SE een Ra - a PERSIE eT Say Rena See pce ea es rete SN EST I a ee ES Se eA NE ALDERMAN STACKS HB 75 W5IESE SEE Se a a aie Bes Se os LP Fias Sb pn I pip! ge in Prado er ns cen 3 seme rie os ee ee ee Oe ee ns pea a ee ee ee Pes ws ae 2 SEES eee Wacdthal sare eee Se et Peers, eer Seas coe Se ee tne ee ae Pim Pe UNE a) ig Peal nes 0 ee eg Pith Sienna Pitan oP — See im Por # E ‘e aN > cp oh Pe Pt Py al Ripe shank Ma Pe Fige Fences Binns eae ese ee SSE ee ee ee ees ae Por ee —— eae ie ee, ss ee ee PF pase ne see — ie ala ST arese as rs ee in ps Pinan Dantes me a ®, PT ee oe eae Se NR ee noe ee SO SO ee ee = es ee eee sent Se a SEs agrhipaoce pipe Spe rs Se ae Fat a he he See EPs Sees = LOU SO ne are I tee ore ee ee ote pire eee —s SE Pe pantie sn ae eee eos - ae a Se Neat 4 3 Fn eS a pots “s ae EOE ee anes ESOL EIEN I Se NE tee SNE ean ee seeeecnl ee Care an teen ts eae Nee ea ee ei oiecateeeeorcs Trades eee a ee PSone ee IDEA oe eee NE Ne ES Oe a7 EE EE OD EC EP I LE Tal EE ee rel Pan 8 Ss area ce PEPE eae ES Fo oP ae nn anil eeea ee = eo di : 2} rf Py i ry ry , * i Q 4 f i Me ews a SS re NT w ee aw Se SE ==nn So cues — OA tT ae al ee ; i ) } Pa Cf cf } if ty ra § tl é d ree tte eee eee ores pee *Se ae ed a F Me a reGENERAL ECONOMIC HISTORYADELPHI ECONOMIC SERIES GENERAL ECONOMIC HISTORY Max Weber eS I CYCLICAL FLUCTUATIONS Simon Kusnstz SOCIAL ECONOMICS F. Von Wieser MONEY Karl Helfferick a Ae ae ar a eRe ' i ! I iGENERAL ECONOMIC HISTORY BY MAX WEBER Translated by MRAN Ke EH KONIGH SEHD Professor of Economics in the University of Iowa AN ADEL PAL PUBLENCATION GREENBERG:PUBLISHER NEW YORKPray er COPYRIGHT, 1927, GREENBERG, PUBLISHER, INC. ne Published May, 1927 a © a Pe eee oe TB 5 a ese eve MANUFACTURED IN THE UNITED STATES OF AMERICA BY THE VAIL-BALLOU PRESS, INC... BINGHAMTON, N. Y. ae a a Leet Ll es ttre SsCONTENTS PART ONE HOUSEHOLD, CLAN, VILLAGE AND MANOR Cuapter I. AGRICULTURAL ORGANIZATION AND THE PROB- LEM OF AGRARIAN COMMUNISM. . . The German agrarian organization, 3.—Settlement re- lations, 4.—Property relations, 7.—Class relationships in the peasantry, 8.—Spread of the Germanic settle- ment form, 10.—Westphalia, 11—Alpine economy, 11. —The Zadruga, 12.—Vestiges of Roman field divisions, 12.—Origin and dissolution of the Germanic agrarian system, 12.—The Celtic agrarian organization, 15.— The Russian Mir, its effects on economic life and its origin, 17.—The Dutch—East-Indian field system, 21.— Chinesé agrarian organization, 22,—Indian agrarian organization, 22.—The German Gehéferschaft, 23.—Th e PAGE theory of primitive agrarian communism, 24.—Primi- tive agriculture, 24. Cuaprer II]. Properry Systems anp Socian Groups . ~ . 26/ (A) Forms of Appropriation j A fees ae 26 (B) The House Community and the Clan 98 The small-family, 28.—The socialistic theory of ‘the ori- gin of marriage, 28. Prostitution, 30.—Sexual free- dom and its forms, 33.—Other historical stages of sexual life in the socialistic theory, 34.—Legitimate marriage under patriarchal law and its contrasts, 36. (C) The Evolution of the Family as Conditioned by Eeo- nomic and non-Economie Factors , . Si economic life; the theory of the three eco- nomic stages, 37 —Division of labor between wine sexes and types of communalization, 38.—The men’s house, 39.—The struggle between patriarchal and aaerarchal law, 41—Group marriage, 43.—Patriarchal authority of the man, 43. Primitive Ly LSE SL ER TET NAS AA es MSIE ar eee eat meets ted os abet weeete te ee be 1} FT TE aa no esteet Sane pepnerlesesc a CONTENTS ar PAGE (D) The Evolution of the Clan ee a ee ey Types of clans, 43.—Organized and unorganized clans, 44.—History of the clan, 44——Prophecy and the clan, 45.—Bureaucracy and the clan, 46. (E) Evolution of the House Community io AG The primitive house community and property relations, 46.—Development into other forms of economic organi- zation, 47.—The patriarchal house community, 47.— Its dissolution, 48.—Monogamy as the exclusive mar- riage form, 49. = a So eo Sees CuapTer III. THE ORIGIN OF SEIGNIORIAL PROPRIETORSHIP 51 The small-family as point of departure, 51.—Roots of seigniorial proprietorship: Chieftainship, 51.—Con- quest of hostile populations, commendation, seigniorial land-settlement and leasing, 52.—Magical charism, 54. —Individual trade, 54.—Fiscal roots of seigniorial pro- prietorship, various forms, 56.—Individual trade of princes, irrigation culture of the modern orient, 56.— Oikos-economy, 58.—Taxation systems of princes, 538.— Methods of exploiting the taxing power, 59.—Delega- gation of taxation to chieftain or landed proprietor, 60. —Seigniorial proprietorship in colonial regions, 61.— The occidental, Japanese and Russian feudal systems, 62, Fg aaa a ad a NS ae RNR ea GHapremylV;. THe MANOR. 35.6 oe = «65 Conditions back of the development of the manor, 65.— Immunity and judicial authority, 65—Precaria and beneficitum, 66.—The manorial holding (fronhof), 67. —Political (‘‘socage”) district (Bannbezirk) and manorial law, 68—Freedom and unfreedom of the peasant, 69.—Exploitation of the peasant by rent ex- actions, forms of these, 72. a See eT a CHapter V. THE PosiITION OF THE PEASANTS IN VARI- OUS WESTERN COUNTRIES BEFORE THE EN- TRANCEVORUCAPITATISM 9-2 “2 = . 32", (4 Frarce, 74.—Italy, Germany, 75.—England, 77. terete ee D Cuaprer VI. Capiraistio DEVELOPMENT OF THE Manor . *79 ) (A) The Plantation eee ee Q Types of plantations, 79—Plantations in antiquity, 80. —The southern states of the U. S. A., 82. (B) Estate Economy eu ar eee ee «| 84. Types of estates, 84.—Stock raising without capital or with little capital, 84.—Intensive capitalistic pas- ee eSCONTENTS vil PAGE toral economy, 85.—Cereal production in England, 85. —Russia, 86.—Germany, the west, 87—the east and “hereditary dependency,” 89.—Organization of an east- Elbe estate, 90—Poland and White Russia, 92. (C) The Dissolution of the Manorial System (sa 5 wes é Causes and Processes of liberation of land and peas- ants, 92.—Various countries: China, 95;—India, the near east, 96; Japan, 96;—Greece and Rome, 96;— England, 98;—France, 98:—South and west Germany, 99;—East Germany, Austria, 100;—Prussia, 103;— Russia, 106. The present agrarian organization, 108. —Inheritance law, primogeniture, 108,—fidei-commissa and entails, 109.—Political results of the break-up of feudalism, landed aristocracies, 110.—Private property in land, 1ll. PART TWO INDUSTRY AND MINING DOWN TO THE BEGINNING OF THE CAPITALISTIC DEVELOPMENT CHAPTER VII. PrincipAL ForMs oF THE ECONOMIC OR- GANIZATION OF InpUsTRY . . . . . 116 Scope of the concept of industry, 115.—Types of raw- material transformation, 115.—Industry in the house community, division of labor between the sexes, 116.— Specialization and communal labor, 117.—Skilled trades, 117.—Relation of the worker to the market, 118—to the job, 118—to the place of work, 119—to the fixed investment, 120. CHaprer VIII. StTaGes IN THE DEVELOPMENT OF INDUSTRY AND MINING oe tg AZZ House industry and tribal industry, 122.—Types of inter-group specialization, castes, 123.—Local speciali- zation, demiurgical labor, 124. Specialization in vil- lage industry and on the feudal manor (Fronhof), 124. On the estate or oikos, 124.—Transition to production to order and for the market, the worker as labor power or as rent-payer, 126.—Shop industry and ergasterion, 126.—Differences in the labor organization of antiquity and of the middle ages, slavery, 130.—Medieval crafts- men and the town, 133—and industrial organizations, 134. A AP AT ET rs er en in ets eet RR Pa ee er eet IT eT PP PTC TS ae PP pee ie om SN ELE LES a3aa nl ol Pee Saas einer TN Ni a eel oD hein eae os MS BT een RAIS ae eS vill CONTENTS PAGS CHaptrer IX. THe Crart GuIbps. . . ay ees. 136 The nature of the guild, 136.—Unfree guilds, 136.— Ritualistie guilds, 137—Guild policy, internal, 138,— external, 141.—Later products of guild policy, 142. CuHaprer X. THE ORIGIN OF THE EUROPEAN GUILDS . . 144 The manorial law theory, 144,—criticized, 145.—Pro- duction of skilled craftsmen by the feudal manor, 146. —Free and unfree craftsmen, 147.—Guild, town and town lord, 147.—Livelihood policy of the guilds, 149. —Guild struggles, with rural workers, laborers, mer- chants, 150.—Guild wars, 15l. CHAPTER XI. DISINTEGRATION OF THE GUILDS AND DEVEL- OPMENT OF THE DomeEsTIC SysteM . . 153 Displacement of the guild, rise of craftsmen to posi- tion of merchant and factor, 153——Subdivision and fu- sion of guilds, 154.—Relation to importer and exporter, 154.—Domestic industry, its varying development in European countries, 155.—Stages in the development of the domestic or putting-out system, 159.—Domestic industry over the world, 160. CHapTerR XII. SHop Propucrion. THE Factory AnD Its WORE-RUNNERS! sc) eeu ee ot) op) LOZ Forms of shop production, factory and manufactory, 162.—Prerequisites of the factory, steady, mass demand and efficient technology, 163,—supply of free labor, 164.—Fore-runners of the factory in the west, com- munal establishments, 165, private establishments (early English factories), 167—-New developments through the interaction of specialization and combina- tion of labor and application of non-human power, 169. —The market of the specialized large industry, political demand, luxury demand and substitute luxuries, 169.— Monopoly and state concession as basis of older large- scale industry, 171.—Relation between factory, craft work, domestic industry and machinery, 173.—Results of factory industry for entrepreneur and laborer, 174. —Obstacles to development of shop industry into the modern factory in various countries, 175. CHapTer XIII. Minina Prior To THE DEVELOPMENT OF MopERN CAPITALISM . . . LS Mining the first field industrialized, 178.—Legal prob- lems, 178.—History of mining law and of mining, earli- est mining outside the occident, 179,—Greece, 180,—CONTENTS 1x PAGE Rome and the middle ages, 181,—Germany, 181,—other western countries, 182.—Periods in the history of Ger- man mining in the middle ages, 183.—Development of industrial forms down to the appearance of modern capitalism, 186.—Smelteries, 190.—The ore trade, 190. Coal mining, 190. LOAN AT PART THREE COMMERCE AND EXCHANGE IN THE PRE-CAPITALISTIC AGE CHAPTER XIV. Points oF DEPARTURE IN THE DEVELOP- MENT OF COMMERCE ..... . 195 Oldest trade that between ethnic groups, 195.—Ped- dling, 195.—Trading castes, 195.—The Jews as an out- cast commercial class, 196.—Seigniorial trade and its varieties, 196.—Gift trade and trade of princes, 197. She ee eee eon ae 1 aS ee aD LOST DEES CHAPTER XV. TECHNICAL REQUISITES FOR THE TRANSPOR- TATION) OK GOODS =) a 2 eS Primitive transport conditions, 199.—Land transport and its primitive possibilities, 199.—Water transport, 199.—Navigation, 200.—Development of sailing, 200. aaa Oe ae te CHAPTER XVI. Forms OF ORGANIZATION OF TRANSPORTA- TION AND OF COMMERCE ... . . 202 (A) The Alien Trader i i 2a ee Ocean commerce and piracy, 202.—Merchant shipping of princes and private persons in the ancient world, 202—Roman conditions, 202.—Shipping and mercan- tile organization in Greece and Rome, 203.—Legal forms of commerce, 204.—Sea loans in antiquity, 204. —Medieval conditions, 205.—Shipping partnerships and sea loans, 205.—Commenda and societas maris, 206.—The turnover of medieval sea trade, 207.—Land commerce, means of transport, 208.—Turnover, dura- tion of voyage and commercial organization, 209.— Inland shipping in the middle ages, 211.—Protection of the merchant, safe conduct, 212.—Legal protection, reprisal, proxenia, hostage, the hanse, 212.—Settle- ments of merchants, 213.—Market organization, 214. 902 ava eee oan a ae A er eS eM c eeSi Se aaee Soe a eee Seer on ae ee aa oo a) ee a Se A SS a ee ee ee ee anne He ae oe ee eee nes oe eee te eet tn Pt i Ory A _ rue are) ra) ri PERV EDERAL SES ES PIES EEIES CHaPTerR XVII. CHapTeR XVIII. CHAPTER XIX. CONTENTS (B) The Resident Trader Ge ee Oe Town origin of the resident merchant, 215.—Stages in the development, 215.—Retail trade dominant in me- dieval commerce, 216,—Struggles of the resident trader for monopoly of the town market, 216,—for internal equality of opportunity, 218, prohibition of forestalling, right of sharing, 218.—Street and staple compulsion, 219.—Struggles with consumers, 220.—Beginnings of wholesale trade, 220. (C) The Trade of the Fairs Nature of the fair, 220.—The fairs of Champagne, 220. —Other fairs, 222. ForMs oF COMMERCIAL ENTERPRISE Calculability and association of interest, 223.—Position numerals, accounting and the trading company, 223. —The commenda as occasional enterprise, 225.—Ori- gin of permanent organization for commercial enter- prise, 226.—Credit and the means of guaranteeing it, house-community and joint liability, 226.—Separation of the property of the company, 228.—The commandite, 229.—Hanseatic company forms, 229. MERCANTILE GUILDS Nature of the mercantile guild, 230.—Local guilds of foreigners in the west, the hanses, 230.—Guilds of resi- dent traders in China and India, 230,—in the west, 232. —History of the occidental guilds, 233—Commercial policies of guilds, especially the German Hanse, 234. Monty AND Monetary History Money and private property, 236.—The functions of money, money as means of payment only, domestic money, 236.—Money as means of accumulation and mark of class distinction, 237.—Money as a general me- dium of exchange, 238.—Varieties of money, 238.— Valuation of different forms, 239.—The precious metals as the basis of the monetary system, 241.—Coinage, 241.—Technique of coining, 242.—Metallic standards, 243.—History of gold and silver values, eastern Asia and the ancient east, 244.—Rome and the middle ages, 244.—Coinage debasement in the middle ages, 247.— Free coinage, 248.—Increase in overseas production of the precious metals from the 16th century, 248.—Ob- stacles to the rationalization of money, 250.—Modern monetary policies, 251. PAGE 215 223CHAPTER XX. BANKING AND DEALINGS IN MONEY IN THE Character of the oldest banking transactions, 254.— Banking in Rome, 256.—Temple banks and state mo- nopolization of banking in antiquity, 256.—Functions of the medieval bank, 258.—Liquidity, establishment of banking monopolies, 260.—The bill of exchange, 261. —Banking in England, the Bank of England, 263— CONTENTS IPRE-CAPITALISTICIVAGE) 9 4). rect. Banking outside of Europe, China and India, 265. CHAPTER XXI. Jews, 270,—of Protestantism, 271. PART FOUR THE ORIGIN OF MODERN CAPITALISM CHAPTER XXII. THE MopDERN MEANING AND PRESUPPOSITIONS OF CAPITATIS M70 arte Capitalism a method of provision for want satisfaction, 275.—Capitalistic supply of everyday requirements pe- culiar to the occident, 276.—General requisites for the existence of capitalism, 276.—Calculable law, 277. CHAPTER XXIII. Commercialization, Ture Externat Facts In THE EVOLUTION OF CAPITALISM 279.—The stock company, Wwark- loans, 279.—Financing of commercial undertakings, the regulated company, 280.—The great colonial companies, 281.—Finanecing by the state, administration without a budget, tax farming, 282.—The exchequer, the special- levy system, 283.—Monopolies, 284. CHAPTER XXIV. x1 PAGE INTERESTS IN THE PRE-CAPITALISTIC PERIOD 267 Absence or prohibition of interest in early society, 267. Evasion of the prohibition, the chattel loan, 268.— Medieval methods of meeting the need for credit, ec- clesiastical prohibition of interest, 269.—The role of the 279 Tue First Great SPECULATIVE CRISES . 286 Speculation and Crises, 286.—The tulip craze, 286.— John Law, 286.—England, the South Sea Company, 288. Later speculative crises, 290.—Capital creation, the age of iron, 290. Pi at 3 Ten) eT Lael Ee NTTERR er ie ee en < acc < la pS Sr een a tae | [Deke aie aiateal Pie ree ners — pare name tes FN tae ee, 0: FP ir PAO Tom nae) Pea A PIT pt PCIE Tee SDT teat a ak aOUI as tee = pike DS BeE: Bake SE eed PI LPO TALS EI TE RB — a ee ea eS Te ee ee tral ere aren a See ae tee eres xil CONTENTS CHAPTER XXV. FREE WHOLESALE TRADE iat < Separation of wholesale from retail trade in the 18th century, forms of wholesale organization, 292.—The fair and the exchange, 293.—News service and the wholesale trade, 294-—Commercial organization and transportation, 296. CHAPTER XXVI. COLONIAL POLICY FROM THE SIXTEENTH TO THE EIGHTEENTH CENTURY. . Accumulation of wealth through colonial exploitation, 298.—Slavery and the slave trade, 299.—Colonial trade and capitalism, 300.—The end of capitalistic exploita- tion of colonies with abolition of slavery, 300. CHAPTER XXVIII. THE DEVELOPMENT OF INDUSTRIAL TECH- NIQUE... (56s; sans hee Factory, machine and apparatus, 302.—The earliest true factory in England, 302.—Cotton manufacture crucial in the rationalization and mechanization of work, 303.—Primary role of coal and iron, 304.— Results, liberation of production from the limitations of organic materials and of labor, and from tradition, 305.—The recruiting of the labor force, 306.—The market of the factory, the military demand, 307—The luxury demand, 309.—Mass demand, 310.—The price revolution of the 16th and 17th centuries, 311.—In- ventions, 311.—Characteristics and causes of western capitalism, 312.—Historical conditions of its develop- ment, 313. CuHaprer XXVIII. CrrizENSHIP Citizenship as an economic, political, and social- Tass concept, 315. —Contributions of the city ‘in various fields of culture, 316.—Various meanings of the term city, 317.—City as a unitary community “peculiar to the oceident, reasons for this, 318.—Origin in oath of brotherhood, 319.—Rise of cities in the east prevented by peculiarities of military organization, 320.—Irri- gation culture and administrative organization, 321.— Obstacles in ideas of magic, 322.—Similarities between cities of antiquity and ‘of the middle ages, tween classical and medieval democracy, 324.—Con- trasts between classical and medieval democracy, ab- sence of the guild and guild policy in the former, 326. —Antiquity characterized instead by conflict between landowners and landless, 328,—and by increasing sharpn of class distinctions with growth of democ- racy (620) The ancient city as a political guild with military“acquisitive interests, and chronic war as its 302CHaprer XXX. Tue EvoLutTionN OF THE CaAPITALISTIC CONTENTS PAGE normal condition, 331.—Contrasts in urban develop- ment between south and north in medieval Europe, 332—The city and capitalism, irrational capitalism, 334.—Rational capitalism a product of the occident since the close of the middle ages, 334.—In antiquity the cities lose their freedom to the bureaucratically organized state and world-empire, which throttled cap- italism with compulsory contributions and services, 336.—In modern times they lose it to competing na- tional states which are forced into alliance with cap- italism, 336. CHapreR XXIX. Tue RationaL STATE. . «. - - . (A); The State Itself; Law and Officialdom te le Seta Phe rational state peculiar to the occident, 338.— Administration by specialists and rational law, 339,— Roman law, rationalization of procedure through inter- action with canon law, 340.—Revival of Roman law and capitalism, 34]1.—Historical descent of characteristic institutions of capitalism, 342.—Formalistic law and capitalism, 342. (B) The Economic Policy of the Rational State Fiscal interests and public welfare the two types of state economic policy before the development of mer- cantilism, 343.—Obstruction of deliberate economic pol- icy in the east by ritualism, caste, and clan, 344.—The occident, beginnings of economic policy on the part of rulers under the Carolingians, 345.—Economic policy , of the Church, especially of the monasteries, 345.— The Emperor and the territorial princes, 346.—Eng- land, 347. (C) Mercantilism” . 2 (2k a ee \Nature and significance of mercantilism, 347.—Its pro- gram, 347.—England distinctively its home, 348.—Two forms of mercantilism, (a) class-monopolies, 349,— (b) nationalistic mercantilism, 350.—Development of capitalism in England alongside mercantilism ; eapital- ism and Puritanism, 351—End of English mercantil- ism, 35l. SPIRIT (5 eo ee ee Neither population growth nor importation of preciou metals crucial in creating western capitalism, 352.— External conditions of its development, 354.—Rational istic economic ethic decisive, 354.—History of economic ethics; at the beginning, traditionalism, steyeotyping 343 ar = [* Se Ne ~ Te oar enn alan eres —a mee Si gO LTRS TELE EET LET PR TTS: My hy a Pe Ot, yh ate A eB aby ot ys ee he OS ee eee tae TBO 4 a) ar De Aes Pesa NNN Rae aR ee lk ad eh as Staats ST Sa renee Pee ee, ee ee ee 1 if Hi A Re Mi Pi rf Y ie a) ik fi oD 82 Hy & i be O He 4) NOTES CONTENTS PAGE of conduct, 354.—Intensification of traditionalism by material interests and by magic, 355.—Traditionalism not overcome by the economic impulse alone, 355.— Breakdown of opposition of internal and external ethics, 356.—Capitalism necessarily arises in a region with an ethical theory hostile to it, 357.—Economic ethics of the Church, 357.—The Jews had no part in the creation of modern capitalism, 358.—Judaism gave Christianity its hostility to magic, 360.—Overthrow of magic by rational prophecy, 362.—Prophecy absent in China, in India created a religious aristocracy, 362.— —Judaism and Christianity plebeian religions, 363. Significance of asceticism for rationalization of life, Tibet, medieval monasticism, 364.—Diffusion of the old religious asceticism over the worldly life by the Refor- mation, 365.—The Protestant conception of the call- ing, and capitalism, 367.—Protestant-ascetic economic ethics stripped of its religious import by the Enlighten- ment; social consequences, 368. + . - . . . > ” - . . INDEX: ORDNIAMES* 6 5° es Se a Ss ee SUBJECT IUNDEX © 2° 5 5S ee es ee 371 383 385TRANSLATOR’S PREFACE Max Weber is probably the most outstanding name in German social thought since Schmoller, and a recent sur- vey finds him the most quoted sociologist in Germany. (See American Journal of Sociology, November, 1926, p. 464.) At a time when the main emphasis in English, and particularly American, economic thought has shifted from general deductive theory to the other two corners of the methodological triangle, namely, psychological and histor- ical interpretation on the one hand and statistical study on the other, there is abundant reason for making available to English readers this last product of Weber’s thought, his economic history. Though Weber was not, as the German editors of the work observe, a specialist in this field, the preparation of a course of lectures on general economic his- tory offered an exceptional opportunity for bringing to- gether and presenting in moderate compass the leading ideas interpretive of economic life and change for which he was already famous in other lands as well as his own. In preparing this English version, intended for stu- dents of the social sciences and the general reader, any- thing of the nature of re-editing the text has been ex- pressly avoided, but a few departures from the German edition have seemed advisable. The highly technical in- troduction on ‘‘Definitions of Concepts’’ (Begriffliche Vorbemerkung) prepared by the German editors has been omitted. In several places, especially in the first chapter, matter has been transferred from foot-notes to the body of the text. Other foot-notes have been omitted or condensed, xv Sr = as Lae ae ee te Pa ce See et a ee ee Pent Senta a treet Sanam eree een aes eohate gt tne Nene nee eer nt ostSUE asda w he oe Me ee ee al aes — a eS = aa avs ree FE ee eee Senora ee ee a tee eee Xvl TRANSLATOR’S PREFACE and the extensive bibliographic references, consisting largely of German books and articles, have been reduced to titles in English, references to Max Weber’s other writ- ings, and a few general works in German and French; all retained notes are grouped at the end of the volume. It is perhaps fair to remark to the critical reader that the translation of a work surveying so large a field of knowl- edge with so much learning and yet so briefly, has presented problems. In places, notably in the sections dealing with medieval institutions, historical exactness would in any case be impossible without vastly greater length of treatment, and the shade and scope of meaning of many expressions in the original is not clear. Moreover, many of the facts dealt with have no close parallel in English history and many terms have no close equivalent in English usage. Especially since the significance of the book lies in its inter- pretive brillianey rather than accuracy of detail, it was clearly preferable to use broad terms giving the general sense and not to enter upon explanations or comparisons which would grow to undue length. On several points of usage, my former teacher in the field of economic history, Professor A. P. Usher, has kindly answered questions and given valuable advice and suggestions.—Finally, it may be a hint useful to some readers to say that both the intrinsic interest of the material and the significance of what the author has to say increase progressively through the book, to the very last chapter, which summarizes Weber’s famous discussion of the relation of religion to the cultural history of capitalism. RHE KeFROM THE PREFACE BY: THE GERMAN EDITORS Max Weber delivered the lectures which are here given to the public, under the title ‘‘Outlines of Universal Social and Economie History,’’ in the winter semester of 1919-20. In doing so, he yielded unwillingly to the pressing solicita- tion of the students, for his interest was entirely centered on the great sociological labors which he had taken up. But after he had given his consent he threw himself into them with that unreserved devotion of his whole power and personality which was characteristic of him. It was the last class which he was allowed to complete; in the middle of his next course, on politics and the general theory of the state, which he began in the summer semester of 1920, he was removed by death. Even if Weber had lived longer he would not have given his Economie History to the public, at least not in the form in which we have it here. Utterances of his prove that he regarded the work as an improvisation with a thousand de- fects, which had been forced upon him, and, like every great scholar, he was his own most exacting critic. The ques- tion thus put up to Frau Weber and the editors selected by her, as to whether publication was at all permissible, has been answered by them, after much hesitation, in the af- firmative. They are convinced that science has a claim to this work of Max Weber. The significance of the work lies, not in the detailed content—Max Weber was not a special- ist, and specialists will find enough in the book to take ex- ception to—but in the penetration of the conception ac- cording to which a scheme of analysis of economic life is fitted to the exposition of the preparation for and develop- xviifeceaetecmaae eee tad = ae te — MO Rt oR ee ae a de en ae ane ane SPN A a eS een Sa ee Renee ne net Pe a a xvii PREFACE BY THE GERMAN EDITORS ment of modern capitalism, and in the masterly skill with which the results of the investigation are utilized in the service of this idea. The situation just pictured set the task of the editors and made it a difficult one. No manuscript or even coherent outlines by Weber himself were available. There were found in his papers only a bundle of sheets with notes little more than ecatchwords set down in a handwriting hardly legible even to those accustomed to it. Consequently, the text had to be restored from notes by students, who willingly made their notebooks available for several months. For the possibility of giving to the world an economic his- tory under Max Weber’s name, thanks are due in the first place to them. The editors hope to have succeeded by this means in restoring the course of the argument. Unfortu- nately the forceful, dramatic mode of expression has been almost entirely lost as it could only appear in an incom- plete and unclear form in the notes, and defied all effort at restoration. As it was impossible to avoid taking some hand in the form of the work, the editors have thought that a somewhat fuller organization and connection of the differ- ent parts into paragraphs and subheads would facilitate reading and understanding it. Here, however, their work stopped, with what is essentially only a linguistically con- servative mission. It could not be their task to take any position in regard to the material presented by the author, to enter into controversy or attempt to remove in advance doubts such as were certain to arise in regard to his argu- ment. Only in a few places, and then only occasionally and briefly, have they felt permitted to correct an obvious er- ror of the author or essay to complete his statements. S. HELLMANN. M. Paty. Munich and Berlin, April, 1923. L5LITIORED DUETED CTU DR GRS LIL ODE LE PECL OOS E 20 TE SSE ey enWheeecthehisas Ee E << Se PART ONE HOUSEHOLD, CLAN, VILLAGE AND MANOR? (The Agrarian Orgamzation) SA 1 See notes at the end of the volume.aos a ems er eee lial meamed ee Tae se Sa Ae * f ; | +, ee See Sat Sa Te ~~ pa Oe teCHAPTER I THE AGRICULTURAL ORGANIZATION AND THE PROBLEM OF AGRARIAN COMMUNISM * The idea of a primitive agrarian communism at the be- ginning of all economic evolution was first suggested by investigations into the ancient German economic organiza- tion, especially by Hanssen and von Maurer.* These men originated the theory of the ancient German agrarian com- munism, which became the common property of scholar- ship. Analogies from other lands to the ancient German rural organization led finally to the theory of an agrarian communism as the uniform beginning of all economic development, the theory developed especially by H. de Laveleye. Such analogies came from Russia and from Asia, especially India. Recently, however, a strong tend- ency has set in to assume private property in land and a manorial type of development for the most ancient periods accessible to us, whether in Germany or in other economic systems. If we consider first the German national agricultural or- ganization as it presents itself to us in the eighteenth cen- tury, and go back from it to older conditions poorly and scantily illuminated by the sources, we must begin by re- stricting ourselves to regions originally settled by the Teutons. Thus we exclude, first, the previously Slavic region east of the Elbe and Saal; second, the region for- merly Roman, that is, the Rhine region, Hessia, and South Germany generally south of a line drawn roughly from the 3 Se nn Seen ees mos mths = Nsee never) ae a = eS SE SE Se Se Pees ee ee Ee ee ch hi | Ht it y TEL Tey RR + GENERAL ECONOMIC HISTORY Hessian boundary to the vicinity of Regensburg; and finally, the region originally settled by Celts, to the left of the Weser. The land settlement in this originally German region had the village form, not that of the isolated farmstead. Connecting roads between the villages were originally quite absent as each village was economically independent and had no need of connections with its neighbors. Even later the roads were not laid out systematically but were broken by traffic according to need and disappeared from one year to the next until gradually in the course of cen- turies an obligation to maintain them was established, rest- ing upon the individual holding of land. Thus the General Staff maps of this region today give the impres-THE AGRICULTURAL ORGANIZATION 5 sion of an irregular network whose knots are the villages. In the sketch, the first or innermost zone contains the dwelling lots, placed quite irregularly. Zone Two con- tains the fenced garden land (Wurt), in as many parts as there were originally dwelling lots in the village. Zone Three is the arable (see below), and Zone Four pasture (‘‘Almende’’). Each household has the right to herd an equal number of livestock on the pasture area, which, however, is not communal but appropriated in fixed shares. The same is true of the wood (Zone Five) which incidentally does not uniformly belong to the vil- lage; here also the rights to wood cutting, to bedding, mast, ete., are divided equally among the inhabitants of the village. House, dwelling lot, and the share of the in- dividual in the garden land, arable (see below), pasture and forest, together constitute the hide (German Hufe, cognate with ‘‘have.’’) The arable is divided into a number of parts called fields (Gewanne) ; these again are laid off in strips which are not always uniform in breadth and are often ex- tremely narrow. Each peasant of the village possesses one such strip in each field, so that the shares in the arable are originally equal in extent. The basis of this division into fields is found in the effort to have the mem- bers of the community share equally in the various quali- ties of the land in different locations. The intermixed holdings which thus arose brought the further advantage that all the villagers were equally affected by catastrophes such as hailstorms, and the risks of the individual were re- duced. The division into strips, in contrast with the Roman custom, where squares predominate, is connected with the peculiarities of the German plow. The plow is universally, to begin with, a hoe-like instrument wielded by the hands ioe a ee te Se eS SS3 ennaeee eat yao Pn eee 6 GENERAL ECONOMIC HISTORY rT Seo oe ee RE =] or drawn by animals, which merely scratches the soil and makes grooves in the surface. All peoples which did not get beyond this hoe-plow were compelled to plow the fields back and forth in order to loosen up the soil. The most suitable division of the surface for this purpose was the square, as we find it in Italy from Cesar’s time on, and as the general staff maps of the Campagna and the outer boundary marks between the individual land holdings still show it. In contrast, the German plow consisted, as far as we can tell, of a knife which cut the earth vertically, a share which cut it horizontally, and finally, at the right, a moldboard which turned it over. This plow made the criss-cross plowing unnecessary, and for its use the division into long strips was most appropriate. The size of the separate strips was usually determined in this connection, by the amount which an ox could plow in a day without giving out—hence the German names ‘‘Morgen’’ (English, ‘“‘morning’’ but equivalent to acre) or ‘‘Tagwerk’”’ (Eng- lish, day’s work). In the course of time these divisions underwent much confusion, since the plow, with its mold- board on the right, had a tendency to work over to the left. Hence the furrows became uneven, and since there were no balks, originally at least, between the separate strips, only boundary furrows being drawn, strips of land belonging to another were often plowed up. The original arrangement would be restored by ‘‘field juries’’ with the rod or later the so-called spring circle. As there are no roads between the single allotments, tillage operations can only be carried on according to a common plan and at the same time for all. This was nor- mally done according to the three field system, which is the most general though by no means the oldest type of husbandry in Germany. Its introduction must be set back at least to the eighth century, since it is assumed as ee OS a aint oes aoe bot oe eee ae a BAe eee ree ne ae eC aaah ow SE es ee eS en ener eterno Seeee “a Pe ee ok Ne oe ~ Ee _THE AGRICULTURAL ORGANIZATION 7 a matter of course in a document of the Rhenish monastery of Lorsch of about the year 770. The three-field husbandry means that in the first place the whole arable area is divided into three tracts, of which at any one time the first is sown to a winter grain and the second to a summer grain, while the third is left fallow and, at least in historical time, is manured. Each year the fields are changed in rotation, so that the one sown with win- ter grain is the next year put to summer grain and in the year following left fallow, and the others correspondingly. There is stall feeding of livestock in the winter, while in summer they run on the pasture. Under such a system of husbandry it was impossible for any individual to use methods different in any way from those of the rest of the community; he was bound to the group in all his acts. The reeve of the village determined when sowing and reaping were to be done, and ordered the parts of the arable which were sown with grain fenced off from the fallow land. As soon as harvest was over, the fences were torn down; anyone who had not harvested on the common har- vest day must expect the cattle, which would be driven on to the stubble, to trample his grain. The hide belonged to the individual and was hereditary.* It could be of varying size and was different in nearly every village. Frequently, as a sort of norm, an extent of 40 acres was taken as the amount of land necessary to support a typical family. The part of the holding consisting of dwelling lot and garden land was subject to free individual use. The house sheltered a family in the narrow sense of parents and children, often including grown sons. The share in the arable was also individually appropriated, while the rest of the cleared land belonged to the com- munity of hide-men or peasant holders (Hiifner), that is, of the members in full standing or freemen of the village. eta eae ath mm rire PN PT ere eat oe anatase nO PND acne ie> os came ee ~— a ees eee ee ree ws i i ln SO I a ERTIES aa eae ee a a ao fe hall ani - SALSA ae ee ec a ee or ier ecee-or er selene na 8 GENERAL ECONOMIC HISTORY These included only those who held title to some share in each of the three fields of arable. One who had no land or did not have a share in every field did not count as a hide- man. To a still larger group than the village belonged the common ‘‘mark’’ which included wood and waste land and is to be distinguished from the almend or pasture. This larger group was made up of several villages. The begin- nings and original form of the mark association (Mark- genossenschaft) are lost in obscurity. In any case it goes back before the political division of the land into districts by the Carolingians, and yet it is not identical with the hundred. Within the common mark there existed, joined in inheritance with a certain farm, a ‘‘head official’’ of the mark (Obermarkeramt), an office which had usually been pre-empted by the king or feudal lord, and in addition a ‘‘wood court,’’ and an assembly of deputies of the hide- men of the villages belonging to the mark. Originally there was in theory strict equality among the members in this economic organization. But such an equal- ity broke down in consequence of differences in the number of children among whom the inheritance was divided and there arose alongside the hide-men half and quarter hide- men. Moreover, the hide-men were not the only inhab- itants of the village. There were in addition other sections of the population. First, younger sons who did not suc- ceed to holdings. These were allowed to go and settle on the outskirts of the holdings on still uncleared land and received the right of pasture, for a payment in both cases (Hufengeld, Weidegeld). The father could also give them, out of his garden allotment, land on which to build a house. From the outside came hand workers and other neighbors who stood without the organization of associated hide-men. Thus there arose a division between the peasants and ARI CIDRDS Dy ea ey 4THE AGRICULTURAL ORGANIZATION 9 another class of village dwellers, called in South Germany hirelings or cottagers (Seldner, Hdusler), and in the north ‘‘Brinksitzer’”’ or ‘‘Kossaten.’’ These latter belonged to the village only on the strength of their ownership of a house but had no share in the arable. However, they could acquire such a share if some peasant, with the con- sent of the village reeve or of the overlord (originally the clan) sold them a part of his share or if the village leased them a piece of the almend. Such parcels were ealled ‘‘rolling holdings’’ (walzende Acker) ; they were not subject to the special obligations of the hide holding or to the jurisdiction of the manorial court, and were freely transferable. On the other hand their holders had no share in the rights of the hide-man. The number of these people of reduced legal status was not small; it happened that vil- lages transformed up to half of their arable into such roll- ing holdings. As a result the peasant population became divided into two strata as regards land ownership, the hide-men with their different subclasses on the one hand, and on the other those who stood outside the hide organization. But there was also formed above the hide-men a special economic stratum who with their land holdings also stood outside the main village organization. In the beginning of the Ger- man agricultural system, as long as there was unclaimed land available, an individual could clear land and fence its so long as he tilled it, this so-called “‘ Bifang’’ was reserved to him; otherwise it reverted to the common mark. ee Se eee ABTS EAE NB aR = aa RNS Sen 2 ee en ee SC i en a ho le oer haere he of oe Pe Sees 4 Hi KY) | : 52 GENERAL ECONOMIC HISTORY Internal differentiation developed through the appear- ance of a professional military class, which resulted from the progress of military technique and improvement ir the quality of military equipment. Neither the training nor the equipment were available for men in a dependent economic position. Thus arose a distinction between those classes which by virtue of their possessions were in a posi- tion to render military service and to equip themselves for the same, and those who could not do this and consequently were not able to maintain the full status of free men. The development of agricultural technique worked in the same direction as military progress. The result was that the ordinary peasant was increasingly bound to his economic functions. Further differentiation came about through the fact that the upper classes, skilled in fighting, and provid- ing their own equipment, accumulated booty in varying de- grees through their military activity, while the non-military men who could not do this became more and more subject to various services and taxes. These were either imposed by direct force or resulted from the purchase of exemp- tions. The other course of internal differentiation is through the conquest and subjugation of some enemy people. Originally, conquered enemies are slaughtered, under some circumstances with cannibalistic orgies. Only as a sec- ondary matter develops the practice of exploiting their labor power and transforming them into a servile class of burden bearers. Thus arises a class of overlords who by their possession of human beings are placed in a position to clear and till land, a thing impossible to the common free- man. The slave or servile population might be exploited communally, remaining in the possession of the group as a whole, and used for collective tillage of the soil, as was partly the case with the helots in Sparta; or, they might beSEIGNIORIAL PROPRIETORSHIP 53 u__..ed individually, being allotted to individual overlords for the tillas> of their personal land holdings. This latter development establishes a nobility of conquest. In addition to conquest and to internal differentiation must be recognized voluntary submission of the defenseless man to the overlordship of a military leader. Because the former needed protection he recognized a lord as patronus (in Rome) or as senior, among the Merovingian Franks. Thus he established a claim to representation before the court, as in the Frankish empire, to a champion in the trial by battle, or to the testimony of the lord instead of the compurgation of the clansmen. In return he furnished services or payments, the significance of which is not, how- ever, the economic exploitation of the dependent. He can be called upon only for service worthy of a free man, espe- cially for military service. In the last days of the Roman Republic, for example, various senatorial families in this way called out hundreds of their clients and colons against Cesar. The fourth mode of origin of seigniorial proprietorship is through land settlement under feudal terms. The chietf- tain with large possessions in human beings and work ani- mals is in a position to rec!aim lend on a quite different scale from the ordinary peasant. Ert wleared land belonged in principle to him who krougi't «t w2der tillace, as long as he was able to cultivate it. Thas the differential command over human labor power, where it appeared, worked indi- rectly as well as directly in the field of winning land for a seigniorial class. An example of such exploitation of a superior economic position is the patricians’ exercise of the right of occupancy on the Roman ager publicus. The seigniorial land, after it was broken up, was regu- larly utilized by the method of leasing. Leases were granted to foreigners,—for example to craftsmen, who then stood EEA TINT DAD = ee a nae On ee eee ae SSE Se EET i at ede eee54 GENERAL ECONOMIC HISTORY under the protection of the king or chieftain—or to - poverished persons. Where the latter are c»ncerned we find, especially among nomadic peoples, the leasing of cattle also; otherwise in general the placing of settlers upon baronial land under obligation to make payments and render services. This is the so-called colonate, met with all over the East, in Italy, in Gaul, and also among the Germans. Money fiefs and grain fiefs, essentially loans, are also frequently a means to the accumulation of serfs and of land. Alongside the colons and slaves, the peons or nexi play a large role, especially in the economic life of antiquity. Frequently there was an intermixing of those forms of dependency which grew out of clan relations with those deriving from seigniorial power. For landless men in the protection of an overlord, or for foreigners, membership in a clan was no longer in question and the distinctions be- tween clan members, mark members, and members of the tribes disappear in the single category of feudal dependents. A further source in the development of seignorial claims is the profession of magic. In many cases the chieftain de- veloped, not out of a military leader, but out of a rain- maker. \Whe medicive men cculd lay a curse on certain objects, whieh taen became protected by ‘‘taboo’’ against all molestation. The «ristecraey of magic thus acquired priestly prcperty, and wuere the prince allied himself with the priest he employed the taboo to secure his personal pos- sessions; this is especially common in the South Sea Islands. A sixth possibility for the development of seigniorial property is afforded by trade. Regulation of trade with other communities originally lies entirely in the hands of the chieftain, who at first is required to use it in the in- terests of the tribe. He makes it a source of income for himself by levying duties which, to begin with, are onlySEIGNIORIAL PROPRIETORS a payment for the protection he grants to foreign me:- chants, since he grants market concessions and protects market dealings—for a consideration always, as need not be said. Later the chieftain often goes on to trade on his own account, establishing a monopoly by excluding the membership of the community—village, tribe, or clan. Thus he obtains the means of making loans, which are the means of reducing his own tribesmen to peonage, and of accumulating land. Trade may be carried on by such chieftains according to two methods: either the regulation of trade, and hence its monopolization, remains in the hands of the individual chieftain, or a group of chieftains unite to form a trad- ing settlement. This case gives rise to a town, with a patriciate of traders, that is, a privileged stratum whose position rests upon the accumulation of property through trading profits. The first is the rule among many negro tribes, as on the coast of Kamerun. In Ancient Egypt, monopolization of trade was typically in the hands of an individual, the imperial power of the Pharaohs resting in large part on their personal trade monopolies. We find similar conditions among the kings of Cyrenaica, and later, in part, in medieval feudalism. The second form of chieftain trade, the development of a town nobility, is typical for antiquity and the early mid- dle ages. In Genoa, and in Venice on the Rialto, the noble families settled together are the only full citizens. They finance the merchants, without themselves taking part in trade, through various forms of credit. The result is In- debtedness of the other population groups, especially the peasants, to the municipal patriciate. In this way arose the patrician janded proprietorship of antiquity, alongside that of mélitary princes. Thus the ancient nations are Lua characterized us a assemblage of coast-wise towns with a Se es ee hatte tat a Se TEETER TS Tl Sea TaaArsS mae Fa ee Peer Nae De RA ELS EE RTS ~~ae ee ered 22D ERETERLS FLERE T TITIAN AD Re SD BB Boe SE ken by rt ee ae Sit SE SE RAI NSE MUS ENCES oh i 200 8 oa be eer eael SRAL ECONOMIC HISTORY __wuivy of large land owners interested in trade. The culture of antiquity retained a coastal character down into the Greek period. No town of this older period lies farther than a day’s journey inland. In the country, by contrast, were the seats of the baronial chieftains with their tenants. Seigniorial property may also have fiscal roots, in the organization of taxation and the officialdom of the state, and under this caption there are two possibilities. Hither there arose a centralized personal enterprise of the prince with separation of the administrative officials from the resources with which they worked, so that political power belonged to no one except to the prince, or else there was a class organization of the administration with the enter- prises of vassals, tax farmers and officials, functioning in a subsidiary role alongside that of the prince. In the latter case, the prince granted the land to the subordinates who paid all the costs of administration out of their own pock- ets. According to the dominance of one or the other of these systems, the political and social constitution of the state would be entirely different. Economic considerations largely determine which form would win out. The east and the west show in this regard the usual contrast. For oriental economy—China, Asia Minor, Egypt,—irrigation husbandry became dominant, while in the west where set- tlements resulted from the clearing of land, forestry sets the type. : The irrigation culture of the Orient developed directly out of primitive hoe-culture, without the use of animals. Alongside it developed a garden culture with irrigation from the large rivers, the Tigris and Euphrates in Mesopo- tamia, and the Nile in Egypt. Irrigation and its regula- tion presupposed a systematic and organized husbandry out of which the large scale royal enterprise of the near east developed, as is shown most characteristically in theSEIGNIORIAL PROPRIETORSHIP 57 New Empire of Thebes. The military campaigns of the As- Syrian and Babylonian kings, which they undertook with their masses of retainers going back to the men’s house system, were primarily man hunts for the purpose of secur- ing the human material for building canals and bringing stretches of the desert under tillage.t The king retained control of water regulations, but re- quired for its exercise an organized bureaucracy. The agricultural and irrigation bureaucracies of Egypt and Mesopotamia, the foundation of which is thus economic, are the oldest officialdom in the world; it remains through- out its history an adjunct of the king’s personal economic enterprise. The individual officials were slaves, or depend- ents of the king, or even soldiers, and were often branded to prevent escape. The tax administration of the king was based on payments in kind, which in Egypt were stored up in warehouses from which the king supported his of- ficials and laborers. Such a provision is the oldest form of official salary. The result of the system as a whole was to place the population in a servile relation to the prince. This rela- tion found expression in the obligatory services of all the dependents and the joint liability of the village for the burdens imposed, and finally in the principle designated under the Ptolemies as i8¢a. Under it the individual peas- ant was not only bound to the soil but to his village as well, and was in fact an outlaw if he could not prove his ista2. The system obtains not only in Egypt but in Mesopotamia as well and also in Japan, where from the seventh to the tenth centuries we find the ku-bun-den system. In the one case as in the other, the position of the peasant corresponds throughout to that of the mem- ber of the Russian mir. Out of the obligatory services of the subject population POE ag a Ls EES ee a ee ea ey ion tate ne otra et a feet Sama Set as ona Pa ane ne ene s Sn etnee os be ee = ae a eee Se a eee ee eer ee meee on Noe Bade pinite cts ai Ll St ERTS AC 2k Bea i aL) A lee ee armas a 7 (tee bo eed 58 GENERAL ECONOMIC HISTORY arose gradually the money economy centering in the prince. This development also might take various courses. One was through an individual economy with production and trade carried on by the prince; or, the prince made use of the labor power politically subject to him to produce goods not only for his own use but also for the market, as was the case in Egypt and Babylonia. Trade and production for the market would be earried on auxiliary to a large household, with no separation between household and in- dustrial establishment. This is the type of economic or- ganization which Rodbertus has designated as ‘‘oikos- economy.”’ This oikos-economy would again be the initial stage in various lines of development. One of these is the Egyptian system of grain banks. The Pharaoh possessed grain ware- houses scattered over the land, to which the peasant de- livered up not only his obligatory payments in kind but his whole production; against these the king could draw checks which he could put into use as money. Another possibility was the development of royal taxation in money, which however, presupposes a considerable permeation of the use of money into private economic relations, as well as a considerable development of production and a gen- eral market within the country; all these conditions were fulfilled in Ptolemaic Egypt. The system encountered dif- ficulties, in view of the then state of development of ad- ministrative technique, in the preparation of a budget. Consequently, the ruler generally shifted the risk of the computation on to other shoulders, by one of three methods. Either he farmed out the collection of taxes to adventurers or officials, or he delegated it directly to soldiers, who paid themselves out of the receipts, or finally, he gave over the task to landed proprietors. The placing of the tax col- lection in private hands was a consequence of the lack ofSEIGNIORIAL PROPRIETORSHIP 59 a dependable administrative machine, which again goes back to moral unreliability in the official personnel. The practise of farming out taxes to adventurers also developed on the largest scale in India.” Every such zamindar has a tendeney to develop into a landed pro- prietor. The recruiting of soldiers is also given over to contractors ealled jagirdar, who have to provide a certain quota irrespective of the elements of which it is composed ; these also strive to become large landholders. Such pro- prietors are akin to the feudal baron living in full in- dependence upward and downward, in a position analogous to that of Wallenstein, who also had to furnish reeruits. When the ruler turns taxation over to officials, he fixes by agreement a definite sum; any surplus belongs to the of- ficial, who also has to pay the administrative staff. This is the system of the earlier mandarin administration in China, as well as of the satrap organization of the ancient east. With the transition to modern taxation policies, the Chinese statistics showed a sudden surprising increase In the population, which the mandarins had purposely under- stated. The third possibility under the head of a money economy centered in the prince, is the delegation of taxa- tion to soldiers. This is a recourse of state bankruptcy and is done when the prince is unable to pay the soldiers. Resort to this device accounts for the transformation in the affairs of the Caliphate under the dominance of Turkish soldiers from the tenth century on. The soldiers develop into a military nobility because the central government no longer has, in fact, control over taxation, and extricates it- self by turning the function over to the army. These three forms of individualization of the originally political functions of securing money and recruits—center- ing them in private contractors, officials, or soldiers—be- came the basis of the oriental feudalism which developed LE. po J Sete ee oe hte STRATE ROPE NEI TiS Ni me ‘ pana + ns [ppt ee EE AAI oe SPSL,Rl se a Bae St sede ety mS ws oe et ee eS ANE ae a ea a a er ence a re teehee see tape ag rer ak ae ner or oan pte aH Nae Sr an tee Pen eee 60 GENERAL ECONOMIC HISTORY upon the disintegration of the money economy in con- sequence of the technical incompetence of the state to ad- minister taxation through its own officials. The result is a secondary, rationalized agrarian communism, with joint responsibility of the peasant communities to the tax farmer, official, or army, and with common tillage and attachment to the soil. The contrast with the western system comes out clearly in the fact that in the east no demesne economy (Fronhofwirtschaft) arose, the exaction of forced pay- ments dominating. A further feature is the liability of collapse into a barter economy on the appearance of the least difficulty in transforming the payments in kind of the peasants into money. In such an event an oriental political system falls back with extraordinary facility from the condition of an apparently highly developed culture into one of primitive barter economy. As a fourth and last method of realizing a royal income, we find the delegation of functions to chieftains or landed proprietors. Thus the prince avoids the problem of an administrative organization. He shifts the raising of the taxes, and on occasion also that of recruits, upon already existent agencies of a private character. This is what happened in Rome when in the imperial period the civiliza- tion extended inland from the sea-coast and the country became transformed from a union of primarily maritime towns into a territorial empire. The inland knew only manorial economy without the use of money. The func- tions of raising taxes and recruits were now imposed upon it, whereupon the large landed proprietors, the posses- sores, become the dominant class down to the time of Justinian. The dependent population over which they rule enables them to furnish the taxes, while the imperial administrative system has not expanded in keeping with the growth of the empire itself. On the side of administra-SEIGNIORIAL PROPRIETORSHIP 61 tive technique, this situation is distinguished by the fact that alongside the municipia appear the territoria, at the head of which stand the landed barons, responsible to the state for taxes and recruits. Out of this condition de- veloped the colonate in the west, while in the east the latter is as old as the iSfa. Under Diocletian this fundamental principle was extended to the empire as a whole. Every person was included in a territorial taxation unit which he was not permitted to leave. The head of such a district is generally a territorial lord, as the center of gravity of the economie and political life has shifted from the sea-coast to the land. A special case of this development is the appearance of colonial proprietorship. Originally the interest in the winning of colonies is purely fiscal in character,—colonial capitalism. The objective, pecuniary exploitation, was achieved through the conquerer making the subject natives responsible for taxes in the form of money or the delivery of products, especially food stuffs and spices. The state generally transferred the exploitation of the colonies to a commercial company,—for example, the British and Dutch East India companies. Since the native chieftains are made the intermediaries of the joint liability they are transformed into territorial lords, and the originally free peasantry into their serfs or dependents bound to the land. Attachment to the soil with feudal obligations and com- munal tillage, with the right and duty of redistributing the land, all appear. Another form of the development of colonial proprietorship is the individual allotment of land by an overlord. The type of this is the encomienda* in Spanish South America. The encomienda was a feudal grant with the right of imposing on the Indians com- pulsory services, payments, or labor dues, and in this form it persisted to the beginning of the 19th century. Bas peters he oa aaa a a St a Se ete ee bee eet =e Se ts oe en em Sn ee ate a heel ame: Wes ee er are raced aera a me = PEELE A LEEst ms ee EM a ee ee ee ee rete ear ee ee ee eee on ee an ae eee i fi MY ry oer Seed oe a eee ea = ar ow oe oe ee ee ee hee 62 GENERAL ECONOMIC HISTORY In contrast with the oriental system of individualizing political prerogatives on fiscal grounds and in relation to a money economy, stands the product economy of the western feudal system and that of Japan, with the development of feudal proprietorship through enfeoffment.* The ordinary purpose of the feudal system is the provision of a mounted soldiery through the granting of land and seigniorial rights to persons who are in a position to take over the services of vassals. It is met with in two forms, according as the pro- prietory power is granted as a fief or as a benefice. For enfeoffment with benefice the organization of Turk- ish feudalism is characteristic. There was no recognition of a permanent individual proprietorship but only grants for life and in consideration of service in war. The grant was evaluated according to its yield, and proportioned to the rank of the family and to the military service of the recipient. As it was not hereditary, the son of the grantee succeeded only in case he could show specific military services. The Sublime Porte regulated all details as a sort of supreme feudal bureau, after the manner of the Frankish major: domo. This system is akin to that which originally obtained in Japan. After the 10th century Japan went over from the ku-bun-den system to one based on the benefice principle. The Shogun, a vassal and commander-in-chief of the em- peror, with the aid of his bureau (ba-ku-fu) evaluated the land according to its yield in rice and granted it in benefices to his vassals the daimios, who in turn re-granted it to their ministerials, the samurat. Later, the inheritance of fiefs became established. However, the original dependence upon the Shogun persisted in the form of the latter’s con- trol over the administration of the daimios, who in turn supervised the operations of their vassals.SEIGNIORIAL PROPRIETORSHIP 63 The Russian feudal system is nearer to the European. In Russia, fiefs (pomjestje) were granted on consideration of certain obligatory services to the ezar and the assumption of tax obligations. The recipients of grants had to assume the position of military officers and civil officials, a specifica- tion which was first set aside by Catherine II. The transformation of the tax administration from the land to the poll basis under Peter the Great led to the result that the land holder became answerable for taxes in pro- portion to the number of souls on his holding, determined through periodical surveys. The results of this system for the agricultural organization as a whole have already been described (pp. 17 ff.). Next to Japan, the medieval occident® is the region which developed feudalism in the highest purity. Condi- tions in the later Roman empire operated as a preparation, especially as to land tenure, which already had a half feudal character. The land rights of the Germanie chief- tains fused into the Roman situation. The extent and significance of land holding was extraordinarily increased through the clearing and conquest of land—the victorious armies had to be fitted out with land—and finally through ‘‘eommendation”’ on a large scale. The peasant who found himself without property, or who was no longer in a posi- tion to equip himself for military service, was compelled by the advance of military technique to place himself in the obsequium of an economically more powerful person. A further influence was the extensive transfers of land to the church. The decisive condition, however, was the invasion of the Arabs and the necessity of opposing an army of Frankish horsemen to that of Islam. Charles Martel un- dertook an extensive secularization of church property with a view to establishing, with the benefices created out of TR Sate eee tae Se PATEL TTA T ERD: PLE See te ts ee bts = a ei Sede et pon ek eS ae he at sae A fae DS aerate eee Re A nom ee SIIST. Seenecret oo Sa Soe esee er eww ws A a deers ote ae aX oe ss EEA : a Peet aatary la ae i Wi oe t iE I if en a eens 64 GENERAL ECONOMIC HISTORY the seized tracts, a tremendous army of vassal knights, the members of which had to equip themselves as heav- ily armed horsemen. Finally, besides the land, it be- came the custom to grant as fiefs political offices and priv- ileges.CHAPTER IV THE MANOR The inner development of seignorial proprietorship, espe- cially of the occidental manor,' was conditioned, in the first place, by political and social class relations. The power of the lord was composed of three elements, first, land hold- ing (territorial power) second, possession of men (slavery) and third, appropriation of political rights, through usurpa- tion or through enfeoffment; the last applies especially to judicial authority, which became far the most important, single force in connection with the development in the west. Everywhere the lords strove to secure “‘immunity”’ (1m- munitas) as against the political power above them. They forbade the officials of the prince to come upon their ter- ritory, or if they permitted it the official had to come di- rectly to the lord himself for the performance of his mis- sion on behalf of the political authority, such as collec- tion of feudal dues or serving of military summons. With this negative aspect of immunity is connected a positive aspect. At least a part of the immediate exercise of rights taken away from the officials of the state became the pre- rogative of the holder of the immunity. In this form im- munity exists not merely in the Frankish empire but be- fore it in those of Babylonia, ancient Egypt and Rome. Decisive is the question of appropriation of judicial au- thority. The holder of land and of men everywhere strug- gled for this prerogative. In the Moslem Caliphate he did 65 nD rd SE LEAD IRR LETS ae See eS en meta St aa ete SEL ee Se Ne tet ne ne Ra ee eae ATES DRS SHRM SNE LE ES ~~: a RAS RE ee erectwa) Sermon ne ae owe ee ewe ee ie RN a SC SRO \ Sai ae er a ee a pe eer RTARTA SR EER LEER ELLE TEEN DARIAN: Bie Bs nb eee 66 GENERAL ECONOMIC HISTORY not succeed; the judicial authority of the general govern- ment was maintained unimpaired. In contrast, the land holders of the west usually succeeded in their endeavors. In this part of the world the lord originally had unlimited judicial power over his slaves, while free persons were sub- ject only to the jurisdiction of a popular court. For un- free persons the criminal process of the official court was final, though it was early true that participation by the lord could not be avoided. This distinction between free and unfree became effaced in the course of time, the power of the lord over slaves being weakened and that over free men being strengthened. From the 10th to the 13th century, the public courts increasingly interfered in the determination of cases affecting slaves; their criminal cases were often tried before the popular court. Especially from the 8th to the 12th century, the position of the slaves steadily improved. With the cessation of the great move- ments of conquest the slave trade declined and it became difficult to supply the slave markets. At the same time the need for slaves increased greatly, in consequence of the clearing of forests. To secure and retain slaves, the lord had progressively to improve their conditions of life. In contrast with the Latin possessor, he was primarily a warrior and not a farmer, and found himself hardly in a position to supervise his unfree dependents, so that on that ground also their situation improved. On the other hand (cf. page 63) his power over the free population was strengthened by changes in military technique, and re- sulted in the extension of the household authority of the lord, originally confined to the familia, over the whole ex- tent of his territorial dominion. There is a correspondence between free and unfree con- ditions of tenure and free and unfree persons. In this con- nection we must consider the. precaria and the beneficium.THE MANOR 67 The precaria is a lease relation based on a documentary ap- plication, and entered into by free persons of every class. Originally it was terminable at will, but soon evolved into a contract renewable every five years but in fact for life and usually hereditary. The beneficium is an enfeoffment in exchange for services, originally of any form whatever, or under some conditions in exchange for payments. Later the beneficium differentiates into that of the free vassal, who bound himself to feudal services, and that of the free man who bound himself to service on the lord’s demesne. In addition to these forms of lease there was a third, the land settlement lease, by means of which the overlord was in the habit of granting land for clearing against a fixed tax and into the hereditary possession of the grantee. This was the so-called quit-rent (Hrbzins), which later made its way into the towns also. Over against these three forms, all of which related to land situated outside the village community ((Gutsver- band), is the manorial estate (Fronhof) with the land de- pendent upon it, of which the Capitulare de villis of Charlemagne gives a clear picture.? Within the manor was first the seigniorial land, or demesne, including the terra salica, which was managed directly by the lord’s officials and the terra indominicata, seigniorial holdings in free peasant villages; and second the holdings or hide land of the peasants. The latter fell into mansi serviles with unlimited services and mansi ingenuiles with limited services, according as hand labor or team work had to be rendered throughout the year or only in connection with tillage and harvest. The payments in kind and the whole product of the demesne—(called fiscus in the case of royal holdings) were laid up in a storehouse and used for the needs of the army and the seigniorial household, any surplus being sold. x ae Me dN EO ee ee eenereetr ae oreieeecnes ee ee ee SS OS \ ate rms ey Pee etarataes a re pe a a kD Ee eis 70 GENERAL ECONOMIC HISTORY free classes dependent upon them. Another such locality is the marsh lands of the North Sea,—Frisia and Ditmarsh ; similarly in parts of the Alps, Tyrol, and Switzerland, and in England. Finally there are the ‘‘mailed peasantry’’ of many parts of Russia, who were individual proprietors ; to them were added later the Cossacks as a plebeian soldier class with the social position of small farmers. As a consequence of the development of feudalism, when the landed nobility began to collect the taxes, there arose exemption from taxation of the nobility itself, with liabil- ity to taxation on the part of the unarmed peasantry. To increase the military power of the territory, the French feudal law set up the principle of nulle terre sans seigneur, intended originally to increase the number of benefices as a guarantee of military strength; on the same principle rested the compulsory reinfeudations imposed by the Ger- man king in connection with every grant of land. This differentiation as regards liability to taxation formed the basis of the policy of the princes in maintaining the peasant holdings. They could not consent to having the hide land alienated from the peasant, as the area subject to taxa- tion was thereby decreased. Thus the territorial princes adopted the system of protecting the peasantry and for- bade the nobility to confiscate the peasant holdings. Several economic results also followed: 1. The large household of the lord and small household of the peasant subsisted side by side. The dues of the peasants originally served only to satisfy the requirements of the lord and were readily fixed by tradition. The peasants had no in- terest in making the soil yield more than was necessary for their own maintenance and for covering their obligatory payments, and the lord had as little interest in increasing the payments, as long as he did not produce for a market. The mode of life of the lord was but little different fromTHE MANOR "1 that of the peasant. Thus ‘‘the walls of his stomach set the limits to his exploitation of the peasant,’’ as Karl Marx observed. The traditionally fixed dues of the peasant class were protected by manorial law and by community of interest. 2. Since on account of the taxes involved, the state was interested in maintaining the peasantry, the jur- ists took a hand, especially in France. The Roman law did not generally, as commonly supposed, work toward the dis- integration of the old Germanic peasant law, but on the contrary was applied in favor of the peasantry, against the nobility. 3. The attachment of the peasantry to the soil. This followed, in so far as personal fealty arose, or in con- sequence of the tax obligation, when the lord became an- swerable for their taxes; to an increasing degree also the nobility established it by usurpation. The peasant could withdraw from the community only by forfeiting his land and by securing another man to take his place. 4. The rights of the peasant in the land became extraor- dinarily diversified. In the case of unfree tenants the lord generally had the right to resume the holding at death. If he renounced the exercise of this right, having no tenants to spare, he at least assessed special dues, the heriot, ete. Free tenants either held leases terminable at any time or were copy-holders with permanent rights. In both cases the legal position was clear, but the state often interfered to forbid the termination of grants—the so-called tenant right. Among the dependents, who as freemen had orig- inally commended themselves to a lord, arose an attach- ment to the lord and of the lord to them in return. The lord could not simply dismiss the villein, but as early as the time of the Sachsenspiegel was compelled to pay him a small capital in money. 5. The lords regularly appropriated to themselves the common mark and often the common pasture or almend as ets Shier noe Sa te CAS See G See I ae ee st mene at ee oeRnd ad ,a pane sd aera aren we SS - | a) Deter SNe eee a De aCe Roe te a ae ONS ee a On near areretae ane ercarea 72 GENERAL ECONOMIC HISTORY well. Originally, the chieftain was head of the mark or- ganization. Out of the lord’s right of supervision evolved in the course of the Middle Ages a feudal proprietorship over the mark and the common pasture of the village. The peasant wars of the 16th century in Germany were waged primarily against this usurpation, and not against excessive payments and dues. The peasants demanded free pasture and free woodland, which could not be granted as the land had become too searce, and fatal deforestation would have resulted, as in Sicily. 6. The lord had established in his own favor numerous ‘‘socage rights’’ or banalités (Bann- rechte) such as a compulsion on the part of the peasant to grind grain at the lord’s mill, to use his bakery, his oven, ete. These monopolies arose, to begin with, with- out compulsion; for only the lord was in a position to erect mills or other institutions. Later, oppressive force was used to compel their utilization. Besides these the lord possessed numerous banalités in connection with hunting and the transportation of goods. They grew out of obliga- tions to the chieftain, transferred to the later judicial over- lord, and were exploited for economic ends. The exploitation of the subjugated peasantry by the lords was carried out, with two exceptions, not by means of forced labor, but by making them into rent-payers. The only two exceptions in the world will be treated later, in connection with the development of capitalistic economy within the manor (ef. Chapter VI). The grounds for this method of exploitation were in the first place the tradition- alism of the lords. They were too lacking in initiative to build up a business enterprise on a large scale into which the peasants would have fitted as labor force. In addition, as long as the cavalry was the core of the army, the lords were bound by their obligations as vassals and could not be spared for agriculture, while the peasant could not beTHE MANOR 73 spared for war. Moreover, the lord possessed no movable capital of his own, and preferred to transfer the risk of active operations to the peasant. Finally, there was in Europe the restriction of manorial law which bound the lords, while in Asia the latter could not rely on sufficient protection on going over to production for the market, since there was nothing corresponding to the Roman law at hand. Here there was no development at all of the demesne (Fronhof) or in-land, farmed by the lord. The lords secured rentals, in numerous ways: 1. Through feudal dues, which the free peasant paid in goods, the servile one in labor. 2. Through fees on occasion of a change in tenant, enforced by the lord as a condition of the sale of the holding. 3. Fees in connection with in- heritance and marriage, imposed as a condition of trans- mitting the land to heirs or for the privilege of letting the peasant’s daughter marry outside the lord’s jurisdiction. 4. Fees in connection with woodland and pasture, as for mast in the forest. 5. Indirect rents secured by imposing on the peasant transportation charges as well as the burden of building roads and bridges. The collection of all these fees and payments was carried out originally through the ‘‘villication’’ system which represents the type of manorial administration for south and west Germany as well as for France, and is everywhere the oldest form of feudal or- ganization for the exploitation of land. This system pre- supposes the scattering of holdings. The lord sets over each of his widely separated holdings (Hufen) a villicus or bailiff, whose duty it is to collect the payments from his neighbors who are dependents of the lord, and to hold them to the performance of their obligations. BevErecoss Tee ae PAPA ePID LF Pes APD cae Nive meme tbe as oe ate be SDs ey ba ae Dy a Se est EP PINOLE pa par aes ae pag ae ee a as ann See EES eect Le RSETSAI Speers eae mx SAT ao = ~ SAY See a er i ea seals ee ene CHEAPER Vit THE POSITION OF THE PEASANTS IN VARIOUS WESTERN COUNTRIES BEFORE THE ENTRANCE OF CAPITALISM France.—Originally there were slaves (serfs) and half- free persons side by side. The slaves may be serfs de corps, subject to unlimited services, and over whom the lord has absolute authority short of life and death, or they may be serfs de mainmorte with limited service and the right of withdrawal; but the lord has the right of resum- ing disposal over the land on the death or removal of the tenant. The half-free peasants or villeins have the right of transferring their lands, and render fixed services or payments—the sign of an originally free status. These relations underwent extensive transformations as a result of two sets of circumstances. In the first place, the num- bers of the servile population were notably reduced by wholesale emancipations as early as the 12th and 13th centuries. This took place contemporaneously and in con- nection with the introduction of money economy. It was in accord with the selfish interests of the lord, since free peasants could be made to bear much heavier burdens of dues. A further cause was the origin of peasant unions. The village community organized itself as a corporation which assumed a joint obligation for the rents of the lord, in return for full autonomy in administration, which auton- omy was also protected by the king. Both sides obtained an advantage from the arrangement: the lord because he 74THE POSITION OF THE PEASANTS 75 had only one debtor to deal with, and the peasants be- cause their power was enormously increased. Temporarily, the unions were even summoned to the Estates General. The nobility found the change the more convenient the more they evolved—in contrast with the Prussian Junkers of the time—into a courtier nobility, a class of rentiers living far from the land and no longer representing any organization for work, so that they were easily eliminated from the economic organization of the country in a single revolutionary night. Italy—tThe original agrarian organization was in this ease changed at an early date through the buying up of the land by the townsmen, or expropriation of the occupiers in connection with political turmoil. The Italian towns early did away with personal servitude, limited the services and payments of the peasants and introduced cultivation on the shares, not originally with capitalistic designs but to cover the needs of the proprietors. The share tenants had to furnish the table supplies of the patricians, each being under obligation to supply a different sort of prod- uct. The movable capital was regularly furnished by the propertied townsman, who did not wish to employ his wealth in capitalistic agriculture. This system of share tenantry distinguished Italy and Southern France from other countries of Europe. Germany.—Northwestern and southwestern Germany and the adjacent parts of northern France were the re- gion especially characterized by the villication organiza- tion, with scattered holdings, referred to at the close of the preceding chapter. From this as a beginning the de- velopment of agricultural organization proceeded by very different courses in the southwest and the northwest. In southwest Germany the villication system disintegrated. The rights of the lord to the land, to personal fealty, and a Bootes Sa ta ne ea Sn Se as aS Sa ee eel tent! Sore a pony E SELEMIN SM MMAR ESE SS Ee perenne coer ie ne aos aoe ee ee EL ets ae ne LE er —. ree nan eea a om a = ~~ ae ee a ae ee nee ES EO EE ar ey ew FIRE TE RFA SRT EERO ELLIE ATEN AD: Bini BE Hg ae RSL ION. ee ee Ways hes + eat 76 GENERAL ECONOMIC HISTORY the justiciary right, became transformed into a simple right to receive a rental, while only relatively few compulsory services and dues in connection with the transfer of in- heritance remained as relics. The Rhenish or southwest German peasant thus became in fact his own master, able to sell his holding or transmit it to heirs. This came about primarily because manorial law developed its greatest power here and because holdings were extremely scattered ; several land holders often lived in one village. Land holding, judicial authority, and liege-lordship were in dif- ferent hands, and the peasant was able to play off one against the other. The chief gain which the land holders were able to secure in west and southwest Germany was the appropriation of large portions of the common mark, and to a much smaller extent, of the common pasture. In northwest Germany the villication system was dis- solved by the landholders. As soon as they saw a possibil- ity of marketing their products they became interested in an increase in the income from the land and in securing holdings suited to production for the market. Conse- quently, at the time of the Sachsenspiegel, and even a little earlier, there were wholesale emancipations of the serfs. The land thus liberated was leased for definite periods to free renters called ‘‘Meier’’ whose property became heredi- tary under strong pressure from the state, which protected them against unexpected increases in rental. If the pro- prietor wished to evict a tenant, the state compelled him to secure another peasant, so that the tax revenue would not be decreased. The interest of the lords in large hold- ings led to a law of single inheritance, the lord forcing the assumption of the holding by an heir. As a rule the rent was paid in kind, while money payments took the place of the compulsory feudal services. In certain parts of Westphalia, serfdom had persisted, but only to theTHE POSITION OF THE PEASANTS ce extent that the lord could resume a part of the inheritance on the death of the tenant. In the southeast,—Bavaria, the upper Palatinate and southern Wurtemberg—the prop- erty rights of the peasant were often insecure. A dis- tinction was made between hereditary tenure (Hrbstift) and non-hereditary (Leibgeding) and also between pro- tected leases and unrestricted leases (Schutzlehen and Vollehen). The latter were only for life and permitted the lord to increase the payments at the death of a holder or to grant the holding to someone else. The lord himself usually stood out for the law of compulsory inheritance. The payments consisted of tithes, and fees on occasion of change of tenant. Their amount depended on the heredi- tary or non-hereditary character of the property. The labor dues were very moderate. Personal bondage was the rule down to the 18th century, but signified nothing beyond a very small and modest and variously limited obligatory payment to the personal overlord who was often separated from the lord of the land. Eastern Germany showed, down to the 16th century, the most ideal legal position of the peasantry. The cultivators usually held the land on terms of a quit-rent, rendered no labor services, and were personally free. Relatively large masses of land were in the hands of nobles who from the beginning were endowed with large-hides, often three or four or more in a single village. Judicial authority and land holding were identified to a considerable extent. This peculiarity made it easier later to subject the tenants to compulsory services and to convert into large scale farms the holdings which the nobles managed directly. In England, there were villains im gross who were serfs and villains regardant who were technically in a higher position; they were strictly attached to the soil but were members of a popular court. Manorial law Pe prt ey st pat ee aes AE: See ee hate a SS — sp ~—« 1a Sek EID nes oat was re rind Peete ee nae Fp a ee LL en et ae a Son a PSEA LEErR NE in ee sa — Jaw PN A Re ae ee TD a ~~ ee eC Sante aD SN I 12 Pan Fi i 7) f } f i i tg | if |: 1 ts i iM Ae 1; t} iH io 78 GENERAL ECONOMIC HISTORY became very strong, making it difficult for the lords to oppress the peasants or increase their obligatory payments. The title to the land and the juridical authority were iden- tified, and at the time of the Norman conquest unified dis- tricts were granted to vassals. But over the land holders stood a strong state, and the English kings possessed in their royal courts and trained jurists a power which put them in a position to protect the peasantry against the feudal landlords.CHAPTER VI CAPITALISTIC DEVELOPMENT OF THE MANOR The manorial system, which arose under the pressure of a strong military interest in connection with the economic, and was originally directed toward using dependent land and dependent labor force to support an upper class life, showed a strong tendency to develop in a capitalistic direc- tion. This tendency manifested itself in the two forms of the plantation and estate economy. (A) THE PLANTATION A plantation is an establishment with eompulsorytebor, producing garden products especially for the market. The plantation economy universally arose wherever the con- duct of agriculture by a class of overlords as a result of conquest coincided with the possibility of intensive cultiva- tion, and was especially characteristic of colonies. In. modern times the plantation products have been sugar cane, tobaceo, coffee, and cotton; in antiquity they were wine and oil. The course of development generally leads through a preliminary semi-plantation system. Here only the mar- ket is regulated and concentrated into one hand, while production is turned over to a servile class as compulsory labor, with joint liability of the community, attachment to the land, and payments to the owner of the semi-plantation, which is a colonizing corporation. This condition domi- nates in South America down to the revolution at the be- 79 OT EPPA SCALE ea ee en tae SAPIENS ate Ee oad a TDL LAL ee Laren mr gn ym ieee ere tee eos ee en ced — Stee ae me N ne nest ame Sn meme ReaD fener a~~ ae ae a a a aa oan Pg REGEN IS SS a ae late eee er ae ae — Pee en nc oe Daten ee ae ene if ei Bi i Views. 80 GENERAL ECONOMIC HISTORY ginning of the 19th century, and in the New England states down to the separation from the mother country. Plantations proper are found scattered over the world at large. Twice did the system reach a classical develop- ment; first, in the ancient Carthago-Roman plantations, and second in the negro plantations in the southern states of the Union during the 19th century. The plantation proper operates with disciplined servile labor. We do not find, as in the case of the manorial economy, a large estate and individual small holdings of the peasants side by side, but the servile population are herded together in barracks. The main difficulty of the enterprise lies in the recruiting of laborers. The workers have no families and do not re- produce themselves. The permanence of such plantations is therefore dependent upon slave hunts, either through war or through periodical raids on a large slave hunting territory such as Africa was for the negro traffic. The plantation of antiquity’ developed in Carthage, where it was scientifically described by Mago, as well as in the Latin literature by Cato, Varro, and Columella. A pre- requisite for its existence is the possibility of obtaining slaves at all times in the market. The products of the Roman plantation are oil and wine. On the plantation we find side by side the coloni who are free small tenants, and the servi who are slaves. The coloni till the land in grain crops with stock and tools furnished them by the lord and hence constitute a labor force rather than a peasantry in the modern sense. The slaves are without families and without property and are herded together in barracks, combining dormitory, pesthouse, and cell for confinement against escape. Work goes forward under strict military routine, beginning with the answer to reveille in the morn- ing, with march in closed ranks to and from work, and issue of clothing by a warehouse to which it must be returned.CAPITALISTIC DEVELOPMENT OF MANOR 81 The only exception is the villicus or inspector, who pos- sesses a peculium and is contubernalis, meaning that he is permitted to marry a slave woman and has the right to keep a certain amount of livestock on the lord’s pasture. The hardest problem was that of keeping up the working population. As the natural increase through the promis- cuous relations of the slaves was insufficient, an effort was made to stimulate the production of children by promising the slave women their freedom after the third birth. This measure proved vain because no life except prostitution awaited the freed women. The difficulties of the lord who maintained his dwelling in the town increased in view of the steady demand for slaves. Since the permanent supply of the slave market ceased to be possible with the termina- tion of the great wars after the beginning of the imperial period, the slave barracks were doomed to disappear. The shrinkage of the slave market could have no other effect than that which the failure of coal mining would have on modern industry. The Roman plantation changed in char- acter for the further reason that the center of gravity of the ancient culture shifted inland, while the slave barracks were bound to the neighborhood of the coast and the possi- bility of commerce. With this shifting of the center of gravity to the land, where traditional manorial economy dominated and corresponding conditions as to transporta- tion obtained, and with the peace brought by the Empire, it was necessary to go over to another system. In the period of decline of the Empire, we therefore find the slaves, inso- far as they are concerned with the agricultural work, pro- vided with families and quartered in the mansus serviles, while on the other hand the colons are subjected to labor services and no longer merely to rent payments ; that is, the two classes converge. The possessor class dominates the economie and political policy of the empire. Money econ- eee Se Se ES SE SS ree SS ean nag i 9S ONS AIS SIEM RMT EATS -— ee Rt at ene annea ed i : ATTA) oe a ma Se 82 GENERAL ECONOMIC HISTORY omy and town life decline; the conditions approach the stage of barter economy. Similar difficulties appeared in the southern states of the North American union. The plantation system arose here a when the great inventions in the field of cotton utiliza- tion were made. In the last third of the 18th century were invented the cotton spinning machine (1768-69) and the loom (1785) in England, and in the United States the ecot- ton gin for separating the fiber from the seed (1793) ; the latter first made possible effective utilization of the cotton crop. Thereupon developed the wholesale marketing of cotton which displaced linen and wool production. How- ever, the mechanical utilization of the product led to en- tirely opposite effects in Europe and America. In the former, cotton gave the impulse to the organization of a free labor force, the first factories developing in Lan- eashire in England, while in America the result was slavery. In the 16th and 17th centuries, efforts were made to use I a as Tal FULTS i Pa ad RN nN the Indians for mass production, but they soon proved themselves unserviceable, so recourse was had to the im- portation of negro slaves. But these, without families, did not reproduce themselves, and as the slave trade was for- bidden by one after another of the New England states, great scarcity of negroes ensued after a single generation— by the end of the 18th century. The utilization of poor emigrants, who sought to pay the still very considerable costs of the ocean passage by plantaticn labor, proved in- sufficient. The next expedient was that of breeding ne- groes, which was carried on so systematically in many southern states that negro-breeding and negro-consuming states could be distinguished. At the same time there broke out a struggle for land for the application of negro labor. The system required cheap land and the possibility of constantly bringing new land under tillage. If the a a en ee eran a onerersd eee at pe ae ot es Ne ears ooCAPITALISTIC DEVELOPMENT OF MANOR 83 labor force was dear the land had to be cheap, and negro culture was exploitative (Raubbaw) because the negroes could not be trusted with modern implements and used only the most primitive tools. Thus began the struggle between the states with free and those with unfree labor. The peculiar phenomenon was presented that the ecomple- mentary productive factor ‘‘slave’’ alone yielded a rent, while the land yielded rone at all. Politically, this situa- tion meant a strurgle between the capitalistic classes of the north and the plantation aristocracy of the south. On the side of the former stood the free farmers, and on that of the planters, the non-slave owning whites of the south, the ‘“noor white trash’’; the latter dreaded the freeing of the negroes on grounds of class prestige and economic compe- tition.” Slavery is profitable only when it is handled with the most rigid discipline associated with ruthless exploitation. Further requisites are the possibility of cheap provision and feeding of the slaves and extensive mining-out cultiva- tion, which again presupposes an unlimited supply of land. When slaves became costly and celibacy could no longer be maintained for them, the ancient plantation system fell, and with it slavery. Christianity did not exert in this case the influence commonly ascribed to it; it was rather the Stoic emperors who began to protect the family and introduced marriage among the slaves. In North America, the Quakers were especially active in the abolition of slavery. Its doom was sealed, however, from the moment when (1787) Congress [sic] prohibited the importation of slaves beginning with the year 1808, and when the avail- able land threatened to become inadequate. The trans- formation of the slave economy into a share tenant system which actually resulted, would apparently have come to pass without the war of secession which was unleashed » W eS 7 GSS — Sr SIE REET enna Pe eae Saree hn keeles je eA PSP ATE wean ie eee ean ee ae Fe em ee ratte I Ts a ee a tht i SNe ae eS} SND Poet aie eer nn oeSAT ATI a a ae TS Po) be Se eee (eke et ed 94 GENERAL ECONOMIC HISTORY In general, it was necessary for other interests to come in from without. One such was the con meretatinterest of—the_newlyestablished—bourgeoisie of the towns, -who promoted _the—weakening-or dissolution of the manor be- cause—it—imited their own market opportunities. The Gown and its economie policies_on the one side and the Qnanor’ on the other were ee not so much in the sense that one represented a barter economy and the other a purely money economy, for the manors produced to a large extent for the market, without the opportunities of which it would have been impossible for the landlord to raise large money payments from the peasants. Through the mere fact of the compulsory services and payments of the tenants, the manorial system set limits to the pur- chasing power of the rural population because it- prevented the -peasants_from—devoting their entire laber power to production for the market and from developing their pur chasingpower. Thus the interests of the bourgeoisie of the towns were opposed to those of the landed proprietors. In- addition, there was the interest on the part of the developing capitalism in the creation of a-freetabor-market, to which obstacles were opposed--by—the—manorial system through the attachment-of the peasants to the soil. The first capitalistic industries were thrown back upon the ex- ploitation of the rural labor power in order to circumvent the guilds. The desire of the new capitalists to acquire land_gave them a further interest antagonistic to the ma- norial system; the capitalistic classes wished to invest their newly acquired wealth in land in order to rise into the socially privileged landed class, and this required a libera- tion of the land from feudal ties. Finally, the fiscal. in- terest-of the-state.also took a hand, counting upon the dis- solution of the manor to increase the taxpaying capacity of the farming country.CAPITALISTIC DEVELOPMENT OF MANOR 95 These are the various possibilities in connection with the dissolution of manorial economy. In» detail;-its—develop- ment—was—extraordinarily -complieated. In China,® the feudal system was abolished in the third century before our era, and private property in the land established. Shi- Huang-Ti, the first emperor of the Ching dynasty, rested his power on a patrimonial in contrast with a feudal army, relying for its support on taxation of the dependent classes. The Chinese humanists, the precursors of the later Con- fucians, took their stand on the side of the monarchy and played the same rationalizing role as the corresponding group in Europe. Since that time, fiscal policy in China has changed times without number.® The two poles be- tween which it vibrated were those of a taxation state and a ‘‘managerial’’ (leiturgisch) state, 1.e., between one pay- ing its army and officials out of taxation and treating its subjects as a source of taxation and one utilizing them as a source of servile labor, supplying its needs by holding specified classes responsible for payments in kind. The lat- ter policy is the one followed by the Roman Empire at the time of Diocletian, when compulsory communes were orga- nized for the purpose. One system made the masses for- mally free, the other made them state slaves. The latter were utilized in China in the same way as they were in EKu- rope in those cases where the lords exploited the dependent population as labor power and not through rent charges. In the latter case private property disappeared, and obliga- tions to the land and attachment to the land, with periodi- cal redistribution, came in. The final result of this de- velopment in China after the 18th century was the aban- donment of the leiturgical principle in favor of the taxa- tion principle; taxes were paid to the state, along with which unimportant remains of public labor services sur- vived. The taxes flowed into the hands of the mandarins, eae SEAS ea SE eS Mae aS a AE LE ES = a = ———— << — mean on ne ie ae oe Poe ee eee arnt are ae C9) Pi ON) See ie Se rene aosSe ere ate -< as ae pence een — je aa DSLR RTL OE TB ES Bs Boe DE LF ARR nears = ee ee eee eee aerate eserves 96 GENERAL ECONOMIC HISTORY whose payments to the court were rigidly fixed, while they pushed the taxes of the peasantry as high as possible. This, however, was notably more difficult because the power of the clans was so great that every official had to secure the consent of the Chinese peasantry. The result has been extensive liberation of the peasants. There are still a few tenants, but they are personally free and pay only a moderate rent. In India, the manorial system still persists; indeed it first arose in a secondary manner out of the practice of tax farming by the fise. English legislation protects the peas- antry, who formerly had no rights, in the same way that Gladstone’s laws protected the Irish in the possession of their holdings and against arbitrary increase in the tradi- tional payments; but it has not in principle changed the established order. In the near east, also, the feudal tenure exists, but only in a modified form, since the old feudal army has disap- peared. Fundamental changes in Persia and other coun- tries exist only on paper. In Turkey the institution of the wakuf (ef. below) has hitherto prevented a moderniza- tion of land holding relations. In Japan, the medieval period comes down to 1861 when, with the downfall of the rule of the nobility, feudal land holding also fell away through the dissolution of the proprietary rights. The pillars of the feudal system, the Samurai, were impoverished, and turned to industrial life; out of this class the Japanese capitalists have developed. —~ In the Mediterranean region in antiquity,’® feudal land holding was displaced only within the region immediately under the power of the great cities like Rome and Athens. The town bourgeoisie was in opposition to the landed no- bility, with the further conflict between the townsmen as creditors and the country folk as debtors. This situation,CAPITALISTIC DEVELOPMENT OF MANOR 97 in connection with the necessity of securing the great mass of peasants for military service, led in Greece to an en- deavor to fit out the hoplites with land. This was the sig- nificance of the legislation of the so-called tyrants, as for example, the laws of Solon. The knightly families were compelled to enter the peasant organizations. The legis- lation of Cleisthenes of about 500 s.c. understood by de- mocracy the condition that every Athenian, te-enjoy—the privileges of-_citizenship, must belong-to-a ‘‘demos,”’ 1. e., a village, just as in the Italian democracies of the middle ages the nobility were compelled to join the guilds. It was a blow against the land system with its scattered hold- ings, and against the power of the nobility, who up to that time had stood above and outside the villages. After this time the knights possessed only the same voting power and opportunity to hold office as any peasant. At the same time, the system of intermingled holdings was everywhere set aside. The class struggles in Rome had similar results for the agricultural organization. Here the field division was in the form of squares of 200 acres and upward. Lach hold- ing was set off by a balk of turf which must not be plowed up ; the limites were public roads, removal of which was also forbidden, in order to maintain accessibility. The land was transferable with extraordinary facility. This system of agrarian law must have been known in the time of the twelve tables and must have been established at a single stroke. It is a law in the interest of the town bourgeoisie, which treats the land holdings of the nobility after the fashion of territory used in towns for speculative building and systematically removes the distinction between land and movable property. Outside the immediate territory belonging to the town, however, the ancient land system was undisturbed. The civilization of antiquity—down to et ae? ea Cee ne Ee <= ap = ss ens me et eee tte ater nt eta IS —— gene? Nee a ee trae wen ohne aS ett ee hs Sa ee renters oeOe ee oe ee ss see ae ae MR Rs Pe Ne REINS TUE NCE at at 28 Dt 98 GENERAL ECONOMIC HISTORY Alexander the Great in the East and Augustus in the West —was riparian in character and the system of tenure re- mained unchanged in the interior; from here it later worked outward again, and finally conquered the entire Ro- man Empire, to remain the dominant institution through the first half of the middle ages. The merchant republics of the Italian towns, under the leadership of Florence, first took up the path toward liberation of the peasantry. To be sure, they deprived the peasants of political rights, to the advantage of the town rulers and councils, the crafts and the merchant guilds, until the nobility itself turned to the peasantry for support against the town population. In any case, the towns liberated the peasantry, in order to buy up the land and release themselves from the clutches of the ruling families (Cp. above, p. 75). In England,'* no legal emancipation of the peasants ever took place. The medieval system is still formally in force, except that underCharles II serfdom was abolished and infeudated land-became private property, in “‘fee-simple.’’ The only explicit exception was the ‘‘copyhold’’ land, which was originally in the possession of unfree peasants, the occupier holding no formal grant, but only a copy of one recorded in the rolls of the manor. In England, the mere fact of the development of a market, as such and alone, destroyed the-manorial system from within. In ac- cordance with the principle fitting the situation, the peas- ants were expropriated in favor of the proprietors. The peasants-became free but without land. In France '” the course of events is exactly the opposite. Here the revolution put an end to the feudal system at one blow in the night of August 4, 1789. However, the measure adopted at that time still required interpretation. This was given by the legislation of the Convention, which declared that all burdens against peasants’ holdings inCAPITALISTIC DEVELOPMENT OF MANOR 99 favor of overlords were presumed to be of feudal character and that they were abolished without compensation. In addition, the state confiscated the enormous estates of the émigrés and of the church, conferring them upon citizens and peasants. However, since equality of inheritance and distribution of holdings had arisen long before the aboli- tion of the feudal burdens, the final result was that-Erance, in -contrast with—Eneland,-became_a land of small and medium--sized--farms. The process—was—one of ereating property-in-the-hands.of the peasantry through the ex- propriation of the landlords. This was possible because the French landlord was a courtier-noble and not a farmer, seeking his living in the army or in civil service positions upon which he had in part a monopolistic claim. Thus no productive organization was destroyed but only a rent relation. Similar in character but less revolutionary and rather by gradual steps was the course of development in south and west Germany. In Baden, the liberation of the peasants was begun as early as 1783 by the Margrave Charles Freder- ick, who was influenced by the Physiocrats. The crucial fact is that after the wars of liberation, the German states adopted the system of written constitutions, and no rela- tionship in connection with which the name of bondage (Leibeigenschaft) could be used is compatible with a con- stitutional state. Hence the unlimited labor dues, taxes, and services which had anything of the character of per- sonal servitude were everywhere abolished. In Bavaria, it was done under Montgelas and confirmed by the constitu- tion of 1818; the peasants received freedom of movement and finally, favorable property rights. This happened in almost all of south and west Germany in the course of the 20’s and 30’s; only in Bavaria the substance of it was not achieved until 1848. In that year the last remains of reread NT or a os Fee) yx or ae as Sen Sih th ot ete = poe, PSR: SCS. oo ee eS = ener ee Se ee en rn eer Oak SPP Et te ee cee TET ga ne meer See eras Ch AIO omen Se) aoe eae “ -— a Se NA a ee 2 Td ee ee ee Le Cee ee oe ee eee ee — a ee eee eee 100 GENERAL ECONOMIC HISTORY the cultivators’ burdens were removed by conversion into money obligations, in the handling of which state credit in- stitutions lent aid. Specifically, in Bavaria personal dues were abolished without compensation; other dues were con- verted into money payments and made subject to extinc- tion by purchase; at the same time, all feudal ties were un- conditionally dissolved. Thus in south and west Ger- many, the landlord was expropriated and the land given to the peasant; the change was the same as in France ex- cept that it took place slowly and according to a more legal process. Quite different was the course of events in the east—in Austria, and the eastern provinces of Prussia, in Russia, and in Poland. Here, if drastic measures had been taken as in France, a functioning agricultural organization would have been destroyed and only chaos would have resulted. It might have been possible to promote a disintegration of the manors into peasant holdings, as happened in Denmark, but it would not have been possible simply to declare feudal burdens abolished. The landed proprietors of the east possessed neither implements nor work animals. There was no rural labor force, but small holders subject to services of man and team, by whose labor the proprietor tilled his land ; that is, it was an organization for working the land, which could not be summarily set aside. A further diffi- culty existed in the fact that there was no official class for the administration of the rural districts, and the govern- ment was dependent on the estate holding nobility to per- form public functions on an honorary basis. Summary measures, such as the presence of an official staff of lawyers made possible in France, were therefore excluded here, as they were in England in view of the aristocratic justices of the peace. If the protection and maintenance of the peasantry is re-CAPITALISTIC DEVELOPMENT OF MANOR 101 garded as the proper objective of an agrarian system, then the dissolution took place in an ideal manner in Austria. In any case, it was better than the Prussian methods, be- cause the Austrian rulers, especially Charles VI and Maria Theresa, knew better what they were doing than did, for example, Frederick the Great, of whom his father said that he did not know how to terminate a lease and box the ears of the tenant. In Austria,!* with the exception of the Tyrol, where a free peasantry predominated, hereditary bondage and a landed nobility had existed side by side. The system of estates using the peasants as labor force was most common in Pomerania, Moravia, Silesia, Lower Austria, and Ga- licia ; elsewhere, a renting system predominated. In Hun- gary, leasing and exploitation by servile labor were inter- mingled. The greatest degree of personal servitude ob- tained in Galicia and Hungary. Here were distinguished ‘“rusticalists’? who were subject to contributions according to a cadaster, and ‘‘dominicalists’’? who were settled on demesne land (Salland) and were not subject to contri- butions. The rusticalists were in part in the better posi- tion. They were divided again, as were also the domini- ealists, into commuted and non-commuted. The holdings of the non-commuted were subject to retraction, while the commuted possessed hereditary rights. After the second half of the 17th century, capitalistic tendencies began to intrude into this organization. Under Leopold I the state interfered, at first in a purely fiscal connection, under the form of a compulsory enrolment in cadasters. The policy was to determine from exactly what land the state could collect taxes. When this measure proved without effect, the authorities tried the system of ‘labor patents’? (1680-1738). The object was legislative protection of the laborers; the maximum of work which pris a — Se oe eg eee meer ng eens a ae re es ena el Sa as ane a ere a ne ant eee ee ca att es vw ——s ae la te eae = Seen ee ee Sn LEED ee a wae A Ss PEREae aoe os coer ees ee Res a Re cea Ce = ews a ete eer Gre setareccerres ee ee ee STOUR RANE st Pl Eo mo sila SSSA SOT B Ba Re SE 102 GENERAL ECONOMIC HISTORY might be demanded from every peasant was determined. The eviction of the peasants was not yet made impossible, however, and Maria Theresa adopted the system of tax ‘‘rectification,’’ aiming to reduce the incentive to evict the peasantry by making the proprietor responsible for the taxes of any peasant displaced by him. But this measure also proved insufficient, and in 1750 the Empress inter- fered directly with peasant evictions, though again without accomplishing anything conclusive. Finally, in 1771, she promulgated the system of complete registration. The landed proprietors were compelled to draw up registers (Urbarien—a sort of Domesday Book) in which each peas- ant holding, with its obligations, was definitely fixed. At the same time, the peasants were given the right to com- mute the obligations and so to acquire hereditary posses- sion. This expedient broke down in Hungary at once, while in Austria it met with notable success. It repre- sented the attempt to maintain the existing number of peasants and to protect them against the advance of agra- rian capitalism. It did not constitute a dissolution of the existing agricultural organization; the peasants were to be protected, but the nobility were also to maintain their posi- tion. Under Joseph II the legislation first took on a revolu- tionary character. He began by dissolving personal bond- age and granting what he understood by this dissolution, namely, freedom of movement, free choice of occupations, freedom in marriage, and freedom from sergeanty or obligatory domestic service. He gave the peasants, in prin- ciple, property in their holdings, and in the tax and regis- tration law of 1789 struck out on a really new path. The former system of compulsory services and payments in kind on the feudal holdings was terminated, the dues and aids being converted into fixed money payments to the state.CAPITALISTIC DEVELOPMENT OF MANOR 103 This attempt to go over at one step to a taxation state broke down. The peasants were not in a position to realize from their products an income large enough to make the money payments, and the economie program of the pro- prietors was so violently disturbed that a great storm arose, forcing the emperor on his death bed to retract a large part of his reforms. Not until 1848, as a result of the revolution, were all the burdens of the peasantry removed, partly with and partly without compensation. Insofar as compensation was required, the Austrian state fixed a very moderate valuation of the services and set up credit institutions as a means of extinguishing them. This legis- lation represented the crowning of the efforts of Maria Theresa and Joseph II. In Prussia,* there has been a pronounced and persistent distinction between the peasants on the crown lands and those on private holdings. For the former, Frederick the Great himself had been able to put through thoroughgoing protective measures. In the first place, he abolished the compulsory domestic service (Gesindeszwangdienst). Then, in 1777, he made the peasants’ holdings hereditary. In 1779, Frederick William III proclaimed the abolition of compulsory services in principle, requiring every recipient of a lease on crown land to renounce them explicitly. Thus on the crown domains a modern agricultural system was gradually built up. In addition, the peasants were eranted the right of purchasing full proprietory rights for a rela- tively moderate sum; the officialdom of the state eoncurred in these measures, not only on account of the income which the commutation money would bring to the treasury, but also because with acquisition of full proprietorship the claims of the crown peasantry against the state were ex- tinguished and the labor of administration reduced. With regard to the peasantry on private holdings, the Se ES ee teas Sara en ee hee en ee Ne i alan rm Ten EMMA CATS ELS Se ae aE Ree ine Sn Pet ein er en aa ESET OI TPIS eners oP Zs ae linear oohc iret ornanhiihe- be mrsin testa eet 4 | . StCAPITALISTIC DEVELOPMENT OF MANOR 109 Modern legislation has entirely abolished feudal ties. In some regions these have been replaced by a system of trusts or fideicommissa. These are first met with in the form of certain peculiar foundations in the Byzantine Empire, be- ginning with the 12th century. To protect the land against the emperors, it was given to the church and thus received a character of sanctity. The purpose for which the church could use it, however, was rigidly prescribed, as for ex- ample the maintenance of a number of monks. The re- mainder of the rent, to the amount of nine-tenths of the total, accrued permanently to the family establishing the foundation. Thus arose in the Moslem world the wakuf, a foundation apparently in favor of the monks or for some other pious purpose, but in reality designed to secure to a family a rent while preventing the Sultan from levying taxes on the land. This device of the fideicommissum was brought by the Arabs to Spain and then taken over by England and Germany. In England it aroused resistance, but the lawyers devised a substitute in the institution of ‘Centails.’” The nature of the institution is this: the in- divisibility and inalienability of holdings of land is secured by agreement on its transfer from one generation to the next, so that no change is possible during the lifetime of the holder. In this way the greater part of the land of England has been concentrated into the hands of a small number of families, while in Prussia a while ago one- sixteenth of the land was tied up in trusts. The result is that a latifundian ownership obtains in England, Scot- land, and Ireland and also (before 1918) in parts of Silesia and the former Austro-Hungarian monarchy, and to a small extent in certain parts of. Germany. The manner in which the agrarian system developed and the feudal organization was displaced has had extraordi- narily far-reaching consequences, not only for the progress ere i Seay sot ays Nar op — SSS or ESE UENO EE AEA ed ona e ie a ee ee Sd on Reet ae Sethe bee eee mg De LS DS Fete eee ae eae ae ae DSS RGSS eet a eee en PS oes See PEON LEE eo110 GENERAL ECONOMIC HISTORY of rural conditions but for political relations in general. Especially has it influenced the question whether a coun- try was to have a landed aristocracy, and what form it would take. An aristocrat in the sociological sense is a man whose economic position sets him free for political activities and enables him to live for political functions without living by them; hence, he is a receiver of fixed income (Rentner, rentier). This requirement cannot be met by those classes who are bound to some occupation by the necessity of working to provide a living for themselves and their families, that is, by business men and laborers. In an agricultural nation, specifically, the complete aristo- erat lives on ground rents. The only country which really possesses such an aristocracy in Europe is England—to a limited extent also the Austria of former times. In France, on the contrary, the expropriation of the landed classes led to an urbanization of political life, since only the plutocracy of the towns, and no longer the landed aristoc- racy, were economically free enough to make politics a pro- fession. The economic development of Germany left only a thin stratum of landlords free for political life, chiefly in the eastern provinces of Prussia, where the expropriation of the peasants went farthest. The majority of the Prus- sian Junkers formed no such aristocratic stratum as the English landlords. They are rather a rural middle class with a feudal stamp, coming down from the past, whose members are occupied as agricultural entrepreneurs in the day-to-day economic struggle of business interests. With the fall in grain prices since the seventies and the rise in the demands of life, their fate was sealed, for the average knightly holding of 400 to 500 acres can no longer support a lordly aristocratic existence. This fact explains the ex- traordinarily sharp conflict of interests in which this class a coe a a ns Pe pe a Te easCAPITALISTIC DEVELOPMENT OF MANOR 111 has stood, and still stands, and their position in political life. With the dissolution of the manors and of the remains of the earlier agrarian communism through consolidation, separation, etc., private-property-in land has been com- pletely-established. In the meantime, in the course of the centuries, the organization of society has changed in the direction described above, the household community shrink- ing, until now the father with his wife and children func- tions as the unit in property relations. Formerly this was simply impossible for physical reasons. The--househald has_at the. same time undergone .an extensive internal trans- formation, and this in twoe-ways; its function has become restricted to the-field.of consumption, and its management placed on an accounting basis. To an increasing extent the development of inheritance law in place of the original complete communism has led to a separation between the property of the man and the woman, with a separate ac- counting. This two-fold transformation was bound up with the development of industry and trade. Laan ee Ne ee we nt era Sopra est israzeMe eaten ee ere id Ea SYS: Sn Kaan ee ee ed dear eee ie + aat su eee) Seen PRN EESR et ia Be a apa ek Mare: Ae SS \ i i i i t eee STEAM NS TEE SNC Ht Eo oes a SNK =e —St ce ee ators Sa LESS RAN =a ~ SEES SLASH PACK LV iawe® Se \ | iF ie } i | iH oy Hi INDUSTRY AND MINING DOWN TO THE BEGINNING OF THE CAPITALISTIC DEVELOPMENT TAINS RIN, a ern mrmere™ tee etbe aie A ae ee me ae ra bs Dl eT ol Ss ae lS iH f I ee oe pe ee orsCHAP ER eavellk PRINCIPAL FORMS OF THE ECONOMIC ORGANIZATION OF INDUSTRY + We understand by industry the transformation of raw materials; thus the extractive operations and mining are excluded from the concept. However, the latter will be treated in connection with industry in what follows, so that the designation ‘‘industpy—enrbraees--all those economic activities-which are not-to be viewed as agricultural, trad- ing, or-transportation-oeperations. From the economic standpoint industry—in the sense of transformation of raw materials—deveteoped—miversaly in the form-of work to provide for the requirements of a house community. In this connection it is an auxitary 0c- cupatien; it first begins to be interesting to us when pro- duction is carried beyond household needs. This work may be carried on for an outside household, especially for a seigniorial household by the lord’s dependents; here the needs of the one household are covered by the products of other (peasant) households. Auxiliary industrial work may also be performed for a village, as in the ease of India. Here the hand workers are small farmers who are not able to live from the product of their allotments alone. They are attached to the village, subject to the dis- posal of anyone who has need of industrial service. They are essentially village serfs, receiving a share in the prod- ucts or money payments. This we call ‘*demiurgical”’ labor. 115 Se en fe tn nt pe NS RE PE Te st 29 Sle aa Dee med see aerate (FTES Pane ral Aaan Rr SE a a a ean pos ad pelea = NA it ea re ea eo ee a a en Se Se ee er ee a ne eee 5 EC LONE a ae et a 116 GENERAL ECONOMIC HISTORY The second mode of transforming raw materials, for other than the needs of a household, is production for sale—that is, craft work. By craft work we understand the case in which skilled labor is carried on to any extent in specialized form, either through differentiation of oc- cupations or technical specialization, and whether by free or unfree workers, and whether for a lord, or for a com- munity, or on the worker’s own account. It will be seen that industrial work for the needs of the worker originally appears in the closed house community. In general the oldest form of specialization is a strict division of labor between the sexes. To the woman ex- elusively falls the cultivation of the fields; she is the first agriculturist. She is by no means given such a high posi- tion as Tacitus, who here waxes fanciful, represents in the ease of the Germans. In ancient England the seduction of a wife was regarded as a mere property damage to be compensated by money. The woman was a field slave; upon her lay the entire work of tillage and all activity con- nected with the utilization of the plants grown upon the land, as well as the production of the vessels in which cooking was done, and finally the broad category of tex- tile work—braiding of mats, spinning, and weaving. As to weaving there are indeed characteristic exceptions. In Egypt, Herodotus was rightly impressed by the fact that men (servile) worked at the looms, a development which took place generally where the loom was very heavy to manipulate or the men were demilitarized. To the man’s share on the other hand fell everything connected with war, hunting, and livestock keeping, as also work in metals, dressing of leather, and preparation of meat. The last ranked as a ritualistic act; originally meat was eaten only in connection with orgies, to which in general the menPRINCIPAL FORMS OF INDUSTRY 117 alone were admitted, the women receiving what was left over. Industrial work in communal form is found in occasional tasks, especially in house building. Here the work was so heavy that the single household and certainly the single man could not carry it out. Hence, it was performed by the village as invitation work on a mutual basis, en- livened by drinking, as is still done in Poland. Another ex- ample in very early time is work for the chieftain, and an- other is ship building, which was done by communal groups voluntarily formed for the purpose and which had a good chance of taking up piracy. Finally, it may hap- pen that a number of free men join together for work in the production of metals, though the production of iron is a relatively late phenomenon. Originally houses were built without metal nails; the Alpine house has a flat roof in spite of the burden of snow, because there are no nails for a sloping roof. As will be seen from the spread of invitation work, the earliest specialization by no means implies skilled trades. The latter are related in primitive lands to magical con- ceptions; the belief in things which can be achieved by the individual only by magical processes had to develop first. This was especially true of the medical calling; the “‘medi- cine man’’ is the earliest profession. In general every highly skilled occupation was originally regarded as in- fluenced by magic. The smiths especially were every- where viewed as characterized by supernatural qualities because a part of their art appears mysterious and they themselves make a mystery of it. The skilled occupa- tions developed within the large household of a chieftain or landed proprietor, who was in a position to train depend- ent persons in a special direction, and who possessed the CSET Sitiaca ios RFI ae ianreelen nina ntten oer Sree iesletes allied ca canbetinin ieee SELES SL LEB AEE ES = Aes = Se je ee SER SE SS SE Ae ne Naty nen remee C a = PR i a et US — =a os ne a eee ha terete aor eaten carer tare reer eee i i or ti ne “ d f AT Ai ie ep tera a aac an 118 GENERAL ECONOMIC HISTORY needs for which skilled work was requisite. The skilled occupation may also have evolved in connection with the opportunity for exchange. The decisive question in this connection is, has the industry access to a market? and also, who sells the final product after it has gone through the hands of the various producers? These questions are also vital for the struggles of the guilds and for their dis- integration. A specialized skilled craftsman may produce freely for stock and for the market, selling his product as a small enterpriser. This extreme case we shall call ‘“price work’’; it presupposes command over raw materials and tools. One possibility is that the raw materials, and under some circumstances the tools, are provided by an associa- tion. Thus the medieval guild as a group bought and distributed certain raw materials, such as iron and wool, in order to safeguard the equality of the members. The opposite extreme is that the craftsman is in the service of another as a wage worker. This appears when he is not in possession of raw material and tools but brings to the market his labor only, not its product. Between the two extremes stands the craftsman who works on order. He may be the owner of the raw materials and tools, giving rise to two possibilities. Hither he sells to the consumer— who may be a merchant ordering from him; in which case we speak of free production for a clientele, or, he produces for an entrepreneur who possesses a monopoly of his labor power. The latter relation often results from indebtedness to the entrepreneur, or from the physical impossibility of access to the market, as for example in the export indus- tries in the middle ages. This is called the ‘‘domestic”’ system, or more descriptively, the putting-out system or factor system; the craftsman is a price worker on another’s account. The second possibility is that raw material and tools—a PRINCIPAL FORMS OF INDUSTRY 119 one or the other or both—are provided by the one who or- ders the work, the consumer. Here we shall speak of wage work for a clientele. A final case is that in which the per- son ordering the work is an entrepreneur who has pro- duction carried on for gain; this is the case of domestic industry, the putting-out system. Here are associated on the one hand a merchant entrepreneur (Verleger) who commonly, though not always, purchases the raw materials, and under some circumstances also provides the tools, and on the other hand the wage worker on order in his home, who cannot bring his own product to the market because the requisite organization of craft work is absent. With regard to the relation of the worker to the place of work, the following distinctions may be made. 1. The work is done in the worker’s dwelling. In this case the craftsman may be a price worker who independently fixes the price of his product; or he may be a home worker for wages for a clientele, producing on the order of consumers ; or finally, he may be a home worker for an entrepreneur. 2. On the other hand the work may take place outside the worker’s dwelling. Here it may be itinerant work, work done in the house of the consumer, as is still common with seamstresses and dressmakers; such work was originally done by ‘‘wandering’’ laborers. On the other hand the work may be brought to the worker, but may be of such a nature that it cannot be carried on in his own house, as in the case of the whitewash industry. Finally, the work place may be an ‘‘ergasterion’’ or work shop, and as such separate from the dwelling of the worker. An ergasterion is not necessarily a factory; it may be a bazaar-shop where work place and place of sale are combined. Or, it may be leased in common by a number of workers; or finally, it may belong to a lord who puts his slaves to work in it, either selling the product himself or permitting the slaves Par pee le Se er Re “ aa ee Nee Savialeatn tala =o em by Se Sa ase ae rere Ser eee ST SS = Pen Ne et a ee Ne IS Os hs De os De DSR SR MS EY, rz aes om rege See een Se Oe ee Se ae eae ees a=) § ant Sd eT anh 4 Speen ee eee petite Si tance et oe te aeRe eters teerat tor pe ee aares ea ee ad lS ATE Payne en asl Seen ee ee ee ee ee tenets Se peereererertars —w No AR IE — 120 GENERAL ECONOMIC HISTORY to sell it on condition of a specified payment. The char- acter of the ergasterion is most clearly seen in the modern shop enterprise where the conditions of work are prescribed by an entrepreneur who pays wages to the worker. The appropriation of the fixed investment, under which the work place and means of work are included insofar as the latter do not come under the head of tools, may also be effected in various ways. There may be no need for a fixed investment, in which case we have to do with pure craft work, as in the medieval guild economy. The ab- sence of fixed capital is characteristic of the latter to the extent that as soon as such capital appears the guild econ- omy is in danger of dissolution. If there is a fixed in- vestment it may be provided and maintained by an asso- ciation,—village, town, or workers’ organization. This case is common, and especially is met with repeatedly in the middle ages, the guild itself providing the capital. In addition we find seigniorial establishments which the workers are allowed to use for a payment; a monastery, for example, establishes a fulling mill, and grants free workers its use. Again it is possible that the seigniorial establish- ment may be not only placed at the disposal of free workers but used in production by workers under the dominium of the owner and whose product he himself sells. This we eall ‘‘oikos,’’ or villa, craft work. Originated by the Pharaohs, it is found in the most varied forms in the establishments of the princes, landed proprietors, and mon- asteries of the middle ages. Under oikos craft work, how- ever, there is no separation between the household and the enterprise, and the latter ranks only as an auxiliary in- terest of the entrepreneur. All thisis-ehanged in the-capitalistic establishment of an entrepreneur- Here -work_is carried on with means pro- vided-by the entrepreneur, and discipline is necessary.PRINCIPAL FORMS OF INDUSTRY 121 The-entreprenetr work shop counts-as fixed capital, form- ing—-an-item—in-the accounting of the entrepreneur; the existence-of-such capital~in the hands of an individual is the fact-whieh brought about the downfall of the guild system. 8 K < | " Ha a4 4 tb a ae ee een =k en eR een ty ae = ee Teiethae ene Bot er nee oer eR SS a a AE ES DOS were ee one See SEEN LAAe RIS ao Ce ee ee Se nas ] NA a a pe eid at ae ee ee ee Ae a ees ie | uh | bi i, CHCAVE Tue ave eld STAGES IN THE DEVELOPMENT OF INDUSTRY AND MINING The starting point of the development is house industry, producing for the requirements of a small or large house- hold. From this point the development may lead to tribal industry, which may arise in consequence of the possession by a tribe of a monopoly, either of certain raw materials or of certain products. Tribal industry is carried on origi- nally as a weleome auxiliary source of income, but later to an increasing extent as a regular occupation. It signifies in the one as in the other of these stages that the products of household activity, prepared with the tools and raw ma- terials of the house community, are brought to the market, so that a window is opened, as it were, in the self-contained household economy, looking out on the market. The mo- nopoly of raw material may be conditioned by the exclusive occurrence of certain materials—stone, metals, or fibers, most commonly salt, metal, or clay deposits—within the territory of the tribe. The result of exploitation of a mo- nopoly may be the appearance of wandering trade. It may be carried on by those who conduct the industry, as in the case of many Brazilian tribes or the Russian ‘‘kus- tar,’’ who in one part of the year as a farmer produces products and in the other part peddles them. Again, it may be qualities of workmanship which are monopolized, as frequently in the ease of wool products of artistie dis- tinction, the worker being in the possession of a trade secret or special skill not readily transferred. This case involves 122THE DEVELOPMENT OF INDUSTRY 123 a special form of price-work in which the craft is mo- nopolized through the possession of land and is attached to a tribe or clan by an hereditary charism. Specializa- tion of production takes place between ethnical groups. It may be confined to the exchange of products between geographically adjacent regions, as in Africa, or there may be a wider development. The one possibility leads to the establishment of castes, as in India.‘ Through the combination of individual tribal groups under an overlordship, tribal industries which origi- nally lay side by side horizontally have here become ar- ranged vertically in a stratification, and the ethnic divi- sion of labor is now found among persons subjected to a common master. The original relationship of the tribes as mutually foreign is expressed in a system of castes whose members do not eat together or intermarry and receive only specified services at each other’s hands. The caste system has had tremendous consequences for the whole social or- ganization of India, because it is anchored in ritualistic and hence religious institutions. It has stereotyped all craft work and thus made impossible the utilization of inventions or the introduction of any industry based on capital. The introduction of any technical improvement whatever at any time would have presupposed the founding of a new easte below all the old series previously existing. When the Communist Manifesto says of the proletarian that he has a world to win and nothing to lose but his chains, the expression would apply to the Indian? except that he can only get free of his chains in the after world, through the fulfillment to the last detail of his caste obligations in this. Every Indian caste had its production process tra- ditionally fixed ; one who abandoned the traditional process lost caste, and was not only expelled and made pariah but also lost his chance in the future world, the prospect of ff ay [eC ReNSCees iEacaceaiain baie oan ae? SAL se Sep we anew ee te a ea Sa Es 8 ae eS amet ee Sra ys OS 6 5S ih Sea SS ir BUN See ee eee re eens= ar Oe ee a ee oes Se ae eee ee aw FON Rs Dt Se TS ne ne ee ee = SAE i A) 7 124 GENERAL ECONOMIC HISTORY reincarnation in a higher caste. Hence, the system became the most conservative of possible social orders. Under the English influence it has gradually broken down, and even here capitalism is slowly making its way. The second possibility which opens up in the stage of exchange between ethnic groups is evolution in the direc- tion of market specialization. Regional division of occu- pations may be first ‘“demiurgic’’—that is, not yet related to a market though no longer inter-tribal, the village or a landed proprietor acquiring craft workers and com- pelling them to work for the village or the estate (oikos). Here is to be classified for example the village industry of India, and in Germany as late as the 14th century the lord of the land was considered under obligation to provide a corps of village craftsmen. Here we find local specializa- tion for self-sufficient production, with which an hereditary proprietorship of work places is regularly associated. Going beyond this is a sort of local specialization which in its end results leads to specialization for the market. Its prior stage is the specialization of village and manorial industry. In the village are found, on the one hand, peas- ants and, on the other, landed proprietors who bring about the settlement of craft workers to produce for the require- ments of the lord, for payment in the form of a share in the harvest or otherwise. This contrasts with specializa- tion for the market in that there is no exchange. Further- more, it still carries the marks of specialization between ethnic groups, in that the craftsmen are foreigners; how- ever, they include some peasants who have lost their status, because unable to maintain themselves, due to inadequacy of their holdings of land. A different course is taken by the seigniorial form of exploitation of craft workers, that is, the large household or estate type of specialization carried out by princes orTHE DEVELOPMENT OF INDUSTRY 125 lords of the land for private or political purposes. Here also specialization takes place without exchange. The duty of furnishing particular services for the disposal of the lord is laid upon individual craftsmen or whole classes of such. In antiquity this arrangement was widespread. In addition to the officia—the officials of the great household, such as the office of treasurer, which was usually filled by a slave—appeared the aritificia. These consisted chiefly of slaves and included certain categories of craft workers within the familia rustica, who produced for the needs of the large estates. Such were smiths, iron workers, building craftsmen, wheelwrights, textile workers—especially female in the gynecium or women’s house—millers, bakers, cooks, etc. They are also found in the city households of the higher nobility, who have at their disposal large numbers of slaves. The list of the Empress Livia, the wife of Augustus, is known; it includes craft workers for the wardrobe and other personal requirements of the princess. A similar situation is found in the princely households of India and China, and again in the medieval manors, both of the lay lords and of the monasteries. In addition to the craft workers for the personal needs of the lord, are those who serve his political requirements. An example on a large scale is the administration of the Pharoahs of the New Empire, after the expulsion of the Hyksos. Here we find a warehouse system replenished from the payments in kind of the dependent classes, and along with it extensive industrial specialization of hand work for the household and political needs of the king. The officials are paid in goods out of the storehouse, recelving a specified allotment, and the written claims to the goods circulate in commerce in the fashion of government notes today. The products are obtained in part from the work of peasants and in part from specialized estate industry. ae aoe eee aaa =— = Pea ate ean Cote he de De his De Je ha me ti bby te rai NB Dn ee ‘ 4 Na Se 2A 35 le a | eee i ee an eee On eae Ea ee RTTee Oe Cem wre ae Ae oe ot ee Se a ee oe ae a eS ae ee ee Le a a eerie ie enencerd Se eR nn etn oe een 126 GENERAL ECONOMIC HISTORY In the large estates of the near east also, luxury crafts were developed and encouraged. The Egyptian and Meso- potamian kings caused the marvels of ancient oriental art to be developed by workers trained in their workshops and dependent upon them and thus gave the estate (oikos) a mission to fulfill in the history of culture. In order that a transition be effected from this condition to production for a clientele and for the market, a circle of consumers with purchasing power to absorb the output was necessary; that is, an exchange economy of some ex- tent had to develop. Here we have a situation similar to that found in the development of the peasantry. The prince, or lord, or slave holder, had his choice between utilizing the skill of the workers as labor power, himself producing for the market by means of them, and exploiting them as a source of rent. In the first case the lord became an entrepreneur utilizing the work of the unfree popula- tion; such a system is found both in antiquity and in the middle ages, the lord employing someone to look after the marketing. This person is the negotiator, the dealer, who is attached as an agent to the princely or other sort of household. The way in which the lord may utilize his people as labor force in such a case may vary. He may employ them as unfree home workers; they remain in their own dvwell- ings and are compelled to deliver certain quantities of goods, the raw materials for which may belong to them or may be furnished by the lord. In antiquity, this rela- tion was widespread. ‘Textiles and pottery products were brought to the market in this way, being produced mainly in the women’s house (yvvaeiov, gynecium). In the middle ages, the linen industry in Silesia and Pomerania arose in this manner; the lord is the merchant-capitalist- employer or ‘‘factor’’ (Verleger) of the craft worker.THE DEVELOPMENT OF INDUSTRY 127 Or, the lord could go over to shop industry. In antiquity we find among the auxiliary industries of the great landed proprietors terra cotta works, sand pits and stone quarries. We also find the large gynecium in which female slaves were used in spinning and weaving. Similarly in Caro- lingian times as to the gynecium. Shop industry developed to an especial extent in the monastic economy of the middle ages in the breweries, fulling mills, distilleries, and other industries of the Benedictines, Carthusians, ete. In addition to auxiliary industries on the land, we find town industries with unfree labor. While in the rural industries the lord disposes of the products through the agency of his unfree labor force, in the towns it is generally the merchant who by means of his trading capital sets up establishments with unfree workers. This relation was common in antiquity. For example, tradition tells us that Demosthenes inherited from his father two ergasteria, a smithy shop, making weapons, and a work shop for the production of bedsteads—which at that time were objects of luxury and not necessities. The combination is ex- plained by the fact that the father was an importer of ivory, which was used for inlaying both in the handles of swords and in the bedsteads, and had taken the shops with their slaves as a forfeit in consequence of the inability of his debtors to pay. lLiysias also mentions a ‘‘factory’’ with a hundred slaves. In both eases we find production for a small upper class on the one hand and for war purposes on the other. In neither case, however, are we concerned with a ‘‘factory’’ in the modern sense, but only with an ergasterion. Whether an ergasterion operates with unfree or with freely associated labor depends on the individual case. If it was a large establishment producing for the market with slave labor it was a case of labor accumulation, not of pierre Sinica Sis TT ~ Tale lore cnt einai Sein a > Sy Se be Ma by Oe a ey eee SS teeta A A sete= ~ Para ee a ap es Te enema near a Be a ae ae et eet et ee eee ee ine ge ee ies 128 GENERAL ECONOMIC HISTORY specialization and co-ordination. Many persons worked to- gether, each turning out independently a single class of products. Over them all was set a foreman who paid the lord double head dues and whose single interest lay in a certain uniformity in the product. Under such relations there could be no question of large scale production in the sense of the modern factory, for the ergasterion had no fixed capital, and did not usually belong to the lord, though it might in some eases. Furthermore, the special features of slave holding made for the impossibility of the development of such an estab- lishment into a modern factory. The human capital con- sumes more in the very moment when the market fails, and its upkeep was a very different matter from that of a fixed capital in machines. Slaves were especially subject to vicissitudes and exposed to risk. When a slave died it meant a loss, in contrast with present conditions where the risks of existence are shifted on to the free workers. Slaves could also run away, especially in time of war, and did so with especial frequency at a time of military mis- fortune. When Athens collapsed in the Peloponnesian War, the whole slave capital utilized in industry became a loss. Furthermore, the price of slaves fluctuated in the most astonishing way in consequence of the wars which were the normal condition of antiquity. The Greek city-state carried on war continuously; to contract a durable peace was regarded as a crime; peace was concluded for a re- Spite, as commercial treaties are made today. In Rome also, war was an every-day occurrence. Only in war time were slaves cheap, in time of peace extraordinarily dear. The lord had his choice in the treatment of this capital, often obtained at high cost, either to keep the slave in a barracks or to support his family along with him. In the second case occupations of a different sort must be foundTHE DEVELOPMENT OF INDUSTRY 129 for the women; hence the lord could not specialize his establishment, but had to earry on several branches in combination in his oikos. If he did specialize, the death of a slave was very disastrous. An additional factor was the absence of all interest in the work on the part of the slave; only by means of quite barbaric discipline could be extracted from them the amount of work which free laborers give today under a system of contract. The large- scale establishments with slaves were therefore a rare ex- ception ; in all history they appear to a considerable extent only where there is an absolute monopoly of the branch of production concerned. The example of Russia shows that factories manned by servile workers were completely de- pendent on the maintenance of such a monopoly; the mo- ment it was broken they collapsed in the face of competi- tion with free labor. It is true that the organization of antiquity often pre- sents a somewhat different aspect. The lord does not ap- pear as an entrepreneur but as an income receiver, utilizing the labor power of the slave as a source of rent. He had the slave taught some craft; then if he did not hire him out to a third party he allowed him to produce independ- ently for the market, or himself to hire out for work, or finally, left him free to conduct his own business, imposing on him in each ease a tax. Here we have economically free but personally unfree craftsmen. In this case the slave himself possessed a certain capital, or the lord lent him capital to carry on trade or small eraft work (the peculium). The self-interest of the slave thus aroused had, according to Pliny, the result that the lord granted him even testamentary freedom. In this way the great mass of the slaves were utilized. A like condition is found in the middle ages, and also in Russia, and everywhere we find some technical designation for the tax as a proof that aa eae aeee eae Ss ne SES Eee ee ean CN ed ae Sr Nn dee tee By Oe = eee meine acoral ha od 5 a eee ert Se ela a ee ee oe eee eae a a a See lS oi ll AB oli piensa es Se rene, — sn eee tr ie et Date et cy ri xt A} t i i) iL 130 GENERAL ECONOMIC HISTORY we are concerned not with an extraordinary but with a quite normal relation, adrogopa, Leibzinz, obrok. Under this manner of utilizing the slaves, whether the lord operated on his own account depended on the presence of a local market, in contrast with a general one in which the slaves could sell their products or labor power. If the labor organization of antiquity and that of the middle ages start from the same point and are similar in the early stages and then later take quite different courses, the reason is found in the completely different character of the market in the two civilizations. In antiquity the slaves remained in the power of the lord, while in the middle ages they became free. In the latter there is a broad stratum of free craftsmen unknown to antiquity. The reasons are, several: 1. The difference in the consumptive requirements in the occident as compared to all other countries of the world. One must understand clearly what a Japanese or Greek household required. The Japanese lives in a house which is built of wood and paper; the mats and a wooden kettle- stand, which together yield a bed, together with dishes and crockery, form the whole establishment. We possess the auctioneer’s list from the trial of a condemned Greek, pos- sibly Alcibiades. The household exhibits an incredibly restricted equipment, works of art playing the leading role. In contrast, the household equipment of the medieval patrician is much more extensive and materialistic. The contrast rests on climatie differences. While in Italy heat is not indispensable, even today, and in antiquity the bed counted as a luxury—for sleeping one simply rolled up in one’s mantle and lay down on the floor—in northern Eu- rope stoves and beds were necessities. The oldest guild document which we possess is that of the bed ticking weavers of Cologne. It cannot be said that the Greeksa. THE DEVELOPMENT OF INDUSTRY 131 went naked; part of the body was covered, but their cloth- ing requirement was not to be compared with that of the middle European. Finally, again in consequence of cli- matic relations, the German appetite was greater than that of the southerner. Dante somewhere speaks of the ‘‘Ger- man land of gluttons.’’ As soon as it was possible to satisfy these needs, a much more extensive industrial pro- duction than that of antiquity necessarily developed among the Germans, in accordance with the law of diminishing utility. This development took place from the 10th to the 12th century. 2. The difference in the market as compared with an- tiquity, as regards extension. In the northern Europe of the 10th to the 12th centuries, purchasers in possession of buying power and industrial products were at hand to a much greater extent than in the countries of antiquity. The civilization of antiquity was coastal; no city of note lay more than a day’s journey from the sea. The hinter- land back of this thin coastal strip was, to be sure, included in the market area; but it possessed little purchasing power since it was in the product-economy stage of development. In addition, the culture of antiquity rested on slavery. As this civilization moved back from the coast and began to take on an inland character, the supply of slaves ceased. Herce the territorial lords endeavored to make themselves independent of the market by providing for their own needs with their own labor force. This autonomy of the oikos which Rodbertus * thought to be characteristic of the whole ancient world, is in reality a phenomenon of later antiquity and reaches its highest development in Carolin- gian times. Its first effect is a narrowing of the market, and later fiscal measures worked in the same direction.‘ The whole process signified an accelerated retrogression toward product economy. In the middle ages, on the a erro a ee te oh at ae eT eh Set Sata = me rene es So arer 5 Nl Ss ne erie On cnn ew eS eee renew = pee aea EE — ss SF TEPER OT AL ESS VAR AB Re En Ba babe Bt en eS NE Rt ee ORS ee Oe eee oe rere Lon are Ee bes Sener ; . 132 GENERAL ECONOMIC HISTORY other hand, the market began in the 10th century to in- erease in extent through the growing purchasing power of the peasantry. Their dependency became less oppressive, the control of the lords losing in effectiveness because the intensivity of tillage was making progress, while the lord, who was tied to his military duties, could not profit by this progress but had to let the whole increase in rent go to the peasant. This fact made possible the first great develop- ment of the handicrafts. It began in the period of market concessions and of the founding of the towns, which in the 12th and 13th centuries moved eastward also. Viewed from the economic standpoint, the towns were speculative ventures of the princes; the latter wished to acquire taxable dependents and therefore founded towns and markets, as settlements of persons who bought and sold. These specu- lations did not always turn out happily. Those of the Polish nobility mostly failed when the growth of anti- semitism drove the Jews into the east and the nobles tried to exploit the movement in the founding of towns. 3. The third reason is the unprofitableness of slavery as a labor system. Slavery was profitable only when the slave could be cheaply fed. This was not the case in the north, where in consequence slaves were preferably ex- ploited as rent payers. 4. The great fact of the instability of slave relations in the north. Runaway slaves were found everywhere in northern lands. There was no eriminal news service, the lords were pitted against each other in regard to the slaves and one who escaped did not risk much, as he could find shelter with another lord or in a town. 5. The interference of the towns. The emperor es- pecially granted privileges to the towns, giving rise to the principle ‘‘town air makes free.’’ He decreed that anyone, no matter whence or from what class he came, be-THE DEVELOPMENT OF INDUSTRY 1338 longed to the town if he settled there. The citizenship of the towns came in part from such acquisitions; in part it was noble, in part made up of merchants, and in part of dependent skilled craftsmen. This. development -was favored bythe increasing weak- ness of the imperial power and by-the partieulartsm of the towns, which was promoted by this weakness; the towns possessed the power, and werein.a-position to laugh in the faces of the territorial lords. The principle ‘‘town air makes free’’ did not, however, go unopposed. -On-the one side the emperors were forced to promise the prinees to op- pose the seizing of new privileges by the towns; on the other their poverty continually forced them to grant the~privr leges. _It was a contest-of powerin-which finally the pohti- eal power of the-princes, who took an inferest"in the towns, proved stronger than the economic power of the territorial lords, whose interest lay in-retainimg their de- pendents. The craftsmen. who settled on the basis of these privileges were of various origins and of divers legal status. Only exceptionally were they full citizens possessing land free of obligations; in part they were persons subject to feudal head dues, bound to make payments to some lord within or without the town. A third category consisted of the “ PIs Dw os 0 St a es Te Se ee ee en ey ee Se 3 pe esas ae SEE RL SSO EET ae Ee eS TN ae I Ee Ee cateninne i eee ee ea BR a aeieieaeals oe a Rte a =< ee ere area e Eee Eo Pe 150 GENERAL ECONOMIC HISTORY Furthermore, the guild had competition to contend against. Under this head are included the craft workers of the landed estates, especially those of the monasteries, in the country and also in the towns themselves. In con- trast with the lay lords, who were hindered by military considerations, the monasteries, thanks to their rational economic procedure, were in a position to set up the most varied industrial establishments and to accumulate con- siderable wealth. In so far as they produced for the mar- ket, they furnished notable competition for the guilds and were fought bitterly by the latter. Even in the Reforma- tion period, the competition of monastie industrial work was one of the considerations which drove the burgher element to the side of Luther. In addition, the struggle was directed against the craftsmen in the country at large, both the free and the unfree, the settled and the itinerant workers. In this struggle the merchants regularly stood side by side with the rural craftsmen against the guilds. None the less the result was an extensive destruction of house industry and tribal industry. A third struggle of the guilds was directed against the laborers, against those who were not yet masters, which set in as soon as the guild undertook limitation of numbers in any form or the closing of the guild or the raising of difficulties in the way of entry into mastership. In this connection are mentioned the prohibition against working on one’s own account instead of that of a master, the pro- hibition against working in one’s own dwelling—because the journeyman could not be controlled or subjected to house discipline—and finally the prohibition against mar- riage by the journeyman before he became a master; this prohibition could not be enforced and a married journey- man class became the rule. The guilds struggled with the merchants, especially theORIGIN OF THE EUROPEAN GUILDS 151 retailers, who met the needs of the town market and would draw their products from wherever they could obtain them most cheaply. Retail trade involved little risk in com- parison with trade with remote regions and allowed a more secure profit. The retailers, of whom the merchant tailors formed a typical stratum, were the friends of the rural craftsmen and enemies of those of the town, and the struggles between them and the guilds are among the most intense known to the middle ages. Parallel with the struggle against the retailers went wars within individual guilds and between various guilds. These arose first in cases where workers possessed of capital and others without it were present in the same guild, which presented an opportunity for the propertyless to become home workers for the wealthy members. A similar situation existed as between wealthy guilds and others possessing little capital, within the same production pro- cess. These struggles led in Germany, Flanders, and Italy to sanguinary guild revolutions, while in France only one guild outbreak occurred and in England the transition to the capitalistic domestic system was completed practically without revolutionary acts of violence. The field of such struggles is to be sought in situations where the process of production was divided transversely rather than on the basis of products. This was especially the case in the textile industry, where the weavers, walkers, dyers, tailors, etc. existed side by side, and the question arose as to which of these different units or stages in the single production process would force the others to leave it in control of the market, renounce to it the chance of large profits and become home workers on account of its members. The walkers were often victors, forcing the other divisions of the industry to be content with allowing them to pur- chase the raw materials and prepare them and market the ‘ ees Bs ons Yt eee PS thane Ee at SS es er alentedn ballon iniorion Tes est Do Yo 3 tee be et oD Oy is ett onl ALESIS ESS es Nite rs Sant SES etn net etherec bree eee IRS Te cena aia a en ee ne ee Oe ee ee bi * ¥ Hf hi 4 { a i i Re ieee TE ERAAIIS ~ = ae va ea 152 GENERAL ECONOMIC HISTORY finished product. In other cases it was the finishers, or weavers, and in London the tailors, who forced the previous stages of the process into their employ. In England the result was that wealthy masters in the guilds came no longer to have anything to do with craft work. The strug- ele often ended in a compromise, to be resumed later and go on to the winning of the market by one of the produc- tion stages. The course of events in Solingen is typical. The smiths, sword furbishers, and polishers, after a long struggle, concluded a treaty in 1487, according to which all three of the guilds were to retain free access to the market. Finally, however, the guild of furbishers obtained control. Most frequently the final stage of production secured the market as a result of the conflict, because knowledge of demand was most easily obtained from that vantage point. This was regularly the case where a cer- tain end product enjoyed an especially favorable market. Thus in wartime the saddlers had an excellent opportunity for bringing the leather dressers under their power. Or, the stage which possessed the most capital might be victo- rious, those who employed the most valuable productive equipment succeeding in the effort to force the others into their service.CHAPTER XI DISINTEGRATION OF THE GUILDS AND DEVELOPMENT OF THE DOMESTIC SYSTEM ? The disintegration of the guilds, which took place after the close of the Middle Ages, proceeded along several lines. 1. Certain craftsmen within the guilds rose to the position of merchant and eapitalist-employer of home workers, i.e. of ‘‘factor’’ (Verleger). Masters with a considerable invested capital purchased the raw material, turned over the work to their fellow guildsmen who carried on the process of production for them, and sold the finished product. The guild organization struggled against this tendency, but none the less it is the typical course of the English guild development, especially in London. In spite of the desperate resistance of the guild democracies against the ‘‘older men,’’ the guilds were transformed into “‘livery companies,’’ guilds of dealers in which the only full mem- bers were those who produced for the market, while those who had sunk to the level of wage workers and home workers for others lost the vote in the guild and hence their share in its control. This revolution first made possible progress in technique, whereas the dominance of the guild democracies would have meant its stagnation. In Germany we do not meet with this course of develop- ment; here if a craftsman became an employer or factor he changed his guild, joining that of the shopkeepers, or merchant-tailors or constablers, a guild of upper class im- porting and exporting merchants. 153 a ene SS ee Seen te tact eee Soe eaten Nt at Eat att atte ete ert Ct aoe: Sergei et anRO he ee oeeianiaheabe er ree a ~ = ere SFA Se ae ea in erent eo ers Seger es HY) H 154 GENERAL ECONOMIC HISTORY 2. One guild might rise at the expense of another. Just as we find trading masters in many guilds, others changed entirely into mercantile guilds, forcing the members of other guilds into their employ. This was possible where the production process was transversely divided. Ex- amples are found in England—the merchant tailors—and elsewhere. The 14th century especially is filled with strug- gles of the guilds for independence of other guilds. Fre- quently both processes run along together; within the individual guild, certain masters rise to the position of traders and at the same time many guilds become organiza- tions of traders. The symptom of this eventuality is regularly the fusion of guilds, which took place in England and France but not in Germany. Its opposite is repre- sented by the splitting of the guilds and the union of the traders, especially common in the 15th and 16th cen- turies. The dealers within the guilds of walkers, weavers, dyers, ete. form an organization and in common regulate the whole industry. Production processes of diverse char- acter are united on the level of small shop industry. 3. Where the raw material was very costly and its im- portation demanded considerable capital, the guilds became dependent upon the importers. In Italy, silk gave occasion to this development, in Perugia, for example, and similarly for amber in the north. New raw materials might also pro- vide the impetus. Cotton worked in this way; as soon as it became an article in general demand, putting-out enter- prises arose alongside the guilds or through their trans- formation as in Germany, where the Fuggers took a no- table part in the development. 4. The guilds might become dependent upon the ex- porters. Only in the beginnings of the industry could the household or tribal unit peddle its own products. As soon, on the other hand, as an industry became entirely orDISINTEGRATION OF THE GUILDS 155 strongly based on exportation, the factor-entrepreneur was indispensable; the individual craftsman failed in the face of the requirements of exportation. The merchant, how- ever, possessed not only the necessary capital but also the requisite knowledge of market operations—and treated them as trade secrets. The textile industry became the main seat of the domestic system; here, its beginnings go back into the early middle ages. From the 11th century on there was a struggle be- tween wool and linen, and in the 17th and 18th centuries between wool and cotton, with the victory of the second in each case. Charlemagne wore nothing but linen, but later, with increasing demilitarization, the demand for wool in- creased and at the same time with the clearing of forests the fur industry disappeared and furs became constantly dearer. Woolen goods were the principal commodity in the markets of the Middle Ages; they play the leading role everywhere, in France, England and Italy. Wool was always partly worked up in the country, but became the foundation of the greatness and the economic pros- perity of the medieval city; at the head of the revolution- ary movements in the city of Florence, marched the guilds of the wool workers. Here again we find early traces of the putting-out system. As early as the 13th century in- dependent wool factors worked in Paris for the permanent market of the Champagne fairs. In general we find the system earliest in Flanders, and later in England, where the Flanders woolen industry called forth mass produc- tion of wool. In fact, wool determined the course of English industrial history, in the form of raw wool, partial products and finished goods. As early as the 13th and 14th centuries England exported wool and partial manufactures of wool. Under the initiative of the dyers and made-up clothing a ee SS api a ee eet eee ane Ss oon SS ee ae me ape a= 3 as ana eee Set Sa On ae ce er ES EEE os SP tt a eects Se te — ~ ET Se SG St et Cl eT san ere ETE ee ne etsreer at pee a ea Te Te ae eS ee tn ted 156 GENERAL ECONOMIC HISTORY interests, the English woolen industry finally became trans- formed to the basis of exportation of finished products. The peculiar feature of this development is that it resulted in the rise of domestic industry through the rural weavers and the town merchants. The English guilds became pre- dominantly trading guilds, and in the final period of the middle ages attached to themselves rural craftsmen. At this time the garment makers and the dyers were settled in the towns, the weavers in the country. Within the city trading guilds broke out finally the struggle between the dyers and garment makers on the one hand and the exporters on the other. Export capital and merchant- employer capital became separated and fought out their conflicts of interest within the woolen industry under Elizabeth and in the 17th century, while on the other side employer capital had also to contend with the craft guilds; this was the first conflict between industrial and trading capital. This situation, which became characteristic of all the large industries of England, led to the complete exclusion of the English guilds from influence on the de- velopment of production. The further course of events followed different lines in England and France as compared with Germany, in con- sequence of the difference in the relation between capital and the craft guilds. In England, and especially in France, the transition to the domestic system is the uni- versal phenomenon. Resistance to it ceased automatically without calling forth interference from above. As a re- sult, in England after the 14th century, a small master class took the place of the working class. Precisely the opposite happened in Germany. In England, the develop- ment just described signified the dissolution of the guild spirit. Where we find amalgamation and fusion of various guilds, the initiative proceeds from the trading class, whichDISINTEGRATION OF THE GUILDS 157 was not to be restrained by guild limitations. They united within the guilds and excluded the masters without capital. Thus formally the guilds maintained themselves for a long time; the suffrage of the city of London, which was nothing but an organization of wealthy dignitaries, was a guild survival. In Germany, the development proceeds in reverse order. Here the guilds more and more became closed groups in consequence of the narrowing of the field of subsistence policy, and political considerations also played a part. In England there was wanting the particularism of the towns, which dominates the whole of German economic history. The German town pursued an independent guild policy as long as it could, even after it was included in the terri- torial state of a prince. By contrast, the independent economic policy of the towns ceased early in England and France, as their autonomy was cut off. The English towns found the path to progress open because they were repre- sented in Parliament, and in the 14th and 15th centuries— in contrast with later times—the overwhelming majority of the representatives came from urban circles. In the period of the Hundred Years War with France, the Parlia- ment determined English policy and the interests brought together there pursued a rational, unitary industrial policy. In the 16th century a uniform wage was fixed, the adjust- ment of wages being taken out of the hands of the justices of the peace and given to the central authority; this facilitated entry into the guilds, the symptom of the fact that the capitalistic trading class, who predominated in the guilds and sent their representatives to parliament, were in control of the situation. In Germany, on the other hand, the towns, incorporated in the territorial principali- ties, controlled the guild policy. It is true that the princes regulated the guilds in the interests of peace and order, Se ete i ln See a Eee Nl a astaan! ete RST GIT STE LE Ne EE en a ae ee De eta aaah tee eS ioe Satire neonar a} test ee snCRIES OT ane ze. a et oe mos USF o SN Rd ~~ ae ee OE RB er eS CA ee ee ee OS a ee ea Sac ESITEN 158 GENERAL ECONOMIC HISTORY but in the large their regulative measures were conserva- tive and carried out in line with the older policy of the guilds. In consequence the guilds maintained their exist- ence in the critical period of the 16th and 17th centuries; they were able to close their organization, and the stream of the unchained forces of capitalism flowed through Eng- land and the Netherlands, less strongly even through France, while Germany remained in the background. Germany was as far from the position of leadership in the early capitalistic movement at the close of the middle ages and the beginning of the modern era as it had been centuries before in the development of feudalism. A further characteristic divergence is the difference in regard to social stresses. In Germany, from the close of the middle ages on, we find unions, strikes and revolu- tions among the journeymen. In England and France, these became more and more rare since in those countries the apparent independence of the home-working small masters beckoned to them and they could work immediately for the factor. In Germany, on the contrary, this ap- parent independence was not available as there was no domestic industry, and the closing of the guilds established a relation of hostility between the masters and the journey- men. The pre-capitalistie domestic industry of the west did not develop uniformly, or even as a rule, out of the craft organization; this occurred to the smallest extent in Germany and to a much greater extent in England. Rather it quite commonly existed side by side with craft work, in consequence of the substitution of rural craft workers for urban, or of the fact that new branches of industry arose through the introduction of new raw ma- terials, especially cotton. The crafts struggled against theDISINTEGRATION OF THE GUILDS 159 putting-out system as long as they could, and longer in Germany than in England and France. Typically, the stages in the growth of the domestic system are the following: 1. A purely factual buying monopoly of the factor in relation to the craft worker. This was regularly established through indebtedness; the factor compels the worker to turn over his product to him exclusively, on the ground of his knowledge of the market as merchant. Thus the buying monopoly is connected with a selling monopoly and taking possession of the market by the factor; he alone knowing where the products were finally to stop. 2. Delivery of the raw material to the worker by the factor. This appears frequently, but is not connected with the buying monopoly of the factor from the beginning. The stage was general in Europe but was seldom reached elsewhere. 3. Control of the production process. The factor has an interest in the process because he is responsible for uniformity in the quality of the prod- uct. Consequently, the delivery of raw material to the worker is often associated with a delivery of partial prod- ucts, as in the 19th century the Westphalian linen weavers had to work up a prescribed quantity of warp and yarn. 4. With this was connected not infrequently, but also not quite commonly, the provision of the tools by the factor; this practice obtained in England from the 16th century on, while on the continent it spread more slowly. In general the relation was confined to the textile industry ; there were orders on a large scale for looms for the clothiers who turned them over to the weavers for a rental. Thus the worker was entirely separated from the means of pro- duction, and at the same time the entrepreneur strove to monopolize for himself the disposal of the product. 6. Sometimes the factor took the step of combining several SS Eee ee fest bom dh rs Wy he Sa en By i boy Og Sn perth nate toe ee a inet ete et En Bot nt eer ns rote wa A a PO te are ene eeea a cet see Ne eee ee eet mee a ee en Re en en Det eee Se ee tees = Se a ne abn de bg gpa NA Seen ese Se eters se ee 160 GENERAL ECONOMIC HISTORY stages in the production process; this also was not very common, and was most likely to occur in the textile in- dustry. He bought the raw material and put it out to the individual workman, in whose hands the product remained until it was finished. When this stage was reached the craft worker again had a master, in quite the same sense as the craftsman on an estate, except that in contrast with the latter he received a money wage and an entrepreneur producing for the market took the place of the aristocratic household. The ability of the putting out system to maintain itself so long rested on the unimportance of fixed capital. In weaving, this consisted only of the loom; in spinning, prior to the invention of mechanical spinning machines, it was still more insignificant. The capital remained in the pos- session of the independent worker, and its constituent parts were decentralized, not concentrated as in a modern factory, and hence without special importance. Although the domestie system was spread widely over the earth, yet this last stage, the provision of the tools and the de- tailed direction of production in its various stages by the factor, was reached comparatively seldom outside the western world. As far as can be learned, no trace what- ever of the system survived from antiquity, but in China and India it was present. Where it dominated, craftsmen might none the less in form continue to exist. Even the guild with journeymen and apprentices might remain, though divested of its original significance. It became either a guild of home workers,—not a modern labor organization but at most a forerunner of such,—or with- in the guild there might be a differentiation between wage workers and masters. In the form of capitalistic control of unfree labor power, ve find house industry spread over the world, as manorial,DISINTEGRATION OF THE GUILDS 161 monastic and temple industry. As a free system it is found in connection with the industrial work of peasants; the cultivator gradually becomes a home worker producing for the market. In Russia especially, industrial develop- ment took this course. The ‘‘kustar’’ originally brought only the surplus production of the peasant household to market, or peddled it through third parties. Here we have a rural industry which does not take its course to- ward tribal industry but goes over into the domestic sys- tem. Quite the same thing is found in the east and in Asia,—in the east, it is true, strongly modified by the bazaar system, in which the work place of the craftsman is separate from his dwelling and closely connected with a general centralized market place in order, as far as possible, to guard against dependence on the merchant; to a certain extent this represents an intensification of the medieval guild system. Dependence of urban as well as rural craft workers upon an employer (factor or ‘‘putter out’’) is met with. China especially affords an example, though the clan retails the products of its members and the connection with clan in dustry obstructed the development of domestic industry. In India the castes stood in the way of the complete subjugation of the craftsman by the merchant. Down to recent times the merchant was unable to obtain possession of the means of production to the extent we find true elsewhere, because these were hereditary in the caste. None the less, the domestic system in a primitive form de veloped here. The last and essential reason for its retarded development in these countries as compared with Europe is found in the presence of unfree workers and the magical traditionalism of China and India. SSE re em as ee ey ee ns Sain iia Sates ae a ee IS. See EEE a oS inet nets RTT LG ITT EP, ee aE ETNA — SLED EO eas ont TS See pairs~ re a oS oy SF pene ai a ee er a bas rs Pheri Sc Ot Ot en en en eee ere Came ChHVALE TE Re xct Ti SHOP PRODUCTION. THE FACTORY AND ITS FORE-RUNNERS ? Shop production, which implies separation between household and industry, in contrast with home work, ap- pears in the most varied forms in the course of history. The forms are as follows: 1. Isolated small shops. These are found everywhere and always; the bazaar system es- pecially, with its grouping together of a number of work shops to facilitate working together, rests on this sep- aration. 2. The ergasterion. This also is universal; its medieval designation was fabrica, a term which is very ambiguous and may designate the cellar den leased by a group of workers and used as a shop, or a manorial insti- tution for wage work with a banalité requiring its utiliza- tion by the workers. 3. Unfree shop industry on a large seale. This is a frequent occurrence in economic history generally, and seems to have been especially developed in later Egypt. It undoubtedly sprang from the gigantic estate of the Pharaoh; out of this seem to have developed separate shops with wage labor. Certain cotton working shops in upper Egypt in the late Hellenistic period were perhaps the first establishments of the kind, but this can not be finally asserted until the Byzantine and Islamic sources are made available. Probably such shops existed in India and China also, and they are typical for Russia, though here they appear as imitations of the west European factory. Among earlier scholars, including Karl Marx, a distine- 162SHOP PRODUCTION 163 tion was current between factory and manufactory. The manufactory was described as shop industry, with free labor, without the use of any mechanical power but with the workers grouped and disciplined. This distinction is casuistical and of doubtful value. A factory is a shop industry with free labor and fixed capital. The composi- tion of the fixed capital is indifferent; it may consist of a very expensive horse-power, or water-mill. The crucial fact is that the entrepreneur operates with fixed capital, in which connection capital accounting is indispensable. Hence a factory in this sense signifies a capitalistic organ- zation of the process of production, i.e., an organization of specialized and co-ordinated work within a work shop, with utilization of fixed capital and capitalistic account- ing. An economie prerequisite for the appearance and exist- ence of a factory in this sense is mass demand, and also steady demand,—that is, a certain organization of the market. An irregular market is fatal to the entrepreneur because the conjuncture risk rests on his shoulders. For example, if the loom belongs to him he must take it into account before he can discharge the weaver when condi- tions are unfavorable. The market on which he reckons must be both sufficiently large and also relatively constant ; hence a certain mass of pecuniary purchasing power is nec- essary, and the development of money economy must have reached the corresponding stage, so that a certain demand can be depended upon. A further requisite is a relatively inexpensive technical production process. This require- ment is implied in the fact of a fixed capital which requires the entrepreneur to keep his establishment going even when conditions are unfavorable; if he utilizes hired labor only, the danger is shifted to the worker, if the loom, for ex- ample, is left idle. In order to find a steady market, “a as TS cabatie Sbeintaneey RATA EIR OY Sa Ee — Moos Sf a terete et ee at heat ae > se EIA I SOIR INEM ee eID ene te ee a BT eeSST TILT AE URI BRE Se Bok Bae SE rhm Dm bee Re eee a Seatac oieieoneeedatasaea tien deteeitiettiad 164 GENERAL ECONOMIC HISTORY again, he must produce more cheaply than under the tradi- tional technique of house industry and the putting-out system. Finally, the development of the factory is conditioned by a special social prerequisite in the presence of a suffi- cient supply of free laborers; it is impossible on a basis of slave labor. The free labor force necessary for con- ducting a modern factory is available only in the west in the necessary quantity, so that here only could the factory system develop. This mass of labor was created in Eng- land, the classical land of the later factory capitalism, by the eviction of the peasants. Thanks to its insular posi- tion England was not dependent on a great national army, but could rely upon a small highly trained professional army and emergency forces. Hence the policy of peasant protection was unknown in England and it became the classical land of peasant eviction. The labor force thus thrown on the market made possible the development first of the domestic small master system and later of the in- dustrial or factory system. As early as the 16th century there was such an army of unemployed that England had to deal with the problem of poor relief. Thus, while in England shop industry arose, so to speak, of itself, on the continent it had to be deliberately culti- vated by the state,—a fact which partly explains the rela- tive meagreness of information regarding the beginnings of workshops in English records as compared with con- tinental. With the end of the 15th century the monopo- lization of industrial opportunities in Germany caused a narrowing of the field of livelihood policy and the problem of the poor became urgent. As a result the first factories arose as institutions for poor relief and for providing work. Thus the rise of shop industry was a function of the capacity of the economic order of the time to supportSHOP PRODUCTION 165 population. When the guild was no longer able to provide the people with the necessary opportunity to earn a living, the possibility of transition to shop industry was at hand. The fore-runners of factory system in the west.—The industry of the craft guilds was carried on without fixed capital and hence required no large initial cost. But even in the middle ages there were branches of produc- tion which required an investment; industries were or- ganized either through the provision of capital by the guild communally, or by the town, or feudally by an overlord. Before the middle ages, and outside of Europe, they were auxiliary to estate economy. Among establishments of the work shop type which existed alongside craft work organ- ized in the guilds, were included the following: 1. The various kinds of mills. Flour mills were origi- nally built by the lords, either lords of the land or judicial lords; this applies especially to water mills, control of which fell to the lord by virtue of his right to the water. They were typically a subject of banalités or legally com- pulsory utilization (Mihlenbann), without which they eould not have existed. The majority of them were in the possession of territorial rulers; the Margraves of Branden- burg possessed no less than 56 mills in Neumark in 1337. The mills were small, but their construction was none the less beyond the financial capacity of the individual miller. In part they were acquired by the towns. Regularly they were leased by the prince or town, the lease often being hereditary; the operation was always on a retail basis. All this applies to saw mills, oil presses, fulling mills, ete., as well as grain mills. It sometimes happened that the territorial lord or the town leased the mill to urban families, giving rise to a mill-patriciate. Toward the end of the 13th century, the partician families of Cologne who held 13 mills organized an association distributing the ESOT NT See Ree hath ea en >.) oe te hte Se Sincere one re Re Dt et a one ee Oh tt iened aed sane poole See In ws ROE AR Nd Lk a er Se ee eee 166 GENERAL ECONOMIC HISTORY profit in fixed shares; the organization was distinguished from a joint stock company by the fact that the mills were hired out for use, that is, exploited as a source of rent. 2. Ovens. In this connection again only those belong- ing to feudal landlords, monasteries, towns or princes, could produce revenue sufficient to perfect them techni- eally. Originally they were built for the household re- quirements of the owners, but later their use was let for a fee and a banalité (Backofenbann) again arose. 3. Breweries. A great majority of breweries were orig- inally built by feudal landlords and made subject to a banalité (Braubann) though destined particularly to sup- ply the needs of the estate itself. Later the princes established breweries as fiefs and in general they made the conduct of such establishments a subject for concession. This development followed as soon as the sale of beer on a large scale began and there came to be a danger that too large a number of breweries in close proximity would fail to yield tax revenue. In the towns arose a municipal Braubann—aside from the preparation of the drink for a household—contemplating from the beginning an heredi- tary industry; thus the brewery was established on the basis of production for the market. Compulsory utiliza- tion of the brewery was an important right of the pa- tricians. With the technical progress in the manufacture of beer, the addition of hops and the preparation of ‘‘thick beer’’ by stronger brewing, the brewery right became specialized, different types falling to different individual patrician burghers. Thus the right to brew attached only to individual patrician houses which had developed the most perfect technical methods. On the other hand there existed a right of free brewing, every citizen who possessed this right being entitled to brew at will in the establishedSHOP PRODUCTION 167 brewery. Thus in the brewing industry also we find enter- prise possessing no fixed capital but operating on a com- munal basis. 4. Iron foundries. These became of great importance after the introduction of cannon. Italy preceded other occidental countries with its bombardiert. To begin with the foundries were municipal establishments, since the towns were the first to use artillery, Florence, as we know heading the procession. From them the armies of the ter- ritorial princes took over the use of artillery, and state foundries arose. However, neither municipal nor state foundries were capitalistic establishments but produced directly for the military-political requirements of the owner, without fixed capital. 5. Hammer Mills. These arose with the rationalization of the working of iron. But far the most important of all such establishments worked in the field of mining, smelting, and salt production. All the industries thus far considered are communally and not ecapitalistically operated. Establishments of a private economic character corresponding to the first stage of capitalism,—that is the possession of the work place, tools, and raw materials by a single owner, so that for the picture of a modern factory, only large machinery and mechanical power are wanting,—are found occasionally in the 16th century, perhaps even in the 15th century, but apparently none existed in the 14th. First arose establish- ments with the concentration of the workers in a single room, either without specialization of work or with limited specialization. Such industries, which are quite like the ergasterion, have existed at all times. Those in question here are distinguished from the ergasterion through work- ing with ‘‘free’’ labor, although the compulsion of poverty is never absent. The workers who bound themselves to ent ene a STATA EIEN TN ane eh Set tee IAS perenne Tt aig ae ee Bott ese eer Cnt pu Rosey ee ted ee a Ee De nn ee TSaa ee rs Sen rar eateee ale Pe by ot Cet ate ee ead RN PE Be St a EGET AN NTE SIVE RENTER PAO AoE ob nek Hi he fi Hh) qt 168 GENERAL ECONOMIC HISTORY such establishments had no other choice in view of the absolute impossibility of finding for themselves work and tools, and later, in connection with poor relief, the measure was adopted of pressing people into them by force. The organization of such a workshop, specifically one in the textile industry, is described for us by an English poem of the 16th century. Two hundred looms are col- lected in the work room; they belong to the enterpriser owning the establishment, who also furnishes the raw ma- terial and to whom the product belongs. The weavers work for wages, children being also employed as workers and helpers. This is the first appearance of combined labor. For feeding the workers, the entrepreneur maintained a complete staff of provision workers, butchers, bakers, ete. People marveled at the industry as a world wonder, and even the king visited it. But im 1555 at the urgent behest of the guilds, the king forbade such concentration. That such a prohibition should issue was characteristic of the economic conditions of the time. As early as the 18th century the possibility of suppressing a large industrial establishment was no longer to be thought of, on grounds of industrial policy and fiscal conditions alone. But in this earlier time it was still possible, for externally the whole distinction between the industry described and the domestic system was that the looms were brought together in the house of the owner. This fact represented a con- siderable advantage to the entrepreneur; for the first time disciplined work appeared, making possible control over the uniformity of the product and the quantity of output. For the worker there was the disadvantage—which still constitutes the odious feature of factory work—that he worked under the compulsion of external conditions. To the advantage for the entrepreneur of control of the work, was opposed the increased risk. If he put the looms out,SHOP PRODUCTION 169 as a Clothier, the chance of their being all destroyed at a single stroke through some natural catastrophe or human violence was much less than with their concentration in one room; moreover, sabotage and labor revolt could not easily be employed against him. In sum, the arrangement as a whole represented only an accumulation of small in- dustrial units within a single shop; wherefore it was so easy, In England in 1543, to issue a prohibition against maintaining more than two looms; for at most ergasteria were destroyed, not organizations of specialized and co- shop and free worker. New evolutionary tendencies first appeared with the technical specialization and organization of work and the simultaneous utilization of non-human sources of power. Establishments which internally represented specialization and co-ordination were still an exception in the 16th cen- tury ; in the 17th and 18th, the effort toward founding such establishments is already typical. As non-human sources of power, the first to be considered is animal power, the capstan horse-power ; natural forces came later, first water and then air; the Dutch windmills were first used to pump out the polders. Where labor discipline within the shop is combined with technical specialization and co-ordina- tion and the application of non-human sources of power, we are face to face with the modern factory. The impetus to this development came from mining, which first used water as a source of power; it was mining which set the process of capitalistic development in motion. As we have already seen, a prerequisite for the transi- tion from work shop industry to specialization and co- ordination of labor with the application of fixed capital, was, along with other conditions, the presence of a secure market of minimum extent. Thus is explained the fact that we first meet with such specialized industry, with [See ee OE PP IDL APNE PM Pet ro ae Sapte Bek et Nani de See ote Ld ee By Ee Sin Oe A. Os ee) ne ne tN ee= a A se Ne eae a ea oe For pe eee tee ne ee | Sababal f ] d < Sapte 170 GENERAL ECONOMIC HISTORY internal division of labor and fixed capital, working for political requirements. Its earliest forerunners were the minting works of the medieval princes; in the interests of control these had to be operated as closed establish- ments. The coiners, called ‘‘house associates’? (Hausge- nossen) worked with very simple implements but the ar- rangement was one of workshop industry with intensive internal specialization of labor. Thus we find here isolated examples of the later factories. With the increase in technical and organizational scope, such establishments were set up to a large extent in the manufacture of weapons, including the making of uniforms, as soon as it became gradually established that the political ruler pro- vided the clothing for the army. Introduction of the uni- form presupposes a mass demand for military clothing, as conversely, factory industry can only arise for this pur- pose after war has created the market. In the same cate- gory, finally, and in the first rank sometimes, belong still other industries producing for war requirements, espe- cially powder factories. Alongside the requirements for the army in furnish- ing a secure market, was the luxury demand. This re- quired factories for gobelins and tapestries, which began to be common in princely courts after the crusades, as decorations for the originally bare walls and floors, in imitation of oriental usage. There were also goldsmith goods and porcelain,—the factories of western princes being patterned after the ergasterion of the Chinese emperors; window glass and mirrors, silk, and velvet and fine cloth generally ; soap—which is of relatively recent origin, an- tiquity using oils for the purpose—and sugar, all for the use of the highest strata of society. A second class of such industries works for the demo- eratization of luxury and the satisfaction of the luxurySHOP PRODUCTION ee requirements of broader masses through imitation of the produce destined for the rich. Those who could not have gobelins or buy works of art had a wall covering of paper, and thus wall-paper factories arose in the early days. Here belong also the manufacture of bluing, starch for stiffening, and chicory. The masses obtain in substitutes something to take the place of the luxuries of the upper strata. For all these products, with the exception of the last named, the market was at first very limited, being restricted to the nobility who were in possession of castles or castle-like establishments. Consequently none of these industries was capable of survival on any other basis than that of monopoly and governmental concession. The legal position of the new industries in relation to the guilds was very insecure. They were antagonistic to the guild spirit and consequently suspect to the guilds. Insofar as they were not maintained or subsidized by the state, they at least sought to secure express privileges and concessions from the latter. The state granted these on various grounds—to guarantee provision for the require- ments of noble households, to provide for the existence of the population which could no longer find support within the guilds, and finally for fiscal ends, to increase the tax paying power of the country. Thus in France, Francis I founded the arms factory of St. Etienne and the tapestry works of Fontainebleau. With these begins a series of privileged manufactures royales for public requirements and for the luxury demand of the upper strata. The industrial development of France thus given a start takes on another form in the time of Colbert. The procedure of the state was simplified here as in England, through the granting of exemptions from the guilds in view of the fact that the privilege of a guild did not always extend over the whole town in which it DS a ag AP IO PP nr ee ns ee et ere ne etree -= ety ot eee See oo er roe Ea FOF SRT URIS se ee ne eee Se at 172 GENERAL ECONOMIC HISTORY was settled; for example, a considerable part of Paris lay outside the guild jurisdiction, and the fore-runners of the modern factories could be established in this ‘‘milieu privilégié’’ without arousing opposition. In England the guilds were purely municipal corpora- tions; guild law had no validity outside a town. Hence the factory industry could be established, in harmony with the procedure under the domestic system and workshop industry, in places which were not towns—with the result that down to the reform bill of 1832 the new industry could not send representatives to Parliament. In general, we have almost no record of such factories down to the end of the 17th century, but it is impossible that they were entirely absent. The reason is rather that in England manufacturing could get along without the support of the state because the guild power had so far disintegrated that it no longer held any privilege which was a bar to such industry. In addition, it may undoubtedly be assumed that the development in the direction of shop production would have gone on more rapidly if conditions such as those of Germany had existed and the possibility had not been present of producing under a small master system. In the Netherlands likewise we hear almost nothing of governmental grants of privileges. None the less, many factories were founded by Huguenots at a relatively early date in Amsterdam, Haarlem, and Utrecht, for the making of mirrors, silks, and velvet. In Austria in the 17th century the state endeavored to attract factories into the country by granting privileges which would be a protection against the guilds. On the other hand, we also meet with the founding of factories by the great feudal lords; of these the first is perhaps the sik weaving works of the Counts of Sinzendorff in Bohemia,SHOP PRODUCTION 173 In Germany the first manufactories were founded on municipal soil, and specifically in Ziirich in the 16th century, when Huguenot exiles founded the silk and brocade industry here. They then spread rapidly among the Ger- man cities. In 1573 we find the manufacture of sugar and in 1592 that of brocade in Augsburg, that of soap in Nurem- burg in 1593; dye works in Annaberg in 1649, manufacture of fine cloth in Saxony in 1676, cloth manufacture in Halle and Magdeburg in 1686, the gold wire industry in Augs- burg in 1698, and finally at the end of the 18th century, widely seattered porcelain manufacture, partly conducted and partly subsidized by the princes. To sum up, it must be held at present, first, that the factory did not develop out of hand work or at the expense of the latter but to begin with alongside of and in addition to it. It seized upon new forms of production or new products, as for example cotton, porcelain, colored brocade, substitute goods, or products which were not made by the craft guilds, and with which the factories could compete with the latter. The extensive inroads by the factories in the sphere of guild work really belongs to the 19th century at the earliest, just as in the 18th century, especially in the English textile industry, progress was made at the expense of the domestic system. None the less the guilds combated the factories and closed work- shops growing out of them, especially on grounds of prin- ciple; they felt themselves threatened by the new method of production. As little as out of craft work did the factories develop out of the domestic system, rather they grew up along- side the latter. As between the domestic system and the factory the volume of fixed capital was decisive. Where fixed capital was not necessary the domestic system has endured down to the present; where it was necessary, es ye FN pe Nae Jy Ss Ae Perea datetime enianera nina keenrertes Set See ttn abe oe eh Ce NR eras a ea a att etn nrc meee anh erwin ~a ale re ne ES TURAN ihe Ea SE eb no A es De Be Te Re pen a ee eas ee nh ne a Ee eee Se ee reer 174 GENERAL ECONOMIC HISTORY factories arose, though not out of the domestic system; an originally feudal or communal establishment would be taken over by an entrepreneur and used for the produc- tion of goods for the market under private initiative. Finally, it is to be observed that the modern factory was not in the first instance called into being by machines but rather there is a correlation between the two. Machine industry made use originally of animal power; even Ark- wright’s first spinning machines in 1768 were driven by horses. The specialization of work and labor discipline within the workshop, however, formed a predisposing con- dition, even an impetus toward the increased application and improvement of machines. Premiums were offered for the construction of the new engines. Their principle— the lifting of water by fire—arose in the mining industry and rested upon the application of steam as a motive force. Economically, the significance of the machines lay in the introduction of systematic calculation. The consequences which accompanied the introduction of the modern factory are extraordinarily far reaching, both for the entrepreneur and for the worker. Even before the application of machinery, workshop industry meant the employment of the worker in a place which was separate both from the dwelling of the consumer and from his own. There has always been concentration of work in some form or other. In antiquity it was the Pharaoh or the territorial lord who had products made to supply his political or large-household needs. Now, however, the pro- prietor of the workshop became the master of the work- man, an entrepreneur producing for the market. The con- centration of workers within the shop was at the beginning of the modern era partly compulsory; the poor and home- less and criminals were pressed into factories, and in the mines of Newcastle the laborers wore iron collars downSHOP PRODUCTION 175 into the 18th century. But in the 18th century itself the labor contract everywhere took the place of unfree work. It meant a saving in eapital, since the capital requirement for purchasing the slaves disappeared ; also a shifting of the capital risk onto the worker, since his death had previously meant a capital loss for the master. Again, it removed responsibility for the reproduction of the working class, whereas slave manned industry was wrecked on the ques- tion of the family life and reproduction of the slaves. It made possible the rational division of labor on the basis of technical efficiency alone, and although precedents ex- isted, still freedom of contract first made concentration of labor in the shop the general rule. Finally, it created the possibility of exact calculation, which again could only be carried out in connection with a combination of work- shop and free worker. In spite of all these conditions favoring its development, the workshop industry was and remained in the early period insecure; in various places it disappeared again, as in Italy, and especially in Spain, where a famous paint- ing of Velasquez portrays it to us although later it is absent. Down into the first half of the 18th century it did not form an unreplaceable, necessary, or indispen- sable part of the provision for the general needs. One thing is always certain; before the age of machinery, work- shop industry with free labor was nowhere else developed to the extent that it was in the western world at the be- ginning of the modern era. The reasons for the fact that elsewhere the development did not take the same course will be explained in what follows. India once possessed a highly developed industrial tech- nique, but here the caste stood in the way of development of the occidental workshop, the castes being ‘‘impure’’ to one another. It is true that the caste ritual of India did ine iad EEE EE SSRIS SL LT U es.) Se om te A de aE oe Cea Sere he BEE DON SIMS TT LEeen pe RRA Rs a ai ak a ad ee Sd ee ae ae tered Ree = Se ee ee A Se eee ee Oe oe gee ee oe Ce ee ned ai UK BY) "7 ‘ ~— i 176 GENERAL ECONOMIC HISTORY not go to the extent of forbidding members of different castes to work together in the same shop; there was a say- ing—‘‘the workshop is pure.’” However, if the workshop system could not here develop into the factory, the exclu- siveness of the caste is certainly in part responsible. Such a workshop must have appeared extraordinarily anomalous. Down into the 19th century, all attempts to introduce fac- tory organization even in the jute industry, encountered great difficulties. Even after the rigor of caste law had decayed, the lack of labor discipline in the people stood in the way. Every caste had a different ritual and different rest pauses, and demanded different holidays. In China, the cohesion of the clans in villages was ex- traordinarily strong. Workshop industry is there com- munal clan economy. Beyond this, China developed only the domestic system. Centralized establishments were founded only by the emperor and great feudal lords, espe- cially in the manufacture of porcelain by servile hand workers for the requirements of the maker and only to a limited extent for the market, and generally on an unvary- ing scale of operation. For antiquity, the political uncertainty of slave capital is characteristic. The slave ergasterion was known, but it was a difficult and risky enterprise. The lord preferred to utilize the slave as a source of rent rather than as labor power. On scrutinizing the slave property of antiquity, one observes that slaves of the most diverse types were intermingled to such a degree that a modern shop industry could produce nothing by their use. However, this is not so incomprehensible; today one invests his wealth in as- sorted securities, and in antiquity the owner of men was compelled to acquire the most diverse sorts of hand workers in order to distribute his risk. The final result, however,SHOP PRODUCTION 177 was that the possession of slaves militated against the es- tablishment of large scale industry. In the early middle ages, unfree labor was lacking or became notably more searce; new supplies did indeed come on the market, but not in considerable volume. In addi- tion there was an extraordinary dearth of capital, and money wealth could not be converted into capital. Finally, there were extensive independent opportunities for peas- ants and industrially trained free workers, on grounds op- posite to the condition of antiquity; that is, the free worker had a chance, thanks to the continual colonization in the east of Europe, of securing a position and finding protection against his erstwhile master. Consequently, it was hardly possible in the early middle ages to establish large workshop industries. A further influence was the increasing strength of social bonds due to industrial law, especially guild law. But even if these obstacles had not existed, a sufficiently extended market for the product would not have been at hand. Even where large estab- lishments had originally existed, we find them in a state of retrogression, like the rural large industries in the Carolin- gian period. There were also beginnings of industrial shop labor within the royal fisct and the monasteries, but these also decayed. Everywhere work shop industry re- mained still more sporadic than at the beginning of the modern era, when at best it could reach its full develop- ment only as a royal establishment or on the basis of royal privileges. In every case a specific workshop technique was wanting; this first arose gradually in the 16th and 17th centuries and first definitely with the mechanization of the production process. The impulse to this mechanization came, however, from mining. an Nin sin ee Oo Ne ean! tnt Le Wisc hen SEE ox ed ats Se Ns en etna ek ig IN, IE RE Le eee I i reat en ares Foti UN te A emer rit PIR nh es nM Ma MAAS ATA TS= Rt Be a ll hal areas a Dl Se eet eae Re CR Ee ee ee ee ———" ‘ 4 d So CHIVASP Tih xr rT MINING?! PRIOR TO THE DEVELOPMENT OF MODERN CAPITALISM In the beginning mining was a matter of surface opera- tions. Turf and bog iron ore, as in interior Africa, and alluvial gold as in Egypt, are probably the most important mining products of primitive times. As soon as under- ground work was undertaken, and shafts and galleries had to be driven, considerable expenditures of labor and ma- terial goods were necessary. These were exposed to ex- traordinary hazards, for one could never tell to what dis- tance a vein would be productive or would return the important operating expenses which the mine required. If these were not kept up, the mine went to ruin and the shaft was in danger of ‘‘drowning.’’ The result was that underground mining was undertaken co-operatively. Where this happened there developed an obligation to the industry, as well as a right, on the part of the associates; the individual could not withdraw from the establishment without endangering the group. The unit of operation was small to begin with. In the early middle ages, not more than two to five men worked in the same shaft. Among the legal problems which developed in connec- tion with mining, the first in order is the question, who has the right to carry on mining at a given place. This may recelve an answer in various ways. First, it is possible that the mark association may dispose of the right, though positive examples of this are not found in the sources. 178MINING 179 Again, it is conceivable that, in contrast with tribal opera- tion, the right to these exceptional finds may inhere in the tribal chieftain; but this also is uncertain, in Europe at least. In the periods for which we possess more than mere guesses the legal situation is covered by two possibilities. Either the right to quarry is treated as pars fundi, the owner of the surface being also owner of what lies beneath it (though this relates to the overlord’s title to the land and not that of the peasant) or, all hidden treasures are ‘‘regalia’’; the political ruler, that is the judicial lord, a royal vassal or the king himself, disposes of them and no one, not even the holder of the land himself, can carry on mining without a concession from the political authority. This regale on the part of the political ruler was founded in the first place on the interest in the possession of precious metals in connection with coinage. Other possibilities arose in ease the finder was taken into account either by the landholder or the lord of the regale. Today the dom- inant principle is freedom of mining; anyone has a right to prospect for minerals under specific formal require- ments, and the finder who has secured a license and dis- covered a vein may exploit it even without consent of the landhclder, on condition only of payment for damage inflicted. 'The modern system of free mining could be built up more easily on the basis of the regale than on that of feudal land law. If the landholder possessed the right, he excluded everyone from the possibility of seeking for minerals. while the lord of the regale, under some condi- tions might have an interest in attracting labor into the ex- ploitation. In detail, the history of the development of mining law and the mining industry took the following course. We have very little information regarding the earliest ee Stee ee nS Ns LOD I see one Ren ren coatteee ones Ch en te hs See ie eo ines Pe tne ae eee ee ers mene SO Te erat en a oe ee rt E 2 ereMES ee eae eee rts 180 GENERAL ECONOMIC HISTORY oa ata industry outside the occident,—in India, and Egypt, for example, as to the mining works on Mount Sinai operated by the earliest Pharaohs. The mining organization of Greco-Roman antiquity is better known. The silver mines of Laurion belonged to the Athenian state, which leased the operation and distributed the yield to its citizens. The Athenian fleet which won the victory of Salamis was built through the renunciation of the silver by the citizens for a period of years. How the mines were operated we do not know. Some indication might be drawn from the fact that some very wealthy individuals owned mining slaves; Nicias, the commander in the Peloponnesian War, is supposed to have owned thousands, which he hired out to the lessee of the mines. The sources for Roman conditions are not unambiguous. On the one hand the Pandects mention condemnation to mine labor, from which it would seem that the use of con- vict slaves or purchased slaves was normal. On the other hand, a selection of some sort must have taken place; at least the indications are that slaves who had committed any offense in the mine were whipped and expelled from mine work. In any ease it is certain that the ler metallr Vipascensis, from Hadrian’s time, discovered in Portugal, indicates that free labor was already employed. Mining was an imperial prerogative, but the existence of a mining regale is not to be inferred; the emperors had a free hand in the provinces and seizing the mines was a favorite exer- cise of their power. The technique which the lex metalli Vipascensis indicates is in contradiction with information from other ancient sources. In Pliny for example we find a row of slaves set to work hoisting water from the bottom of the mine to the surface by passing buckets. In Vipasca on the contrary, galleries for the same purpose are estab- lished beside the outer shaft. Medieval gallery building fal Rom eee ee a ee eS Ne = eae aN —~ a eee ee ee ee ee be eer ees P] i osMINING goes back traditionally to antiquity, but in other ways much of the lex metalli Vipascensis seems to echo later medieval relations. Mining is placed under an imperial Procurator, to whom corresponds the mine master of the political over- lord in the middle ages. There is also the obligation to work. The individual receives the right of driving five putet into the ground, as in the middle ages five was the maximum number of shafts. We must assume that he was obliged to keep all five in operation. If he did not utilize his right during a specified short period—shorter than in 181 the middle ages—it was taken from him and the privilege might be taken up by anyone who was in a position to carry on the work. We find also that in the beginning there were certain compulsory payments, and if these were not forthcoming the right to the mine was again thrown open. A part of the mining fields was reserved for the fisc, exactly as later in the early middle ages, and to it also a part of the raw product had to be delivered; this was first set at half, while in the middle ages it gradually sank to a seventh or even less. The operations were carried on by associated workers with whom any participant might come to his own agreement. The association imposed obligatory payments for the socit, to raise the cost of driving galleries and shafts; if these payments failed the mining right again became free. In the middle ages Germany took the lead over all other countries in the precious metals, while tin was mined in England. In the first instance royal mines are found here, though not on the basis of the regale but because the land belonged to the king; an example is the Rammelsberg near Goslar in the 10th century. Placer gold mining was also carried on in the royal streams, the right being granted by the king for a fee, again not on the basis of the regale but on that of control over navigable waters. Leasing of rn ea a ee te hn teh et Ona ne en heey EA TO TS Tis hee ae ae pores Neer ~ o Pie ag ON pI PE SMT TS feanenen seers eter eine Se ee iain cat nndSoe EN aes ar sa Se ARN Re a a a DS A ee ee ee ee ee en Se Rw ieee Sanaa diene ete td 182 GENERAL ECONOMIC HISTORY mining rights by the king is first met with under Henry II; here also the basis was not the regale but the lease of land to monasteries. In general, what was leased to the monasteries was only that to which the king had a legal right, by virtue of the control of the empire over the land. Originally the king possessed a tithing right in all mining products, which right was generally leased to private per- sons; but in the case of the monasteries this right is leased in the 11th century as imperial property. Under the Hohenstaufens the relation of the political authority to mining advances a step farther. The concep- tion of the regale which underlies the measures even of Conrad III was definitely formulated by Frederick Barba- rossa; he declared that no one might obtain the licentia fodiendi without a concession from the king, for which a payment was to be made; even the feudal landlords had to get such a concession. The arrangement soon became an accepted fact, for the Sachenspiegel recognized the royal mining regale as an institution. However, the theoretical right of the king led at once to conflicts with the princes, whose right to the regale was first recognized in the Golden Bull. The struggle over the mines between the crown and the feudal landholders is also met with in other countries. In Hungary, the king succumbed to the magnates, and if he wished to operate a mine was forced to buy the tract in question outright. In Sicily, where Roger I still recognized underground treasure as the property of the landholder, the kingdom established its claim to the regale in the second half of the 12th century. In France, the barons claimed the mining right as pars fundi down to about 1400. Then the crown obtained the victory and remained in absolute possession of the regale down to the revolution, which made the mines national property. In England, King JohnMINING 183 claimed a universal regale, especially over the important tin mines, but in 1305 the crown was forced to recognize that the king did not have the right to make mining de- pendent upon a concession from him. In the 16th century, under Elizabeth, the regale was restricted in fact to the precious metals, all other mines being treated as pars fundi; thus the new industry of coal mining was free from royal claims. Under Charles I, the situation again wav- ered, but finally the crown surrendered completely and all underground treasures became the property of the owners of the land or ‘‘landlords.’’ In Germany freedom of mining, that is, freedom of pros- pecting, derived not from the mark community, but from the ‘‘freed mountains’’ (gefreiten Bergen). i 198 GENERAL ECONOMIC HISTORY Finally, in many places, economic history reveals trade by princes on their own account.* Very old examples on the most extensive seale are furnished by the Egyptian Pharaohs, who as ship-owners carried on exportation and importation. Later examples are the doges of Venice, in the earliest period of their city, and finally, the princes of numerous patrimonial states of Asia and Europe, includ- ing the Hapsburgs to well along in the 18th century. This trade could be carried on either under the direction of the prince himself, or he could exploit his monopoly by grant- ing a concession or leasing the privilege. In adopting the latter measures he gave the impulse to the development of an independent professional trading class.Ci ACE, Ee kav TECHNICAL REQUISITES FOR THE TRANSPORTATION OF GOODS ! For the existence of commerce as an independent occupa- tion, specific technological conditions are prerequisite. In the first place there must be regular and reasonably re- lable transport opportunities. One must, to be sure, think of these in the most primitive possible terms through long ages. Not only in the Assyrian and Babylonian times were inflated goat skins used for the diagonal crossing of rivers, but even in the Mohammedan period, skin-bag boats long dominated the river traffic. On land the trader had recourse far into the middle ages to primitive transport media. The first was his own back, on which he earried his goods down to the 13th century; then pack animals or a two wheeled cart drawn by one or at the most two horses, the merchant being restricted to commercial routes as roads in our sense are not to be thought of. Only in the east and in the interior of Africa does caravan trade with slaves as porters appear to occur fairly early. In general even there, the pack animal is the rule. The typical animal of the south is the ass or the mule: the camel does not appear until late, in the Egyptian monuments, and the horse still later; it was originally used for war and found application in the transport of goods only in more recent times. Traffic by sea had to make use of equally primitive means of transportation. In antiquity, and likewise in the early middle ages, the boat propelled by oars was the rule. The 199 SR RT Se tay eta a SDP LEDER Ay De = Seat Pa ene Po Kos me Ne Sosy et Ot Eee Bd ee a eae at perenne ered a ee eee treesNM RRs eR a SR ane se Sona lh eee ihe si ree pee £0 rere ART RANE TAC at Bae 200 GENERAL ECONOMIC HISTORY construction we must picture as very clumsy; we find men- tion of the cords with which the plank boats had to be held together or they would break apart. It is true that sail- ing goes back so far that its invention cannot be determined, but it was not sailing in the sense that the term now bears. Originally it served only for supplementing the oars when winds were favorable, while tacking against the wind seems to have been still unknown in the early middle ages. The Eddas contain only a doubtful reference to it and it is doubtful whether the first use of tacking is to be ascribed to Andrea Doria as medieval tradition had it. From Homer and still later sources we learn that the ships were not so large but that they could be pulled up on the beach when a landing was made each evening. The anchor evolved very slowly in antiquity, from a heavy stone to an instrument in the form customary today. Shipping was at first, of course, purely coastal traffic; deep-sea naviga- tion is an innovation of the Alexandrian period and was based on the observation of the monsoon. The Arabs first ventured to try to reach India by allowing it to drive them across over the open sea. Nautical instruments for deter- mining location are among the Greeks the most primitive imaginable. They consisted of the odometer, which in the manner of a sand glass allowed balls to fall whose number indicated the miles passed over, and the ‘‘bolis’’ for de- termining the depth. The astrolabe is an invention of the Alexandrian period and not until that time were the first lighthouses established. Shipping in the middle ages, like that of the Arabs, re- mained technically far behind Chinese practice. The mag- netic needle and mariner’s compass which were applied as early as the third and fourth centuries in China, were not known in Europe until a thousand years later. After the introduction of the compass in the Mediterranean andTECHNICAL REQUISITES 201 Baltic seas it is true that a rapid development began. However, a fixed steering rudder behind the ship was not universal until the 13th century. Rules of navigation were a trade secret. They were objects of bargaining down to the days of the Hansards who in this connection became champions of progress. The decisive forward steps were the advances in nautical astronomy, made by the Arabs and brought by the Jews to Spain, where in the 13th cen- tury Alfonso X had the tables prepared which are known by his name. Compass maps were first known from the 14th century. When at that time the western world took up ocean navigation, it was confronted by problems which for the time being it had to solve with very primitive means. For astronomical observations the pole star offered in the north a tolerably secure basing point while in the south the Cross long served for orientation. Amerigo Vespucci deter- mined longitude by the position of the moon. At the be- ginning of the 16th century its determination by clocks was introduced, these having been so far perfected that it was possible to determine longitude approximately by measur- ing the difference between their time and that shown by the sun at midday. The quadrant by which latitude could readily be determined seems to have been first used in 1594. The speed of ships corresponded to all these conditions. There was an extraordinary change on the introduction of sailing in contrast with the row boat. Yet in antiquity the stretch of sea from Gibraltar to Ostia required from eight to ten days, and the stretch from Messina to Alex- andria about as long. After the English developed effec- tive sailing methods in the 16th and 17th centuries, there were sailing ships which were not so far behind moderately fast steamers, although their speed was always dependent upon the wind. a TTS TS ED SER ibe. by oe i> es Des oy eh Ss Stine —, RN ees ne Lee eS a aPrd a a 4 ? a eae ake ieeae es tA ie I eee ee Det eens ee Sa rN ih an el AM Si es ti ci sri a lla ee CH AP LHR evel FORMS OF ORGANIZATION OF TRANSPORTATION AND OF COMMERCE (A) THe ALIN TRADER Commerce by sea is everywhere originally conjoined with piracy; the warship, pirate ship, and merchant ship are to begin with not distinguished from each other. The dif- ferentiation came about through the warship developing away from the merchant ship and not conversely, the war- ship being brought to such a technical development by the inerease in the number of banks of oars and other innova- tions, that, in view of the costs and limited usefulness of the room left available for cargo, it was no longer avail- able as a merchant ship. In antiquity the Pharaohs and the Egyptian temples are the first ship owners, so that we find in Egypt no privately owned shipping whatever. On the other hand private shipping is characteristic of the Greeks in Homeric times, and of the Phenicians. Among the Greeks the city king originally held possession of the ships both for trade and for piracy. But he could not pre- vent the growth of great families which shared in ship owning and finally tolerated him only as a primus inter pares. Among the Romans in the earliest times, overseas trade was one of the main sources of the significance of the city. We do not know certainly how great was the ownership of tonnage, or the export trade; apparently, however, the Romans did not come to equal the Carthaginians in this 202TRANSPORTATION AND COMMERCE 203 field. Later they went over to a purely import or debit commerce. After the Punie Wars private shipping rose from a zero level in Rome. But the Roman policy was so strongly continental in character that the possession of shipping was originally regarded as unbecoming for a senator; under the Republic and even in the imperial period he was forbidden to have more ships than were necessary to market his own surplus products. We do not know how the operation of shipping in antiquity was organized from an economic point of view. The only certainty is the increasing use of slaves as a means of propulsion. The officers of the ships were skilled crafts- men. We find on Roman and Greek ships, the captain, helmsman, and a flutist who gives the rhythm to the rowers. Again, we have no clear idea of the relation be- tween ship owners and merchants. Originally the former were merchants themselves, but a special class of traders by sea in connection with foreign commerce is soon met with, the guzopo of the Greek cities. This foreign trade must have been very slight in extent, for as regards goods for the masses, especially the grain requirements of the large cities of antiquity, provision must have been on a basis of communal self-sufficiency. In Athens the ship owners were obliged to bring back grain to the city as return cargo, while in Rome the state took in hand the provision of ships and supply of grain and regulated both far down into the imperial period. This arrangement did indeed assure peace and security to the sea traffic and was very favorable to the foreign commerce, but it was not permanent. The financial needs of the emperors, arising out of the necessity for a standing army on the frontier, forced upon them a leiturgical or compulsory service organization of state functions. To an increasing degree these were taken care of not through taxation but leiturgically, the fise organ- wie eee ah nee ean ha etn ea te oe St tn an sree nnerNi are at eS ee Renee ee on ee ete ee oe) peat ened TORENT OT beers Se NA ee ee a eres 204 GENERAL ECONOMIC HISTORY izing the various occupations along guild lines and laying upon them the labor burdens of the state. In consideration of this duty they received a monopoly of their respective branches of industry. This system led to a leiturgical organization of shipping also and consequently to an early retrograde development. In the third century the pri- vate marine disappeared, as did the navy at the same time, giving piracy a chance for a new and strong develop- ment. For knowledge of the arrangements brought about in antiquity by the requirement of legal forms for trade, we are restricted to very few remains. We possess for one thing the lex Rhodia de iactu concerning shipping hazards. It shows that a number of merchants were generally car- ried on a ship. If goods had to be thrown overboard in a time of distress, the loss was borne equally by the partic- ipants. Another institution, the sea loan (foenus nau- ticum), which was taken over by the middle ages from antiquity, is a consequence of the fact that trade by sea was affected by extraordinarily high risks. If a loan was made on goods to go overseas, neither the lender nor the borrower reckoned upon repayment in case of loss of the ship. The danger which both incurred was shared in such a way that the creditor received exceptionally high in- terest,—probably 30%—in exchange for which he bore the entire risk, and in the ease of a partial loss his payment was also reduced. From the court pleas of the Attic orators, Demosthenes and others, we know that sea loans resulted in affording to the lenders the possibility of getting sea commerce in their power to a large extent. They prescribed to the ship owner the course and duration of the voyage and where he should market the goods. The extensive dependence of the sea merchants upon the capital- ists which finds expression in this arrangement leads us toTRANSPORTATION AND COMMERCE) 205 infer that the former were weak in capital. In order to distribute the risk a number of lenders usually participated in the loan upon a single ship. Furthermore, it often hap- pened that a slave of the creditor accompanied the cargo overseas, another indication of the dependence in which his trade stood in relation to the money power. The sea loan dominated the whole period of antiquity until Justinian forbade it as usurious. This prohibition had no permanent effect, resulting mainly in a change in the form of shipping credit. Conditions in the middle ages are obscure. In harmony with pre-capitalistie institutions the shipyards belonged to the cities and were leased to the ship building guilds. Sea trade bore a less capitalistic character than in antiquity. The common form under which it was carried on was that of the association of all those interested in the same trading enterprise. During the whole medieval period a ship almost never went out on the account of a single individual, because of the risk, but was always built for a number of share holders; that is, partnership possession dominated. On the other hand, the various partners would be concerned in the ownership of several vessels. Like ship building and ownership, the individual venture was usually the oc- easion for an association. This included the ship owner, the officers, the crew, and finally the merchants. They were all brought together in a company and took goods with them, although the merchants often sent a representative or factor, an employee, instead of going themselves. The danger was borne in common and gain or loss distributed according to a fixed rule. Alongside this organized community of risk existed the sea loan of the capitalists. The latter was preferred by the traveling merchants of the middle ages because it was advantageous for them to buy goods by means of loans and rE yes oa 4 eS a a EE SAS on eee Se ew, Ant Aa PT Sin eDiets a aa anal = ne Serie ae oe Rt oe Pa we a as a eee eS ae BR Be DN ee ee ee ey Seiten eee en re nt ee se SNe f 206 GENERAL ECONOMIC HISTORY shift the risk to the ereditors. According to the constituum usus of the maritime law of Pisa, the rate of interest was 35% ; it fluctuated around this level but varied according to a tariff of grades of risk. Originally, all the merchants included in the risk community themselves went on the voyage and took the goods with them; those involved were small merchants who peddled their wares. This custom declined gradually and in its place appeared the com- menda, and apparently the societas maris was of contem- porary growth. The commenda is found in Babylonian and Arabian as well as Italian law and in a modified form in the Hanseatic. The essence of it is that in the same or- ganization two types of associates are included, one of which stays in the home port while the other takes the goods overseas. The relation originally represented only per- sonal convenience, certain ones out of a number of mer- chants, chosen in rotation, marketing the goods of the others. Later it beeame an arrangement for the investment of capital. Those who furnished the money were in part professional traders but in part, especially in the south, money capitalists, such as nobles who wished to employ their surplus wealth for gain in commerce. The organiza- tion was carried out according to the plan that to the travel- ing socius was given money or goods estimated in money ; this investment formed the trading capital and was called by the technical name commenda. The goods were sold overseas and others bought with the proceeds, which again on the return to the home port were appraised and sold. The mode of dividing the gain was as follows: if the socius who remained at home furnished all the capital he received three-fourths; if, however, the investment was provided by him and the traveling socius jointly—generally in the ratio of two-thirds to one-third—the sharing was by halves. The characteristic feature of this business was that capitalisticTRANSPORTATION AND COMMERCE 207 accounting was employed for the first time; the capital at the end of the operation was compared with that at the beginning, and the excess determined and distributed as gain. As to form, however, there was no permanent capitalistic enterprise but only an individual venture, the accounts being closed after each expedition. This arrange- ment dominated sea trade throughout the middle ages and after the transition to permanent capitalistic business had taken place it remained the accounting form for the in- dividual venture. The turnover of medieval commerce as measured by modern standards was extremely small. It was carried on by mere small dealers who worked with trifling quantities. In 1277 the English exports of wool amounted to 30,000 double ecwt. In this quantity 250 merchants shared, so that 120 double ewt. fell to each in a single year. The average amount of a commenda in Genoa in the 12th cen- tury was about 250 American dollars or 50 pounds ster- ling in silver. In the 14th century in the domain of the Hanseatic League, it was forbidden to take up more than one commenda and the amount was not higher than that given above. The total trade between England and the Hanseatic League at the time of its highest development came to less than 4,000 dollars or 800 pounds. For Reval the conditions can be followed in the customs registers; in 1369 there were 178 merchants concerned in 12 ships leav- ing the port, each of whom was involved for some 400 dol- lars on the average. In Venice the typical cargo amounted to $1,500, in the Hanseatic League in the 14th century to $1250. The number of ships annually entering the port of Reval in the 15th century was 32 and for Luebeck, the most important Hanseatic port, in 1368, it is 430—against which are 870 departures. It was a crew of petty capital- ‘stie traders who traveled themselves or got others to travel Ferrie vias Fear 47 and ons Sensebo nd tk ad Sent rete ee ata Pe SLY SRT a ee ers ee ee ee es Soe De ee ree eee 208 GENERAL ECONOMIC HISTORY — for them, and this fact explains the organization into com- panies. On account of the danger from pirates, a single ship was not in a position to determine independently its time of sailing. Ships formed themselves into caravans and were either convoyed by armed vessels or were themselves armed. The average duration of the voyage of a marine caravan in the Mediterranean varied from a half year to a year. In Genoa only one caravan a year went to the Orient, in Venice two. The voyage in caravans resulted in an extremely slow turnover of the capital. In spite of these conditions the significance of the com- merce as a source of income must not be underestimated. In 1368 the turnover in all the Baltic ports together amounted to nearly $4,000,000 measured in silver—three times as much as the king of England received as the total revenue of the state. In land commerce the risk was less, as the only danger came from robbers and not from natural catastrophes in addition; but in compensation the expenses were incom- parably higher. Corresponding to the limited risk the company organization was absent; likewise any land loan analogous to the sea loan. Attempts were made to estab- lish such an institution, but the Curia interposed against it as a notoriously usurious business. In land commerce also it was the rule for the merchant to accompany his goods. Not until the 13th century were transport conditions secure enough that the merchant was released from regularly accompanying his goods, making instead the victwarius responsible for them, a condition which presupposed established business relations between consignor and consignee. Land commerce suffered under technical difficulties as a result of the condition of theTRANSPORTATION AND COMMERCE 209 roads. The Roman roads have been a subject of much talk but conditions were far from ideal on these also. Cato and Varro warned against using them on account of the low persons who frequented them and also the vermin, and counseled against putting up in any tavern near the road on account of the excessive charges imposed on travelers. In the outer provinces the Roman roads may have served for commerce also, but they were not pri- marily intended for this purpose and their straight line courses had no regard for its needs. In addition, in the Roman period, protection was given only to those roads which were important for the provisioning of the capital or for military and political purposes. Their upkeep was imposed on peasants as a governmental function, on con- sideration of exemption from taxation. In the middle ages the feudal lords were interested in the maintenance of commercial routes from a fiscal stand- point. They cared for the roads through their scarari —peasants upon whom the maintenance of roads and bridges was imposed as one of the most oppressive burdens which the feudal organization knows at all—and tolls were collected in return. There was no agreement among the lords establishing a rational layout of the roads; each lo- eated the road in a way to make sure of recouping its cost in duties and toll. A systematic planning of roads is first found in Lombardy in the days of the Lombard League. In consequence of all these facts the volume of land trade in the middle ages was much smaller even than that of trade by sea. As late as the 16th century the factor of a large commercial house traveled from Augsburg to Venice to get 16 bags of cotton. It has been computed that the goods which went over the St. Gothard pass in one year at the end of the middle ages would have filled only from one bs oad ee St ee eh en ee be SE a me <4 ON ee TES DEWITT TE IE ES eae: 4) SS RL IN LEE EN LLL ETSeiad as ee ara et m2 pon ie ee) ot ee ee ot aes A eS eee oe rae 210 GENERAL ECONOMIC HISTORY to one and a half freight trains. Considering the smallness of the volume the profit must have been correspondingly high to cover the duties and the costs of subsistence during the journey. In view of the condition of the roads the du- ration of the journey was also long. Even on land the merchant could not choose at will the time of the trip. The insecurity of the roads made it necessary to secure an escort, and the latter would wait until a considerable num- ber of travelers came together. Thus land trade, like that by sea, was bound to a caravan system. This is a primitive phenomenon and is found in 3abylon as well as in the middle ages. In antiquity and in the orient there were officially designated caravan leaders. In the middle ages these were provided by the towns. © Not until the peaceful conditions of the 14th and 15th centuries had established tolerable security could one begin to travel as an individual. On the technical side this was made pos- sible through an organization of land transport in the form of the so-called pack train (Rottfuhr). The train system developed out of feudal arrangements, in which again the monasteries took the lead. The lord of the land placed horses, pack animals, carts, ete., at the disposal of the public for hire. The carts were provided in rotation by the possessors of certain peasant holdings upon which this burden was imposed. The feudal organization gradually gave place to a professional class, but a systematized in- dustry only developed after the towns took the business of the trains in hand. The train workers organized them- selves into a guild within the town, placing themselves un- der the strict discipline of the elected ‘‘forwarder’’ (Aufgeber) who dealt with the merchants and distributed the vehicles among the various members of the guild. Re- sponsibility of the train leader was a principle generally recognized.TRANSPORTATION AND COMMERCE 211 For inland shipping various forms of organization came into existence. The use of feudal or monastie ships and rafts often rested on the compulsion of a banalité, so that the lords actually had a monopoly over the movement of goods. In general, however, they were not able to exploit it themselves but transferred it to the union (Einwng) of transport workers. Then this union of highly special- ized workers secured possession of the monopoly and the lord was expropriated. In addition there arose rather early, though in general after the development of towns, free shipping guilds who regularly practised a system of rotation of the work. They transported goods in their own small vessels, the opportunities for gain being distributed according to rigorous rule by the guild. It also happened that the urban community took in hand the organization of shipping. On the Iser the burghers of Mittenwald had a monopoly of the rafting, the right to transport cargoes rotating among them in serial order. From the agri- cultural establishments at higher elevations heavy goods were rafted down stream, while goods of high value were hauled back to the higher regions. Finally, closed as- sociations arose which took the shipping in hand, develop- ing out of the feudal or guild organization—out of the former, for example, on the Salzach and the Inn. Origi- nally the archbishop of Salzburg held the shipping monop- oly as a fief; then arose a union of the ship operators who constituted themselves an inland merchant marine. The or- canization owned the ships, hired the transport workers, and took over the monopoly from the archbishop. In the 15th century he repurchased the privilege and granted it as a fief. On the Mure also, shipping rested on an in- dustrial association of the forest shipping men, which grew out of the monopoly of wood and hence pertained to the owners of forest land. The large supply of wood in the PSO PAP DST ERR Se by oe te ots On eS a i “a Sh _ Cet= ee Ee ee ee eee Bin ot nS Sesleri ctl Sent ac ee ore it Ww acca pene Say BIE esa coat te mee ty dE oe mm PN RR PT Se (ears bul ad 212 GENERAL ECONOMIC HISTORY Black Forest resulted in the Murg shipping organization extending its field of operations to the Rhine, and it be- eame divided into a Forest organization and a Rhine or- ganization. Finally, the company took up the transporta- tion of foreign goods with a view to the freight earnings. The Danube shipping organization in Austria and the Upper Rhine shipping organization developed out of guilds; thus in a way analogous to the situation of the mining com- munity, shipping came into the hands of associations of workers. The requirements to which these relations gave rise among the merchants, looked first in the direction of per- sonal protection. Occasionally this provision took on a sacerdotal character, the foreign merchant being placed un- der the protection of the gods or of the chieftain. An- other form was the conclusion of safe conduct agreements with the political powers of the region, as in upper Italy during the middle ages. Here later the burghers, by cap- turing their fortified places, forced the knights who threat- ened the trade to move into the towns and in part them- selves took over the protection of the merchants. The fees for conduct were at one time the leading source of income for those living along the roads, as for example in Switzer- land. The second great requirement of commerce was legal protection. The merchant was an alien and would not have the same legal opportunities as a member of the na- tion or tribe, and therefore required special legal arrange- ments. One institution which served the purpose is that of reprisal. If a debtor of Genoa or Pisa, for example, could not or would not pay a debt in Florence or in Frankfort, pressure was brought to bear on his compatriots. This was unfair and in the long run intolerable, and the oldest commercial treaties aim at preventing such reprisals. Be-TRANSPORTATION AND COMMERCE 213 ginning with this primitive rule of retaliation the need of the merchant for legal protection gave rise to various in- stitutions. Since the merchant as a foreigner could not appear before the court, he had to provide a patron who represented him; hence arose in antiquity the phenomenon of the proxenia, which manifests a combination of hospital- ity and representation of an interest. To it corresponds the law of hostage in the middle ages; the foreign mer- chant was authorized and required to place himself under the protection of a citizen, with whom he had to store his goods, and the host in turn was obliged to guard them on behalf of the community. In contrast with these arrangements it constituted a great step in progress when with the increase in number of the merchants a hanse was organized. This was ordinarily a guild of foreign merchants carrying on trade in a distant city, who organized for mutual protection. It goes with- out saying that the organization pre-supposed a permit from the ruler of the city. With this organization of the merchants in a foreign country was regularly associated the establishment of special merchant settlements, which relieved the merchants of the necessity of immediately sell- ing their goods. This purpose was served the world over by the caravansaries of the land trade and factories for sea commerce of the middle ages—the fondachi, warehouses and sales rooms. In this connection there were two alter- natives. First, the sales rooms might be set up by the foreign merchants in their own interests, as was possible when their activity made them indispensable to the place where they settled. In this case they became autonomous, choosing their own governor, as for example the merchants of the German hanse in London. On the other hand, the home merchants might set up institutions for the foreigners, to control their access to the market and hold them in leash. palsdeanieeie rn ory een ee SSeS Re EE ES oS VAS Ee a TET ee tnt net Resse) 3S Se —— I i merce nd a a ae) eaprot Ma od Rt BND SS Se To ee Se ee nt eee ~ ie aad pm a eae Oe al pi aie a 0 ae 214 GENERAL ECONOMIC HISTORY An example is the fondaco of the German merchants in Venice. Finally, it became necessary to establish fixed times for trading; the buyer and seller must be able to find one an- other. This requirement was met by the fixed markets and gave rise to the market concessions. Markets were every- where established for the foreign traders by concession from the princes,—in Egypt, India, and European antiquity, and in the middle ages. The object of such a concession was on the one hand the provision for the needs of the au- thority granting the concession, and on the other the pro- motion of fiscal aims; the prince wished to profit by the trade in the market. As a result the regulation of trans- port, for a consideration, was regularly associated with the market concession, as was also the establishment of a market court, partly in the interest of the prince who drew from it the court fees, and partly in the interest of the foreign traders who could not come before the regular domestic courts. There were also regulations affecting measures, weights and coinage and the time and method of trading. As compensation for these services the prince collected the market dues. Out of this original relation between the merchants visit- ing the market and the authority granting the concession, evolved still other institutions. The merchants needed large quarters for having their goods tested, weighed and stored. An early development was a banalité involving compulsory use of the crane belonging to the prince, im- posed as a method of taxation. Primarily, however, the fiscal interest was promoted by compulsory brokerage. The merchants also had to be checked in regard to the amount of their dealings, as payments were to be made on the basis of these. Accordingly brokers were established, an institution taken over by the west from the orient (svm-TRANSPORTATION AND COMMERCE 215 sarius, sensarius, hence Italian sensal). In addition to these requirements was that of compulsory routing. Since the prince had to guarantee the safety of the merchant the latter must utilize the roads belonging to the prince. Finally, there was the compulsion of the market, requiring that, with a view to control, the trade of the foreign mer- chants must take place publicly, in the market or the ware- house. (B) Tur ResSmDENT TRADER The conditions pictured in the preceding section apply not only to the trade of the early middle ages but also to Arabia and the world in general, so long as the foreign trader predominates. Totally different conditions arose when the class of resident merchants developed. Typically, the phenomenon of the resident trader is a product of the development of towns, although undoubt- edly there were resident merchants previously, in the market settlements in the neighborhood of fortresses. The resident merchant was technically designated mercator. 3y this term the middle ages understood a trader who had acquired the privilege of settlement in the town, and pri- marily a retailer, whether he sold his own products or those of foreigners. In certain legal sources the term is used as equivalent to merchant in modern commercial law; a mercator is one who buys and sells, lueri causa. But this usage, which appears especially in Rhenish documents, eannot be taken as the common one for the middle ages. In the population structure of the medieval towns the mercator was not a wholesaler but rather anyone who brought something to market, the craftsman as well as the professional trader. The professional trading class of the towns developed in barton Cas eee at Std Son det aera i een See ae eeawe re acne Sa a Leet res Re eS NNN OR kT SES Fel oe-tepahes tease Seeder Cee ee eo cee ee a — . 216 GENERAL ECONOMIC HISTORY the following way. The resident merchant is to begin with an itinerant trader. He travels periodically in or- der to market products at a distance or to secure products from a distance and is a peddler who has acquired a fixed residence. The next stage is that in which he has the trav- eling done for him, either by an employee or servant or by a partner; the one arrangement goes over into the other. The third stage is formed by the system of factories. The trader has increased in capital power to a point where he founds independent settlements at distant points, or at least maintains employees there, and so establishes an interlocal system of relations. Finally, the resident trader becomes completely fixed in his location and deals with dis- tant regions by correspondence only. This condition did not become possible until the late middle ages because there was not sufficient interterritorial legal security. The center of gravity in medieval trade lies in retailing. Even the merchant who brought in goods from a distance, as from the orient, centered his interest in selling directly to the consumers. The risk was less, the gain more steady and secure, and in general higher than would have been the case with wholesale trade, and the business possessed in a degree a monopolistic character. Even the Hansards were not merchants in the present sense, but emphasized chiefly the control of retail trade in foreign lands, seeking to ex- clude foreign competition in retailing in Russia, Sweden, Norway, and England. Even in the 16th century the Mer- chant Adventurers in England, to whom Elizabeth granted privileges, pursued this policy. Wholesalers in the proper sense perhaps did not exist at all in the early middle ages, and toward the end of the period only in small and slowly increasing numbers, in the large commercial centers of southern Europe; in the north they were still exceptional. The resident traders as a class had to contend againstTRANSPORTATION AND COMMERCE 217 other groups.? One series of such struggles were external, such as the struggle to maintain the monopoly of the urban market. This was contested by the non-resident tribal and clan trade, especially in distant commerce con- nected with tribal industry, and the trade of non-resident foreign trading peoples. Out of the wish to suppress such competition grew the conflict with the Jews. In the early middle ages no hostility to them can be found in Germany. Even in the 11th century the bishop of Speyer invited Jews to the town in order, as he expressed it, to increase the glory of his city. It was in the time of the crusades that the first wave of anti-semitism broke over Europe, under the two-fold influence of the war between the faiths and the competition of the Jews, although we find anti-semitic movements even in antiquity. Tacitus condemned the Jews >?) on the ground of ‘‘superstition,’’ and as a Roman despised all oriental ‘‘extasis’’? as contemptible. This struggle against the Jews and other foreign peoples—Caursines, Lombards, and Syrians—is a symptom of the development of a national commercial class. The resident trader also contended with the merchants settled in the country, on the land. This struggle ended in the 15th century with the complete victory of the urban merchants: Duke Louis the Rich of Bavaria for example, (1450-1479), prided himself especially on having in the interest of control forced the rural merchants in his ter- ritory into the towns. Again, there was a struggle against retailing by other merchants, a struggle which took various forms. In part, the urban merchants established the re- quirement that foreign merchants could offer their wares for sale only on certain days. Sale direct to consumers was forbidden to them, and likewise, in the interest of control, all trade with each other, and finally compulsory disposal was imposed upon them; that is, the requirement Lt ie OT mm oe (CL 2IS WLS needal Ser Seer eee rer Soma at a a leer ara ae A ot ae Page ee nm Se ee, Oe ee ee ee “ mas ee . 218 GENERAL ECONOMIC HISTORY of selling at a given time and place whatever goods they had brought to that place at that time, whether to con- sumers or to local merchants. The resident merchants succeeded in still further in- tensifying their control over the foreigners. They imposed the compulsion of hosting, the obligation of taking up residence with particular citizens who should watch over their activities (see above, page 213). Since this gave rise to the danger of forbidden dealings between guest and host, they devised public warehouses with compulsory occupation of these. Frequently, though not always, the two arrange- ments were combined, as in the case of the fondaco dei tedeschi in Venice. Every German merchant must live in this fondaco and store all his goods there. The fondaco had almost no power of self-government; its officers were imposed on the German merchants by the city, which it- self controlled them through brokers. Compulsory broker- age, which was one of the most effective of all these meas- ures, prevented trading between the foreigners and local persons. The rise of the brokerage system was due to the monopolistic tendencies of the resident trade and to the wish of the city to control every single transaction of the foreigners. The broker could not transact any business of his own or enter into any partnership relation; he was officially dependent upon the fees which came to him in connection with the business under his supervision. The second great object of contention in the merchant class was in regard to internal equality of opportunity. One of the members protected by the group must not have better chances than another, and this applied espe- cially to retailing. This purpose was served by the pro- hibition of pre-sale or ‘‘forestalling,’’ and the right of sharing. The first of these rules prohibited dealers from selling goods before they had been brought into the town.TRANSPORTATION AND COMMERCE 219 On the other hand, if one merchant, due to superior capital power, had bought more goods than another, the right of sharing became operative; it specified that any member of the association could demand that a part of the goods in question be given up to him on payment of their actual cost. This provision was endurable only in the case of re tailers; wholesale trade, insofar as it affected goods from a distance, could not be subjected to such stipulations with- out being prevented from developing altogether. As a result a bitter struggle set in as the wholesale trade suc- ceeded in winning greater freedom. A third conflict which had to be fought out by the resi- dent trading elass was the conflict over the field of action as such. This related to the endeavor to exploit the op- portunities of the town to the greatest possible extent. It gave rise to the struggle over the staple compulsion and restriction as to streets, that is, the right to compel all mer- chants to use a specified street at a specified place and to market goods at a specified point or port. This require- ment was to begin with rather favorable for the develop- ment of the trade; without the monopoly which it created with reference to specific places and streets it would have been impossible in view of the small volume of the trade, to provide the technical requirements and meet the costs of the necessary port and street development. But this does not alter the fact that for those who secured the monopoly, especially the town lords and the princes, purely fiscal con- siderations ruled. Every territorial lord attempted by war to gain possession of staple and street rights. The con- flicts which arose were very violent in Germany, especially during the 14th and 15th centuries. The staple and street rights formed both an objective and a resource in the struggle. If the right was once attached to a certain place the lord in control could inflict serious damage by obstruct- bose soos eV be Se teeter eos ee eerste art)Is De — — eS eee? ot moar ow -- =< One hoee atsenee k o oee ED at ee eee ce eee a eer ee ee oe ee Pe eet 220 GENERAL ECONOMIC HISTORY ing and barricading the streets, and also by political means. The history of English-French relations in the later cen- turies of the middle ages is full of examples. Finally, the resident merchant class was in conflict with the consumer’s interests, and was divided internally ac- cording as it was interested in the local market or in dis- tant trade. The consumers wished as far as possible to buy at first hand from the foreign traders, while the in- terest of the great majority of the local merchants was opposed, looking toward regulating the market from the point of view of the retailer, while keeping open the pos- sibility of securing supplies. In the long run it proved impossible to secure both interests. With the recognition of this fact began the splitting off of a wholesale trading in- terest and an opposition of interest within the mercantile sroup, while the interests of the retailer and the consumer began to draw together. (C) Tue TRADE oF THE Fars The regular activities of both the foreign and the resident merchant looked toward the consumers. In con- trast, the first form of trade between merchant and mer- chant is met with at the fairs. Since in the middle ages the retailer with purely local interest predominated, the fair developed as the most important form of interlocal trade organization. It is characterisic, in the first place, that the fair is visited not by local men but by traveling merchants who come for the purpose, and second, that the trade is concerned with goods in hand. The latter point distinguishes it from the exchange of the present day, on which goods not present and often not yet produced are dealt in. The typical fair is exemplified by those of Champagne.TRANSPORTATION AND COMMERCE 221 In the four principal cities of Champagne six fairs were held, each of which lasted for 50 days, including the busi- ness of arranging and opening the fair, the payment of exchange, ete., so that with exception of holidays the year was filled by the six fairs. They were organized from above; there was a court of the fair, the custodes nun- dinarum, composed of a civis and, in view of the question of safe conduct, a miles. The fairs are first mentioned in 1174 and reached their highest development in the 13th and 14th centuries. They had police and financial power over those who attended them and as the extreme penalty could impose exclusion. This measure was adopted by other powers, notably the church; not infrequently was excom- munication threatened on political or fiseal grounds in or- der to exclude an offender from the fair, and entire com- munes have met this fate. Champagne derived its com- mercial significance from the fact that it lay between the English wool producing region and the wool manufacturing region of Flanders on the one side, and Italy, the great im- porter of oriental goods, on the other. Consequently, among the goods which were dealt in, the first place was taken by wool and wool manufactures, especially cheap cloth. In exchange for these the south brought articles of high value, fine tanned sheepskins, spices, alum, fine wood for the inlaying of furniture, dies for coloring cloth, wax, saffron, camphor, gum, lace—a mixture of the products of southern climes and of the east. The cloth fair was the most important of all the fairs of Champagne and had the largest turnover. All the coinages of the world met there. In consequence Champagne was the first home of the money changing business and the classi -al point for the settlement of debts, especially for the repayment of the debts of the Church. The man of power in the worldly sense who did not pay his debts was in fact invulnerable Stier rs oe nes = a re NT EAS PAI, alin Seas EET ee ee et atte htt oh Se ts te een es ee ee AS aE RITA IS eee atte ne wn Iare te Se ea Pat ee eT ee os 7 wee ~—s oe ee pe See ee ee f KY rf v fF re f i iy v ih Se Sates 222 GENERAL ECONOMIC HISTORY to the merchant in his ‘‘Burg.’’ Quite different the prel- ate who must expect to be excommunicated by his spiritual superior if he broke his word. The special credit reliabil- ity of the high spiritual orders thus established came to expression in the fact that a considerable portion of the bills of exchange were drawn upon prelates and were pay- able, on pain of excommunication, at the latest four days before the beginning of the general settlement. The pur- pose of this rule was to secure to the merchant hard cash for the business of the fair; it was mitigated by the fact that the obligation of the prelate enforceable by church action corresponded to an inereased security of remit- tances to him, which were similarly guaranteed by ec- clesiastical penalties. No other fair of the period achieved so great significance. In Germany there was an attempt to establish a fair at Frankfort; it did develop gradually but never achieved the rank of the Champagne fairs or even that of Lyons. In Eastern Europe Novgorod, later Nijni-Novgorod, was a point of exchange between the Hanseatic merchants and the fur traders and peasant producers of Russia. In Eng- land,* there were numerous fair towns* but none was the equal of the fairs of Champagne.CHAP TER: XovVrg FORMS OF COMMERCIAL ENTERPRISE Rational commerce is the field in which quantitative reckoning first appeared, to become dominant finally over the whole extent of economic life. The necessity of exact calculation first arose wherever business was done by com- panies. In the beginning commerce was concerned with a turnover so slow and a profit so large that exact computa- tion was not necessary. Goods were bought at a price which was fixed traditionally, and the trader could confine his efforts to getting as much as he could in sale. When trade was carried on by groups it was necessary to pro- ceed to exact bookkeeping in order to render an account- ing. The technical means of computation were crude, down almost to the beginning of the modern period. Our sys- tem of characters, with values depending on their position, was an invention of the Hindus, from whom the Arabs took it over and was perhaps brought to Europe by the Jews. But not until the time of the crusades was it really known generally enough to serve as a method of computa- tion; yet without this system, rational planning was im- possible. All peoples who used a literal system of nota- tion like that of antiquity and of the Chinese, had to have in addition some mechanical aid to computation. In an- tiquity and down to the late middle ages, the counting frame or abacus served this purpose and was still employed 992 L090 Sa EE (SRE aeSd re ~ ie Sn Ce oe eee SR HK] Ar fi ry i eae eS a eer aeaerte FTI SNA a ERAT EE ROB RL Bi he Bae Bie ee OS 224 GENERAL ECONOMIC HISTORY after the Arabic position digits had long been known. For as the column system made its way into Europe it was at first viewed as a disreputable means of securing an im- moral advantage in competition, since it worked in favor of the competitors of the virtuous merchant who disdained its use. Consequently it was first sought to exclude it by prohibitions, and even the highly developed Florentine cloth making guilds repudiated it for a time. But the abacus made dividing difficult, and it was ranked as an obscure mystery; the computations which have come down to us from the Florence of that time, which were carried through with literal notation, are wrong to the extent of three-fourths or four-fifths. On the grounds of this antip- athy, the Roman numerals were still written for making the entries in the account books after the computations were actually carried out with Arabic figures. Down to the 15th or 16th century, the position system of notation struggled for official recognition. The first books on computation usable by merchants come from the 15th century, the older literature, going back to the 13th, not being popular enough. Occidental book- keeping was built up on the basis of familiarity with the position notation; the like of it had not been seen in the world and only foreshadowings are found in classical antiquity. The occidental world alone became the abode of money computation, while in the orient computation in kind has remained the rule; (the accounting in terms of grain certificates in Egypt will be recalled—above p. 58). It is true that there was bookkeeping in antiquity, in the banking business—the Greek zpazefira: and the Roman argentarw. The entries, however, were documentary in character; they were not designed as an instrument of control in connection with income. Genuine bookkeeping first arose in medieval Italy, and as late as the 16th cen-COMMERCIAL ENTERPRISE 225 tury, a German clerk traveled to Venice to secure instruc- tion in the art. Bookkeeping grew up on the basis of the trading com- pany." The family is everywhere the oldest unit support- ing a continuous trading activity, in China and Babylonia, in India, and in the early middle ages. The son of a trad- ing family was the confidential clerk and later the partner of the father. So through generations one and the same family functioned as capitalists and lenders, as did the house of Igibi in Babylonia in the 6th century B. c. It is true that in this ease the transactions concerned were not extensive and complicated like those of today, but were of a simple sort. It is characteristic that we hear nothing more of bookkeeping either from Babylonia or Indian trading houses, although at least in India the position numerals were known. The reason apparently is that there, as in general in the orient and in China, the trading association remained a closed family affair and accountabil- ity was therefore unnecessary. The trading association ex- tending beyond the members of a family first became gen- eral in the west. The first form of group organization was occasional in character, the commenda, already referred to. The con- tinual participation in such ventures might gradually lead to a permanent enterprise. This evolution in fact took place, although with characteristic differences between southern and northern Europe. In the south the traveling merchant was regularly the entrepreneur, to whom the commenda was given, because in view of his year long absence in the orient he could not be controlled. He be- came the entrepreneur and received commendas from various parties, up to ten or twenty, accounting to each commendator separately. In the north, in contrast, the socius who remained at home was just as regularly the ome NN be em be dS ST Santee Bia merge Oh te eB sO Ree east nck ee eee ss aie wert = eames = PSS ELIT ALLE OLY Let ia Ee myeyrenimoe et ee nem 22 ead ey ane oe ee ee ei ee A Oe ee a 226 GENERAL ECONOMIC HISTORY entrepreneur; he was the one who entered into relations with numerous traveling soci whom he provided with com- mendas. The traveling factor was regularly forbidden to undertake more than one commenda and this brought him into dependence upon the settled partner who thus evolved into a managerial functionary. The reason is found in the difference between the commerce of the south and the north. In the south the journeys involved notably greater risk since they led into the orient. With the spread of the commenda organization, de- veloped permanent industrial enterprise. First, account- ability penetrated into the family circle due to business connections with tractators from outside the family, since an accounting had to be made for each separate venture even when the particular commenda pertained to a member of the family. In Italy this development went forward more rapidly than in Germany, the south again taking the lead over the north. As late as the 16th century the Fuggers would indeed admit foreign capital into their af- fairs, but very reluctantly. (The Welsers were more broad- minded in this regard.) In contrast, the association of out- siders in family business spread in Italy with increasing rapidity. Originally there was no separation between the household and the business. Such a separation gradually became established on the basis of the medieval money ac- counting while, as we have seen, it remained unknown in India and China. In the great Florentine commercial families such as the Medici, household expenditures and capital transactions were entered in the books indiscrim- inately ; closing of the accounts was carried out first with reference to the outside commenda business while in- ternally everything remained in the ‘‘family kettle’’ of the household community. The prime mover in the separation of household andCOMMERCIAL ENTERPRISE 227 al business accounting, and hence in the development of the early capitalistic institutions, was the need for credit. The separation remained in abeyance as long as dealings were in cash only; but as soon as transactions were suspended over a long interval, the question of guarantee- ing credit intruded. To provide this guaranty, various means were used. The first was the maintenance of the wealth of the family in all its ramifications, through main- taining the house-community even to remote degrees of kinship, an objective to which for example the palaces of the great commercial families in Florence owe their origin. Associated with this was the institution of joint responsibil- ity of those who lived together ; every member of the house- community was answerable for a debt of any other member. Apparently this joint responsibility grew out of a tradi- tional criminal lability; in the ease of high treason the house of the guilty person was razed and his family de- stroyed as suspect. This idea of joint responsibility no doubt passed over into the civil law. With the permeation of outside capital and outside persons into the family busi- ness for the purpose of trade, it was renewed at irregular intervals. Out of it arose the necessity for an agreed allo- cation of the resources at the disposal of the individual for personal use and of the power to represent the house in ex- ternal matters. In the nature of the case, the house-father could everywhere bind the family, but this joint responsi- bility nowhere developed to such lengths as in occidental commercial law. In Italy its root was in the household community and the stages in its development are the com- mon dwelling, the common workshop, and finally the com- mon firm. It was otherwise in the north, where the large family community was unknown. Here the credit require- ment was met by having all the participants in the trading venture sign together the document establishing the re- Pen eer reeraa Ae Set shah eel Secvn bn tapers tarda ak et ate te ea rs oe REE NN so m2 ot pee ar er ee ae ee 228 GENERAL ECONOMIC HISTORY sponsibility. Then each participant was responsible for the group, usually without limit, though in the reverse direction the whole was not responsible for the parts. Fi- nally, the principle became established that each participant was responsible for every other, even if he had not signed the document. In England the same result was achieved by the common seal or the power of attorney. After the 13th century in Italy, and after the 14th in the north, joint responsibility of all the members of a company for the debts of the firm as such was fully established. The final stage in the development established as the most effective means for securing credit standing, and the method which outlived all the rest, separation of the prop- erty of the trading company as such from the private wealth of the associates. This separation is found at the beginning of the 14th century in Florence and toward the end of the same century in the north also. The step was unavoidable since to an increasing extent persons not members of the family belonged to the trading units; in addition it could not be avoided within the family itself when the latter came repeatedly to employ outside capital. Expenses for the family on one hand and personal expenses on the other were separated from business disbursements, a specified money capital being allocated to the business. Out of the property of the firm, for which we find the designation corpo della compagma, evolved the capital concept. In detail the development took various courses. In the south the field of its development was the great family commercial houses, not only in Italy but in Germany as well, as illustrated by the Fuggers and Welsers. In the north the course of development was through small-fam- ilies and associations of small traders. The crucial fact was that the center of large money dealings and political money power lay in the south, as did also the bulk of theCOMMERCIAL ENTERPRISE 229 mineral trade and oriental commerce, while the north re- mained the abode of small capitalism. In consequence the forms of organization which developed in the two regions were quite different. The type of the southern commercial company was the commandite, in which one partner carried on the business and was personally respon- sible, the other participating through his investment and sharing in the gain. This development arose from the fact that in the south the traveling merchant holding the commenda was the typical entrepreneur, and when he took up a fixed abode he became the center of the permanent enterprise which took on the form of the commenda. In the north the relation was reversed. The sources from the Hanseatic region at first give the impression that there was no permanent enterprise but that the trade was split up into purely occasional ventures and into a number of inextricably confused individual transactions. In reality these individual ventures were permanent enterprises and are accounted for individually because the Italian (double entry) bookkeeping was not introduced until later. The forms of organization are the Sendeve and the Wed- derleginge. Under the first the traveling partner was given goods on commission, receiving a share in the gain; the latter was designed to enlist his interest in the business by ascribing to him a share in the capital of the transac- tions from which he was excluded.Hl iB i ) R Sars a) aoe i = ae eee oe awe Se ae ee a ee a a Dl ad a ee aed Ne ee ee ee Coes fae CHVAGE TE RY xovek Tek MERCANTILE GUILDS ' The mercantile guild is not a specifically German insti- tution ; it is found spread over the entire world, except that there are no unquestionable records of it in antiquity and in any ease it did not in antiquity play a political role. In form the guild is either an organization of for- eign traders for the purpose of legal protection against those of the locality, or it is an organization of native merchants. In the latter case it develops out of tribal industry and trade, as in China. The two forms are also found in combination. In the occident, for example, we find to begin with only guilds of foreigners in particular localities; for example, the German trading guild in London of the 14th century, which established a storehouse called the ‘‘Steel-yard.’’ Of an interlocal character were the hanses, a designation met with in Germany, England, and France, whose de- velopment varied much in detail. Closely related to them technically is the institution of the Hansgraf or count of the hanse, found in a number of towns. The hansgraf is an official granted a concession by the political authority, if not constituted by it, who is responsible for the legal protection of the merchant population engaged in inter- local trade represented by him; he never interferes in the form of trade itself. Of the second type of guild, made up of resident mer- chants with the object of monopolizing the trade of a dis- 230MERCANTILE GUILDS 231 trict, there is an example in China, in the tea traders’ guild of Shanghai. Another is the kohong guild in Can- ton, whose 13 firms dominated the whole of external com- merce as a monopoly down to the Peace of Nanking in 1842. The Chinese guild practised price regulation and guaranty of debts, and held the power of taxation over its members. Its criminal power was draconic; a breach of regulations led to lynch justice on the part of the guild members and even in the 19th century there were execu- tions for violation of the set maximum number of appren- tices. In domestic commerce, bankers’ guilds, and trad- ing guilds existed in China, as for example the bankers’ guild in Niu-Chwang. The Chinese guilds possessed great significance for the development of the monetary institu- tions of the country. Debasement of coinage by the Mon- gol emperors resulted in the disintegration of the coinage system. The ensuing paper money regime led to the use of silver in bars in the wholesale trade, and the guilds took in hand their preparation. Thus the guild became the center of monetary policy, achieving control of the determi- nation of weights and measures, and appropriating to itself criminal jurisdiction. In India, the guilds appear in the time of Buddhism, from the sixth to the fourth century B. c., and reach their greatest development from the third century on. They were hereditary organizations of traders with hereditary rulers. Their highest development was reached when they became money lenders to the various princes who were in competition with each other, and their decay was the result of the revival of castes which had been partly pushed into the background by Buddhism; after the Indian middle ages the policies of the princes again became dominant. Thus was formed the caste of the lamani or banjari which ap- peared in the 16th century in the pursuit of the corn and aes a I meres ret mena — aeowe ee eee ee Dt ee Oe en hi i i j 4 See esd sod ane Ree eed ae ee oe See Sd RR TR 232 GENERAL ECONOMIC HISTORY salt trade and the provisioning of the army and was per- haps one of the roots of the present day banya or trading easte. In India we also meet with the differentiation of forms of trade according to various confessional sects. The dschaina seet is restricted by ritualistic considerations to trading at fixed points; the wholesale and distant trade based on credit is a monopoly in the hands of the Parsees, who are not restricted by ritualistic considerations and are distinguished by responsibility and truthfulness. Finally, the bhaniya caste carries on retail trade and is to be found in every connection where gain which is off-color from an ethical standpoint is to be made. Thus its members en- gage in tax farming, official money lending, etc. In contrast with China, the regulation of the coinage, weights, and measures has in the west remained in the pos- session of the political authority, which either itself exer- cised the power or turned it over to the political agencies, but has never granted it to guilds. The great power of the guilds in this part of the world rests entirely on political privileges. The forms of guilds are various. First to be noticed is the city guild. This is a group which dominates the city and controls especially in the economic interests of industrial and trading policy. It is met with in a two- fold form. Hither it is a military union, such as the compania communis in Venice and Genoa, or it may be a separate union of the traders within the town (merca- danza), growing up with the craft guild. The second main type is the guild as a taxation unit, which is a specifically English institution. The English guilds derive their power from the fact that they took over from the king the func- tion of collecting taxes (firma burgi). Only those who paid taxes were members and one who paid none was excluded and possessed no right to trade. The EnglishMERCANTILE GUILDS 233 guild owed to this fact its control over citizenship in the clty. In detail the evolution of the occidental guilds was highly various. The English guild merchant reached the peak of development of its power in the 13th century, after which began a series of internal economic revolutions. In the 14th century followed its separation from craft work; one who wished to remain in the guild must renounce craft activity. Immediately, however, the trading mem- bers began to come to the fore in the craft guilds and sep- arated out as “‘lvery companies,’’ that is as members in full standing, being raised above the poorer craft workers by the cost of the livery or regalia, which the latter were unable to meet. The separation of the wholesale traders from the retail was not yet complete in the 16th century, although at that time the first guild of foreign traders, the Merchant Adventurers, was founded by a concession. It is true that English legislation endeavored to restrict the guilds along eraft lines, permitting their members to trade only in one type of goods. On the other hand, the power of a strong state always stood over the guilds in England, although their interests were also represented in Parliament. In consequence the cities never had the power over the coun- try which they obtained in Germany, and rural traders and land holders were always admitted to the guilds. In Italy the development went forward within the in- dividual city states. The guilds kept their purely local character; after the separation-leagues (Sonderbund) ob- tained the victory over the consular constitution, there began a struggle within the guilds, between the craft guilds and trading guilds. In Germany we find at first traces of a development similar to that in Italy. A symptom is the tT na mr i ae epee cease Pe re en ren PSE.cen rem eS ee Baas ee oo Le ON SLATE PLT a nD = a On SS SE AE RSE TAS mae ee a ARR aR al ao EEANNCT UNDECLARED 234 GENERAL ECONOMIC HISTORY appearance of the burgomaster, who to begin with was an illegitimate guild master and whose position suggests that of the Italian capitano del popolo. In addition we find in many cities of north Germany a development resembling the English, a guild merchant determining the economic policy of the city. In a number of old rich cities of middle Germany we find, on the other hand, a guild which manages the city unofficially, as in Cologne the ‘‘ Richerzeche,’’ the guild of the rich merchants which financed the revolution against the archbishops, binding the citizens together un- der oath against the town lords and thenceforward ruling permanently in the city and controlling admission to citi- zenship. The rule in Germany, however, is the presence of trading guilds, among which the shop keepers and mer- chant tailors stand out. The shop keepers correspond to the retailers of today. The merchant tailors, who cut up imported cloth and sold it to consumers, became dominant in the smaller towns in the north; they always had to con- test the market with the weavers, but generally obtained the victory, while in the large towns the patrician families stood over them in rank and dignity. One cannot speak of a systematic trading policy on the part of the towns dominated by guilds, and especially of the town leagues, in the middle ages. The towns carried on no trade on their own account; this did not begin until the 16th century. The policy of the German Hanse may stand as an exception. It alone consciously pursued a consistent commercial policy, which shows the following characteristics. 1. Only the citizens of the Hanse had a right to share in the commercial privileges which the Hanse secured. 2. It aimed at direct retail trade in foreign countries and abstained from the forwarding or commission business, a policy on the basis of which it went to pieces as soon asMERCANTILE GUILDS 235 a local commercial class arose in England, Scandinavia, and Russia. 3. The Hansards made use in trade of their own ships only ; they could not lease those of outsiders nor sell Hanse ships or shares in them to outsiders.2 4. The Hansards carried on trade in merchandise only, entering into neither money transmission nor the banking business as did the Florentines. 5. The Hanse everywhere secured concessions for settlements and warehouses in order to keep its own members under control. All its business activ- ities were subjected to strict regulation; weights and meas- ures were prescribed; no credit business could be trans- acted with outsiders, the object being to prevent outside capital from becoming influential in the organization; even marriage with non-members was prohibited. 6. The Hanse made the first effort toward standardization, carrying on trade in fixed types of goods—wax, salt, metals, fabrics. 7. On the negative side, the Hanse had no customs pol- icy; at most it collected duties for war purposes. Its in- ternal policy was directed toward the dominance of a mar- ket aristocracy, and especially in the sense of suppressing the craft guilds. In the aggregate these measures repre- sent a policy organized in the interest of a resident foreign trading class. he if t ST Aen a ee SeSer Len eae PNRM NA Rn ere ea a et od Bea aisle teehee ck Sen ee ta eke et tere ae nen et ee ee eee _— me ae — CHA PU ER xi MONEY AND MONETARY HISTORY ? From the evolutionary standpoint, money is the father of private property; it possesses this character from the beginning, and conversely, there is no object with the character of money which does not have that of individual ownership. The oldest private property consists in ob- jects of individual handiwork, the tools and weapons of the man, and articles of adornment of both men and women. They are subject to a special law of inheritance from per- son to person, and in the field of such objects the origin of money is primarily to be sought. Today, money has two special functions, serving as a prescribed means of payment and a general medium of exchange. Historically, the function of a prescribed means of payment is the older of the two. Im this stage money does not enter into exchange, a characteristic made possible by the fact that many transfers of value take place from one economic unit to another which do not involve ex- change but yet require a means of payment. Such are tribal gifts between chieftains, the bride price, dowries, head money, damage payments, and fines—payments which must be made in a standard medium. On a secondary level there become included payments from the chieftain to his followers, in contrast with those from subject to chieftain —that is the wage which the lord gives to his vassals in the form of a gift—and still later payments of generals to their soldiers. Even in a city like Carthage, and exclusively in 236MONEY AND MONETARY HISTORY 237 the Persian Empire, the coinage of money appears only for the purpose of providing a means for making military payments, not as a medium of exchange. In this stage of development, money in the unitary sense of today is not to be thought of; rather in each economic zone different sorts of services rendered correspond to speci- fic sorts of goods which mediate the payment function, so that different species of money exist side by side. For ex- ample, never and nowhere could a man buy a wife for shells, but only for cattle, while in small transactions the shells were accepted because they were available in small denominations. Money which develops in this way in con- nection with intra-group payments we call internal money. A further function, which is less characteristic of money today but which it has performed through long periods of history, is that of a medium for accumulating treasure. The chieftain who wished to maintain himself in his posi- tion must be prepared to support his followers and to com- pensate them by gifts on special occasions. Hence the extraordinary value which was placed on the thesaurus such as was possessed by every Indian rajah and every Merovingian king. The Nibelungen hoard is nothing else than such a thesaurus. As means of accumulation, various typical objects were employed, such things as the prince was accustomed to give as presents to his followers and which at the same time constituted objects valued for the purpose of making payments. Here again money was not a means of exchange but merely an object of class possession; one who possessed it kept it only on grounds of prestige and for nourishing his social self-esteem. In this function money required one of the most important characteristics which is demanded of it today, namely, that of durability, in contrast with that of portability. Elephant tusks and huge stones of a certain quality, and a Fa te aL EE ENE eepe ay Ym s ia na al pa A ts a Ns eee ey Ty eS as) oa = ~— a —— NS Se EE NATE CS a Nrlowashenebatene he io alan k oa cae te ee ares 238 GENERAL ECONOMIC HISTORY later gold, silver, copper, and metals of all kinds, serve as money and as a medium for accumulation. This class character money finds expression in two facts. The first is that in the primitive stage of development it is differ- entiated according to the sexes, the woman not daring to possess the same type of money goods as the man; thus the possession of certain aragonite stones was reserved to men while pearl shells were women’s money only and were used for the morning-gift of the husband to the bride. In addition, class differentiation involved distinguishing chieftain money from that of the subjects; shells of a certain size could only be acquired and possessed by the chieftain and were paid out by him only in case of war or as presents. The function of money as a general medium of exchange originated in foreign trade. Its source is in some cases a regular commerce by gifts outside the group, such as that revealed for Egypt and the ancient east in the Tell- el-Amarna tablets. A state of peace between two peoples presupposed con- tinual gifts between their rulers; this is really a quasi- commercial exchange between the chieftains, out of which chieftain trade as such develops. To omit the gifts means war. A second source is a foreign product of wide spread use. The typical clan and tribal trade imparts to certain objects, not obtainable locally and therefore highly prized, the function of a medium of exchange. This external money took over the internal function where quasi- commercial payments were to be made, such as duties or road tolls. The chieftain provided the safe conduct but had to permit the merchants to pay with the medium which they carried with them. In this way the external money made its way into the internal economy. At this stage of development money appears in nu-MONEY AND MONETARY HISTORY 239 merous forms: 1. As objects of personal adornment. The type is the cowry shell in Africa and the regions of the Indian Ocean, extending into the interior of Asia. In addition there has been a great quantity of objects serving as means of payment or exchange in circles of vary- ing extent—beads, amber, coral, elephant tusks, and cer- tain kinds of sealps. Regularly and primarily decorative money was internal money; it became a general me- dium of exchange where the same means of payment was used in different tribes. 2. Utility money. This was primarily external money. As a means for carrying out obligatory payments or evaluating other goods, various objects of general use are met with; for example, grain, aS in Java, also cattle and slaves. It is not generally, however, such articles of common use but rather means of enjoyment such as tobacco, brandy, salt, iron tools, and weapons. 3. Clothing money. This primarily performed the functions of internal as well as external money. As clothing money we meet with furs, skins, and fabrics, which are not produced in the locality. 4. Token money. Un- der conditions which have not the least relation to modern monetary conditions it happens that after people have become accustomed to certain objects on social grounds or accustomed to making certain payments in them, the monetary function becomes attached to them as mere sym- bols which have no value or significance in themselves. Thus in interior British India Chinese game counters are found as money. In Russia there has been fur money, consisting of bits of fur with no use value, and similarly in southern regions the use of quantities of cotton as money developed into the preparation of strips in a form which excluded real value but adapted them for service as token money. Since in this stage not one means of payment alone buteet eo Pree a oed ae came RR OR Be Pa ea kee ik ty TS hs a te os hein ee re ee a ae en ee nee tonnes - ~—s eng feo ts i i Ht _— ims soa om 240 GENERAL ECONOMIC HISTORY many circulate side by side, some scale of relative values is necessary. They are generally brought together in a scale, not in the sense that a unit of one is made equivalent to so many units of another but that several objects to- gether form a value unit. Thus in Java the value unit con- sists of a certain very valuable stone and 20 pearl shells. Of the Missouri River Indians it is reported that the pur- chase price for a wife consisted of two knives, a pair of trousers, a blanket, a flint-lock, a horse, and a leather tepee. The meaning is that a woman is of equal value with a com- plete equipment for an Indian warrior and is sold by her tribe for this amount. It follows that the basis of such value scales is not merely economic qualities but the customary worth of the goods, their traditionally imposed social significance, and also the requirement for round numbers easily handled. In this connection again the deci- mal figures play a special role. Thus there are tribes in which ten cocoanuts equal in value a certain quantity of tobacco, 300 dolphin teeth correspond to a woman, etc. Head money and expiatory payments also, and other considerations expressed in money, have no relation to economic values but to social valuation exclusively. The head money (wergeld) of a free Frank amounted to 200 solidi. This amount was fixed because it had to be brought into a certain relation with the head money for a half- free or servile person. Only traditionally imposed evalua- tions find expression in these principles. As soon as eco- nomic exchange relations make headway, as was already the case in the early middle ages, head money is no longer determined in terms of a claim for restitution of damage but it becomes a typical phenomenon that a larger amount is insisted upon. Evaluation in terms of a given monetary good by no means always implies payment in the same good, but may be only a standard in which the paymentMONEY AND MONETARY HISTORY 241 of the individual is measured. The latter may depend upon the capacity to pay of the dispenser—‘‘in quo potu- ertt’’—not according to a tariff but signifying rather a tra- ditionally fixed consideration for restitution. Out of the conditions just described evolved the distine- tive position of the ‘“noble’’ metals as a nominal basis of monetary organization. The determining conditions of this evolution are purely technical. The precious metals oxidize ‘with difficulty and hence are not easily destroyed, while in consequence of their relative scarcity they have a high value for the specific use of objects of adornment; finally, they are relatively easy to shape and to subdivide. The decisive fact was that the scales could be applied to them, and were applied at a very early date. The grain of 6 & wheat seems to have served as the earliest comparative weight. It goes without saying that the precious metals have also been employed in the form of objects of utility, but were specialized as a means of payment even long be- fore they became media of exchange. In the former case they appear first in the chieftain trade; the tablets of Tell- el-Amarna show that the western Asiatic rulers expected from the Pharaohs more than anything else shipments of decorative gold. A preferred form for the gift of the prince to his followers was the gold ring; in the skaldic language the king is specifically called the ring spender. In the form of coinage, money first appears in the 7th century before Christ. The oldest mints were located in Lydia, probably on the coast, and arose out of the co- operation of the Lydian king and the Greek colonists. A forerunner of coined money was precious metal in bars privately stamped by merchants, which appear in Indian commerce and later in Babylonia and in China. The shekel is nothing but a piece of silver with the stamp of a certain mercantile family, which was recognized for Li ~4 7 — ETT See eR erectaares Se et a een a a et A et ee ne FSA eT ~ oe Se ret oe aed Sr en) 242 GENERAL ECONOMIC HISTORY econscientiousness in weighing. The Chinese tael is sim- ilarly a piece of bar silver stamped by the mercantile guilds. Not until later did the political power take over the coinage, and shortly afterwards assume a monopoly of the activity. The last seems however to have been the case in Lydia. The Great King of Persia stamped the daries as a means for paying his Greek mercenaries. The Greeks introduced coins into commerce as a medium of exchange. On the other hand, Carthage did not attempt coinage until three centuries after its invention, and even then the purpose was not to secure a medium of exchange but merely a means for paying its mercenary armies. In general the Phenician commerce was carried on entirely without money, and it was especially the technical advan- tage of coins which helped to establish the superiority of Greek trading activity. Even Rome, which earried on an export trade in primitive times, went over to coinage very late and to begin with only to the coinage of copper. It tolerated the stamping of precious metal in Capua, while in Rome itself the most diverse sorts of coins circulated until 269 B. c. when the coinage of silver was taken up. In India coinage is first met with between 500 and 400 B.c. and was in fact taken over from the west; really usable coins in the technical sense are first found after the Alexandrian period. In eastern Asia the conditions are obscure; per- haps an independent origin of coinage is to be assumed. Today, it is limited to the coinage of copper, in consequence of the persistent debasement by the mandarins. The technology of manufacturing coins had little in com- mon with that of today before the 17th century. In an- tiquity the coins were cast, in the middle ages ‘‘struck,”’ that is stamped, but until the 13th century it was purely a handicraft operation. The coin had to pass through the hands of not less than ten to twelve different craftsmen whoMONEY AND MONETARY HISTORY 243 worked with hand tools only. The costs of the process were extremely high, amounting to a fourth of the value for the small coins and was still as much as 10 per cent in the 14th and 15th centuries, while today it may be placed at 10 per thousand. In consequence of the primi- tive technique the accuracy even of the best coins varied; even with the English gold crown, in spite of relative per- fection of the process, the variation was still 10%. Com- merce reacted to these errors by accepting the coins where possible only by weight. For fineness the stamp was a fairly secure guaranty. The first relatively exact coins which were also maintained constant were the famous Flor- entine gold gulden, after 1252. A really reliable coinage in the technical sense dates, however, only from the end of the 17th century, although the use of machinery in coining occurs somewhat earlier. 3y a metallic standard we today understand in the first place the enforcement of certain coinage as a means of payments, either in all amounts (standard money) or up to a certain maximum amount (subsidiary coins) ; in the second place, connected with this is the principle of free coinage of the standard money which with the deduction of minimal costs of manufacture anyone at any time has the right to have made and with it to make payments to an unlimited extent. The standard may be mono-metallic or bi-metallic. In the latter case the only conception which seems possible to us is the so-called double standard, that is the several metals are set by law in a fixed relation to each other, as for example in the Latin Monetary Union gold stands to silver in the ratio of 1 to 154%. The second possibility, which was much more prevalent earlier, is that of parallel standards. Under this rule there was either actual unrestricted coinage of the metals, with in general no scheduled value relation or only a periodical adjust-pete Sao a = — Oe ee ee eee eee Sn na ee ee Sern ey b ui A ae i rae ae ee 0 ota ope ea ae oe DT Sek eee 244 GENERAL ECONOMIC HISTORY ment of a varying value relation. In the choice of the metal for coinage the matter of the needs of trade were de- cisive. Internal and local trade could use only a metal with a value not too high, and here we find silver or cop- per or both. Distant commerce could and from necessity did for a time get along with silver, but after the commerce grew in importance it preferred gold. For the actual cir- culation of gold, however, the legal relation to silver was decisive; whenever one of the metals was given an un- favorable valuation in comparison with the available sup- ply, the consequence was that the coins stamped from that metal would be melted up and used in commerce in this condition. The history of the value relation between the different metals shows a sharp contrast as between eastern Asia on the one hand and the western Asiatic and European con- ditions on the other. Because the eastern Asiatic coun- tries were cut off from the outer world an abnormal rela- tion arose and it was possible to maintain a relative valu- ation which never existed in the west. Thus in Japan for a time gold was valued only 5 times as high as silver. In contrast, the continuity was never completely broken in the west. In Babylon values were reckoned in terms of silver, which however was not coined by state agencies, but circulated in the form of privately stamped silver bars or shekels. The value of silver in comparison with gold was set at 1314 to 1 and this relation remained the standard for antiquity. The Egyptians took over the Babylonian silver bars in the form of deben but reckoned in terms of copper, silver, and finally gold, side by side, large amounts being paid in gold. For later antiquity and the time down to the Merovin- gians, the monetary policy of Rome was definitive. Here originally parallel standards of copper and silver prevailedMONEY AND MONETARY HISTORY 245 and the effort was made to fix the ratio at 112 to 1. The important measure was the manufacture of the silver sestertium equal to a pound of metal. Gold was coined merely as a commercial coin while copper progressively de- clined to the level of credit money for small transactions and came finally to have the character of token money. Coinage was in fact predominantly in the hands of military generals whose names the gold and silver coins almost al- ways bore, even in the republican period; they were preferred as payment for spoils of war, and served the purposes not of commerce but of paying the army. When Cesar took over the imperial power the first real regulation of standards was instituted, Cesar going over to the gold standard. His aureus was intended to be equal to a hundred silver sestercis on the basis of a ratio of 11.9 to 1. Hence silver had somewhat increased in value, a sign of the fact that trade experienced an increasing need for it. The aureus maintained itself down to the time of Constantine, while silver was variously experimented with. Nero decreed the denarws, increasing the prestige of the aureus. Caracalla pursued the debasement of coin- age systematically as a business, and his successors, the barrack emperors, followed in his path. This coinage pol- icy, and not the alleged outflow of the precious metals to India or a failure of mining, ruined the Roman monetary organization. It was restored by Constantine the Great. He replaced the aureus with the gold solidus of which he coined 72 from a pound (327.45g.) of metal. In commerce the solidus probably passed by weight. The gold solidus outlived the Roman empire. In the Merovingian period, it possessed the highest prestige in Germany within the area of the former Roman economic penetration, while to the east of the Rhine the older Roman silver coins circulated in a way somewhat similar to the rye ~ S ens en ea eS ea eeeee eae ae OS EAE Be ET LOWE See SS Nee na Sees ee ae ae Sprieeictrostactantand t-te dertesehek dieataeteoe tet ores yi BK hi Se dd ad = ee SI SAS A a eed 246 GENERAL ECONOMIC HISTORY Maria Theresa dollar later in Africa. The change to the Carolingian rulers meant politically a shifting of the eenter of gravity from the western to the eastern portion of the Frankish empire; but in coinage policy, although much gold was imported into the empire from the east, it meant a change from a gold to a silver standard. Char- lemagne after many measures not clear as to their import, established a unit pound of 409 grams—though this as- sumption is not undisputed,—and out of this pound coined 20 silver solidi of 12 denarii each. Officially, the Carolin- gian coinage system, the last survival of which is the English units of pounds sterling, shillings, and pence, re- mained in force to the end of the middle ages and with it, over by far the greater part of the continent, the silver standard. The central problem for the coinage policy of the middle ages, however, was not that of the standard, but was raised by questions of an economic and social character which affected the production of coins. Antiquity took seriously the coinage monopoly of the state. In the middle ages on the contrary, the rule was appropriation of the coinage function by numerous territorial coinage jurisdictions and their proprietors. As a result, after around the middle of the 11th century, the Carolingian coinage system every- where had only a common-law significance. The coinage right, it is true, remained officially reserved to the king, or emperor; but the manufacture of coins was carried out by an association of handicraft producers and the revenue from the coinage business fell to the individual coinage lord. Infeudation of the coinage right to individual coin- age lords involved an incentive to debasement which was practised on a wide scale throughout the middle ages. In Germany the solidus sank from the 13th to the 16th cen- tury to a sixth of its original content ; likewise in EnglandMONEY AND MONETARY HISTORY 247 the denarius from the 12th to the 14th century; in France, was originated the solidus grossus, a thick coin stamped on both sides, which competed intensively with the thin de- narius coined in Germany in the 12th and 13th centuries and stamped on only one side (Brakteaten) ; but the new coin sank from the 14th to the 16th century to a seventh of its value. The coinage debasement which affected silver led to the result that in commerce, which has to compute in stable units, the prestige of gold was increased. In consequence it was an epoch-making event when in 1252 the city of Florence minted a gold solidus of 314 grams weight (flor- enus, florin) and maintained it at a weight as nearly uni- form as was technically possible. Everywhere the new colnage was accepted, and it became the general monetary unit of commerce. Nevertheless we observe a pronounced increase in the price of silver, which can only have been caused by the urgent demand of the growing money econ- omy for silver for use in trade. Toward 1500 the ratio between silver and gold increased from 121% to 1 to 101% to 1. At the same time there was an irrational fluctua- tion of the currencies in relation to each other and a differ- ‘pagament’’ or metal in the ‘ ence between bullion and form of coin. While in wholesale trade men computed in terms of bars or Florentine gold gulden, in retail transac- tions the various coins were evaluated by agreement. It was not only the greed of the coinage lords which was responsible for the debasement; it was due largely to the automatic working of the variation between specimens of the same coinage, which amounted to as much as 10%. Only the worst of the coins struck would remain in cir- enlation, while the best made would be melted up at once, or in any case sorted out. It is true that the greed of the monetary lords contributed; they employed their monopoly ND er crea ae a me—] ore a eee ret rae RUST OWE RENTER A Bl Ee aE be fm onc ope ea ee I eel cee ea e ae en ga ee 248 GENERAL ECONOMIC HISTORY to put out new coins, cancelling and calling in the old. But the latter were to a large extent in circulation outside their home district. The monopoly which a coinage lord officially claimed, he never could fully put into effect in his territory ; a change could only be brought about through an agreement between several princes. Thus, aside from the coinage and good faith of the Florentines, the middle ages remained a period of coinage irrationality. Precisely be- eause of this irrational condition in the production of coins, unrestricted coinage went without saying; since the coinage lord by increasing the mintage could secure an advantage from his business he strove to secure all the precious metal for his own mint. The possessors of precious metal were subjected to pressure in this connec- tion; prohibitions on export were of common occurrence, especially in districts containing mines, and miners and shareholders in the mines of precious metals seemingly had no choice as to whether they should bring the metal to the mint of the coinage lord or not. Yet all these meas- ures remained without effect. Not only was an enormous amount of smuggling carried on, but the coinage lord had to arrange by agreement to concede a supply of metal to the mints of other lords who possessed no mines, and this metal constantly returned to his district in the form of foreign coins. An irrational trade in coins persisted throughout the middle ages; the demand for the various sorts of coins could not be determined and the extreme fluctuations in the seigniorage operated to prevent adjust- ment of supply to demand; only the competition among the coinage lords caused them to renounce seigniorage. After the 16th century the increased inflow of precious metal to Europe provided the economic basis for the estab- lishment of more stable relations in the field of coinage, andMONEY AND MONETARY HISTORY 249 at least in western Europe the absolute states had already cleared out the multiplicity of coinage lords with their competition among themselves. Down to the date men- tioned Europe had been a region of permanent exporta- tion of the precious metals; only the period of the crusades, lasting for about 150 years, with their spoils in gold, and also the produce of the plantations, had formed an inter- ruption to this condition. At this time the discovery of the sea route to the East Indies by Vasco de Gama and Albuquerque broke the monopoly of the Arabs over the transit trade. The exploitation of the Mexican and Peru- vian silver mines brought great quantities of American metal to Europe, while the discovery of an effective process for extracting silver, by amalgamation with mercury, con- tributed to the result. The quantity of precious metal ob- tained from Mexico and South America has been estimated for the period from 1493 to 1800 at nearly 214 million kilograms of gold and 90 to 100 million kilograms of silver.” The increase in the production of the metal meant im- mediately a sharp increase in the supply of coined silver. The silver standard permeated to the farthest confines of trade in Europe and reached its expression in the money of account. In Germany, the Florentine gold gulden was even brought out in silver (the Joachimstaler). This con- dition obtained until the Brazilian deposits of gold were opened up. Although exploitation of these lasted only for a short time—from the beginning to the middle of the 18th century—it dominated the market and resulted in the change of England to the gold standard, against the will of the English law makers and the advice especially of Isaac Newton. After the middle of the 18th century, silver production again came to the fore and influenced Se geri ramneme ee ba eae tlPPS TURAN GB DS Behe BE ak by eee Sel Pe a re Sora, oe Ne ee Cae cen eet ul in ¥ a hy i bi 250 GENERAL ECONOMIC HISTORY the French legislature at the time of the revolution, calling into being the French double standard. But the rationalization of coinage could not at once be earried out. The condition which obtained before it was completed may be described by saying that innumerable kinds of coins were in eirculation, yet no money, in the present day sense of the word. Even the imperial coinage edict of Ferdinand I in 1859 was forced to recognize thirty types of foreign coin. The extraordinary range of variation in the content of the same type of coin, due to the imperfection of the technique of manufacturing, espe- cially in the case of the smaller coins, in connection with the great volume of the mintage, led to a restriction in Germany in the 16th century of the legal tender power of the silver coins, but without the transformation of these into subsidiary coins; the definite rational establishment of subsidiary coinage was reserved for English monetary pol- iey to introduce. The official monetary unit was the gold gulden coined in silver, the Joachimstaler, but in fact the following development took place in the commercial field. After the 13th and 14th centuries, commerce emanci- pated itself from coinage and reckoned in bullion, accept- ing coins only by weight, specifying payment in a certain type of coin, which had to be recognized as customary by the empire. Finally, it went over to deposit banking. The prototype of the latter was provided by China. Here the debasement of the coins had led to the establishment of metallic deposit banks for the commerce of the merchants. With the fixation of a weight unit the silver payments were made either by checks or instruments similar to checks, drawn on a bank in which the individual merchant kept his deposit of bar silver, or else by means of silver in stamped bars—taels—which, however, played no consider-MONEY AND MONETARY HISTORY 251 able role in comparison with the payment by checks. Thus was created a bank money based on the possession of bul- lion by the merchants concerned and which was the ex- clusive means of payment for the persons connected with the deposit system. [mitations of this prototype are found in the west as early as the 16th century: in Venice the Rialto bank; in Amsterdam, the Wisselbank, 1609; in Nuremburg in 1621; in Hamburg in 1629. These banks reckoned by weight and only coined pieces were accepted in payment. The indi- vidual aecount was usually subject to a minimum, as were the payments; thus in Amsterdam the minimum size of the draft or order were 300 gulden. On the other hand, no payment above 600 gulden could be made in any other way than through the medium of the bank. In Hamburg this bank standard persisted down to 1873. Modern monetary policy is distinguished from that of the past by the absence of the fiscal motif; only general economie interests resting on the need of commerce for a stable basis of capital computation determine its char acter. In this connection England took the lead of all other countries. Originally, silver was in England the effective means of payment for all internal trade was based on a gold money of account. After the commerce while international Brazilian discoveries, increasing amounts of gold flowed to England and the English government was subject to in- ereasint embarrassment by the parallel system. After gold became cheap it flowed to the mints and at the same time the silver circulation was endangered by the melting up of the silver coins. As all loans had to be repaid in silver, capitalistic enterprise was interested in preventing the outflow of the silver. tempted to maintain the parallel coinage by arbitrary At first the government at- a ee eS RENEE AE TOLTremere Sead ae SCENIC ge Sena a RAR eR a eo ET) ee eee eee ee a ee 252 GENERAL ECONOMIC HISTORY measures, until in 1717 it decided to carry out a new de- finitive valuation. Under the guidance of Isaac Newton the typical English gold coin, the guinea, was fixed in value at 21 shillings even though gold was still over-valued. When in the course of the 18th century gold continued to flow in, silver flowed out and the government proceeded to radical pre- ventive measures. Gold was made the standard metal and all silver degraded to the position of subsidiary coin. It lost its unlimited legal tender and was alloyed and coined at more than its bullion value so that the danger of its leaving the country was removed. After much experimenting, the French government finally adopted during the revolution a double standard, the basis of which was silver; 1000 franes were coined from 9 pounds of silver (222% to the kilogram) and the ratio of silver to gold was fixed at the current relative value of 15144 to 1. The extraordinary domestic demand for coin in France, which was stronger than that of England, led in fact to a stabilization in the value relation between gold and silver over a long period. In Germany, the silver system had to be left intact dur- ing the 19th century, the first part of which shows a period of decreasing metal production. There was no central au- thority in a position to effect a transition of gold. Gold was however minted as a commercial coin with a legalized value, especially in Prussia; but the attempt to give gold a different position in the monetary standard was unsuccess- ful. The war indemnity of 1871 first enabled Germany to go over to the gold standard, a step which was facilitated by the sharp increase in the world’s stock of gold which followed the Californian discoveries, while on the other hand the value ratio of 1514 to 1 was gradually destroyed.MONEY AND MONETARY HISTORY 253 These conditions determined the creation of the Ger- man Reichsmark equal to one-third Taler; since 30 Taler equalled a pound of silver, the ratio of 1514 to 1 made the pound of gold equal to 1395 marks. re Hh i | i¢; i bt PeRes ot pen Se ae ot en oS ott eee FFM, = oa EE ee ne ~~ a as reset hc free basen iene heriaie testi ar er eee sce eae oc st fh) CHAPTER xox BANKING AND DEALINGS IN MONEY IN THE PRE-CAPITALISTIC AGE Prior to the period of capitalism the activity of a bank consisted primarily, wherever a plurality of kinds of money were in circulation, in the business of exchanging money. To this was added the necessity of a money disbursing business, especially that of making payments at a distance. In antiquity as a whole, and especially in Greece, we find as the typical banking transaction the assumption of ob- ligations to make payments and the issue of letters of credit to travelers as a means of making payments at a distance, and in addition, not indeed exchange operations in the modern sense, but the creation of means of payment which suggest the check of the present day. Furthermore, the function of providing for the safekeeping of money, or deposit business, belongs to the very oldest of banking operations. It was so in Egypt, where the bankers were to a large extent administrators of property, and also in Rome. Where there was no coinage of any kind, as in Babylonia, and also in China and India, the business of money chang- ing was absent. In its place the bankers were the agencies which stamped the silver bars which circulated as money, as in the case of the tael, and hence carried on the business of providing money. Thus in the pre-capitalistic age the banks transacted a deposit business with transfer or assignment of credits for 254BANKING IN PRE-CAPITALISTIC AGE 255 the elimination of cash payments. The arrangement pre- supposed that the depositor-customer permanently main- tained a deposit in the bank in question; correspondingly we find bank ‘‘notes’’ even in Babylon. Yet one must not think in this connection of bank notes in our sense, for the modern bank note circulates independently of any deposit by a particular individual. In contrast, the Babylonian bank notes or tickets were merely a means for the more rapid and secure transmission of payments between depositor-customers. The extent of this more ancient de- posit business is unknown; in any case one must guard against thinking of conditions in terms too modern. The relations were generally restricted to strictly local transac- tions and to those taking place between merchants; conse- quently the bank tickets were not a medium for general circulation. Peculiar to Babylon was the development out of the de- posit business of the role of the banker as a lender of eredit. The professional banker made loans on a small scale against pledges or personal security. The credit function of the Babylonian banker was based on the ab- sence of coinage. Payments were reckoned in silver shekels, but these were not used for payment, so that the banker was necessary as an intermediary; and in this con- nection he arranged for postponement, since he was also often in a position to provide the means for payment in eash, and afforded certainty to the seller by substituting himself for the future payer. Another peculiarity in Babylonia was that the banker regularly furnished com- menda credit, that is, capital for enterprise ; a large number of commenda contracts have come down to us in cuneiform writing, while we have no other example of such credit business in the ancient world. The reason is that where coined money was in use the banking business developed eee eer eryBe Re ae eee ab toe ee Se os So oa ee — wi . ere Reema rere ea Ae ra as psec oS od aa) Oa EV nN SN ee ee eed a nn Cee Pe ae ee Eo i qi if bb if i i t i) 256 GENERAL ECONOMIC HISTORY out of coinage, but in Babylon it developed out of money, that is to say, credit, dealings. In Rome, the occupation of the banker exhibits two special features. The first, which is of no particular con- cern to economic history, is that the banker was the pro- fessional auctioneer. In the second place, we find here for the first time the transaction of an account-current deposit business in the modern sense, and its recognition as a spe- cifie means for the liquidation of debts with the aid of the banker. In Rome the purpose of this business was origi- nally to provide a uniform and secure means of payment, in view of the fact that the coinage of silver was not in- troduced until late and that the amount of the coinage depended upon the booty secured by the generals. This backwardness of coinage relations in Rome affords the simplest explanation for the fact that the deposit (recep- tum), and the order or draft (actio receptitia) drawn only against the balance of the account current, possessed so much significance, and that the bookkeeping of the banker was there subject to a unified legal regulation. The books of the Roman argentarii speak of receipts and expenditures, though not in the sense of the modern book- keeping. A special book was kept for each individual cus- tomer, in which he was credited and debited (acceptum ferre, expensum ferre). These entries served to prove that payment had been made. Beyond this too little has sur- vived of the bookkeeping of the argentarii to permit of more exact statements. In general, however, the banks of antiquity were only exceptionally private undertakings, and these were subject to an extensive competition by temple banks and state banks. The temple of antiquity first served as a de- pository. Insofar as they served as banks this was their primary function, and in this connection they were muchBANKING IN PRE-CAPITALISTIC AGE 257 more famous than the depositories of the private bankers. The deposits in the temple were sacred and could not be stolen without committing sacrilege. The temple at Delphi was a storehouse for numerous private persons, and espe- cially for the savings of slaves. Numerous inscriptions tell how the liberty of slaves has been purchased by the god; in reality the purchase was made out of the savings of the slaves which were given over to the temple for safekeeping in order to protect them from the master. The same func- tion as depositories was performed by numerous temples in Babylon, Egypt, and Greece, while in Rome they lost this character in early times. In consequence, the temples in antiquity also became important lending agencies, especially for the princes, who secured more favorable terms from them than from private money lenders. It is true that we find the large money lender, even in the code of Ham- murabi, but in general the treasury of the state and its money lender was the temple. This function was fulfilled in Babylon by the temple of the sun god Sippar, and in Egypt by the temple of Ammon; the treasury of the Attic maritime league was the temple of Athena. A second source of competition for the private banker grew up in the state banks. The making of banking into a public function resulted, where it happened, not in con- sequence of mismanagement and bankruptcy of the bankers as in the middle ages, but from fiscal considerations. Not only had the money changing business developed into a fruitful source of profit, but for political reasons also it seemed advantageous to be in possession of the largest pos- sible quantity of private deposits. In almost all the Hellenistic states, especially in Ptolemaic Egypt, the result was a royal banking monopoly. It is true that these estab- lishments had nothing to do with the tasks of the modern state bank, such as note issue, regulation of standards, and en eeene ALTE —= J RA i) eae Sam SSNS. esrm ep eed a meager ae SOO ~- =e VETS AE TIA eS RE Bae BO kD ig emo at es E a WRENS ihe Bate 20 oe ak 2 ot as au oats See Sen p 4 Sn ras 258 GENERAL ECONOMIC HISTORY coinage policy; they were purely fiscal institutions. The extraordinary power of the capitalistic knights as a class in Rome rested essentially on the fact that they succeeded in preventing such a monopolization of the banking fune- tion by the state. The beginnings of medieval banking are diverse in char- acter. Inthe 11th century we meet with campsores, money changers, who secured a considerable profit from their work. At the end of the 12th century the business of making payments at a distance was in their hands; it was carried out by means of the cambium or exchange letter, a device taken over from the Arabs. In contrast with an- tiquity, the business of lending money was only assumed by the resident banker relatively late or not at all; as a rule they loaned only large sums and only to the political powers. The small scale business in money was in the hands of an alien class, the Jews, Lombards, the Caursines, the two latter designations being used to include southern- ers of every sort. This consumptive credit in the hands of aliens was originally emergency credit at a very high rate of interest, and based on a pledge or other security. Alongside it appears at an early date the business of commenda credit. In the granting of such credit the bank- ers also took part, but were subject—in contrast with Babylonian conditions—to the competition of merchants dealing in goods of the most various sorts, and also that of private money lenders. The deposit business was called into existence by the continual monetary debasement. Communal banks arose among the merchant class with deposits in metal or in various coins at their bullion value, on the basis of which payments were made by deposit transfers or checks, limited to a certain mini- mum. For a time, deposit banking business was in the hands of the money changers, but in the long run theyBANKING IN PRE-CAPITALISTIC AGE 259 did not enjoy sufficient confidence, and large company banks arose. In the field of medieval banking is further included the collection of taxes, corresponding roughly to the tax farm- ing of antiquity. From the beginning of the 13th to the end of the 14th century this was the main source of the large fortunes, especially those of the Florentine banking families, the Acciajuoli, the Peruzzi, and the Medici. As these maintained their factors in all large commercial places, they were the natural agency for gathering from all quarters the taxes of the Curia, which was the greatest taxing power of the age; also they kept the most accurate accounts and accepted only full value money in the sense of the Florentine gold gulden. This function brought the collectors, as in the ease of the mandarins in China, very large opportunities for profit, as it lay in their hands to evaluate the money of the various regions in terms of the eoin demanded by the Curia. Finally, the business of financing is to be named among the functions of medieval banking. By this, however, is not to be understood the financing of large enterprises in the present sense. The need for financing operations ex- isted only exceptionally, and generally in connection with military ventures. In this field it was undertaken in Genoa as early as the 12th century. In this way, for ex- ample, the great sea expeditions of the Genoese against Cyprus were financed through the formation of a ‘‘ma- ona.’’ a share eommenda enterprise for the conquest and exploitation of the island. Im the same way to a large extent the wars of the cities among themselves were financed by organizations of creditors. For roughly a hundred years together the total tax and harbor customs receipts of Genoa were administered exclusively in the interests of such a consortium. Far beyond these limits went the ALS te ne ee eda se ase = ee Re oe SiiasiriereSrcee elena ee tn ee q Ay Sa Peceetr Ty ta aL ey ane ee NA Se ge ee kk Se cr ee ee 260 GENERAL ECONOMIC HISTORY financing operations of the great Florentine bankers in the Franco-English wars of the 14th century. To the extent to which these transactions remained in private hands arose the questions out of what source the funds came, where the money went, and by what means the banks were at all able to meet an effective obligation to pay, which in fact tended to collapse. That is, we are con- fronted by the problem of the ‘‘liquidity’’ of the medieval bank. The liquidity of the institutions we have described was very poor. The money which the Peruzzi or other great Florentine bankers advanced to the citizens of Florence for their wars did not come out of their own capital, which would not have been at all sufficient, but out of deposits which they received on the grounds of their prestige, out of every circle of the population down to the lowest strata, and for a low rate of interest. But these deposits were payable on short notice while the war loans ran for long periods. Consequently the financial opera- tions ended in bankruptcy as soon as the military ventures in which they were employed resulted unfavorably. This applies even to the Fuggers, for the way in which they finally settled with the Spanish crown meant that not only did they suffer enormous losses but also that the remainder of their wealth was tied up in forms on which they could not realize. The private means of the large banking houses being in- sufficient for the financing of large enterprises of the state, and their liquidity being easily lost, the pressure of events was in the direction of monopolistic banking. The political authority which required money for its purposes received it only in return for a grant of various monopolies, of trade, of the customs, and of the banking business also. The prince, or the city, made banking a public enterprise and granted the privilege as a monopoly, or farmed it outBANKING IN PRE-CAPITALISTIC AGE 261 to private persons in return for a loan of money. The oldest example of such a banking monopoly is the Banca di San Giorgio in Genoa, and the latest the Bank of Eng- land. Even this latter did not arise out of a voluntary organization of merchants but was a purely political under- taking which financed the War of the Spanish Succession. The distinction between it and the medieval banks lies only in the manner in which it was able to establish its business, namely on the basis of bills of exchange. The present day bill of exchange is a means of payment characterized by the fact that three persons are involved in it ; besides the receiver there are the drawer and the drawee. Of these the drawer is always responsible, as is also the drawee or acceptor, from the moment of acceptance. In addition, when the bill is transferred to third parties by endorsement, every individual endorser becomes respon- sible, with no question raised regarding the transaction in connection with which the bill was drawn. In ease of non- payment a special process of execution is available which in the middle ages involved imprisonment for debt. The significance of the bill of exchange for the bank of today lies in these characteristics ; they impart to it the certainty that specific sums can be drawn at a specified time and hence give it liquidity. In the middle ages there was no such possibility. It is true that the bill of exchange was known, but it then signified only an instrument similar to our checks. It was a mere means of payment, ordinarily of payment at a distance, by means of which one paid debts with money to which one had a claim at some other place; difference in place between the one who promised payment and the point where payment was made was essential to the instrument, especially as the canon law condemned with all its power the use of local bills as a usurious business. The typical medieval bill originally consisted of two Ss SRN ELRe eRe aes kD eT Se — a ee ee ee a noainrerinsiemte a oe ey Ne Cn bt eee ae cee err 262 GENERAL ECONOMIC HISTORY separate documents. One of these, the ‘‘open letter,’’ (litera aperta), was what we should call a domiciled bill. The merchant A in Genoa promised to pay to B in Bar- celona on a certain day a certain sum, through C, the debtor of A. If the bill was issued by a prince it was drawn upon his treasury which had to pay to the court a certain sum. The second document, the ‘‘closed letter’’ (litera clausa) or ‘‘draft’’ evolved into the present bill. It informed the debtor of the drawer that he was to pay the sum on account of his ereditor the drawer. The literae apertae had to be drawn up and witnessed officially while the literae clausae were ordinary letters. Both documents were placed in the hands of the person in favor of whom the bill was drawn. The further development consisted in the gradual dropping of the literae apertae on account of the expense. The binding promise which they originally contained became included in the draft and recognized as a part of the latter, which thus increased in significance; but it was still distinguished from the modern bill in that it was not negotiable by endorsement, which character it did not achieve until the 17th century. It is true that it contained the formula promitto tibi vel tuo certo nuntio, which made it possible to place it in the possession of a third party and to legalize his receipt of the payment in place of the named receiver; but this order clause disappeared later because a regular machinery for making payments developed in the large fairs. These af- forded the possibility of liquidating bills without incurring the risk of transporting money, by turning it over to a clearing house for entry, with payment only of net balances. Actually the bills were only discount instruments in connec- tion with which it was tacitly assumed that they would be liquidated through a deposit bank or a local merchants’ association. This condition worked to the advantage of theBANKING IN PRE-CAPITALISTIC AGE 263 merchants engaged in the exchange business, giving them an interest in securing a monopoly of the fees for effecting exchange transfers, and they opposed endorsement. Thus even in the 16th century when any exchange was trans- ferred a new bill had to be drawn instead of endorsing the old one. It is true again that in the 16th century the law of exchange had reached its present development, and equivocation on legal grounds was excluded by the maxim “chi aecetta paghi’’ (the acceptor must pay). This un- conditional assurance of payment made it possible for the bill of exchange to become the bank paper of today. The part of the medieval banker in payments consisted in accepting the bill; the banker of today discounts it, that is, he pays it, with the deduction of the discount with the view of cashing it later and thus invests his operating eapital in bills. The institution which first consistently carried on such an exchange business is the Bank of England. English banking history before the founding of the Bank of England shows that the goldsmiths, as dealers in the precious metals and owners of stocks of metal, were in a position to carry on a banking business and often had a monopoly of the testing of coins as to weight and fineness, but that they never played the role of bankers in the sense described above. They received deposits in the manner of the medieval banker, and financed political enterprises, those of the Stuarts as well as of Cromwell. They also transacted a deposit business and in connection therewith issued paper means of payment, to their customers first, but the circulation of these ‘‘goldsmith notes’’ did not remain confined to this circle. The state bankruptcy of 1672 put an end to all this. When, at that time, the Eng- lish government declared that it eould not repay its debts but would pay interest on them only, while the depositor- Fa AS aatL cetera areEe eS N MSR iy ee el Tt ss Sno Ss Se Sy ee = Se Sn _— a enti oe Se a ce ee ern ee ee aes Li i 5] ‘ 264 GENERAL ECONOMIC HISTORY customers of the goldsmiths were entitled to withdraw their capital at any time, the result was inability of the gold- smiths to meet the demand for payment of deposits. The result was that in England at this time, as earlier in the Italian cities, there was a clamor among the depositors for a public monopoly bank. The political authorities took advantage of this demand to monopolize the banking business and secure a share in its profits for the state. The merchants hoped for loans at a low interest through the fact that a state bank, in view of the security which it offered, would be in a position to attract to itself deposits in large volume, and also hoped for release from their coinage difficulties—although we cannot be sure how they argued. On the other hand, we must not assume as applicable to that time the modern view accord- ing to which a large bank of issue undertakes the task of using its credit through a suitable discount policy to draw gold into the country or to force an accumulated stock into circulation. Rather it was hoped that the bank would function as a deposit bank, that is, circulate its notes on the basis of a definite quantity of metal and so assist in re- ducing the fluctuations in the ratio between gold and silver. The final establishment of the Bank of England in 1694 was based on purely political motives with a view of financ- ing the war of William of Orange with Louis XIV. In its establishment the procedure customary to the country was employed; certain payments, especially the salt tax, were pledged to the money lenders, and the participating creditors were organized as governors into a company with, legal privileges. The new establishment was combated by many interests. Opposed to the project were, in the first place, the Tories, as opponents of William of Orange, and, on the other hand, the Whigs who on general principles feared the strengthen-BANKING IN PRE-CAPITALISTIC AGE 265 ing of the position of the king. Hence the bank could only be organized as an independent private corporation, not as a state bank, and it was necessary to include in the act the specification that money could be advanced to the state only on the basis of a special authorization by Parliament. Hence in the view of the Tories the bank was consistent only with a republic, not a monarchy; they contended that a bank with such an organization presupposed a kingdom under the control of the capitalist groups interested in the bank. Finally the goldsmiths also opposed the bank be- cause they were excluded from the business, and also be- cause, in common with the nobility, they feared the political and economic power of the merchant class. The bank came into existence with a share capital of £1,200,000, all of which disappeared into the pockets of the state. In exchange it received the right to deal in bills of exchange. The last named right was by far the most im- portant, since it was connected with the issue of notes. The use which the bank would later make of this right through its discount policy was in fact foreseen by no one. In any case, however, it was the first institution to begin systematically to purchase exchange, thereby shortening for producers as well as merchants the interval before the product reached the final consumer, by discounting the bills before maturity. With the Bank of England the ac- celeration of capital turnover is the clearly conceived pur- pose of exchange dealings; it pursued this business in a systematic way as no bank had done before. Only in part does the development of banking outside of Europe offer a parallel to that in Europe itself. In India and China, banking retained down to the last few decades the character which it had in antiquity and in the middle ages. It is distinguished from occidental banking by its extraordinary power in connection with the regulation eat eee pia eines eet asi enhSe ee eateae = — ern ene Sere AS SULT CA re ta ee by et ee oS tt none Se a ee ee sociupsirbecordetastanibitedarberteneeinioeisbcataents onke beer orate 266 GENERAL ECONOMIC HISTORY of monetary standards. In China the banker conducts the stamping of the taels; he determines the conditions of credit, fixes the rate of interest, and designates all the con- ditions of making payments, so that the standardization of commercial settlements lies entirely in his hands. But this mechanism of settlement is a credit business insofar as foreign trade is concerned, which in Canton for example, is in the hands of a few large Chinese houses. As long as the independent Chinese states existed the banks also car- ried on war financing, as in Europe; with the establishment of the unitary Chinese empire this opportunity was lost. In India the banking business in its entirety is strictly regulated by sects or castes. Here also in the period of the great independent states political credit was financed by the banks, and here also the unitary state of the Grand Mogul put an end to this; subsequently political monetary dealings were involved only in connection with govern- mental budgeting and the anticipation of income through loans. The functions of the banks in India and China to- day still consist essentially of the business of making pay- ments and small or oceasional credit operations. There is no business eredit in any way systematized, no business or- ganization which could make any use of our discount pol- icy; the native Asiatic commerce knows only checks and payment assignments of the most various sorts, but not the bill of exchange. That in addition the Chinese bankers still possess a monopolistic control over the regulation of stand- ards is explained by the enormous misuse of paper money in China.CHAPTER XXI INTERESTS IN THE PRE-CAPITALISTIC PERIOD In its beginnings interest is a phenomenon either of in- ternational or feudal law. Within a tribal village, or clan community, there is neither interest nor lending, since transfers of value in consideration for a payment are un- known. Where outside resources are used in economic life it is done under the form of neighborly help, such as invi- tation work in connection with house building or assistance in case of emergency, which rests on the duty of helping the clan brother without compensation. Even the Roman mutuum, a loan without interest, is a survival of these primitive conditions. The obligation to help in case of need receives an extension when it is taken over by re- ligious communities and imposed upon brothers in the faith; the best known example is that of the Israelites. It is not the fact that they took interest which is peculiar to the Jews, for interest has been received everywhere in the world, including the medieval monasteries themselves; rather it was exceptional and repugnant to the western peoples that the Jews took interest from Christians but not from each other. The prohibition in the Torah against taking interest or usury from the brother rests partly on military and partly on religious grounds. In the first place, the clan brother must not be imprisoned for debt and thus lost to the army. For this reason the ancient Egyptian religious code ascribed to the curse of the poor, a special force with the divine 267 Ses taeA tr SELF T SAMOS TURIN ~~ ee ye Searle a eat ee ee ee ee peru Se ore tiie Smee data i ‘e if Y ——— a Eeewerr hey tba ee ee St a eee eres ) 268 GENERAL ECONOMIC HISTORY powers and this idea passed over into the book of Deu- teronomy. The distinction thus set up between internal and external ethics survived the exile; and after the Israelites became the Jews, interest was still forbidden be- tween compatriots while it might be taken from foreigners (‘‘Gojim’’). Thus Maimonides could ask the question whether the Jew was under obligation to take interest from them.” The prohibition of interest taking from a brother is also characteristic of early Islam and of Brahminism. Interest everywhere arises in the field of lending to foreigners out- side the tribe or that of loans between classes. In this con- nection the contrast between creditor and debtor was origi- nally always a contrast between a town-dwelling patritiate and rural peasants; it was so in China, India, and Rome, and the same conception also dominates in the Old Testa- ment. The possibility that a prohibition against interest should arise rested on the fact that all credit was originally emergency credit and purely for consumptive purposes, so that the idea of a brotherly obligation could arise in op- position to the demand for interest by the master class; a further consideration is that behind the warning against interest there was a strong military interest since the cred- itor ran the risk of being reduced to the condition of a landless proletarian who would not be in a position to equip himself for war. The occasion for breaking through the prohibition against interest was provided by the loan of concrete prop- erty. The first case is the cattle loan. Among nomads, the contrast between propertied and non-propertied per- sons is fearfully sharp. The man who owns no cattle is forthwith outlawed and can only hope to rise again to full citizenship through a Joan of stock and stock breeding. OfINTEREST 269 similar import is the seed loan, which in Babylonia espe- cially, confronts us as a customary usage. In the one case as in the other the object of the loan replaces itself mani- fold and it did not appear an unjust conception if the creditor reserved for himself a part of the fruits of his eattle or grain. In addition, the prohibition against in- terest was broken wherever town life developed. In the Christian occident the need for credit for indus- trial purposes originally found expression rarely in the form of a loan with a definite interest but rather in that of an association. It was not the prohibition of usury by the church which was behind this arrangement, so much as the risk connected with oversea business ventures. In view of this risk a definite interest rate was not so much at issue in such transactions; instead, the creditor participated in the gain as compensation for the risk to which the capital he provided was subject. Hence the Italian commenda, the dare ad proficwum de mari, with an interest rate depend- ing in accordance with a scale, on the port of destination. These primitive trading credit transactions were not af- fected by the ecclesiastical prohibitions of usury. On the contrary, a fixed loan against fixed interest became custom- ary in connection with land transportation because the risk here was less than in overseas trade. The formula saluuwm in terra signified that the capital loan must be without reference to the result of the enterprise. At the same time, however, the opposition to usury on the part of the church increased in energy. Hence the pro- hibition of interest is not a product of an age of purely natural economy, but the movement reached its full de- velopment only as it was allowed to lapse in the face of a growing money economy. Pope Gregory IX even con- demned sea loans as usury. Equally false is the assertion yer ees re Po ah SLY ete en omea Se ORME cea bE ee bcleieSesenecastadhcah lara pr dentiio eat ints ae eee eee ee ee ee = — — a if AM AY] 4 iA j y SOE yy a ee aed —_ ae 70 GENERAL ECONOMIC HISTORY that the church pursued an opportunistic policy in con- nection with interest and favored the development of cap- italism. In fact it pursued the war against interest with increased determination and forced many a man to restore interest on his death bed just as today the confessional en- forces restitution of goods stolen from a master. But the more money economy developed, the oftener was the prohi- bition evaded, and the church had to meet the situation by general indulgences. Finally, in the face of the power of the great Florentine bankers in the 15th century it was confronted by facts which made all opposition fruitless. Theology then attempted to interpret the prohibition as leniently as possible, but the tragedy was that the church itself as a temporal power was forced to have recourse to loans at interest. At first, before the church itself undertook the establish- ment of lending institutions (the montes pietatis) a way out was found in the money lending of the Jews. This was characterized by the fact that it afforded the political au- thorities the possibility of adopting a ‘‘sponge policy”’; that is, the population was exploited through their pay- ments of interest to the Jews and at irregular intervals the state confiscated the profit and the outstanding loans and simultaneously banished the Jewish creditors. In this way the Jews were hounded from city to city and from country to country; formal pools for robbing them were established between the princes, as for example between the Bishop of Bamberg and the Hohenzollern Burgrave of Nuremberg to the effect that they shared in the booty when the Jews fled from the jurisdiction of one to that of the other. Meanwhile the attitude of the church to the taking of interest became increasingly cautious. It is true that a formal suspension of the prohibition was never decreed, but in the course of the 19th century ecclesiastic depositions re-INTEREST 271 peatedly recognized as legal the taking of interest under specified conditions. In northern Europe the prohibition against usury was broken up by Protestantism, although not immediately. In the Calvinistic synods we repeatedly meet with the con- ception that a lender and his wife must not be admitted to the Lord’s Supper, but Calvin himself declared in the Constitutio Christiana that the purpose of the prohibi- tion of interest was only the protection of the poor against destitution and not the protection of the rich who carried on business with borrowed money. Finally, it was the Cal- vinistic leader in the field of classical philology, Claudius Salmasius, who in his book De Usuris in 1638, and in a number of later tracts, undermined the theoretical founda- tions of the prohibition against interest.dal aan rere a let alee eee al Seated a A fPART FOUR THE ORIGIN OF MODERN CAPITALISM * He i +4 He A at | em eet ered ie 4) ns reeSb ny ot eee ae See ee oe oo fe ae er ae a f \ if f ; if F if if y l} He | 2 {i i ie } ; 1 1; iF j Se ee Oe ee es tere ak ae ee Bee SS etCHUASP LE Rig exoxc te THE MEANING AND PRESUPPOSITIONS OF MODERN CAPITALISM Capitalism is present wherever the industrial provision for the needs of a human group is carried out by the method of enterprise, irrespective of what need is involved. More specifically, a rational capitalistic establishment is one with capital accounting, that is, an establishment which determines its income yielding power by calculation accord- ing to the methods of modern bookkeeping and the striking of a balance. The device of the balance was first insisted upon by the Dutch theorist Simon Stevin in the year 1698. It goes without saying that an individual economy may be conducted along capitalistic lines to the most widely varying extent; parts of the economic provision may be organized capitalistically and other parts on the handicraft or the manorial pattern. Thus at a very early time the city of Genoa had a part of its political needs, namely those for the prosecution of war, provided in capitalistic fashion, through stock companies. In the Roman empire, the sup- ply of the population of the capital city with grain was carried out by officials, who however for this purpose, be- sides control over their subalterns, had the right to com- mand the services of transport organizations; thus the leiturgical or forced contribution type of organization was combined with administration of public resources. Today, in contrast with the greater part of the past, our everyday needs are supplied eapitalistically, our political Pe 275 eaten RINSE LASS. ea eeerr weer yt ne = SE rs eT 276 GENERAL ECONOMIC HISTORY needs however through compulsory contributions, that is, by the performance of political duties of citizenship such as the obligation to military service, jury duty, ete. A whole epoch can be designated as typically capitalistic only as the provision for wants is capitalistically organized to such a predominant degree that if we imagine this form of organization taken away the whole economic system a must collapse. While capitalism of various forms is met with in all periods of history, the provision of the everyday wants by capitalistic methods is characteristic of the oecident alone and even here has been the inevitable method only since ~the middle of the 19th century. Such capitalistic begin- nings as are found in earlier centuries were merely antici- patory, and even the somewhat capitalistic establishments of the 16th century may be removed in thought from the economic life of the time without introducing any over- whelming change. The most general presupposition for the existence of this present-day capitalism is that of rational capital ac- counting as the norm for all large industrial undertakings which are concerned with provision for everyday wants. Such accounting involves, again, first, the appropriation of all physical means of production—land, apparatus, ma- chinery, tools, ete. as disposable property of autonomous private industrial enterprises. This is a phenomenon known only to our time, when the army alone forms a uni- versal exception to it. In the second place, it involves free- dom of the market, that is, the absence of irrational limita- tions on trading in the market. Such limitations might be of a class character, if a certain mode of life were prescribed for a certain class or consumption were standardized along class lines, or if class monopoly existed, as for example if the townsman were not allowed to own an estate or the ha se SRN A Rs Bet we ee sb Te eT ee Se 3 ~~ SE aN REO rie nese re co ee a a a a ete ee eee ee ES SSA ee ]MEANING OF MODERN CAPITALISM 277 knight or peasant to carry on industry; in such cases neither a free labor market nor a commodity market exists. Third, capitalistic accounting presupposes rational tech- nology, that is, one reduced to calculation to the largest possible degree, which implies mechanization. This applies to both production and commerce, the outlays for prepar- ing as well as moving goods. The fourth characteristic is that of calculable law. The capitalistic form of industrial organization, if it is to oper- ate rationally, must be able to depend upon calculable adju- dication and administration. Neither in the age of the Greek city-state (polis) nor in the patrimonial state of Asia nor in western countries down to the Stuarts was this condi- tion fulfilled. The royal ‘‘cheap justice’’ with its remis- sions by royal grace introduced continual disturbances into the calculations of economic life. The proposition that the Bank of England was suited only to a republic, not to a monarchy, referred to above (page 265) was related in this way to the conditions of the time. The fifth feature is free labor. Persons must be present who are not only legally in the position, but are also economically compelled, to sell their labor on the market without restriction. It is in contradiction to the essence of capitalism, and the develop- ment of capitalism is impossible, if such a propertyless stratum is absent, a class compelled to sell its labor services to live: and it is likewise impossible if only unfree labor is at hand. Rational capitalistic calculation is possible only on the basis of free labor; only where in consequence of the existence of workers who in the formal sense volun- tarily, but actually under the compulsion of the whip of hunger, offer themselves, the costs of products may be unambiguously determined by agreement in advance. The sixth and final condition is the commercialization of eco- nomic life. By this we mean the general use of commercial et et en eer exe Sr ett ete terepred va ad —— =. a oe an al oe Oe ee ee ee ee Sa RRs SN Ce ee TD teary : t i a l i iu if i! 278 GENERAL ECONOMIC HISTORY instruments to represent share rights in enterprise, and also in property ownership. To sum up, it must be possible to conduct the provision for needs exclusively on the basis of market opportunities and the caleulation of net income. The addition of this commercialization to the other characteristics of capitalism involves intensification of the significance of another fac- tor not yet mentioned, namely speculation. Speculation reaches its full significance only from the moment when property takes on the form of negotiable paper.CHAP Ri OXOxelni THE EXTERNAL FACTS IN THE EVOLUTION OF CAPITALISM ? Commercialization involves, in the first place, the ap- pearance of paper representing shares in enterprise, and, in the second place, paper representing rights to income, espe- cially in the form of state bonds and mortgage indebted- ness. This development has taken place only in the modern western world. Forerunners are indeed found in an- tiquity in the share-commandite companies of the Roman publicant, who divided the gains with the public through such share paper. But this is an isolated phenomenon and without importance for the provision for needs in Roman life; if it had been wanting entirely, the picture presented by the economic life of Rome would not have been changed. In modern economic life the issue of credit instruments is a means for the rational assembly of capital. Under this head belongs especially the stock company. This repre- sents a culmination of two different lines of development. In the first place, share capital may be brought together for the purpose of anticipating revenues. The political au- thority wishes to secure command over a definite capital sum or to know upon what income it may reckon; hence it sells or leases its revenues to a stock company. The Bank of St. George in Genoa is the most outstanding example of such financial operations, and along the same line are the income certificates of the German cities and treasury notes (Rentenmeisterbriefe) especially in Flanders. The sig- nificance of this system is that in place of the original con- 279SF TO EE an en ee ee a ee ee an eo eee at DH f fi ; eer Nae eed ~ a a nd al =a SI Ra el NARs te ey oy Tt os eS ee Oo oo meee > at Se ieee eS 280 GENERAL ECONOMIC HISTORY dition under which unusual state requirements were cov- ered by compulsory law, usually without interest and fre- quently never repaid, loans come to be floated which appeal to the voluntary economic interests of the participants. The conduct of war by the state becomes a business opera- tion of the possessing classes. War loans bearing a high interest rate were unknown in antiquity; if the subjects were not in a position to supply the necessary means the state must turn to a foreign financier whose advances were secured by a claim against the spoils of war. If the war terminated unfortunately his money was lost. The secur- ing of money for state purposes, and especially for war purposes, by appeal to the universal economic interest, is a creation of the middle ages, especially of the cities. Another and economically more important form of asso- ciation is that for the purpose of financing commercial en- terprise—although the evolution toward the form of asso- ciation most familiar today in the industrial field, the stock company, went forward very gradually from this begin- ning. Two types of such organizations are to be distin- guished; first, large enterprises of an inter-regional char- acter which exceeded the resources of a single commercial house, and second, inter-regional colonial undertakings. For inter-regional enterprises which could not be financed by individual entrepreneurs, finance by groups was typical, especially in the operations of the cities in the 15th and 16th centuries. In part the cities themselves car- ried on inter-regional trade, but for economic history the other case is more important, in which the city went before the public and invited share participation in the commer- cial enterprise which it organized. This was done on a considerable scale. When the city appealed to the public, compulsion was exercised on the company thus formed to admit any citizen; hence the amount of share capital wasFACTS IN EVOLUTION OF CAPITALISM 281 unlimited. Frequently the capital first collected was in- sufficient and an additional contribution was demanded, where today the liability of the share holder is limited to his share. The city frequently set a maximum limit to the individual contribution so that the entire citizenship might participate. This was often done by arranging the citizens in groups according to the taxes paid or their wealth and reserving a definite fraction of the capital for each class. In contrast with the modern stock company the investment was often rescindable, while the share of the individual was not freely transferable. Hence the whole enterprise represented a stock company only in an embryonic sense. Official supervision was exercised over the conduct of operations. In this form the so-called ‘ ‘regulated’’ company was common, especially in the iron trade as in Steier, and it was occasionally used in the cloth trade, as in Iglau. A consequence of the structure of the organizations just de- scribed was the absence of fixed capital and, as in the case of the workers’ association, the absence of capital account- ing in the modern sense. Share holders included not only merchants, but princes, professors, courtiers, and in gen- eral the public in the strict sense, which participated gladly and to great profit. The distribution of the dividends was carried out in a completely irrational way, according to the gross income alone, without reserves of any kind. All that was necessary was the removal of the official control and the modern stock company was at hand. The great colonization companies formed another pre- liminary stage in the development of the modern stock com- pany. The most significant of these were the Dutch and English East India companies, which were not stock com- panies in the modern sense. On account of the jealousy of the citizens of te provinces of the country the Dutch East IAS Pir PoP retidnaetaect aes Se Re pO a Se erent ar rs Bat de!) bes eee ensSa a ee eae aerate tears a ae ne ee A SF are er ee a Se a ee ee ee ee (ar ADE SE SECIS INTE ot a © 282 GENERAL ECONOMIC HISTORY India Company raised its capital by distributing the shares among them, not permitting all the stock to be bought up by any single city. The government, that is the federa- tion, participated in the administration, especially because it reserved the right to use the ships and cannon of the company for its own needs. Modern capital accounting was absent as was free transferability of shares, although relatively extensive dealings in the latter soon took place. It was these great successful companies which made the device of share capital generally known and popular; from them it was taken over by all the continental states of Europe. Stock companies created by the state, and eranted privileges for the purpose, came to regulate the conditions of participation in business enterprise in gen- eral, while the state itself in a supervisory capacity was involved in the most remote details of business activity. Not until the 18th century did the annual balance and inventory become established customs, and it required many terrible bankruptcies to force their acceptance. Alongside the financing of state needs through stock companies stands direct financing by measures of the state itself. This begins with compulsory loans against a pledge of resources and the issue of certificates of indebtedness against anticipated revenues. The cities of the middle ages secured extraordinary income by bonds, pledging their fixed property and taxing power. These annuities may be regarded as the forerunners of the modern consols, yet only within limitations; for to a large extent the income ran for the life of the purchaser, and they were tied up with other considerations. In addition to these devices the necessity of raising money gave rise to various expedients down to the 17th century. The emperor Leopold I at- tempted to raise a “‘cavalier loan,’’ sending mounted mes- sengers around to the nobility to solicit suyscriptions; butFACTS IN EVOLUTION OF CAPITALISM 283 in general he received for answer the injunction to turn to those who had the money, [f one desires to understand the financial operations of a German city as late as the close of the middle ages, one must bear in mind that there was at that time no such thing as an orderly budget. The city, like the territorial lord, lived from week to week as is done today in a small household. Expenditures were readjusted momentarily as income fluctuated. The device of tax farming was of as- sistance in overcoming the difficulty of management with- out a budget. It gave the administration some security as to the sums which it might expect each year, and assisted it in planning its expenditures. Hence the tax farm oper- ~ ated as an outstanding instrument of financial rationaliza- tion, and was called into use by the European states occa- sionally at first and then permanently. It also made pos- sible the discounting of public revenues for war purposes, and in this connection achieved especial significance. Ra- tional administration of taxation was an accomplishment of the Italian cities in the period after the loss of their freedom. The It to order its finances in accordance with the principle of alian nobility is the first political power mereantile bookkeeping obtaining at the time, although this did not then include double entry. From the Italian cities the system spread abroad and came into German ter- ritory through Burgundy, France, and the Hapsburg states. It was especially the tax payers who clamored to have the finances put in order. A second point of departure for rational forms of ad- ministration was the English exchequer system, of which the word ‘‘check’”’ is a last survival and reminder. This was a sort of checker board device by means of which the payments due the state were computed, in the absence of the necessary facility in operating with figures. Regu< oe CREE pe SESS es OI a a La eh ot OP aepra ts od ae eo ae oe ee — SELF RT ETS LS AD, ae Se pire free be-lentaehe ie de ereeetesies el ete oe ee oe ee oe re ee Stare = ee = a e if I ee ee aT 284 GENERAL ECONOMIC HISTORY larly, however, the finances were not conducted through setting up a budget in which all receipts and disbursements were included, but a special-fund system was used. That is, certain receipts were designated and raised for the purpose of specified expenditures only. The reason for this procedure is found in the conflicts between the princely power and the citizens. The latter mistrusted the princes and thought this the only way to protect themselves against having the taxes squandered for the personal ends of the ruler. In the 16th and 17th centuries an additional force work- ing for the rationalization of the financial operations of rulers appeared in the monopoly policy of the princes. In part they assumed commercial monopolies themselves and in part they granted monopolistic concessions, involving of course the payment of notable sums to the political au- thority. An example is the exploitation of the quicksilver mines of Idria, in the Austrian province of Carniola, which were of great importance on account of the process of amalgamating silver. These mines were the subject of protracted bargaining between the two lines of the Haps- burgs and yielded notable revenues to both the German and the Spanish houses. The first example of this policy of monopoly concession was the attempt of the Emperor Frederick II to establish a grain monopoly for Sicily. The policy was most extensively employed in England and was developed in an especially systematic manner by the Stuarts, and there also it first broke down, under the pro- tests of Parliament. Each new industry and establishment of the Stuart period was for this purpose bound up with a royal concession and granted a monopoly. The king se- eured important revenues from the privileges, which pro- vided Lim with the resources for his struggle against Parliament. But these industrial monopolies establishedFACTS IN EVOLUTION OF CAPITALISM 285 for fiscal purposes broke down almost without exception after the triumph of Parliament. This in itself proves how incorrect it is to regard, as some writers have done, modern western capitalism as an outgrowth of the monopolistic policies of princes.”oF a it — rae ro al ae Loaten ee ae Pe eee ett A ee ee ee eee Peo yas be eed ar ak Te ee a eeinarres Re DG OAEAY, CHAPTER THE FIRST GREAT SPECULATIVE CRISES ? We have recognized as characteristics and pre-requisites of capitalistic enterprise the following: appropriation of the physical means of production by the entrepreneur, free- dom of the market, rational technology, rational law, free labor, and finally the commercialization of economic life. A further motif is speculation, which becomes important from the moment when property can be represented by freely negotiable paper. Its early development is marked by the great economie crises which it called forth. The great tulip craze of Holland in the 1630’s is often numbered among the great speculative crises, but it should not be so included. Tulips had become an article of luxury among the patricians who had grown rich in colonial trade, and suddenly commanded fantastic prices. The public was misled by the wish to make easy profits until with equal suddenness the whole craze collapsed and many individuals were ruined. But all of that had no significance for the economic development of Holland; in all periods it has happened that objects connected with gaming have be- come subject to speculation and led to crises. It is quite otherwise with John Law and the great speculation in France and the contemporary South Sea speculation in Eng- land, in the second decade of the 18th century. In the financial practice of the large states it had long been customary to anticipate revenues by the issue of cer- tificates, to be redeemed later. In consequence of the War of the Spanish Succession, the financial requirements of 286FIRST GREAT SPECULATIVE CRISES 287 the government rose to an extraordinary height in England as well as in France. The founding of the Bank of Eng- land supplied the financial needs of that country, but in France the state was already hopelessly in debt, and on the death of Louis XIV no one knew how the excessive debt was to be taken care of. Under the regency came forward the Seotechman, John Law, who thought he had learned something from the founding of the Bank of England, and had a theory of his own regarding financial affairs, al- though he had had no luck with it in England. He saw in inflation, that is the utmost possible increase in the medium of circulation, a stimulus to production. In 1716, Law received a concession for a private bank which at first presented no exceptional character. It was merely specified that the credit obligations of the state must be received in payment for the capital, while the notes of the bank were to be accepted in the payment of taxes. In contrast with the Bank of England there was no clear plan as to the manner in which the bank was to have a regular and secure income so as to maintain the liquid character of its issues. In connection with this bank Law founded the Mississippi Company. The Louisiana territory was to be financed to the extent of a hundred million livres; the com- pany accepted the same amount of obligations of the state as payment for stock and received in exchange the monop- oly of the trade in a territory to be determined. If one examines the Louisiana plan it will be observed that a cen- tury would have been required before Louisiana would have yielded sufficient revenue to make possible the re- payment of the capital. To begin with, Law intended to carry out an undertaking similar to the East India Com- pany, entirely overlooking the fact that Louisiana was not, like India, an ancient civilized country, but a forest waste inhabited by Indians.er a al MF = a Se re ee EE GES ee ee ee a ee ee ee Se ee tae ed ee ere eee rs om Sal IRE IRIE SA SE a nh ae areree ead 288 GENERAL ECONOMIC HISTORY When, in 1718, he saw himself threatened by the compe- tition of a stock company which wished to lease the indi- rect taxes, he combined the Mississippi Company with the Compagnie des Indes. The new company was to carry on the trade with India and China, but the political power was not available to secure for France the share in the Asiatic trade which England already possessed. However, the regency was induced to give to Law the right of coin- age and the lease on all the taxes, involving power of life and death over the state, in exchange for a loan at 3% by means of which the gigantic floating debt was to be taken eare of. At this point the public embarked on an insane course of speculation. The first year a 200 % dividend was declared and the price of shares rose from 500 to 9,000. This phase of the development can be explained only by the fact that short selling was impracticable since there was as yet no systematic exchange mechanism. In 1720 Law succeeded in getting himself appointed Comptroller General of Finances. But the whole enter- prise quickly disintegrated. In vain the state decreed that only John-Law-notes should be legal money; in vain it sought to sustain them by drastic restriction on the trade in precious metals. Law’s fall was inevitable simply because neither Louisiana nor the Chinese or East India trade had yielded sufficient profit to pay interest on even a fraction of his capital. It is true that the bank had received depos- its, but it possessed no liquid external resources for repay- ment. The end was a complete bankruptcy and the declar- ation that the notes were of no value. A result was an enduring discouragement on the part of the French pub- lic, but at the same time freely transferable share certifi- cates, made to bearer, had been popularized. In the same years a parallel phenomenon was exhibited by England, except that the course of development was notFIRST GREAT SPECULATIVE CRISES 289 so wild as that in France. Soon after founding of the Bank of England, the idea of a competing institution be- came current (1696). This was the land bank project resting on the same ideas later presented in the proposals of the German agrarians, namely, of using land credit in- stead of bills of exchange as a cover for bank notes. But this project was not carried out because in England it was well understood that the necessary liquidity would be ab- sent. This, however, did not prevent the occurrence that in 1711, after the fall of the Whig government, the Tories adopted a course similar to that followed a few years later by John Law. The English nobility wished to create a centralized power in opposition to the specifically Puritan basis of the Bank of England, and at the same time the gigantic public debt was to be paid off. For this purpose was founded the South Sea Company, which made considerable advances to the state and in return received a monopoly of the South Pacific trade. The Bank of England was not shrewd enough to keep aloof from the project; it even outbid the founders and it was due only to the Tories, who on the ground of political repugnance refused it participation, that its offer was not accepted. The course of events was similar to that of John Law’s institution. Here also bankruptcy was unavoidable be- eause the South Sea trade was not sufficient to pay inter- est on the sums advanced. Yet prior to this eventuality, just as in France, speculation gave rise to transferable certificates. The result was that enormous property was dissipated while many adventurers came out of it smiling, and the state—in a way none too honorable—achieved a substantial lightening of its burden of interest. The Bank of England remained standing in all its former prestige, being the only financial institution based on the rational PLES ee Seater rere EMR, ar a newSE SRT RTL RES Bl bah BOE eet ~— Se Oe itt oe nel ieee ncaa eae Sale Ln ee ee 290 GENERAL ECONOMIC HISTORY discounting of exchange and hence possessing the requisite current liquidity. The explanation is that exchange repre- sents nothing but goods already sold, and such a regular and sufficient turnover of goods no place in the world ex- cept London at that time could provide. Speculative erises of a similar sort have taken place from that time forward, but never since on the same scale. The first crises in rational speculation began a full hun- dred years later, after the conclusion of the Wars of Libera- tion, and since that time they have recurred almost regu- larly at intervals of about 10 years—1815, 1825, 1835, 1847 ete. It was these which Karl Marx had in view when in the Communist Manifesto he prophesied the downfall of capitalism. The first of these erises and their periodic recurrence were based on the possibility of speculation and the resultant participation of outside interests in large business undertakings. The collapse has resulted from the fact that in conse- quence of over-speculation, means of production, though not production itself, grew faster than the need for con- sumption of goods. In 1815 the prospect of the lifting of the continental blockade had led to a regular rage for founding factories; but the war had destroyed the buying power of the continent and it could no longer take the Eng- lish products. This crisis was barely overcome, and the continent had begun to develop buying power, when in 1825 a new crisis set in because means of production, though not goods, had been speculatively produced on a scale never known before and out of correspondence with the needs. That it was possible to create means of production to such an extent is due to the fact that with the 19th century the age of iron had begun. The discovery of the coking proc- ess, the blast furnace, and the carrying of mining opera- tions to unprecedented depths, introduced iron as the basisFIRST GREAT SPECULATIVE CRISES 291 of creating means of production, where the machines of the 18th century were built only of wood. Thus production was freed from the organic limitations in which nature had held it confined. At the same time, however, crises became an imminent factor of the economic order. Crises in the broader sense of chronic unemployment, destitution, glut- ting of the market and political disturbances which destroy all industrial life, have existed always and everywhere. But there is great difference between the fact that a Chi- nese or Japanese peasant is hungry and knows the while that the Deity is unfavorable to him or the spirits are dis- turbed and consequently nature does not give rain or sun- shine at the right time, and the fact that the social order itself may be held responsible for the crisis, even to the poorest laborer. In the first case, men turn to religion; in the second, the work of men is held at fault and the la- boring man draws the conclusion that it must be changed. Rational socialism would never have originated in the ab- sence of crises. i EY Fi i SY 3 TT ILO, Sooners meerBoor ee SN oe ie a ign i rnc at ncaa tn agen ene gietiincagitiaetmennreny ee Se SEE ee a ee ene cD nN Bie > ahi Sr testa pe neal tata eater are e q Ri i i NAR se Tl eb Te eS eters i f GHA PY hin oxy FREE WHOLESALE TRADE? In the course of the 18th century the wholesaler becomes finally separated from the retailer and comes to constitute a definite branch of the merchant class, whereas the Han- sards, for example, were not yet typically wholesalers. Wholesale trade is significant, first, beeause it evolved new commercial forms. One of these is the auction, which is the means by which the importing wholesaler turns over his goods as quickly as possible and secures the means for making his payment abroad. The typical form of export trade, which takes the place of the fair as an institution, is consignment trading. It consists in the sending of goods to be sold to a third party, the consignee, who must market them according to the directions of the consignor. Thus consignor and consignee do not meet as the earlier traders did, at the fair, but the goods are sent abroad on a specu- lation. A positive prerequisite for trading on consign- ment is the establishment of regular exchange quotations on the point of destination, since otherwise the risk in con- signment would be unbearably high. A negative require- ment is that trading on the basis of samples is not yet es- tablished and hence the goods must be seen by the pur- chaser himself. Consignment trading is ordinarily over- seas trade; it prevails where the merchant has no connec- tion with the retailer. Further development consists in the appearance of a buying commission man alongside the one who sells, the 292FREE WHOLESALE TRADE 293 former buying abroad without sight of the goods. The oldest form of such trade was based on samples. It is true that selling at a distance existed before this develop- ment, ““merchantable goods”’ being bought and sold which must come up to the traditionally established quality; whether they did so was decided by mercantile courts of arbitration. Sale by sample, however, is a specifically modern form of trading at a distance. It played a funda- mental role in commerce in the latter part of the 18th and the 19th centuries, being displaced by standardization and the specification of grades, which makes it possible to do away with the sending of samples. The new practice re- quires that grades be definitely established. It was on the basis of trading by grades that speculation and exchange dealings in connection with commodities became possible in the 18th century. The fair is a prior stage of the exchange. The two have this in common, that trading takes place between merchants only ; the difference consists in the physical presence of the goods in the case of the fair, and also in the periodical repe- tition of the fair itself. An intermediate type between the exchange and the fair is the so-called ‘‘permanent fair.”’ In all the great commercial centers there arose in the 16th to the 18th centuries establishments which bore the name of exchange or ‘‘bourse.’’ However, exchange dealings in the strict sense did not yet take place in them since the majority of those who frequented them were not local per- sons but non-resident merchants who resorted to the “‘ex- change’’ because of its connection with the fair and be- cause the goods were typically on the spot or represented by samples and were dealt in on this basis and not accord- ing to standard grades. Exchange dealing in the modern sense first developed in the field of negotiable paper and money, not in that of goods, the former being standardizeddd od ee SS ae ae Pm te ee ood oa ae ee sees hence tl i Sia tienen gli ena naar ” ee ee ee ee be oe ee are peers 294 GENERAL ECONOMIC HISTORY by nature. Only in the course of the 19th century were those commodities added which could be graded with suffi- cient accuracy. The innovation in developed exchange dealings is the sys- tem of rational dealing in futures or speculation for a rise, i.e., selling with a view to buying the goods at a lower fig- ure before the date of delivery. The absence of such trad- ing involved the possibility of such crises as those of the Tulip Craze and the Mississippi Company. It is true that agreements to deliver goods not in possession of the sales- man were earlier met with, but they were generally pro- hibited because it was feared that they would facilitate the buying up of goods to the disadvantage of consumers. It could nowhere be systematically carried out as in a mod- ern exchange, where speculation for a rise is always pres- ent in opposition to speculation for a fall. The first ob- jects subject to futures trading were money, especially paper money and bank notes, state annuities, and colonial paper. Here there could be difference of opinion as to the effect of political occurrences or the yield of enterprise and hence these instruments were an appropriate object for the practice of speculation. In contrast, industrial paper is entirely absent from the earliest price current bulletins. Such speculation underwent an enormous expansion with the building of railroads; these provided the paper which first unchained the speculative urge. Under the head of goods, grains, and a few colonial products available in large volume, and then other goods, were drawn into the circle of exchange speculation during the 19th century. For the development of a wholesale trade carried out in such fashion, and specifically for speculative trade, the indispensable prerequisite was the presence of an adequate news service and an adequate commercial organization. A public news service, such as forms the basis of exchangeFREE WHOLESALE TRADE 295 dealings today, developed quite late. In the 18th century, not only did the English Parliament keep its proceedings secret, but the exchanges, which regarded themselves as merchants’ clubs, followed the same policy in regard to their news information. They feared that the publication of gen- eral prices would lead to ill feeling and might destroy their business. The newspaper as an institution came into the service of commerce at an astonishingly late date. The newspaper, as an institution, is not a product of capitalism. It brought together in the first place political news and then mainly all sorts of curiosities from the world at large. The advertisement, however, made its way into the newspaper very late. It was never entirely absent but originally it related to family announcements, while the ad- vertisement as a notice by the merchant, directed toward finding a market, first becomes an established phenomenon at the end of the 18th century—in the journal which for a century was the first in the world, the ‘‘Times.’’ Official price bulletins did not become general until the 19th cen- tury; originally all the exchanges were closed clubs, as they have remained in America virtually down to the present. Hence in the 18th century, business depended on the or- ganized exchange of letters. Rational trading between regions was impossible without secure transmission of let- ters. This was accomplished partly by the merchant guilds and in part by butchers, wheelwrights, etc. The final stage in the rationalization of transmission of letters was brought about by the post, which collected letters and in connec- tion therewith made tariff agreements with commercial houses. In Germany, the family of Thurn and Taxis, who held the postal concession, made notable advances in the rationalization of communication by letter. Yet the vol- ume of correspondence is in the beginning surprisingly small. In 1633, a million letters were posted in all Eng- oe ah et the 2a etn noon ere ree Sow SELES aieee a cn at oe ee SS ; ip an nm eee — SERIE SA nd Se eae oe Sargeras eer ar a ee 296 GENERAL ECONOMIC HISTORY land while today a place of 4,000 population will equal the number. In the field of commercial organization nothing was changed, at least in principle, in the period before the intro- duction of the railroads. In the 18th century, ocean ships had reached very little greater displacement than those of Venice at the close of the middle ages. It is true that their number was greater, and the size of warships had in- ereased. This provided a stimulus for the multiplication and enlargement of merchant ships also, but the impulse could not be followed out in the epoch of wood construc- tion. Inland shipping had been facilitated by the con- struction of locks, but it retained its guild organization down into the 19th century and in consequence experienced no startling innovations. Land transport also remained as before. The post produced no change; it merely for- warded letters and small packages, but did not concern it- self with large scale production, which was decisive for economic life. Only the roads underwent an extraordinary improve- ment, through the construction of turnpikes. In this the French government under Sully took the lead, while Eng- land leased the roads to private enterprisers who collected tolls for their use. The building of the turnpikes wrought a revolution in commercial life comparable to no other before the appearance of the railways. There is no com- parison between the present density of road traffic and that of this period. In 1793, 70,000 horses went through the Lit- tle town of Liineburg while as late as 1846 only 40,000 were used in freight transport in all Germany. The costs of land carriage amounted to ten or twenty times the freight on the railways at a later time, and were three to four times as high as the charges for inland shipping at the same period. A half billion ton-kilometers was the highest fig-FREE WHOLESALE TRADE 297 ure for transportation for the movement on land in Ger- many, while in 1918, 67 billions were carried on the rail- roads. The railway is the most revolutionary instrumentality known to history, for economic life in general and not merely for commerce, but the railway was dependent on the age of iron; and it also like so many other things, was the plaything of princely and courtier interests. =e A EELS, San fe eee eee ee es aoas Ow b| <3 8" i Oe = = a a Da Te Oe a a a eee tees RR pT ee ee ee Fane XOX Vel CHAPTER COLONIAL POLICY FROM THE SIXTEENTH TO THE EIGHTEENTH CENTURY ? At this point it is pertinent to inquire into the significance which the acquisition and exploitation of the great non- European regions had for the development of modern cap- italism, although only the most characteristic features of the older colonial policy can be mentioned here. The acqui- sition of colonies by the European states led to a gigantic acquisition of wealth in Europe for all of them. The means of this accumulation was the monopolizing of colonial prod- ucts, and also of the markets of the colonies, that is the right to take goods into them, and, finally, the profits of transportation between mother land and colony; the last were ensured especially by the English Navigation Act of 1651. This accumulation was secured by force, without ex- ception and by all countries. The operations might take various forms. Hither the state drew a profit from the colonies directly, administering them by its own agencies, or it leased them, in return for a payment, to companies. Two main types of exploitation are met with: the feudal type in the Spanish and Portuguese colonies, the capital- istic in the Dutch and English. Forerunners of the feudal colonization form are espe- cially the Venetian and Genoese colonies in the Levant, and those of the Templars. In both cases the opportunity for securing a money income was afforded by the subdivision of 298COLONIAL POLICY 299 the region to be exploited into fiefs, ‘‘encomiendas”’ in the ease of Spain. The capitalistic colonies regularly developed into planta- tions. Labor power was furnished by the natives. The opportunities for application of this labor system, from which favorable results had been secured in Asia and Africa, seemed about to expand enormously when it was transferred to trans-oceanic lands. It was found however that the American Indians were entirely unsuitable for plantation labor,” and importation of black slaves to the West Indies took the place of their use and gradually grew into a regular commerce of enormous extent. It was ear- ried on on the basis of slave trading privileges (‘‘assiento’’) the first of which was granted by the emperor Charles V in 1517 to the Flemings. These slave trading privileges played a large role in international relations well into the 18th century. In the treaty of Utrecht, England secured the right to import slaves into the Spanish possessions in South America, to the exclusion of all other powers, and at the same time assumed the obligation of delivering a certain minimum number. The results of the slave trade were considerable. It may be estimated that at the begin- ning of the 19th century some seven million slaves were living in the territory of the European colonies. Their mortality was extraordinarily high, running in the 19th eentury to 25% and to a multiple of that figure earlier. From 1807 to 1848. a further five million slaves were im- ported from Africa, and the aggregate of slaves transported thence overseas can be set equal to the population of a first class European power in the 18th century. In addition to the black slaves there were white half- slaves, the ‘‘indentured servants”’; they were especially numerous in the English North American colonies where in the 17th century their number surpassed that of the Per eet ore ttt SN RA De Ra ep ae To a ES os eeeertos ee oe ee Ps eres Perens ets 306 GENERAL ECONOMIC HISTORY duction from the organic limitations of human labor. Not altogether, it is true, for it goes without saying that labor was indispensable for the tending of machines. But the mechanizing process has always and everywhere been intro- duced to the definite end of releasing labor; every new in- vention signifies the extensive displacement of hand work- ers by a relatively small man power for machine super- vision. Finally, through the union with science, the production of goods was emancipated from all the bonds of inherited tradition, and came under the dominance of the freely rov- ing intelligence. It is true that most of the inventions of the 18th century were not made in a scientific manner; when the coking process was discovered no one suspected what its chemical significance might be. The connection of industry with modern science, especially the systematic work of the laboratories, beginning with Justus von Liebig, enabled industry to become what it is today and so brought capitalism to its full development. The recruiting of the labor force for the new form of production, as it developed in England in the 18th cen- tury, resting upon the concentration of all the means of production in the hands of the entrepreneur, was carried out by means of compulsion, though of an indirect sort. Under this head belong especially the Poor Law, and the Statute of Apprentices of Queen Elizabeth. These meas- ures had become necessary in consequence of the large num- ber of people wandering about the country who had been rendered destitute by the revolution in the agricultural system. Its displacement of the small dependent peasant by large renters and the transformation of arable land into sheep pastures—although the latter has occasionally been overestimated—worked together constantly to reduce the amount of labor force required on the land and to bringINDUSTRIAL TECHNIQUE 307 into being a surplus population, which was subjected to compulsory labor. Anyone who did not take a job vol- untarily was thrust into the workhouse with its strict disci- pline; and anyone who left a position without a certificate from the master or entrepreneur was treated as a vagabond. No unemployed person was supported except under the compulsion of entering the workhouse. In this way the first labor force for the factories was re- cruited. With difficulty the people adapted themselves to the discipline of the work. But the power of the possess- ing classes was too great; they secured the support of the political authority through the justices of the peace, who in the absence of binding law operated on the basis of a maze of instructions and largely according to their own dictates. Down into the second half of the 19th century they exer- eised an arbitrary control over the labor force and fed the workers into the newly arising industries. From the be- ginning of the 18th century, on the other hand, begins the regulation of relations between entrepreneur and laborer, presaging the modern control of labor conditions. The first anti-trucking laws were passed under Queen Anne and George I. While during the whole middle ages the worker had struggled for the right to bring the product of his own labor to market, from now on legislation had to protect him against being paid for his work in the products of others and to secure for him remuneration in money. Another source of labor power was in England the small master class, the great majority of whom were transformed into a proletariat of factory laborers. In the market for the products of these newly estab- lished industries, two great sources of demand appeared, namely war and luxury, the military administration and court requirements. The military administration became a consumer of the products of industry to the extent that the eee Rees Pan AS eleee STARA. ao. ~~ na rare ae ap ee Se ee eee bor Ly a ie Ve H Hs Hf : eee A Se a kp ae Tk eae 308 GENERAL ECONOMIC HISTORY great mercenary armies developed and the more so as army discipline and the rationalization of arms and all military technique progressed. In the textile industry the produc- tion of uniforms was fundamental, as these could by no means be the product of the army itself but were a means of discipline in the interest of unitary regimentation, and in order to keep the soldiers under control. The produc- tion of cannon and fire arms occupied the iron industry, and the provision of supplies did the same for trade. In addi- tion to the land army there was the navy; the increasing size of the war ships was one of the factors which created a market for industry. While the size of merchant ships had changed little before the end of the 18th century and as late as 1750 the ships entering London were typically of about 140 tons burden, war ships had grown to a size of a thousand tons in the 16th century and in the 18th this became the normal burden. The demand of the navy, like that of the army, increased further with the growth in the number and extent of the voyages (and this also applies to merchant ships) especially after the 16th cen- tury. Down to that time the Levant cruise had normally occupied a year; at this time ships began to remain much longer at sea and at the same time the increasing magni- tude of campaigns on land necessitated a more extensive provision with supplies, munitions, ete. Finally, the speed of ship building and of the construction of cannon in- creased with extraordinary rapidity after the 17th century. Sombart has assumed that the standardized mass pro- vision for war is among the decisive conditions affecting the development of modern capitalism. This theory must be reduced to its proper proportions. It is correct that an- nually enormous sums were spent for army and navy pur- poses; in Spain 70 % of the revenues of the state went for this purpose and in other countries two-thirds or more.INDUSTRIAL TECHNIQUE 309 But we also find outside the western world, as in the Mogul Empire and in China, enormous armies equipped with artillery (although not yet with uniforms), yet no impulse toward a capitalistic development followed from the fact. Moreover, even in the west the army needs were met to an increasing extent, developing in parallelism with capital- ism itself, by the military administration on its own account, in its own workshops and arms and munition fae- tories; that is, it proceeded along non-capitalistie lines. Hence, it is a false conclusion to ascribe to war as such, through the army demands, the role of prime mover.in the creation of modern capitalism. It is true that it was in- volved in capitalism, and not only in Europe; but this motive was not decisive for the development. Otherwise the increasing provision of army requirements by direct action of the state would again have forced capitalism into the background, a development which did not take place. For the luxury demand of the court and the nobility, France became the typical country. For a time in the 16th century, the king spent 10 million livres a year di- rectly or indirectly for luxury goods. This expenditure by the royal family and the highest social classes consti- tuted a strong stimulus to quite a number of industries. The most important articles, aside from such means of en- joyment as chocolate and coffee, are embroidery (16th cen- tury), linen goods, for the treatment of which ironing de- velops (17th century), stockings (16th century), umbrel- las (17th century), indigo dyeing (16th century), tapestry (17th century), and carpets (18th century). With regard to the volume of the demand the two last named were the most important of the luxury industries; they signified a democratization of luxury which is the crucial direction of capitalistic production. Court luxury existed in China and India, on a seale un- ee ee ear SELL NSE LAOS OL.SA Ra De Na aes ak yo oe oe SE at Ot oe ne ee eerste SA NNER Rn — a a ne ne eee ee ee OST RSUE RET ETNON 310 GENERAL ECONOMIC HISTORY known in Europe; and yet no significant stimulus to eapi- talism or capitalistic industry proceeded from the fact. The reason is that the provision for this demand was arranged leiturgically through compulsory contributions. This system maintained itself so tenaciously that down to our own time the peasants in the region of Peking have been obliged to furnish to the imperial court the same objects as 3000 years ago, although they did not know how to pro- duce them and were compelled to buy them from producers. In India and China the army requirements were also met by forced labor and contributions in kind. In Europe it- self the leiturgical contributions of the east are not un- known, although they appear in a different form. Here the princes transformed the workers in luxury industry into compulsory laborers by indirect means, binding them to their places of work by grants of land, long period con- tracts, and various privileges—although in France, the country which took the lead in luxury industries, this was not the case; here the handicraft form of establish- ment maintained itself, partly under a putting-out organi- zation and partly under a workshop system, and neither the technology nor the economic organization of the in- dustries was transformed in any revolutionary way. The decisive impetus toward capitalism could come only from one source, namely a mass market demand, which again could arise only in a small proportion of the luxury industries through the democratization of the demand, especially along the line of production of substitutes for the luxury goods of the upper classes. This phenomenon is characterized by price competition, while the luxury in- dustries working for the court follow the handicraft prin- ciple of competition in quality. The first example of the policy of a state organization entering upon price compe- tition is afforded in England at the close of the 15th cen-INDUSTRIAL TECHNIQUE 311 tury, when the effort was made to undersell Flemish wool, an object which was promoted by numerous export pro- hibitions. The great price revolution of the 16th and 17th centuries provided a powerful lever for the specifically capitalistic tendencies of seeking profit through cheapening produc- tion and lowering the price. This revolution is rightly as- cribed to the continuous inflow of precious metals, in conse- quence of the great overseas discoveries. It lasted from the thirties of the 16th century down to the time of the Thirty Years’ War, but affected different branches of economic life in quite different ways. In the case of agricultural products an almost universal rise in price set in, making it possible for them to go over to production for the market. It was quite otherwise with the course of prices for indus- trial products. By and large these remained stable or rose in price relatively little, thus really falling, in comparison with the agricultural products. This relative decline was made possible only through a shift in technology and eco- nomics, and exerted a pressure in the direction of increas- ing profit by repeated cheapening of production. Thus the development did not follow the order that capitalism set in first and the decline in prices followed, but the reverse; first the prices fell relatively and then came capitalism. The tendency toward rationalizing technology and eco- nomic relations with a view to reducing prices in relation to costs, generated in the 17th century a feverish pursuit of invention. All the inventors of the period are dom- inated by the object of cheapening production; the notion of perpetual motion as a source of energy is only one of many objectives of this quite universal movement. The inventor as a type goes back much farther. But if one serutinizes the devices of the greatest inventor of pre- capitalistic times, Leonardo da Vinci—(for experimenta- wa Se eS re rete Bea es— NN A Rt pa — eee ee ae Ree rien Seta tate ea eer yj ee ee ba meee ed a Sepa emt tt ts oe ot oe a a OO ta nee 312 GENERAL ECONOMIC HISTORY tion originated in the field of art and not that of science )— one observes that his urge was not that of cheapening pro- duction but the rational mastery of technical problems as such. The inventors of the pre-capitalistic age worked empirically ; their inventions had more or less the charac- ter of accidents. An exception is mining, and in conse- quence it is the problems of mining in connection with which deliberate technical progress took place. A positive innovation in connection with invention is the first rational patent law, the English law of 1623, which contains all the essential provisions of a modern statute. Down to that time the exploitation of inventions had been arranged through a special grant in consideration of a pay- ment; in contrast the law of 1623 limits the protection of the invention to 14 years and makes its subsequent utiliza- tion by an entrepreneur conditional upon an adequate roy- alty for the original inventor. Without the stimulus of this patent law the inventions crucial for the development of capitalism in the field of textile industry in the 18th century would not have been possible. Drawing together once more the distinguishing charac- teristics of western capitalism and its causes, we find the following factors. First, this institution alone produced a rational organization of labor, which nowhere previously existed. Everywhere and always there has been trade; it can be traced back into the stone age. Likewise we find in the most varied epochs and cultures war finance, state contributions, tax farming, farming of offices, etc., but not a rational organization of labor. Furthermore we find everywhere else a primitive, strictly integrated in- ternal economy such that there is no question of any free- dom of economic action between members of the same tribe or clan, associated with absolute freedom of trade ex- ternally. Internal and external ethics are distinguished,INDUSTRIAL TECHNIQUE 313 and in connection with the latter there is complete ruthless- ness in financial procedure; nothing can be more rigidly prescribed than the clan economy of China or the caste economy of India, and on the other hand nothing so un- scrupulous as the conduct of the Hindu foreign trader. In contrast with this, the second characteristic of western capitalism is a lifting of the barrier between the internal economy and external economy, between internal and ex- ternal ethics, and the entry of the commercial principle into the internal economy, with the organization of labor on this basis. Finally, the disintegration of primitive economic fixity is also met with elsewhere, as for example in Baby- lon; but nowhere else do we find the entrepreneur organi- zation of labor as it is known in the western world. If this development took place only in the occident the reason is to be found in the special features of its general cultural evolution which are peculiar to it. Only the occi- dent knows the state in the modern sense, with a profes- sional administration, specialized officialdom, and law based on the concept of citizenship. Beginnings of this institu- tion in antiquity and in the orient were never able to de- velop. Only the occident knows rational law, made by ju- rists and rationally interpreted and applied, and only in the occident is found the concept of citizen (cwis Romanus, citoyen, bourgeois) because only in the occident again are there cities in the specific sense. Furthermore, only the oc- cident possesses science in the present-day sense of the word. Theology, philosophy, reflection on the ultimate problems of life, were known to the Chinese and the Hindu, perhaps even of a depth unreached by the European; but a rational science and in connection with it a rational tech- nology remained unknown to those civilizations. Finally, western civilization is further distinguished from every other by the presence of men with a rational ethic for the nt nT fi Seca-srapee Say CAML NSE LAS OLS = TTSLR ST RTI ool ieseerier Seer Snsenaenh tee be eae betel ate ook ee eee pei Patt ee eo es tt ie Ie: ' f be i i } ; iH i Mi I i A in ie A li ia HF iF | re \ it ee 5 i FY i, A if ry i: H bh i; bi K i ug 314 GENERAL ECONOMIC HISTORY conduct of life. Magic and religion are found everywhere; but a religious basis for the ordering of life which con- sistently followed out must lead to explicit rationalism is again peculiar to western civilization alone.@HVA Pt ER sexevelaier CITIZENSHIP * In the concept of citizenship (Birgertwm) as it is used in social history are bound up three distinct significations. First, citizenship may include certain social categories or classes which have some specific communal or economic interest. As thus defined the class citizen is not unitary; there are greater citizens and lesser citizens; entrepreneurs and hand workers belong to the class. Second, in the politi- eal sense, citizenship signifies membership in the state, with its connotation as the holder of certain political rights. Finally, by citizens in the class sense, we understand those strata which are drawn together, in contrast with the bu- reaucracy or the proletariat and others outside their circle, as ‘‘persons of property and culture,’’ entrepreneurs, recipients of funded incomes, and in general all persons of academic culture, a certain class standard of living, and a certain social prestige. The first of these concepts is economic in character and is peculiar to western civilization. There are and have been everywhere hand laborers and entrepreneurs, but never and nowhere were they included in a unitary social class. The notion of the citizen of the state has its fore- runners in antiquity and in the medieval city. Here there were citizens as holders of political rights, while outside of the oecident only traces of this relation are met with, as in the Babylonian patriciate and the Josherim, the inhabi- tants of a city with full legal rights, in the Old Testament. 315 a Ee SEARING ELASRE a ery Nee eres oe Sr reer ee a Sedona teehee et a ens he AY : Sb eat SE er en ee Se SE eT irral 316 GENERAL ECONOMIC HISTORY The farther east we go the fewer are these traces; the no- tion of citizens of the state is unknown to the world of Islam, and to India and China. Finally, the social class signification of citizen as the man of property and culture, or of one or the other, in contrast with the nobility, on the one hand, and the proletariat, on the other, is likewise a specifically modern and western concept, like that of the bourgeoisie. It is true that in antiquity and in the middle ages, citizen was a class concept; membership in specifie class groups made the person a citizen. The difference is that in this case the citizen was privileged in a negative as well as a positive sense. In the positive sense in that he only—ain the medieval city for example—might pursue cer- tain occupations; negatively in that certain legal require- ments were waived, such as the qualification for holding a fief, the qualification for the tourney, and that for member- ship in the religious community. The citizen in the quality of membership in a class is always a citizen of a particular city, and the city in this sense, has existed only in the west- ern world, or elsewhere, as in the early period in Mesopo- tamia, only in an incipient stage. The contributions of the city in the whole field of cul- ture are extensive. The city created the party and the demagogue. It is true that we find all through history struggles between cliques, factions of nobles, and office- seekers, but nowhere outside the occidental cities are there parties in the present-day sense of the word, and as little are there demagogues in the sense of party leaders and seekers for ministerial posts. The city and it alone has brought forth the phenomena of the history of art. Hellenic and Gothie art, in contrast with Myecenean and Roman, are city art. So also the city produced science in the modern sense. In the city civilization of the Greeks the discipline out of which scientific thinking developed,CITIZENSHIP 317 namely mathematics, was given the form under which it continuously developed down to modern times. The city culture of the Babylonians stands in an analogous relation to the foundation of astronomy. Furthermore, the city is the basis of specific religious institutions. Not only was Judaism, in contrast with the religion of Israel, a thor- oughly urban construction—a peasant could not conform with the ritual of the law—but early Christianity is also a city phenomenon; the larger the city the greater was the percentage of Christians, and the case of Puritanism and Pietism was also the same. That a peasant could function as a member of a religious group is a strictly modern phenomenon. In Christian antiquity the word paganus signified at the same time heathen and village dweller, just as in the post-exilic period the town-dwelling Pharisee looked with contempt on the Am-ha-aretz who was ignorant of the law. Even Thomas Aquinas, in discussing the dif- ferent social classes and their relative worth, speaks with extreme contempt of the peasant. Finally, the city alone produced theological thought, and on the other hand again, it alone harbored thought untrammeled by priestcraft. The phenomenon of Plato, with his question of how to make men useful citizens as the dominant problem of his thought, is unthinkable outside the environment of a city. The question whether a place is to be regarded as a city is not answered on the basis of its spatial extent.2 From the economic standpoint, rather, both in the occident and elsewhere, the city is in the first place the seat of commerce and industry, and requires a continuous provision of the means of subsistence from without. From an economic standpoint, the various categories of large places are dis- tinguished by the source from which supplies come and the means by which they are paid for. A large place which does not live on its own agricultural production may pay ae re - a a a ne eat Sn re ne a Bi Bl eed aes a Ae i a oeem - PRL SLA ERB ED Bs be BL anh bg gre eee PA eos eee are era a a eee ee Re ene cen et ed oe eerees ane ans j UI ea) Sn ; © . 5 eee a 318 GENERAL ECONOMIC HISTORY for its imports by its own products, that is industrial products, or through trade or rents, or finally by means of pensions. The ‘‘rents’’ represent salaries of officials or land rents; subsistence on pensions is illustrated by Wies- baden, where the cost of imports is met by the pensions of political officials and army officers. Large places may be classified according to the dominance of these sources of in- come to pay for the imports of subsistence goods, -but this is a condition common to the world at large; it belongs to large places and does not distinguish a city. A further general characteristic of a city is the fact that in the past it was generally a fortress; throughout long periods a place was recognized as a city only if and so long as it was a fortified point. In this connection the city was regularly the seat of government, both political and ecclesiastical. In some eases in the occident a cwitas was understood to mean a place which was the seat of a bishop. In China it is a decisive characteristie that the city is the seat of a mandarin,® and cities are classified on the basis of the rank of their mandarins. Even in the Italian Re- maissance the cities were distinguished by the grade of their officials and upper class residents, and the rank of the resident nobility. It is true that outside the western world there were cities in the sense of a fortified point and the seat of political and hierarchical administration. But outside the occident there have not been cities in the sense of a unitary community. In the middle ages, the distinguishing characteristic was the possession of its own law and court and an autonomous administration of whatever extent. The citizen of the middle ages was a citizen because and insofar as he came under this law and participated in the choice of adminis- trative officials. That cities have not existed outside the occident in the sense of a political community is a factCITIZENSHIP 319 calling for explanation. That the reason was economic in character is very doubtful. As little is it the specific ‘“Germanie spirit’? which produced the unity, for in China and India there were unitary groups much more cohesive than those of the oecident, and yet the particular union in cities 1s not found there. The inquiry must be earried back to certain ultimate fundamental facts. We cannot explain the phenomena on the basis of the feudal or political grants of the middle ages or in terms of the founding of cities by Alexander the Great on his march to India. The earliest references to cities as political units designate rather their revolutionary char- acter. ‘The occidental city arose through the establishment of a fraternity, the cvvoxiwpos in antiquity, the coniwratio in the middle ages. The juristie forms, always relating to externals, in which the resulting struggles and conflicts of the middle ages are clothed, and the facts which lie behind them, cannot be distinguished. The pronouncements of the Staufers against cities prohibit none of the specific pre- sumptions of citizenship, but rather the contwratio, the brotherhood in arms for mutual aid and protection, involv- ing the usurpation of political power. The first example in the middle ages is the revolutionary movement in 726 which led to the secession of Italy from the Byzantine rule and which centered in Venice. It was ealled forth especially by opposition to the attack on images carried out by the emperors under military pressure, and hence the religious element, although not the only factor, vas the motive which precipitated the revolution. Previ- ous to that time the dux (later doge) of Venice had been appointed by the emperor, although, on the other hand, there were certain families whose members were constantly to a predominant extent appointed military tribunes or district commandants. From then on the choice of the ana € Seine tee) re Pt ig nar age SSS ENS. a eesaa re s >- Clan economy in China, 22, 45 (see also China). Class relations in ancient vs. medieval cities, 328 ff. Coal, in middle ages, 190f., 304 ff.; use for smelting iron, 304 ff. Coinage, technique, 242, 247, 250 (see also Money); C. and banking, 254, 258, 265 f. Colonial policy, 298-301 (Chap. XXVI). Colonial proprietorship, 61. Colonies, slavery in, 299 ff. Colonizing companies, role in evolution of capitalism, 281 f. Colons, colonate, 54. Commandite, 229. Commenda, 206; and capital ac- counting, 225 ff.; in S. vs. N. Europe, 229; C. and interest on money, 269. eOppays i true \e hafplea taath tbabinblnd mptri th eds ale gene haa ee '- Ne a it bate el at eed Commendation, 53, 63. Commerce, beginnings and early development, 195-8 (Chap. XIV); originally between ethnic groups, 195; forms, 195 ff.; caste and, 195 f.; out- cast peoples (Jews), 196; seigniorial trade, 196 f.; gift trade, 197; trade of princes, 198; transportation, 199-201 (Chap. XV); forms of organi- zation, 202-222 (Chap. XVI) ; the alien trader, 202-15; earli- est times, 202; antiquity, 203 ff.; volume of C. in middle ages, 203, finance, 205f.: vol- ume of land trade, 209 f.: legal arrangements, 212 ff.; resident merchant, 215 ff., struggles, 216 ff.; the fairs, 220 ff.; forms of enterprise, 223 ff. (Chap. XVII); computation and ac- counting, 223 ff.; the commen- da, 225 1.; separation of house- hold and business, 226 ff.; S. vs. N. Europe, 228 f. See also Guilds, mercantile, Money. Commercialization of life, rela- tion to capitalism, 277 f. Commission trading, 292 f. Common pasture, in early agri- culture, Sff. (Chap. I pas- sim) ; appropriation by lords, (alot: Communism, agrarian, theory of, 3, 24; of fiscal origin, see China, India, Russia. Communalization of work, two types, 39. Compania communis (Venice), 232. Compass, nautical, 200 f. Compulsion, see Mills, Breweries (Factory forerunners), Bana- lités. Computation, 223 ff. Concubinage, 34. Consignment trading, succeeds the fair, 293. Constitutum usus, 206. Corpo della compagnia, 228. > 388 INDEX Cottager in primitive Agr. vil- lage, 9, Cotton, divergent effects of in- dustry in Eng. and U. S..A., 82; decisive role in develop- ment of capitalism in Eng., 303 ff. Cowry shell money, 239. Craftsmen, wandering, and Chris- tianity, 137. Craft work, defined, 116. (See Guilds). Developed by oikos system in ancient east, 126; organization in antiquity, 126- 30; in medieval turope, 130- 34. Crises, speculative, 286-91 (Chap. XXIV); Mississippi Company, 287 ff.; South Sea Company, 288 ff.; later history of C., 290f.; and socialism, 290 f.: speculation and C., 294. Croatia, see South Slavs. Curia, 208. See Church. Custodes nundinarum, in Cham- pagne fairs, 22). Cyrenaica, chieftain trade, 55, Cyvvar, in Scotch husbandry, 15. Dare ad proficuum de mari, 269. Debt, public, relation to com- mercialization and capitalism, 279 ff., 286 f. Demesne farming, absent in orient, 60, 73. Demiurgical labor, in India, 22. Democracy in ancient, vs. medi- eval cities, 324 ff.; of ancient city a political guild, 33). Demos (duos), 97, 324, 328. Dependence, personal, result of conquest, exploited communally in Sparta, 52; result of com- mendation, 53, of land settle- ment, 53; servility to prince under irrigation culture, 57. Domestie system (putting-out system), 118; displaces guilds, 153-161 (Chap. XI); appear- ance of in guilds, 142; course of development, 153 ff.; in tex-tile industry, 155ff.; growth alongside guild industry, 158 f.; stages, 159 f.; basis of per- manence the unimportance of fixed capital, 160; later stages confined to west, 160; limited development with free workers outside Europe, 160 f.; not dis- placed by early factories, 173. Dschaina, Indian trading sect, 196. 232, Duc-duc, 40. Dues and fees, feudal, 73 Dutch East India Company, agrarian system, 21f.; organ- ization, 281 f. Egypt, disintegration of clan by political forces, 46; chieftain trade, 55; irrigation culture, 56 f.: officialdom of state, 57 ldia, 57; grain banks, 58; craft work for the state, 125; early shipping, 202; monetary his tory. 244: banking, 254, 257; law prohibiting interest, 267 f. exooTns, 135. eutropot, 203. Enclosure of land, in Germany, 14: in England, see Estate Economy. Encomienda, 61. Endogamy, 29, 35; a phenomenon of retrogression, 36 England, Germanic land settle- ment form, 10; condition of peasantry prior to capitalism, tate or O% pas- es, Sul 77 {.- effect of strong Normans on feudalism, toral and cereal estat no formal abolition of feudal- ism, 98; guild masters separate from craft work, 152, 153; guild development, contrast w. Germany, 153 f., 156-8; signit- icance of representation ¢ towns in Parliament, 157; guilds and early factories, | ‘ f yk struggle over mining rights, 182 f.; mercantile guilds (Guild Merchant), 232f.; INDEX 389 separation of wholesale and retail trade, 233; monetary history, 249, 251f.; banking history, 263-5 (see Bank of England) ; policy towar’s slav- ery, 300f.; type of N. KEu- ropean city, 333f.; mercantil- ism in, 348f.; Church of E. economic policy, 349. Enterprise, and capitalism, 275; forms of commercial, 223 (Chap. XVIII). See Commerce. > Erbex (free-holding farmer) in Westphalia, 11; in India, 23. Ergasterion, 119f.; (fabrica), 162. Estate economy, 84-92; definition, forms, 84; for stock raising, 84 f.; in England, 85 f.; in Rus- sia, 86f.; in Germany, 87-92; Poland and White Russia, 92. See Oikos-Economy. Estates General (France), 75. Ethies, internal and external, 312; rational E. peculiar to west, 312f.: attitude of clas- sical E. antagonistic to capital ism, 357, based on impersonal- ity of relations, 357 f.; Roman E. characterized by caveat emp internal vs. external E., 356: breakdown of dualism, 313, 356 ff.; dualism main- tained by Jews, 359 f. Exchange, the, as an _ institu- tion, 293f.; exch. quotations requisite for consignment trad- Q-* 204 tor. ing, 293. Exchequer, Eneglish, Exogamy, basis of, 36. 283. Faber (fabri), 147, 328. Fabrica (ergasterion) , workshop, universally found, 162. Factor (Verleger) and _ factor system. See Domestic System, Putting-Out System. F. under slavery, 126; rise of, 153 ff. Factory, meaning, prerequisites and development, 162-77 (Chap. XII). See also technology STALIN ae ne TILES. ~ teat eeaiaon as Ieesaansrsicldeeenlaniciaed-siemleaycheien-sk bates tot pated i we Ba) ae OS et A Sa ree ee a 9 Setalambltiebleiekoi totale tee tet = eens (Chap. XXVII, pp. 302ff.) Definition, factory and shop, 162 f.; prerequisites, large and steady market, 163; free labor, 164; forerunners, communal mills, ovens, breweries, found- ries, iron works, 165-7: early factory, ergasterion with free labor, in England, 168 f.: sup- pression by the state, 169; new development through labor specialization and power, 169f.; coiners, weapon and uniform factories, 170; market, luxury demand, 170f.; legal relations of early factories, Ol fi development alongside, not out of, craft work and domestic system, 173; not called forth by machines, 174; social effects of, 174f.: why undeveloped outside W. Europe, 175 ff.; stages in England, 302f.; recruiting of labor, 306 f.; market, 307 ff.; ration- alism in labor organization, science and the state, 312 ff. Fairs and fair trade, 220 ff. (see Commerce) ; other than Cham- pagne, 222; F. displaced by consignment trading, 292; rela- tion to the exchange, 293 f, Family, small-family, 28; and property relations, 37 ff.; mod- ern, of restricted scope, 111, (See Mother-right, Matriar- chate, Patriarchate, Mar- riage.) F. as business unit, evolution into the company, 225-29. Father-right, patriarchate, 30. Feudalism. Chapters III, IV, V and VI, passim; see Table of Contents; also under various countries; also topics, Manor, Peasantry, Seigniorial pro- prietorship. Military signifi- cance of F., 52, 63 f. Fideicomissum (trust) in Byzan- tium and Moslem world, Eng- Jand and Germany, 109. 390 INDEX Fiefs, money and grain, 54; land, 62. Firma burgi, 232. Fiscus, 67. Flanders, putting-out system, 155; woolen industry, 155, 221. See Netherlands. Florence, banking, 259f.:; clas- sical guild city, 326 ff. See City and Citizenship. Fondaco, 213f., F. dei Tedeschi (Venice) 218. Forest culture (vs. irrigation type), 56. Deforestation in England, and modern techno- logical development, 304 f. Forestalling, 140, 218. Forging, mechanical, 304. Foundries, relation to artillery, forerunner of factory, 167. Freedom and unfreedom of per- sons under feudalism, 66 ff.; effacement of distinction, 66. See Dependence, Peasantry, Slavery. France, condition of peasantry prior to capitalism, 74f.; emancipation of serfs, 12th and 13th centuries, 74; peasant unions, 74; evolution of nobil- ity into courtiers, 74; sweep- ing away of feudalism at the Revolution with expropriation of lords, 99f.; early factories (manufaetures royales) 171 f., 309 ff.; struggle over mining rights, 182; monetary history, 250, 252; John Law specula- tion, 286 ff. ; economic policy of the state (Colbert), 349. Fraternitates, and guilds, 146. “Freed mountain” (Germany, mining), 183. Genoa, trading nobility, 55; Banea di San Giorgio, 259, 261. Geographical factors in Mediter- ranean economic development, contrast with China and India, 354.German settlement form, charac- ter and area, 3 ff.; spread and modification, 10 f.; origin, 12; disintegration, 13 f. Germany, land enclosures, 14; condition of peasantry prior to capitalism, 75-77; in south- west, 75 f.; in northwest, 75 f.; in east, 77; development of estates in post-medieval period, east vs. west, 87 ff.; position of peasantry in the east, 89 ff.; Peasants’ War, 89; gradual abolition of feudalism after Wars of Liberation, in the west, 99f.;: in the east, 100- 106; guild development, con- trast w. England and France, 153, 156-8: G. out of main stream of capitalistic develop- ment, 158; early factories on municipal soil, 173; mining, in the middle ages, 181 ff., 184 ff.; mercantile guilds, 233 f.; mone- tary history, 249, 250, 252; de- lay in developing capitalism, 304. Gift trade, 197 Gold. See Money, Coinage, Min- ing. Goldsmith bankers (England), 263 f. Grain banks (Egypt), 58. Greece, marriage by exchange of wives, 42; abolition of feudal tenure (Athens), 96f.; primi- tive shipping, 202; early his- tory of money, 241 f.; banking, 254, 257. See Antiquity. Guilds, craft. Forms and policies, 36-143 (Chap. IX); Origin and development, struggles, 144-152 (Chap. X) ; disintegra- tion, displacement by domestic system, 153-161 (Chap. XI); definition, 136; unfree G. in antiquity, 136; ritualistic, 137: free association the type in the west, 137 ff.; beginnings in antiquity, 137; G. in Islam, 138; internal policy, liveli- INDEX 391 hood policy, 138 ff.; regulations in interest of equal opportu- nity, 139 ff.; external policy monopoly policy, 142f.; later developments, 142f.; master- piece, 142; limitation of master- ship, 143; manorial law theory of origin, 144f.; criticized, 145f.; G. and fraternitates, 146; relation to territorial do- minion, 146 f., to towns, 147 f.: continuity in Italy, 148; acqui- sition of lords’ prerogatives, 148 f.; struggle to estab-ish monopoly, 149f.; struggle vs. competitors, 150, vs. laborers, 150f., vs. merchants, 150f., between guilds, 151 f.; lines of disintegration, England vs. Germany, 153 f.; developments in the textile industry, 155f.; later history, England, France and Germany, 156-8; displace- ment by domestic system, 158 ff.; legal relation to early factories, 171; not displaced by factories until 19th century, 173; role of G. in growth of medieval cities, 326 ff. Guilds, Mercantile, 230 ff. (Chap. XVIII). See Commerce. Gynicium (women’s house, ‘yu- vaixetov), 125, 126, 127. Hamlet system of land settle- ment, 12. Hand-workers, in primitive agri- cultural village, 8. See Craft work, Leiturgical labor. Hansards, Hanseatic League, 207, Genoese. policies, 234 f. Hansgraf, 230. Hide (Hufe), Hide-man (Hiif- mer), 5, 7 ff.; military theory of origin of the hide, 12. Hieroduli (Sacerdotal prostitu- tion), 29. Horse, 38; and other pack ani- mals, 199. Hostage in medieval trade, 213, 218, WRU H eta at ‘TATA Ere. Lid op edetoh ime ene n emery 3: ee Ta oe! ere ee CAPSSied amt Nieonaeitnng- Seine abel ee eee Ft eae nd ilambiilenhielersbed ata o ees Hoe-culture, 24 f.; 37 f. Household, House-community, structure and property rela- tions, 26, 28 ff.; evolution of, 46 ff.; property relations in, 46 f.; development into oikos, 47, into Zadruga, 47; modern changes, 111; industry in, 122. See also Family. Hungary, dissolution of feudal- ism, 101, 102; struggle over mining rights, 182. Hypergamy (India), 35f. lia (Egypt), 57, 61, 335. Immunity (immunitas), 65f.; failure of lords to achieve in Moslem lands, success in the west, 65f. India, early agrarian organiza- tion, 22 f.; sacerdotal prostitu- tion, 32: position of clan, 45: later history of manorial Sys- tem, 96; oikos craft work, 125- trading caste and caste trade, 195 f.; “Arabic” notation, 223 f.; mercantile guilds, 231: coinage, weights and measures, 232; banking, 254, 265 f.: citi- zenship idea absent, 316; no cities in western sense, 320 ff.- military organization, 320 f.: caste an obstacle to growth of cities, 322; economic policy of the state, beginnings killed by caste system, 344f.:; obstacles to capitalism, restrictions on gain seeking, 357; peculiarity of caste as eternal, 308 ff. ; caste and capitalism, 361; character of Hindu prophecy, 362 f. See Caste, Buddhism. Indians, American, efforts to en- Slave, 82. Industry, defined, 115; forms of organization, 115 ff. (Chap. VII; see Organization) ; stages in development, 122 ff. (Chap. TIT; see Stages.) See also Guilds, Shop Production, Fac- tory, Capitalism, Technology, 392 INDEX Labor, Investment. Tribal in- dustry, 122; I. in house com- munity, 122. Inheritance, collateral, a sur- vival of clan organization, 28; I. law, England vs, France, 108; Germany, 108; fideicom- missum and primogeniture re- sults in large estates in British Isles, parts of E. Germany and former Austria-Hungary, 109. Inst-people, 90. Interest, 204, 206. History of prior to capitalism, 267-70 (Chap. XXI); early law of, intra-group vs. external, 267; military and religious basis of suppression within groups, 267; among Jews, in Islam, Brahminism, China, India, Rome, 268; process of break- down of prohibition, 268 f.- evasion in Christian middle ages, 269; attitude of the Church, 269ff.; role of the Jews, 270f.; Protestantism andl. 27. Inurbamento, 333. Inventions and modern technol- ogy, 302ff.; three lines of Significance, 305f., 311 ff.- new character in 18th century, 311; spread from art and mining to industry, 312; first rational patent law (Eng.), 12, Investment, fixed, in industry, ownership, 120. Iron, charcoal and coal, in rela- tion to the modern technolog- ical development, 304 ff. Irrigation culture, characteristic of the east, 56 ff., relation to military organization and growth of cities, 321. Islam, guilds in, 138; citizenship idea absent, 315. Italy, condition of peasantry prior to capitalism, 75; early abolition of servitude, estab- lishment of share tenantry,75; abolition of feudal tenure by city republics, 98; mercan- tile guilds, 233; banking, 259 ff.; beginnings of occi- dental city (Venice), 319; growth, 324 (Florence), 326 ff. Japan, prostitution, 33; feudal- ism, 62; abolition of feudalism in 19th century, 96; state eco- nomic policy, 344. Jerusalem, sacerdotal prostitu- tion, 32 Jews, disintegration of clan or- ganization by religious forces, 46; an outcast trading people, 196; anti-semitism in middle ages, 217; in medieval bank- ing, 258; and interest-taking, 267 f., 270 f.; traces of citizen- ship idea in Josherim, 315; granted trading privileges in India, 344; role in western eco- nomic development, 358-61; significance of Judaism, 359 ff. Joint liability, of peasants in the Russian mir, 20; in the guild, 149; in early modern company development, 227f.; in late tome, 335. Josherim, germ of idea of citizen- ship among Jews, 316. Journeymen, in the guild system, organize, 143; forbidden to marry, 150. Judaism, relation of prophecy to decay of magic and growth of cities, 322f.; maintained eth- ical dualism, 359f.; role in development of capitalism, sup- pression of magic, 360, 362, 363 f. Judicial authority, of lords in western feudalism important, 65 ff. Kamerun, regulated chieftain trade, 55. ; Kinship, in modern family, 28; among Indian peoples, 29. KnXépos, 328. INDEX 393 Kulak, Russian village bourgeois, 18. Kustar (Russia), 122, 161. Kuae, German mining share, 186, 190. Labor, division of between sexes, 38 ff., 116 f., in guilds, insist- ence on finished product basis, 139, 154; skill absent in first specialization, 117; skill and magic, 117; demiurgical labor, 115, 124; communal, 39f., 117; itinerant or wandering, 119; oikos craft work, 120, 124f.; supply of free labor prerequisite to factory, 164, 167 f., 306f., source in Eng- land, 164, 306; position of labor in early factories, 168, 175f.; in medieval German mining, 183 ff.; free market for free labor essential to capitalism, 277; limitations of labor removed by steam engine, 305f.; labor relations and regulation in I8th century England, 307; rational organ- ization of labor a_ crucial achievement of capitalism, 312. See also Craft work, Industry, Peasantry, Slavery. Lagemorgen, land division ante- cedent to open field system, PATE Lamani, Indian trading caste, Ste Land. See Agrarian organization, Manor, Property. Land settlement lease, 67. Landed aristocracy, England and other countries, 110. Law. Manorial law, 68. Roman Law and the position of the peasantry, 76, 341; English law and the peasant, 77 .; cal- culable law a requisite ior capitalism, 277: Rational law, peculiar to the occident, 313; origin on the formal side in Roman law, 339; law after Cette te AU ica aI ene aie ected $a Ate mem ea ahi rorsa ne saan Snealanitn alee gases oases ea hn CR ade Be ee 349 f.. nationalistic, 350 f.; dis- appearance in England, 351. Ve rces, 135. Merchant, dominance of produc- tion by, . 156-1 export trade, "155. See Commerce, Guilds, mercantile. Merchant Adventurers, the, 216, 233. Metals, as money, 241 ff.; pre- cious, not primary cause of capitalism, 352f. See Mining, Money. Middle Ages, oikos craft work, 125; obstacles to development of factory industry, 177; min- ing, 181 ff.; shipping, 204 ff.; roads, 209; monetary problems and policies, 246 ff.; banking, 958 ff.- interest on money and ideas regarding, 269-71; com- pared with antiquity as to INDEX 395 growth of cities, 323 ff. See topics and countries. Miles, in Champagne fairs, 221. Military demand, and capital- ism, 354. See Factory. Military organization, relation to growth of cities, east vs. west, 320 f., 324 f., 328 f., 331 f. See also Interest, Agrarian or- ganization, Peasant protection, Seigniorial proprietorship. Milking, 24 (Chap. I, note 6), 38. Mills, mill-compulsion, 165 f. Mining, source of impulse to mechanization, 177, 312. His- tory of prior to capitalism, 162-191 (Chap. XIII) ; meth- ods, primitive and early, 178; legal relations, 178f.; pars fundi vs. regale, 179; Greco- Roman conditions, 179 f.; mid- dle ages, 180 ff.; struggle of crown and lords, Germany, Hungary, France, England, 181 ff.; organization, epochs, 183 ff.: differentiation in per- sonnel, 187 ff.; role of capital, 187 ff.; analogy to guild his tory, 189f.; smelteries and ore dealers, 190; coal in the middle ages, 190f.; union of coal and iron, 191. Mir (Russia), 17 ff.; origin, 19; destruction, 18. pices, 135. Mississippi Company, 287 ff. Mohammedanism, and prostitu- tion, 30; and sexual freedom, Bos Money, and Chinese guilds, 231; nature and _ history, 236-53 (Chap. XIX) ; father of pri- vate property, 236; origin, 236: functions and order of their appearance, 236 ff.; early forms, 238f.; relation and value of forms, 239 ff.; metals and coinage, 241 f.; technique of coinage 242 f.; standards SEBS RAGES CL OS top tne eresaaa am by) Tt te ne Se FRO T am ae or leenat de Seise ie tan ce nt De eres My ie i <5 396 INDEX 243 ff.; value of gold and sil- ver, 244; M. in middle ages, 246 ff.; effects of influx of metals in 16th century, 248 ff., 352f.; coinage defects cause use of bank money, 250f.; policy of modern nations, 251 ff. Money economy, princely, 58 f. Monopoly policy of princes, role in evolution of rational admin- istration, 284 f. Montes pietatis, 270. Morgen (Acre), 6. Mother-law, Mother-right, 29 f. See Matriarchate. Nadyel, in Russian land system, 17 ff. Nautical instruments, 200 f. Navicularii, 136. Navigation, 200 f. Near east, feudalism in, 96. Negotiable paper and capitalism, 278, 279f. See Bill of Ex- change, Speculation. Negotiator, medieval] trader, 126, 197. Netherlands, early factories, 172. See Flanders, News service, newspapers, 294 ff. Next (peons), 54. Norway, spread of Germanic set- tlement system to, 10: failure of feudalism to develop, 69. Obsequium, 63. Occident, capitalistie develop- ment peculiar to, 312; city and citizenship peculiar to, 318, reasons, 320 ff.; development of city and citizenship, 319-2: economic policy in town, Church and state, 345 ff. “Odal” peasantry (Norway), 69. Oikos-economy, 48, 58, 124 fe Sie 146, 162, 165. See Estate econ- omy. “Older men” in English guilds, 153. Open field (Gewann) in Agr. Village, 5. Organization, forms: of in in- dustry, 115-2] (Chap. VII); house-community and village, 115; production for sale, 116; communal and invitation work, 118; domestic or putting-out System, I118f.; relation to place of work, 119: ownership of fixed investment, 120f. See also Agrarian system, Com- merce, Military organization. Orgy, 28 ff. Orient, army organization in re- lation to political constitution 321; basis in irrigation, 321 f.:; role of magic, 322 f. See Irriga- tion-culture, Babylon, China, Egypt, India, Japan. Origo (Rome), 336. Ovens, oven-compulsion, 166. Overlordship, of land and person, 27. See Guild, Manor, Mar- ket, Seigniorial proprietorship, Town. Pars fundi (mining), 179. Parsees, in Indian trade, 232. Pasture, common, 5, 11, 16; ap- propriation of by lords, 71, 76; enclosures, 85. See Manor. Patriarchate, 30, 37, 41 ff., 45 ff.; disintegration of, 48 ff. Peasantry, origin of dependent position, 13 ff.; protection by princes, 70, 76, 90: absent in Eng., 164; relation of Roman law to position of, 71; attach- ment to soil, 71; rights of in Jand, 71; position of before entrance of capitalism, 74 ff. (Chap. V); in France (un- ions), 74f., Italy, 75, Ger- many, 75-77, England, 77 f. See Agrarian system, and various countries. Peasant Wars, in Germany, 72, 89. Peddling trade, 195, 216,Peons (nei), 54. Persia, persistence of feudalism, 96. Persian Empire, money in, 237, 942 = Phenicians, primitive shipping, 202; commerce non-monetary, 242. Piracy, 199, 208. Plantation economy, 79-84; def- inition, 79; semi-plantation, 79, in S. Am. and New Eng., 79 f.: two classical dev elop- ments of P. E., and Wes. Ac Carthage-Rome 80; problem of slave labor, 80, of slave sup ply, 81 f., of land supply, 82 f.; abolition of slavery, 83f. Plow, primitive, in general ys. in Germany, 5f. Plow association (Scotland), Wayat Poland, estate economy, 92; dis- solution of feudalism, 107 Te Polyandry, and polygamy, 42. Popolo grasso, 327. Population growth in west and in China, not the cause of capitalism, 352. Poor law, English, 306. Poor as source of labor for factory industry, 167, England, 306, Germany, 164. Postal service, 295 f Power, relation to early fac- tories, 169. See Technology. Precaria, 67. Price revolution of 16th and 17th centuries, 311. See also Money. Price work, 118, 134 f Proletarius, proletariate, 328. Promiscuity, in socialistic theory of marriage history, 291 Property systems and social croups, 26-50 (Chap. forms of appropriation, 26 ff. ; forms of groupings, Zone: house community and clan, so- cialistic theory of marriage and property, 98-37: evolution of the family, survey of primi- INDEX 397 tive economic life and institu- tions, forms of family and of property, 37-43; the clan and its property relationships, 43- 46; the house-community and its property relationships, 46- 50; property in land, estab- lished by dissolution of feudal- ism, 111; in position of guild master, 143; money the father of P., 263; P. in means of pro- duction, aspect of capitalism, 276. See Communism, Invest- ment. Prophecy, and disruption of the clan, 45; relation to capital- ism, 362 ff. Prostitution, 30ff.; sacerdotal, 31 ff.; status of contractual, 31; struggle of religious against, 32f.; P. in middle ages, 33. Protestantism, and interest tak- ing, 271; relation to growth of capitalism, 365 ff. Proxenia, in medieval trade, 213. Prussia, dissolution of feudalism with compromise of peasant in- terests, 103-6. Puritans, and corn-law repeal, 86: attitude toward labor and economic policy, 349, 351. See also Bank of England, Protes- tantism. Putting out system system), 118, 153 ff. (domestic Quadrant, nautical, 201. Quakers, and slavery, 83, 300. Railways, 295 ff. Rationality and capitalism, R. organization of labor pecul- capitalism, 312; ra- tional state, 338 ff. (see Law, State): rational ethic, 312f.; commerce first field of R., 223; R. in technology and science, 8313 ff.: in ethics and conduct of life, 354 ff.; process of devel- opment, 356 ff. See Capitalism. — 275: jar toara al a ~7 teat! Sarat teeda di poate Eat a Pr en eS igi Sn Sneran ore Se ee hee lblaecleeipreik oe cnt ot ot “Real dependency,” 68. Reformation. See Protestantism. Regale, mining, 179 ff. Regulated company, 281. Xeligion, and prostitution, 32 ff.; a product of the city, 317; role in development of cities, 322; R. and capitalism. See Capitalism. See also Buddhism, Christianity, Islam, Judaism, Magic. Reprisal, in medieval trade, 212. Resident trader, 215 ff. See Com- merce, Richerzeche (Cologne), 234. Risk, in early factories, 168; shipping R., in antiquity, 204, in middle ages, 205, 206. Roads, in primitive Germanic agrarian organization, 4, 14, Roman, medieval, 209; modern development, 296 f. Rolling of iron, 304. sa Rolling holdings (walzende Ack- er), 9. Rome, types of seigniorial rela- tions, 53; disintegration of national economy by delega- tion, 60f.; preparation for feudalism, 63; abolition of feudal tenure, 97; re-establish- ment under Empire, 98; primi- tive shipping, 203 f.; monetary history, 242, 244-46; banking, 254, 256, 258; rational capital- ism in, 335, displaced by leitur- gical organization, 336. See also Campagna. Roman law, relation to peasant rights, 71; role in develop- ment of rational law and capitalism, 339 ff., 341 ff. Runridge system, in Scotch hus- bandry, 15. Russia, agrarian system, 17 ff.; stratification of peasantry, 19; harshness of serfdom, its ori- gin, 20; feudal system of, 63: late establishment of serfdom, 86 f.; liberation of peasants after Crimean War, 106 f.; es- 398 INDEX tablishment of serfdom to the mir, 20, 107; failure of fac- tories with unfree workers, 129; failure of free guilds to develop, 147. Sachsenspiegel, 71. Salvum in terra, 269. Sample trading, 292 f. Science, its displacement of tra- dition a factor in capitalistic development, 306; vs. philos- ophy, an occidental achieve- ment, 313; a product of the city, 316 f.; attitude of Cathol- icism and Protestantism to- ward, 368. See Rationality, Technology. Scotland, agrarian system, 15 f.; stock-raising estates, 84 f. Sea loan, 205. Seigniorial proprietorship and feudalism, 51 ff. (Ch. III); chieftainship as source of dif- ferentiation in wealth, 51; bearings of military specializa- tion, 52; conquest and subju- gation, 52f.; voluntary sub- mission, commendation, 53; feudal land settlement, 53; ex- ploitation of seigniorial land, 53f.; magic, 54; trade, 54; fiseal sources, 56 ff.; colonial proprietorship, 61; enfeoffment and feudalism, fief and bene- fice, 62. Seigniorial power, three elements, 65. Seigniorial trade, 196 f. Sendeve, 229. Serfdom. See Peasant, and va- rious countries. Serfs de corps, serfs de main- morte (France), 74. Servia, see South Slavs. Sex, freedom, 33, division of labor between the sexes, 38 ff.; differentiation of money be- tween sexes, 238. Sharing, right of, in guilds, 140; among merchants, 218 f. Shekel, 241.x i ‘ \ i op HY bTi development --97 (Chap. old Aral vy: > ey i \ : { { ) rom retail emption o ity, 70 : , ’ FN . i century, Site See Lion \ o44 yi ¥ b f ‘ j { i } i ¢ 5 ‘ay 4 r } i \ \ ) f Ry TENGEants, 199; Californian gold discoveries, 252; religious de- nominations and economic life, 366. Vassal vs. freeman, 67. Vengeance, duty of clan, 27. Venice, trading nobility, 55; form of guild, 232; Rialto bank, 251; prototype of occi- dental city, 319 ff. Victuarius, 208. Village, primitive agricultural, sketch of Germanic, 4; descrip tion, 5 ff. See Agrarian organi- zation, India, Russia. Villains, See England, Peasants. Villicus, villication system, 73, io. Wage work vs. price work, 118, 119, 134 f. Wander years, in guild system, peculiar to Germany, 143. INDEX 401 Wandering trade, 122. War, demand for military goods, relation to early capitalism, 170, 307 ff. War loans, a modern phenome- non, 280. Wardship, status of early medie- val craftsmen, 147 f.; guild struggles against, 149. Wedderleginge, 229. settlement form, Wesphalia, ll White Russia, land system, 17 estate economy, 92. Wild field grass husbandry, 16. Woman, position of, in primitive soeiety, 38ff.; in antiquity, 116 f. See Sexes, Family, Mar- riage, Matriarchate. Woolen industry in development of capitalism, 303. > Zadruga, of South Slavs, 12, 47.2 See Be att 2 et ee ek as SN i fe iy \; 4 f i if : iF | Hy ; eee ans Ne teen a Ck ee eee oy FPA a NEE REN oe =a 1This book is a preservation photocopy. 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