The Age of the Reformation

by Preserved Smith

THE CAPITALISTIC REVOLUTION

SECTION 1. THE RISE OF THE POWER OF MONEY

[Sidenote: Reformation and economic revolution]

Parallel with the Reformation was taking place an economic revolution even deeper and more enduring in its consequences. Both Reformation and Revolution were manifestations of the individualistic spirit of the age; the substitution, in the latter case, of private enterprise and competition for common effort as a method of producing wealth and of distributing it. Both were prepared for long before they actually upset the existing order; both have taken several centuries to unfold their full consequences, and in each the truly decisive steps were taken in the sixteenth century.

It is doubtless incorrect to see either in the Reformation or in the economic revolution a direct and simple cause of the other. They interacted and to a certain extent joined forces; but to a greater degree each sought to use the other, and each has at times been credited, or blamed, with the results of the other's operations. Contemporaries noticed the effects, mostly the bad effects, of the rise of capitalism, and often mistakenly attributed them to the Reformation; and the new kings of commerce were only too ready to hide behind the mask of Protestantism while despoiling the church. Like other historical forces, while easily separable in thought, the two movements were usually inextricably interwoven in action.

[Sidenote: Rise of capitalism]

Capitalism supplanted gild-production because of its fitness as a social instrument for the production and {516} storing of wealth. In competition with capital the medieval communism succumbed in one line of business after another—in banking, in trade, in mining, in industry and finally in agriculture—because it was unable to produce the results that capital produced. By the vast reward that the newer system gave to individual enterprise, to technical improvement and to investment, capitalism proved the aptest tool for the creation and preservation of wealth ever devised. It is true that the manifold multiplication of riches in the last four centuries is due primarily to inventions for the exploitation of natural resources, but the capitalistic method is ideally fitted for the utilization of these new discoveries and for laying up of their increment for ultimate social use. And this is an inestimable service to any society. Only a fairly rich people can afford the luxuries of beauty, knowledge, and power, that enhance the value of life and allow it to climb to ever greater heights. To balance this service, it must be taken into account that capitalism has lamentably failed justly to distribute rewards. Its tendency is to intercept the greater part of the wealth it creates for the benefit of a single class, and thereby to rob the rest of the community of their due dividend.

[Sidenote: Primary cause of the capitalistic revolution]

So delicate is the adjustment of society that an apparently trivial new factor will often upset the whole equilibrium and produce the most incalculable results. Thus, the primary cause of the capitalistic revolution appears to have been a purely mechanical one, the increase in the production of the precious metals. Wealth could not be stored at all in the Middle Ages save in the form of specie; nor without it could large commerce be developed, nor large industry financed, nor was investment possible. Moreover the rise of prices consequent on the increase of the precious metals gave a powerful stimulus to manufacture and a {517} fillip to the merchant and to the entrepreneur such as they have rarely received before or since. It was, in short, the development of the power of money that gave rise to the money power.

In the earlier Middle Ages there prevailed a "natural economy," or system in which payments were made chiefly in the form of services and by barter; this gave place very gradually to our modern "money economy" in which gold and silver are both the normal standards of value and the sole instruments of exchange. Already in the twelfth century money was being used in the towns of Western Europe; not until the late fourteenth or fifteenth did it become a dominant factor in rural life. This change was not the great revolution itself, but was the indispensable prerequisite of it, and in large part its direct cause.