(Drivebycuriosity) - It seems that some things never change. Today there is an antitrust campaign against "Big Business". Politicians and bureaucrats claim that big corporations abuse their alleged monopoly power and try to dismantle them. A similar crusade unsettled the Renaissance. Early in the 16th century Jacob Fugger was in the pillory. The banker, investor & industrialist was a champion of free enterprise and unfettered capital markets, a
crusader for economic and personal freedom, and a warrior for capitalism. The mogul got attacked by unsuccessful competitors, debtors and political & religious
reformers, who all claimed that Fugger`s firm was too big and abused her alleged monopoly power.
Greg Steinmetz`s biography "The Richest Man Who Ever Lived" explains the rise of the Renaissance tycoon and describes how he amassed his wealth, cooperated with popes & emperors and struggled with his enemies (amazon ). The Renaissance story has surprisingly many similarities to today`s developments.
Fugger wasn`t the heir of a dynasty, instead he accumulated his huge wealth on his own and his rise can be explained by education, intelligence and willingness to take high risks. He was born 1459 in Augsburg, a city in Southern Germany, today part of Bavaria. At Fugger´s birth Augsburg was on its way to becoming the money center of Europe, the London of its day. When he was young his mother secured him an apprenticeship in Venice, the most commercial minded city on earth, where young men went to learn about trade and banking. The Italians had invented it, as shown by the words credito, debito and even banca.
In Venice Fugger got introduced to the advantageous craft of accounting. He learned double-entry bookkeeping, so named because each entry had a corresponding entry to make the books balance. The method helped him to understand a complex business in a quick glance by summarizing the highlights and condensing the value of an enterprise to a single figure, its net worth.
The Big Picture
The fact, that Fugger, as a teenager, already understood the importance of bookkeeping and how to do it, gave him an edge over his competitors, who kept sloppy books and overlooked details left money on the table. While his competitors believed that they could live without detailed figures, Fugger had clerks in each of his offices, who monitored every transaction and let nothing sneak through. The offices had to update the figures every week and close the books at year-end, no exceptions.
Fugger could see the big picture like no one else. By knowing exactly where he stood at every moment, he always knew how much he had to lend or whether he had to cut back. And he knew exactly, down to the last kreuzer, how much he was worth.
Fugger also was innovative. He created a news service, the world`s first. A network of couriers raced to Augsburg with market information, political updates and the latest gossip - anything that would give him an edge.
Fugger benefited also from his political skills. He wove close connections with the uprising Habsburg family and helped at least two of them to become emperor of the Holy Roman Empire by financing them and bribing their electors. He also supported other members of the Habsburg family to secure the kingship of Spain.
Fugger`s huge loans to the Habsburgs and other rulers were a kind of a highly risky gamble that could have driven him into insolvency, because royals could not be forced to pay them back. But they also made him extremely rich. Being the top financier of the Habsburg family for instance gave him control over highly profitable silver mines in Austria and Hungary, that partly were used a collateral and delivered a large part of his income.
Promising Projects
Fugger had lucrative connections with the popes as well. The Vatican amassed a lot money from donations, because people in the Middle Ages and the Renaissance believed that they could avoid hell - even though they had committed sins, even murders -
if they donate enough money to the church.
Fugger dominated the business of transferring collection plate donations from
Germany to Rome. Partly because he could move the money more safely and efficiently than the others
because of the size of his branch network. He had so many offices and
handled so much money that he could create a close loop where he could
debit an account in one branch and credit an account in another. Actual
coins never changed hands. This made him different from other bankers
and endeared him to the Vatican because the pope could get is money
without the risk of highway robbers seizing it en route. Like a credit
card company taking a cut on every swipe, Fugger collected 3 percent on
each transfer. This made him "God´s banker", the top financier to Rome. The taycoon served seven popes and minted coins for four of them.
Besides financing the Habsburgs and popes the entrepreneurial bet his money on other risky but highly promising projects like Portugal´s pepper trade in Asia and Spain`s exploration of their American colonies, the New World.
Public Enemy
Naturally
Fugger`s outstanding success created envy & political resistance. Martin Luther pleaded with the princes "to
crack down on big business". The knight Ulrich von Hutten, a
supporter of Martin Luther, turned Fugger into a public enemy and
demanded the execution of Jacob Fugger & Nephews. Thomas Müntzer, a
self-proclaimed mystic, lead a peasant revolution army in order to
"throw away the profiteering evildoers", especially his arch-enemy
Fugger.
The Renaissance banker defended
himself and declared, that companies like his benefited all level of
society, producing jobs and wealth for all. Fugger claimed that he and other business leaders knew better than to cheat on their
customers. Reputation was everything and the importance of credibility
checked the urge to lie, gouge and steal.
Richer Than The Medici
Fugger`s balance sheet of 1525 showed that he had a net wealth - assets minus liabilities - of 2.02 million florins, the highest reported wealth so far. That beats the net worth of the Medici family, the richest Italian bankers, by far. Their bank had never more than 56,000 florin. After Jacob Fugger´s death the balance sheets of the family grew bigger. They opened offices in more cities, became more international and more sophisticated. The Fugger company lasted another hundred years and wrapped up its affairs only because Fugger family members lost interest and preferred to live as country squires rather than businessmen.
As many of the mega-rich (Rockefeller, Carnegie) he also was philanthropic. Fugger started a public housing project in Augsburg, the Fuggerei, that offers rents below market prices, today known as affordable rents.
Steinmetz`s
book is much more than a biography. He depicts political developments in the
German speaking lands in the 16th century, than a patchwork of kingdoms, duchies, electorates and free cities like Augsburg, Frankfurt and Hamburg. He writes about the rise and fall of the Hanse (Hanseatic League), an early trade union, containing wealthy free cities like Lübeck, Hamburg, Bremen, Rostock, Stralsund, Tallinn, Riga, Gdansk, and Bruges, an opponent of Fugger. And Steinmetz describes the role of the
emperors of the "Holy Roman Empire", who were traditionally members of
the Habsburg family. After the death of Charlemagne, the first emperor,
Europe split into kingdoms that further split into principalities,
duchies or whatever other entities had enough military power to stay
independent. The followers of Charlemagne, the emperors (Kaisers) got elected like the popes. Seven princes and bishops - the most powerful territorial leaders in the
German-speaking countries - comprised the electoral college that
selected the emperor. The emperor received no funding except from his own
estates. He was weak because, unlike the centralized states of France
and England, Germany´s provincial lords clung to their independence. So the emperors relied on bankers who financed them and the Habsburg emperors relied on Fugger, the most powerful financier of his time.
Early Class Struggle
The German speaking lands experienced a boiling up controversy between the monopolistic Catholic Church, ruled by Rome, and reformers like Martin Luther, Thomas Müntzer & Ulrich von Hutten, that escalated into a violent class struggle and a bloody revolution, the German Peasant`s War. Fugger sided with Rome, the emperor and the aristocrats, because the church was an important source of his income, and the reformers & revolutionaries wanted to expropriate "the rich" and destroy tycoon Fugger.
Some things never change.
