70. Jews and Finance in the Medieval Period (Jewish History Lab)

Okay, let's go on to the last part, which is the most difficult part of this section, talking about moneylending. Moneylending and the medieval churches. Shylock, of course, is the the image. Shylock is the merchant of Venice and Shakespeare's famous play here, appropriately indicated with a red hat, which was the badge that Jews were required to wear in Venice at the time of the setting of this particular play. So the idea of moneylending is heavily discouraged by the church, specifically one Christian to another, and charging interest. If you look at Deuteronomy chapter 23, verses 20-21, it says very clearly, interest of food or money or anything on which interest can be charged. You may charge interest to a foreigner, but not to your brother. Now there's a lot more to say about this in terms of Jewish thought, but basically the way the rabbis understood this for centuries is that fellow Jews are brothers and non-Jews are not brothers. They are in the category of foreigners. Again, there are some interesting exceptions where there were some Jewish thinkers who argued that Christians were brothers as well because they believed in the same God as the Jews. Others disagreed, but for the most part this is the way it was understood, that a Jew was allowed to charge interest to a non-Jew. Now given that Jews basically lived in a kind of binary society where there was only Christians and Jews, there were very, very few minorities of any other religious denomination, so the only people who would be able to technically lend money on interest to Christians, if Christians aren't doing it to each other, is the Jews. So they had kind of like a monopoly on the entire possibility of moneylending. The church tried to deal with this in some ways. A fourth century thinker, Ambrose, argued that it's a very beautiful thing for Christians to lend money and not charge interest to each other, kind of like a gemach, kind of free loan society, but it was hard to encourage this because after all there's no profit. I mean you have to be independently wealthy and willing to risk your money to lend money without charging interest, so it just was not happening. And so moneylending, especially as the economy became more and more sophisticated, it became much more necessary to have the institution of credit flowing in society. This is especially true if you have an agricultural society where you have farmers who are cash poor, they're not actually bringing in coin, but they've got to buy seed and they have to wait a long time until they can harvest. So sometimes credit is the only way to bridge that period where they will not have anything to pay for their goods and services for. Ultimately, however, the church decreed in the 12th century the so-called Decretum Gratiani, also known as the Law of Gratian. Here's another, on the left by the way, you see an illuminated manuscript that illustrates one of the many laws discussed in the Decretum Gratiani actually has to do with whom may marry whom in terms of blood relations. But the Law of Gratian said full stop, Christians, you can't charge each other interest, which means effectively Jews are the only source of credit in medieval Europe. And so Jews started engaging in money lending. Again, when we think about all the things we talked about in the last two segments about the risks of agriculture, the risks of commerce, money lending has a lot to speak about. Guild membership was a hotly contested element and frequently when Jews would establish themselves in particular municipalities, they had to negotiate the rights that they would have when they moved there. And some cities would simply negotiate in advance a law, non tolerandus judaeus, that Jews were not allowed to settle there, more likely because the nobility tended to have a vested interest in having Jewish people live there. They would negotiate that, okay, fine, Jews can move here, but no shoemakers, okay, Jews cannot sell shoes, or Jews can sell shoes, but only when they're ready-made, they can't actually make them. So guilds and various type of trade unions, primitive trade unions often restricted the tasks that Jews could be involved in. Now, we definitely did have Christians who were nevertheless interested in the kind of profit that Jews were involved in. So the Jews had a monopoly, but it was only de jure, meaning according to the law, the written law. De facto, they did have to compete with Christians and ultimately the church would find a way around it, specifically the Franciscans, and that would be the end of the Jewish monopoly, although not necessarily the end of Jewish money lending for reasons we'll see in just a few minutes. So what's going on with usury, which is kind of like the nasty word for money lending? The benefits are fantastic. It involves a high rate of profit. The rate of interest charged was anywhere from 30 to 200 percent. We're talking about loan shark rates. It was very, very expensive to borrow money, and so that meant that people who could afford to lend the money could make a massive amount of profit. It was an urban profession, and Jews, as we have seen over and over again in the diaspora, they have gravitated to urban settings. So this is something that makes a lot of sense. It's like you can have banker's hours. You can simply say when you're going to open, 10 to 3, and then you just let the customers come to you. I mean, it's a fantastic possibility, and it is portable. It's the kind of thing where if you're dealing in cash, especially when you have lots of contacts through commercial ventures, you can deposit money for safekeeping, you can exchange letters of credit, and so on, and it requires fairly minimal effort. Moreover, the Jews were actually quite well prepared for this because they were literate, they were numerate, they had this great relationship with the king, the where if they're making money through money lending, that means a really great flow of currency to the king directly. Later on, when we get to 18th century Poland, the king would realize if it's so easy for the Jews to make money, then we want a bigger part of it, and ultimately they would take apart the very structure that held it together, but that's hundreds of years later in the period we're talking about. Now, the risks, however, are also commensurate. The biggest risk, of course, is resentment because we all have credit cards and nobody likes getting a credit card bill, and when you look at the statement and you see, okay, I bought this, I bought this, and what? Interest charge? Wow, you feel really bad about it, especially if you can't pay off the balance down to zero every month. You see that interest charge, and every month you're saying, wow, I'm paying so many dollars for nothing, for stuff I bought a long time ago and all already gone, so there's a great deal of resentment. This can come from the peasants when they may borrow small sums, but they carry an oppressive debt load, and when peasants get too upset, then what happens is pogroms. You have popular uprisings, often against the will of the king, who is happy to see the Jews engage in usury and then bringing more funds back to them, but if it's too much, then the king can't control the peasants under these terms. The clergy are often resentful of this because it represents a legal fictional go-around or a loophole to the Law of Gratian because the Law of Gratian clearly allows Jews to charge interest, but who wants this kind of thing happening in society, even though it is economically necessary? And the nobility and even the king, however, can show resentment because it was not at all that uncommon for nobles and even kings to end up borrowing large sums of money from Jewish populations, and then when things don't go their way, like for example, they're trying to finance a border war or an expansion of some sort, then it becomes much more expedient to simply expel the Jews and cancel their debts. We see this happening frequently in medieval Europe. England, for example, expelled their Jews in 1290 over basically this issue, where it was simply easier to simply say, okay, do over, and as we saw in France, as we will see in France, the Jews will then be invited back a generation later, because when they expel the Jews, then they have no more source of credit. They need credit to keep their economy growing, so then they invite the Jews back. They end up borrowing a lot of money, it becomes too much, they expel the Jews, and they enter into this cycle once again. So this is the kind of danger that is associated with money lending in this period. So the relative wealth and power that are accumulated through money lending can be quite ephemeral because of the large-scale resentment that can be built up in the population. Later on, when we get to Eastern Europe, in the next semester of these classes, some of the elements of this become even greater when alcohol is involved, because in Eastern Europe, Jews frequently had monopoly on the production of alcohol, something called propanazia, and so people could drink on a tab and then end up having a huge bill plus an interest charge on top of that. Many of the revolts you'll see in the 17th and 18th century in Eastern Europe have this at the root, the exploitative practices of some of the Jewish communities that are are heavily resented by their customers when they have to actually pay the bill for what they purchased. It's a very difficult period, definitely. Now, how does this all come to end? Largely, the Italians wake up and say they've got to get involved in this. So in Italy, in the middle of the 15th century, you have this institution developed by the Franciscan order of monks called the Monti di Pieta, which means the the Mountains of Piety, and essentially what they do is they create their own loan societies which operate a lot like modern credit unions or banks. In fact, this is where credit unions and banks begin to get their ideas and get started. They charge interest, but it's small interest, between 4 and 15 percent, which is much more manageable. The purpose of this interest is largely to cover the overhead of hiring staff to manage the funds and so on. They lend to Christians at a very low rate of interest, but it is approved by the Church, first temporarily and then towards the end of the 15th century, formally approved by the Church, because the overhead costs are not interest for a profit-bearing idea. They're really there to just keep the system flowing. Now, the demand for credit far outstrips the supply that the Monti di Pieta are able to service, but it still means that the Jewish monopoly has been pierced. Now that the Church has officially sanctioned this type of banking, there is no reason why one would still have to go to a Jew, but the fact that demand is still so high, far more than the amount of cash in the Monti di Pieta are able to maintain, it meant that Jewish money lending still continued right up until really the modern era, but it tended to be on a much smaller scale. Instead of lending to nobles, Jews were more likely to lend to local peasants so that they could buy, you know, spoons and things like that, and there were a few exceptional individuals. These so-called court Jews would really rise to power shortly after the 15th century, but for the most part, Jewish money lending was a much smaller affair at this point and much more local. If you were a typical Christian, say, in the Italian peninsula, chances are you would be more likely to do business with a Jew who was much more local and had much less strenuous demands for collateral, but you did have the option, especially if you were borrowing larger sums, that the Monti di Pieta would make more sense for you. So this is essentially how the monopoly was eliminated by the Italian banking houses. Still, when we kind of reflect on the overall economic picture of the Jews in the medieval period, we can understand how, in particular, money lending was highly resented and would feed a growing anti-Semitic surge that is going to be the topic of next week's lectures. That anti-Semitic surge would ultimately overwhelm much of Western Europe, forcing the Jews to move further to the East, and it is to that subject that we will turn next week. For now, I want to thank you very much for participating, and I hope you have an excellent week.