Debt: The First 5,000 Years

by David Graeber

In part, this was due to the habit of Christian princes of exploiting, for their own purposes, the fact that Jews did sit slightly outside the system. Many encouraged Jews to operate as moneylenders, under their protection, simply because they also knew that protection could be withdrawn at any time. The kings of England were notorious in this regard. They insisted that Jews be excluded from merchant and craft guilds, but granted them the right to charge extravagant rates of interest, backing up the loans by the full force of law.113 Debtors in medieval England were regularly thrown in prisons until their families settled with the creditor.114 Yet the same thing regularly happened to the Jews themselves. In 1210 AD, for example, King John ordered a tallage, or emergency levy, to pay for his wars in France and Ireland. According to one contemporary chronicler, “All the Jews throughout England, of both sexes, were seized, imprisoned, and tortured severely, in order to do the king’s will with their money.” Most who where put to torture offered all they had and more—but on that occasion, one particularly wealthy merchant, a certain Abraham of Bristol, who the king decided owed him ten thousand marks of silver (a sum equivalent to about a sixth of John’s total annual revenue), became famous for holding out. The king therefore ordered that one of his molars be pulled out daily, until he paid. After seven had been extracted, Abraham finally gave in.115 John’s successor, Henry III...

as Norman Cohn put it, “What had once been a flourishing Jewish culture had turned into a terrorized society locked in perpetual warfare with the greater society around it.”119 One mustn’t exaggerate the Jewish role in lending. Most Jews had nothing to do with the business, and those who did were typically bit players, making minor loans of grain or cloth for a return in kind. Others weren’t even really Jews. Already in the 1190s, preachers were complaining about lords who would work hand in glove with Christian moneylenders claiming they were “our Jews”—and thus under their special protection.120 By the 1100s, most Jewish moneylenders had long since been displaced by Lombards (from Northern Italy) and Cahorsins (from the French town of Cahors)—who established themselves across Western Europe and became notorious rural usurers.

One mustn’t exaggerate the Jewish role in lending. Most Jews had nothing to do with the business, and those who did were typically bit players, making minor loans of grain or cloth for a return in kind. Others weren’t even really Jews. Already in the 1190s, preachers were complaining about lords who would work hand in glove with Christian moneylenders claiming they were “our Jews”—and thus under their special protection.120 By the 1100s, most Jewish moneylenders had long since been displaced by Lombards (from Northern Italy) and Cahorsins (from the French town of Cahors)—who established themselves across Western Europe and became notorious rural usurers.

) and Cahorsins (from the French town of Cahors)—who established themselves across Western Europe and became notorious rural usurers.121

The Church quickly came under considerable popular pressure to do something about the problem, and at first, it did try to tighten the clamps. Existing loopholes in the usury laws were systematically closed, particularly the use of mortgages. These latter began as an expedient: as in medieval Islam, those determined to dodge the law could simply present the money, claim to be buying the debtor’s house or field, and then “rent” the same house or field back to the debtor until the principal was repaid. In the case of a mortgage, the house was in theory not even purchased but pledged as security, but any income from it accrued to the lender. In the eleventh century, this became a favorite trick of monasteries. In 1148, it was made illegal: henceforth, all income was to be subtracted from the principal. Similarly, in 1187, merchants were forbidden to charge higher prices when selling on credit—the Church thereby going much further than any school of Islamic law ever had. In 1179, usury was made a mortal sin, and usurers were excommunicated and denied Christian burial.122 Before long, new orders of itinerant friars like the Franciscans and Dominicans organized preaching campaigns, traveling town to town, village to village, threatening moneylenders with the loss of their eternal souls if they did not make restitution to their victims. All this was echoed by a heady intellectual debate in the newly founded universities, not so much as to whether usury was sinful and illegal, but...

in transporting goods to wherever they were needed), whereas interest accrued even if the lender did nothing at all. Soon the rediscovery of Aristotle, who returned in Arabic translation, and the influence of Muslim sources like Ghazali and Ibn Sina, added new arguments: that treating money as an end in itself defied its true purpose, that charging interest was unnatural, in that it treated mere metal as if it were a living thing that could breed or bear fruit.

Merchant capitalism of the sort long familiar in the Muslim Near West only really managed to establish itself—quite late, compared with the situation in the rest of the medieval world—when merchant capitalists managed to secure a political foothold in the independent city-states of northern Italy—most famously, Venice, Florence, Genoa, and Milan—followed by the German cities of the Hanseatic League.126 Italian bankers ultimately managed to free themselves from the threat of expropriation by themselves taking over governments and by doing so, acquiring their own court systems (capable of enforcing contracts) and, even more critically, their own armies.

It is often held that the first pioneers of modern banking were the Military Order of the Knights of the Temple of Solomon, commonly known as the Knights Templar. A fighting order of monks, they played a key role in financing the Crusades. Through the Templars, a lord in southern France might take out a mortgage on one of his tenements and receive a “draft” (a bill of exchange, modeled on the Muslim suftaja, but written in a secret code) redeemable for cash from the Temple in Jerusalem. In other words, Christians appear to have first adopted Islamic financial techniques to finance attacks against Islam. The Templars lasted from 1118 to 1307, but they finally went the way of so many medieval trading minorities: King Phillip IV, deep in debt to the order, turned on them, accusing them of unspeakable crimes; their leaders were tortured and ultimately killed, and their wealth was expropriated.128 Much of the problem was that they lacked a powerful home base. Italian banking houses such as the Bardi, Peruzzi, and Medici did much better. In banking history, the Italians are most famous for their complex joint-stock organization and for spearheading the use of Islamic-style bills of exchange.129 At first these were simple enough: basically just a form of long-distance money-changing. A merchant could present a certain amount in florins to a banker in Italy and receive a notarized bill registering the equivalent in the international money of account (Carolingian derniers), due in,...

The Venetians were only the most famous in this regard. They created a veritable mercantile empire over the course of the eleventh century, seizing islands like Crete and Cyprus and establishing sugar plantations that eventually—anticipating a pattern eventually to become all too familiar in the New World—came to be staffed largely by African slaves.133 Genoa soon followed suit; one of their most lucrative businesses was raiding and trading along the Black Sea to acquire slaves to sell to the Mamluks in Egypt or to work mines leased from the Turks.134 The Genoese republic was also the inventor of a unique mode of military financing, which might be known as war by subscription, whereby those planning expeditions sold shares to investors in exchange for the rights to an equivalent percentage of the spoils. It was precisely the same galleys, with the same “merchant adventurers” aboard, who would eventually pass through the pillars of Hercules to follow the Atlantic coast to Flanders or the Champagne fairs, carrying cargoes of nutmeg or cayenne, silks and woolen goods—along with the inevitable bills of exchange.

It was around this same time, however, at the height of the fairs of Champagne and the Italian merchant empires, between 1160 and 1172, that the term “adventure” began to take on its contemporary meaning. The man most responsible for it was the French poet Chretien de Troyes, author of the famous Arthurian romances—most famous, perhaps, for being the first to tell the story of Sir Percival and the Holy Grail. The romances were a new sort of literature featuring a new sort of hero, the “knight-errant,” a warrior who roamed the world in search of, precisely, “adventure”—in the contemporary sense of the word: perilous challenges, love, treasure, and renown. Stories of knightly adventure quickly became enormously popular, Chretein was followed by innumerable imitators, and the central characters in the stories—Arthur and Guinevere, Lancelot, Gawain, Percival, and the rest—became known to everyone, as they are still. This courtly ideal of the gallant knight, the quest, the joust, romance and adventure, remains central to our image of the Middle Ages.

“Knights” had originally been a term for freelance warriors, drawn from the younger or, often, bastard sons of the minor nobility. Unable to inherit, they were often forced to band together to seek their fortunes. Many of these bands became little more than roving gangs of thugs, in an endless pursuit of plunder—precisely the sort of people who made merchants’ lives so dangerous. Culminating in the twelfth century, there was a concerted effort to bring this dangerous population under the control of the civil authorities: not only the code of chivalry, but the tournament, the joust—all these were more than anything else ways of keeping them out of trouble, as it were, in part by setting knights against each other, in part by turning their entire existence into a kind of stylized game.137 The ideal of the lone wandering knight, in search of some gallant adventure, on the other hand, seems to have come out of nowhere.

their entire existence into a kind of stylized game.137 The ideal of the lone wandering knight, in search of some gallant adventure, on the other hand, seems to have come out of nowhere.