mort-gage
(literally, “dead pledge”), wherein the borrower pledged land as security and the lender collected all income from that land during the term of the loan and did not deduct this income from the amount owed.
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As University of Pennsylvania sociologist Randall Collins noted, the economic system that developed in this era was not merely a sort of proto-capitalism involving only the “institutional preconditions for capitalism, … but a version of the developed characteristics of capitalism itself.” Collins referred to this as “religious capitalism,” adding that the “dynamism of the medieval economy was primarily that of the Church.”
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The Church’s bursting treasuries had another effect. Monks began to leave their fields, hiring a labor force that proved more productive.
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Thus, as “religious capitalism” unfolded, more monks worked as executives and foremen. In this way, the medieval monasteries came to resemble modern firms—well administered and quick to adopt the latest technological advances.
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The arrangement also allowed monks to retire into liturgical work, where they conducted endless paid Masses for souls in purgatory and for living benefactors who wished to improve their fates in the next world. Monks now enjoyed leisure.

The advent of leisure for clergy and other church officials had a profound impact on the rise of the West, for, as will be seen, in the centuries to come church figures played key roles in advancing science, economics, and learning.

The Virtue of Work

Just as important as these economic developments were changes in attitudes toward work that Christianity inspired. Notions of the dignity of labor were incomprehensible in ancient Rome or any other precapitalist society. Traditional societies celebrated consumption while holding work in contempt. In China, for example, the Mandarins grew their fingernails as long as they could (even wearing silver sheaths to protect them from breaking) to make it evident that they did no labor. Capitalism required and encouraged a remarkably different attitude, one that saw work as intrinsically virtuous. Max Weber identified this as the Protestant ethic, so-called because he believed it to be absent from Catholic culture. But Weber was wrong.

Belief in the virtues of work arose centuries before Martin Luther was born.
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Despite the fact that many, perhaps even most, monks and nuns were from the nobility and wealthiest families,
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they honored work not only in theological terms but also by actually doing it. In Randall Collins’s words, they “had the Protestant ethic without Protestantism.”
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In the sixth century Saint Benedict made evident the virtue of work, writing in his famous
Rule
: “Idleness is the enemy of the soul. Therefore the brothers should have specified periods for manual labor as well as prayerful reading.… When they live by the labor of their hands, as our fathers and the apostles did, then they are really monks.”
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In the fourteenth century Walter Hilton, the English Augustinian, wrote, “By the discipline of the physical life we are enabled for spiritual effort.”
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This commitment to manual labor distinguishes Christian asceticism from that found in the other great religious cultures, where piety is associated with rejection of the world and its activities. Eastern holy men, for example, specialized in meditation and lived by charity, whereas most medieval Christian monastics lived by their own labor, sustaining highly
productive estates. Being of the world sustained a healthy concern with economic affairs. Although the Protestant-ethic thesis was wrong, capitalism was indeed linked to a Christian ethic.

Thus it was that, beginning about the ninth century, the growing monastic estates came to resemble “well-organized and stable firms” that pursued “complex commercial activities within a relatively free market,” investing in “productive activities involving a hired workforce,” “guided by anticipated and actual returns.” If this was not capitalism in all its glory, it was certainly close enough.

A Theological Revolution

Just as Augustine’s teachings had marked a shift in Christian attitudes toward commerce, Christian theologians who witnessed the growing economic activities of the great religious orders began to think anew about doctrines concerning profits and interest. In this way, the Church made its peace with early capitalism many centuries before there were any Protestants.

The Church had long opposed charging interest, a position inherited from the Jews. The basis for this doctrine was the Old Testament passage Deuteronomy 23:19–20, which admonishes: “You shall not charge interest on loans to another Israelite, interest on money, interest on provisions, interest on anything that is lent. On loans to a foreigner you may change interest, but on loans to another Israelite you may not change interest.”
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Of course, the prohibition in Deuteronomy did not necessarily bar Christians from charging interest, since they were not Israelites. But the words of Jesus in Luke 6:34 were taken to prohibit interest: “If you lend to those from whom you hope to receive, what credit is that to you? Even sinners lend to sinners, to receive as much again. But love your enemies, do good, and lend, expecting nothing in return.”

Interest on loans was thus defined as the sin of usury. As Benjamin Nelson wrote in his history of usury, as late as the Second Lateran Council in 1139 the Church “declared the unrepentant usurer condemned by the Old and New Testaments alike and, therefore, unworthy of ecclesiastical consolations and Christian burial.”
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But while widely condemned in principle, charging interest was pretty much ignored in practice. That is what allowed some of the great religious houses to venture into banking
late in the ninth century. Likewise, bishops became second only to the nobility in their reliance on borrowed money. Many secured loans from private Italian banks that enjoyed the full approval of the Vatican. Documents from 1215 show that the Papal Court itself had usurers from whom prelates could obtain loans.
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Still, more traditional clergy continued to condemn usury and, more broadly, the pursuit of profit. Augustine may have approved of prices set on a free market, but were there no moral limits to profit margins?

During the thirteenth century Christian theologians declared that profits were morally legitimate. Echoing Augustine, Saint Albertus Magnus proposed that the “just price” is simply what “goods are worth according to the estimation of the market at the time of sale.”
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That is, a price is just if that is what uncoerced buyers are willing to pay. Adam Smith could not have found fault with this definition. Magnus’s student Thomas Aquinas likewise recognized that worth is not really an objective value—“the just price of things is not absolutely definite”—but is a function of the buyer’s desire for the thing purchased and the seller’s willingness or reluctance to sell. Aquinas’s respect for market forces is best revealed by his story about a merchant who brings grain to a country suffering a famine and who knows that other merchants soon will bring much more grain to this area. Is it sinful for him to sell at the prevailing, high market price, or should he inform the buyers that soon more grain will arrive, thus causing the price to decline? Aquinas concluded that this merchant can, in good conscience, keep quiet and sell at the current high price.