February 2024
Book Group: Medici Money: Banking, Metaphysics, and Art in Fifteenth Century Florence, Tim Parks, 2005.
My initial impression, after one chapter, is that it will be a pretty straightforward read – it is not clear to me if it will be anything other than a slightly-dramatized history of the Medici’s. Parks is not a historian, cites no references, and has a 4-page “Bibliographic Note” which makes it clear that he doesn’t think much of academics. All this does not make me optimistic.
Final impression: My initial impression was accurate, but I did learn some very general things.
- Most interesting was to understand how chaotic the Italian City States were at the time.
- There were continual wars conducted by mercenary armies; citizens were taxed to support the wars, and some smaller towns were sometimes looted or ravished, but mostly the wars didn’t involve civilians
- Many governments were nominally ‘elite republics’ that were governed by councils of members of powerful families, but in practice it appears that one family would typically be in power, and would uses a combination of nepotism and favoritism to stay in power.
- Italy consisted of five power centers that were continually shifting alliances: Naples in the south, Rome farther north, and then Milan, Florence and Venice. When one would become dominant, a couple others would enter an alliance against ti.
- Also of interest was the way banks worked
- While banks loaned money and effectively collected interest, that counted as usury and so they used various facades to avoid the appearance of usury
- Banks also needed to participate in trading to create means of getting repayment for their investments
- Bankers also, apparently because they were really concerned about their souls, cultivated close relationships with the catholic church to achieve absolution.
- As time went on
- the Church became more and more corrupt, and became of less use as a way of allowing bankers to ‘purify’ themselves by association
- bankers, in an effort to cultivate a high social status, made more and more loans to princes and others who could not be counted on to repay them in anything but social capital.
- the generations of Medici morphed from
(1) just bankers who kept a low social profile (e.g., Giovani),
(2) bankers and behind-the-scenes political operators (e.g.,Cosimo);
(3) primarily politicians and elite patrons with little compentence in banking (e.g., Lorenzo)
- the Church became more and more corrupt, and became of less use as a way of allowing bankers to ‘purify’ themselves by association
Background
- Usura is Italian for usury, and at this time it was considered a mortal sin. However, working hand in hand, the Church and the bankers found ways around this, partly by raising prices on goods the Church purchases from the bankers (who also ran trade networks) to replace interest, and partly by “discretionary deposits.” These were deposits in which the depositors name was kept secret, and which gifts (not interest) were regularly paid to the depositor.
- Banking was useful for the wealthy because it was not safe to send gold or other forms of wealth over the highways. Instead, money would be deposited in one branch of a bank in one city, and it could be withdrawn at another branch of the same bank in another city via a letter of credit. This was also useful because the name of the depositor was often a secret, because now wealth was no longer tied to a local area, and because wealth was liquid and hard to track, contrary to its characteristics when tied up in material assets.
- The Five Medicis.
Giovanni di Bicci di Medici founded the Medici bank in 1397. He drove the growth of the bank and stalled out of politics (and advised his children to do the same).
In 1429 Giovanni died and his son Cosimo took over. Cosimo was a skilled administrator and presided over the growth of the bank’s wealth and power during this period he also became a generous patron of the arts, and the most powerful political figure in Florence.
In 1464 his son, Piero (the gouty), took over both the bank and the political position, but, sick and bad tempered, lasted only five years. During this time the bank began its rapid decline.
In 1469 Lorenzo (the magnificent) took over after Piero’s death. Lorenzo allows the banks decline to continue, but is a skillful politician, a good poet, and a skilled political manipulator and aspiring dictator.
In 1492 Lorenzo died, and his son Piero took over, but ruled for only two years, fleeing as the French army advanced and drowning while crossing a river. - Historical context (before):
The important banking innovations had already been invented: double-entry bookkeeping; the bill of exchange; the letter of credit; the deposit account.
Two banks, the Bardi (13th C) and Peruzzi (14th C), had come before them and were larger and wealthier than the Medici’s ever were.
Florence had already become a republic, due to the declining power of the papal states to the south, and the Holy Roman Empire to the north.
In 1338 (and for decades afterwards) the Plague reduced the population of Europe by about 30%, and that of major cities even more.