Something very new took hold in the economy of 16th century Europe. It was inspired by humanism, and it made exploration possible. It allowed for the rise of a new merchant class. It moved England from a medieval to an early modern country. It created growth. And we still have it today. What is it? Credit.
In this episode, I look at the history of credit in the medieval period, and how it all started to change in Europe, and in England under the Tudors.Â
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Book Recommendation:
Sapiens, a Brief History of Humankind by Yuval Noah Harari
References:
John H Munro:
https://www.economics.utoronto.ca/workingPapers/tecipa-439.pdf
Usury, Calvinism, and Credit in Protestant England: from the Sixteenth Century to the Industrial Revolution
Religion and religious institutions in the European economy, 1000-1800
https://books.google.es/books?id=Q6Q9pc27-NMC&sitesec=buy&source=gbs_vpt_read
The Songs and Travels of a Tudor Minstrel: Richard Sheale of Tamworth, Andrew Taylor
Professor Craig Muldrew: The Economy of Obligation
—–Rough Transcript:—–
Hello and welcome to the Renaissance English History Podcast, a part of the Agora Podcast Network. I’m your host, Heather Teysko, and I’m a storyteller who makes history accessible because I believe it’s a pathway to understanding who we are, our place in the universe, and being more deeply in touch with our own humanity. This is Episode 119, and today we are going to talk about economics, specifically the rise of credit in Tudor England.
But first, I want to remind you of two things – first, the Tudor Summit is happening this coming weekend, March 2 and 3. It’s two days of talks from leading Tudor scholars like Tracy Borman and Leanda de Lisle, plus bloggers, and authors galore. You can sign up at www.TudorSummit.com. Also, as a special for the Tudor Summit, tickets to TudorCon are $50 off until March 8 – remember, that’s the live event we’re doing in October. I have a lovely new site up at www.TudorCon.info where you can see all the speakers, and get all the information you need in order to plan your trip.
So I have been reading the books by the philosopher historian Yuval Noah Harari, and if you haven’t read his book Sapiens, a brief history of humankind, I highly recommend you add it to your list. In the book he discusses how a particular species of animal – the homo sapien – went from just one more species, to the one that completely dominates the world, with a lot of focus on the cognitive revolution. In his work, he writes about the history of money as a unit of exchange, and the level of trust that we need to have, both in each other, and in the government or person issuing the money, that the money is, in fact, worth something.
Consider that a dollar bill, or a five pound note, is just a piece of paper. You can’t eat it, or drink it, or even take shelter in it. But, you can go to a store, and exchange it for food, or water, or shelter. And the reason you can do that is because the person who owns the store trusts that they, in turn, will be able to take your money, and use it for their own shelter, and food, and water. The system works because we all believe and trust in it.
The system of using money to represent value is thousands of years old, and along with that system came the person who needed to have something – a piece of equipment, seed to plant, or an ox – and didn’t have the money, so they promised future earnings in exchange for the seed or ox today. That is called credit. Credit also goes back about five thousand years. But something happened in the 16th century, that changed both the entire way that the economy was structured, and the use of credit. And that something was the idea of a growth economy. Those of you who took basic economics will remember Adam Smith’s Wealth of Nations as the pivotal source that described capitalism. But the forces that led to his 18th century work were already starting to move in the 16th century so that 200 years later, when Adam Smith wrote The Wealth of Nations, he was reporting on changes that had been taking place over two centuries.
Harari talks about the huge mindset that came with the scientific revolution, and the Reformation, and I want to talk about it here, and then give some examples from our Tudor friends. This is an area that still needs a lot of development, and I look forward to new research coming out about it. Recently the Social History Society in the UK put together a panel and discussion on the history of money, and there are several historians who are studying the rise in consumer credit in Tudor England.
So let’s talk about economics and lending for a minute, shall we? The Bible prohibited lending money for profit – called usury – in both the Old and New Testaments. In Exodus 22: 25, for example, there’s this: If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury’.
Even Jesus, in the New Testament, spoke against lending in the Gospel of Luke, But love ye your enemies, and do good, and lend, hoping for nothing again.” There is also the story of Jesus overturning the tables of the money lenders, written down in both Matthew and Mark.
Over the course of the 1500 years between when Jesus spoke those words, and the Tudor period, the Church had several levels of bans against Usury, differentiating between different types of loans, with lots of levels involved. And that is itself an entire podcast. But for our purposes, we should know that there were general bans against usury – namely lending for the purpose of getting money back through interest – but there were lots of loopholes, and ways that people could justify lending or taking out loans.
The economy during this period also saw very little growth. The prevailing viewpoint was that it was a zero sum game. If I got more money, it means that you lost. Maybe I grow my land, but that means taking it at your expense. There was only so much land. There was only so much gold. You couldn’t just create wealth from nothing.
It should also be noted that the prevailing mindset during the medieval period was that our life on earth here was simply a dress rehearsal for the afterlife. An audition for  heaven or hell, and we’re all just hanging out waiting for the second coming of Jesus, and the rapture, and our awaited fates in the afterlife. Add to that the belief that nothing could come that was as great as the civilizations of Rome and Greece. Everything that was good had already happened. All the medical discoveries had happened in Rome, with Galen and Aristotle, and if you wanted to learn medicine, you simply had to discover more of their works. If you wanted to learn about science, you simply had to read Plato. That was it. Rome had been the height, and ever since then we were trying to put the empire back again, and failing miserably. Nothing that humanity could build would ever match with what the Romans created.
Medieval writers such as Master Gregory, a 12th century man who lived in Oxford, wrote a manuscript called The Marvels of Rome – it lives in Cambridge now. It describes the wonders of Ancient Rome, from going through the city gates, to the statues and baths. Later in the 14th century  another chronicler, Ranulph Higden, used it as a source in his own Universal History book.
So here we are, around the year 1500. The greatest events of the past have already happened. We’re waiting here for the Rapture. The idea of improving and growing the economy is completely unheard of. If you talked to someone in 1500 about possibly growing the economy, they would look at you like you were insane. There’s nothing to grow. You only win more by taking it from others. There is a fixed pie. You don’t grow that pie.
And then, along comes humanism, and the Scientific Revolution. And guess what? The earth isn’t the center of the universe! There is more out there than we could ever comprehend. And guess what else? The Pope is fallible.
Trade with new lands meant that there were new products available to purchase, things that no one had ever thought of before. A consumer culture was growing, and some historians have even argued that the Renaissance was actually one big rise of consumerism.
Either way, there was more available to buy than ever before. And new debated in religion meant that people started realizing that there was value here on earth. Not just in waiting for the afterlife. You could prosper and enjoy life now. And, even more importantly, for the first time people began to feel as if the future was going to be better than today. And that, Harari points out, is the essence of credit – the belief that tomorrow you will have more than you have today.
If you come to me and you want to open a new cloth trading business with the Low Countries, and you ask me to help you with that by lending you money, I have to believe not just that you are going to be successful enough to repay it, but that the people you are depending on in the Low Countries will also be successful enough to pay you. I need to believe that you are going to have that money in the future, and that is an awful lot of trust to put in someone.
But as Harari points out, this trust is what creates growth. How does it do this? By allowing me to pull from tomorrow’s profits by financing my projects today. And, in essence, by creating a form of currency that is backed, not just by gold, the way money had been backed up before, but by a belief in the future, and a level of trust that we all put in each other.
New religious scholars began to disagree with the ancient Usury laws. Notably John Calvin, who himself is a little ambiguous as to where he stands on credit, but his followers who came after him were certainly more liberal on credit. Another theologian, the French Charles du Moulin wrote that loans were okay, and wrote that if a lender lent money to a wealthy merchant, and that man profited from the loan, the lender deserved some of that profit as well, basically stating that interest on loans was okay.
The idea of wealth began to change too, especially when it came to the creation of wealth in the middle classes. Du Moulin said that lending money was basically good, because it allowed more merchants and trades people to engage in their work, and it gave them capital to get started that they normally wouldn’t have.
These ideas got to England, notably through Martin Bucer, a German reformer who was a Chair at Cambridge University in the mid 1500’s. He noted that ancient Roman law allowed for a 12% interest rate  on loans for business, and that some countries already permitted such interest rates, and were having success with creating more wealth from it. He also argued that lending was important for the prosperity of society. The idea also began to circulate that you should follow the no-lending rule when it came to the poor, but for the rich, there was no reason why, if you loaned them money, you shouldn’t also benefit from that risk you took for them, and the rewards they had.
That isn’t to say that the opinion was universal. Elizabeth’s Soliciter General in 1592, Edward Coke, stated that all usury is damned and prohibited. But the main problem that many of the more Puritan reformers had to money lending was similar to the issues people have with payday lenders today – that it preys on the poor, and destroys their lives so that a few wealthy people can prosper. They also worried that it made the poor want to have more stuff – a rise in consumerism was frowned upon by the Puritans, of course.
Like with any prohibition, the people who were still performing the activity were getting fabulously wealthy – the people who lent money while usury laws were still in existence were charging incredibly high rates of interest – some as high as 70%. By making lending money legal, interest rates were expected to go down. In 1540 Charles V broke from the Roman rule on usury and permitted business loans in the low countries with an interest rate of up to 12%, in accordance with the ancient Roman laws. Rates higher than 12% were considered to be usurious, which led to the modern belief that high interest rates are usury.
In 1545 Henry VIII followed suit, creating a national interest rate of 10%. But his interest rate, while lower, didn’t make any distinction between business or personal loans. In 1552, that interest rate law was reversed in the Protestant reign of Edward VI, with the comment that usury was was a vice most odious and detestable.
In 1571 Elizabeth I reinstated her father’s law on interest rates, even keeping the same name of the statue. Her justification was that the repeal of the statute was impossible to enforce, and people were still lending money anyway. At least this way it could be regulated. It stated that any interest above 10 pounds for every 100 pounds was null and void.
The new law was still framed in a religous perspective though, stating, “For asmuch as all usery being forbidden by the law of god as sin and detestable,  be it enacted that all usury, loan, and forebearing of money by way of loan, sale of wares, or other doings whatsoever for gain, above the sum of 10 pounds for one hundred pounds per year shall be forfeit.
The next part of this is the theories and beliefs of Sir Francis Bacon served Elizabeth, but primarily is remembered for his work serving James I as Solicitor General, Attorney General, and Lord Chancellor. He does have a famous quote about usury being the certaintest means of gain, though one of the worst. But he also recognized that the growth of the economy depended on lending, and decided that the best way to facilitate that was through regulating the interest rate, and the goal was always to lower it. In particular, they paid close attention to what was going on in the Netherlands, trying to re-create the same level of success that the Low Countries were having with lower interest rates. Interestingly, by this point, all the arguments for and against the higher interest rates were from an economic standpoint, and no one was quoting the Bible any longer. By 1624 James I lowered the national interest rate to 8%, and by the 18th century it was down to 5%. The rate kept being lowered until the usury laws were phased out completely in the 19th century.
So that’s it for this week.
. And you can get in touch with me through the listener support line at 801 6TEYSKO or through twitter @teysko or facebook.com/englandcast. And remember to get your Tudorcon tickets at Tudorfair.com. Â
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Heather Teysko is the creator, writer, and producer of The Renaissance English History Podcast,  one of the longest running indie history podcasts, going since 2009. She's been writing about history online for over 25 years, since her first site on Colonial American history became number one in history on Yahoo in 1998. She writes books, created the original Tudor Planner (a yearly diary filled with Tudor history) and in 2019 created the world's first Tudorcon (you can "attend" online this year!). She has been passionate about Tudor England since she first read Alison Weir's The Six Wives of Henry VIII 20 years ago, and subsequently moved to London after college to spend her time immersed in Tudor history.