[Sidenote: Risks of banking]
Though the Fuggers and other firms soon went into large business of all sorts, they remained primarily bankers. As such they enjoyed boundless credit with the public from whom they received deposits at regular interest. The proportion of these deposits to the capital continually rose. This general tendency, together with the habit of changing the amount of capital every few years, is evident from the following table of the liabilities of the Fuggers in gold gulden at several different periods:
Year Capital Deposits 1527 . . . . . . . 2,000,000 290,000 1536 . . . . . . . 1,500,000 900,000 1546 . . . . . . . 4,700,000 1,300,000 1563 . . . . . . . 2,000,000 3,100,000 1577 . . . . . . . 1,300,000 4,000,000
A smaller Augsburg firm, the Haugs, had in 1560, a capital of 140,000 florins and deposits of 648,000. As all these deposits were subject to be withdrawn at sight, and as the firms usually kept a very small reserve of specie, it would seem that banking was subject to great risks. The unsoundness of the method was counterbalanced by the fact that most of the deposits were made by members of the banker's family, or by friends, who harbored a strong sentiment against embarrassing the bank by withdrawing at inconvenient seasons. Doubtless the almost uniformly profitable career of most firms for many years concealed many dangers.
The crash came finally as the result of the bankruptcy {522} of the Spanish and French governments. [Sidenote: Bankruptcy of France and Spain, 1557] Spain's repudiation of her debt was partial, taking the form of consolidation and conversion; France, however, simply stopped all payments of interest and amortization. Many banks throughout Europe failed, and drew down with them their creditors. The years 1557-64 saw the first of these characteristically modern phenomena, international financial crises. There were hard times everywhere. Other states followed the example of the French and Spanish governments, England constituting the fortunate exception. Recovery followed at length, however, and speculation boomed; but a second Spanish state bankruptcy [Sidenote: 1575] brought on another crisis, and there was a third, following the defeat of the Armada. The failure of many of the great private companies was followed by the institution of state banks. The first to be erected was the Banco di Rialto in Venice. [Sidenote: 1587]
The banks were the agencies for the spread of the capitalistic system to other fields. The great firms either bought up, or obtained as concessions from some government, the natural resources requisite for the production of wealth. One of the very first things seized by them were the mines. [Sidenote: Mining] Indeed, the profitable exploitation of the German mines especially dates from their acquisition by the Fuggers and other bankers late in the fifteenth century. Partly by the development of new methods of refining ore, but chiefly by driving large numbers of laborers to their maximum effort, the new mine-owners increased the production of metal almost at a bound, and thereby poured untold wealth into their own coffers. The total value of metals produced in Germany in 1525 amounted to $4,800,000 per annum, and employed over 100,000 men. Until 1545 the German production of silver was greater than the American, and copper was almost as valuable {523} a product. Notwithstanding its increased production, its value doubled between 1527 and 1557. The shares in these great companies were, like the "Fugger letters," or certificates of interest-bearing deposits in banks, assignable and were actively traded in on various bourses. Each share was a certificate of partnership which then carried with it unlimited liability for the debts of the company. One of the favorite speculative issues was found in the shares of the Mansfeld Copper Co., established in 1524 with a capital of 70,000 gulden, which was increased to 120,000 gulden in 1528.
[Sidenote: Commerce]
Whereas, in banking and in mining, capital had almost created the opportunities for its employment, in commerce it partly supplanted the older system and partly entered into new paths. In the Middle Ages domestic, and to some extent international, commerce was carried on by fairs adapted to bring producer and consumer together and hence reduce the functions of middleman to the narrowest limits. Such was the annual fair at Stourbridge; such the famous bookmart at Frankfort-on-the-Main, and such were the fairs in Lyons, Antwerp, and many other cities. Only in the larger towns was a market perpetually open. Foreign commerce was also carried on by companies formed on the analogy of the medieval gilds.
New conditions called for fresh means of meeting them. The great change in sea-borne trade effected by the discovery of the new routes to India and America, was not so much in the quantity of goods carried as in the paths by which they traveled. The commerce of the two inland seas, the Mediterranean and the Baltic, relatively declined, while that of the Atlantic seaboard grew by leaps and bounds. New and large companies came into existence, formed on the joint-stock principle. Over them the various governments exercised a large control, giving them a semi-political character.
{524} [Sidenote: Portugal]