The usury doctrine and urban public finances in late-medieval Flanders (1220 - 1550): rentes (annuities), excise taxes, and income transfers from the poor to the rich
The objectives of this study are three-fold. The first is to rebut Charles Kindleberger’s famous dictum that usury ‘belongs less to economic history than to the history of ideas’; and in particular to demonstrate that the resuscitation of the anti-usury campaign from the early 13th century led to a veritable financial revolution in late-medieval French and Flemish towns: one that became the ‘norm’ in modern European states from the 16th century (in England, from 1693): a shift in public borrowing from interest-bearing loans to the sale of annuities, usually called rentes or renten. That anti-usury campaign had two major features: (1) the decrees of the Fourth Lateran Council of 1215, which provided harsh punishments – excommunication -- for both unrepentant usurers and princes who failed to suppress them; and (2) the establishment of the two mendicant preaching orders: the Franciscans (1210) and the Dominicans (1216), whose monks preached hellfire and eternal damnation against all presumed usurers – including, of course, anyone who received any interest on government loans. There is much evidence that from the 1220s, many financiers in many French and Flemish towns, fearing for their immortal souls, preferred to accept far lower returns on buying rentes than the interest they would have earned on loans. These rentes, based on 8th-century Carolingian census contracts, had two basic forms: (1) life-annuities, by which a citizen purchased from the government, with a lump sum of capital, an annual income stream lasting a lifetime, or the lifetime of his wife as well; (2) perpetual annuities, by which the annual income stream was indeed perpetual, or until such time as the government chose to redeem the rentes, at par. Initially, some theologians opposed sales of rentes as subterfuges to cloak evasion of the usury doctrine. But in 1250-1, Pope Innocent IV declared them to be non-usurious contracts, essentially because they were not loans. Subsequent popes in the 15th century confirmed his views and the non-usurious character of rentes, on two conditions: (1) that the buyer of the rente could never demand redemption or repayment, and (2) that the annual annuity payments (and any ultimate redemptions) be in accordance with actual rent contracts: i.e., that the funds be derived from the products of the land. Ecclesiastical authorities soon agreed that taxes on the consumption of the products of the land (and sea) met this test: i.e., taxes on beer and wine (which always accounted for the largest share), bread, textiles, fish, meat, dairy products, etc. The second objective is to measure the importance of 'rentes' in the civic finances of Flemish towns, in terms of both revenues and expenditures: from the annual town accounts Ghent (14th century only), and Aalst (1395-1550), where they had far greater importance. The related third objective is to measure the burden of the excise taxes for master building craftsmen in Aalst, in tables that measure the values of the excise tax revenues expressed in real terms: first, in the equivalent number of ‘baskets of consumables’ (which form of the base of the Consumer Price Index), and second their value in terms of the annual money-wage incomes of master masons (for 210 days). This provides an entirely new look at the late-medieval ‘standard of living’ controversy – with indications that this consumption-tax burden sometimes rose from about 13,200 to almost 30,000 days’ wage income, for a town of perhaps 3600 inhabitants (but obviously less dramatic on a per capita basis). That tax burden rose the most strongly when, by other indications, real wages (RWI = NWI/CPI) were also finally rising; and thus possibly these real wage gains were largely eliminated. That per capita tax burden would have been all the greater if, in the course of the 15th century, Aalst had experienced the same decline as did small towns of Brabant, to the east, on the order of 25%, and some other Flemish towns, in which the population decline varied from 9% to 28 %. In earlier publications I had challenged the widespread view that the era following the Black Death, with a radical change in the land:labour ratio, came to be a ‘Golden Age’ of the artisan and labourer. I contended instead that frequent inflations eroded or eliminated wage gains, and thus that periodic rises in real wages were due essentially to steep deflations combined with pronounced wage-stickiness. As I also calculated, English artisans in the 1340s had earned real wages that were about 50% of the Flemish; but by the 1480s, they had narrowed that gap (with much less inflation) to about 80%. That gap was probably even smaller, until the 1640s, when England’s Parliament finally imposed similar excise taxes on consumption.
|Date of creation:||Aug 2007|
|Date of revision:||Jan 2008|
|Publication status:||Published in La fiscalità nell’economia Europea, secc. XIII - XVIII, Fondazione Istituto Internazionale di Storia Economica “F. Datini”, Prato, Serie II: Atti delle “Settimane de Studi” et altri Convegni 1.39(2008): pp. 973-1026|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- D. C. Coleman, 1983. "Proto-Industrialization: A Concept Too Many," Economic History Review, Economic History Society, vol. 36(3), pages 435-448, 08.
- North, Douglass C., 1984. "Government and the Cost of Exchange in History," The Journal of Economic History, Cambridge University Press, vol. 44(02), pages 255-264, June.
- Hoffman, Philip T. & Postel-Vinay, Gilles & Rosenthal, Jean-Laurent, 2001. "Priceless Markets," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226348018.
- Munro, John H., 2002. "The medieval origins of the 'Financial Revolution': usury, rentes, and negotiablity," MPRA Paper 10925, University Library of Munich, Germany, revised Sep 2002.
- Mendels, Franklin F., 1972. "Proto-industrialization: The First Phase of the Industrialization Process," The Journal of Economic History, Cambridge University Press, vol. 32(01), pages 241-261, March.
- Julian Cornwall, 1970. "English Population in the Early Sixteenth Century," Economic History Review, Economic History Society, vol. 23(1), pages 32-44, 04.
- Allen, Robert C., 2001. "The Great Divergence in European Wages and Prices from the Middle Ages to the First World War," Explorations in Economic History, Elsevier, vol. 38(4), pages 411-447, October.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:11012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.