‘The Richest Man Who Ever Lived,’ by Greg Steinmetz
By JERRY Z. MULLER
The New York Times Review of Books, July 31, 2015
Jacob Fugger, the Renaissance-era financier, is a familiar name in Germany, but little known in the English-speaking world. “The Richest Man Who Ever Lived,” by Greg Steinmetz, a journalist turned securities analyst, is an attempt to remedy that. Though it doesn’t quite live up to its promise, it provides a serviceable and colorful introduction to one of the most influential businessmen in history.
Fugger was born in 1459 into a family of prosperous merchants in the commercial city of Augsburg. By the time of his death in 1525, he was not only the wealthiest man in Europe, but had also played a role in creating the Hapsburg Empire, in crowning two Hapsburgs as Holy Roman Emperors and, inadvertently, in starting the Protestant Reformation.
Steinmetz claims that “to understand our financial system and how we got it, it pays to understand” Fugger. Not really. One of the characteristics of the entrepreneur — along with the ability to generate trust, to calculate profitability and to evaluate risk — is the ability to spot opportunity, and opportunity is peculiar to context. So to understand Fugger’s career means first of all to recapture the context in which he found his opportunities.
Fugger’s wealth came from seizing opportunities at the nexus between money, war and political power. He lived in an age of both growing commerce and transformations in the means of violence, as gunpowder weapons replaced swords, lances and spears. That took warfare out of the hands of those who had trained for it their entire lives — knights — and put it in the hands of those less skilled but able and willing to wield muskets and cannons, that is, paid soldiers. Rulers increasingly came to depend on mercenaries to gain power, and they needed huge sums of money to hire and supply armies.
That’s where Fugger came in. He took profits from his family’s trading business, combined it with deposits from rich investors and lent to rulers. Paying outright interest was still frowned upon by the Roman Catholic Church, due to the prohibition on usury. But economic opportunity triumphed over theological niceties through a variety of legal fictions. Rather than take direct payment, for example, Fugger received the right to mine copper, an essential ingredient of cannons, and silver, a means to their purchase. To market the copper and silver extracted in Hungary, the firm built an elaborate distribution network that eventually stretched across much of Europe. Fugger constructed roads, and in a Europe fragmented into small states, had to negotiate safe-conduct passes and agreements on customs duties.
None of this has much to do with our current financial system. But that makes it all the more historically interesting. Unfortunately, Steinmetz sacrifices analysis to a relentless stream of stories, colorful facts, exaggerated claims and dubious historical analogies. The book seems designed more to entertain than to enlighten.
Fugger’s greatest advantage came from the prosaic process of monitoring and moving money. He was an early adopter of double-entry bookkeeping, which he learned as a young man in Italy, and which allowed for more precise keeping of accounts. Along with other Augsburg merchants, Fugger created an increasingly international money market. Through his network of branch offices, he was able to transfer funds without physically moving cash, by debiting an account in one branch and crediting it in another. That network allowed him to become a major transfer agent for the Peter’s Pence, the voluntary contributions of Catholics to the Vatican; he earned 3 percent on each transfer for his trouble.
Fugger’s close connections to the Vatican eventually led him to become the transfer agent for the indulgences sold by the papacy. The deal was grace for cash: time off in purgatory in return for charitable contributions to the building of St. Peter’s Basilica in Rome. Fugger received a sizable percentage off the top.
But indulgences served as the immediate cause of Martin Luther’s 95 Theses, and thus of the Protestant Reformation. Luther, who had visited Fugger’s palatial residence in Augsburg, regarded him and his like as an oppressive force — which, in a sense, Fugger was, because the rulers who borrowed so heavily from him needed to tax their populations to repay their debts. When German peasants began to revolt, Fugger not only supported the princes (as did Luther), he supplied them with the funds to suppress the rebellions.
Steinmetz hyperbolically writes that Fugger was “a warrior for capitalism at a make-or-break moment in its development.” There was no such dramatic moment, at least in Fugger’s day. But by accumulating and channeling capital, he was able to put it to more effective uses. He organized the extraction and refining of metals, traded in a variety of goods and seems to have played a hidden role in funding the voyage of Ferdinand Magellan.
He also, as Steinmetz notes, accumulated his wealth with a perfectly good conscience, using some of it to build churches in his native Augsburg, and a remarkable housing project for the working poor, the Fuggerei, which survives to this day. He also tried to convince recalcitrant theologians that there was nothing sinful in profiting from the lending of money.
Some still aren’t sure about that.
THE RICHEST MAN WHO EVER LIVED
The Life and Times of Jacob Fugger
By Greg Steinmetz
Illustrated. 283 pp. Simon & Schuster. $27.95.
Jerry Z. Muller is the author of “The Mind and the Market: Capitalism in Western Thought” and “Capitalism and the Jews.”
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