The Journal of Modern History, Vol. 83, No. 1 (2011)
Introduction: What were the social and institutional factors that led to, and reinforced, the precocious emergence of Florentine commercial capitalism, especially in the domain of international merchant banking? The dominant stream of answers emphasized by economic historians focuses on the invention in late medieval and Renaissance Italy of a variety of innovative business techniques—bills of exchange, double-entry bookkeeping, partnership contracts, commercial courts. If these impressive organizational inventions are interpreted as facets of a broader rise of efficient impersonal markets, then a tension emerges in Florentine, and indeed in European, historiography between economic historians and the research of social and political historians who emphasize the deeply personalistic—mainly familial and clientelistic—character of social relationships of the period. Were impressive early capitalist business techniques really signs of a teleological breakthrough of the market from its traditional social shackles, as the master narrative of modernization would have it? Or instead were economic relations in the market embedded in, and hence reflective of, the surrounding social and political networks of the time, as anthropologically oriented historians have argued?3 If evidence can be found in support of both propositions, then how are we to reconcile these seemingly contradictory interpretations?
In this article, we address these historical questions through both a statistical analysis of Florentine commercial credit in the early Quattrocento and a documentary study of business correspondence from the same time. Our conclusion will be that commercial credits among Florentine companies were indeed highly correlated with a wide range of noneconomic, social relationships among the partners of these companies. Correlations between economic and social relations were highest in the merchant-banking pinnacle of the Florentine economy—precisely in the industries where reliance on advanced capitalist business techniques was greatest. New business transactions did not displace the oligarchic social networks of the time, we argue; rather, they built on and formalized these relationships into markets. In particular, family and neighborhood provided strong traditional foundations to Renaissance Florentine credit markets. In addition, Florentine republicanism—especially through its elected city council—provided political scaffolding that allowed personalistic social networks, and the economic credit networks built on them, to “open out” topologically toward expansive liquidity and growth instead of closing inward into cliques and corruption. We identify two mechanisms through which republicanism influenced the emergence of economic credit markets: public certification of reputation (onore), through co-optative elections, and the incorporation of carefully filtered newcomers into expansive economic-cum-political networks of exchange.
Economic Credit in Renaissance Florence
By John F. Padgett and Paul D. McLean
The Journal of Modern History, Vol. 83, No. 1 (2011)
Introduction: What were the social and institutional factors that led to, and reinforced, the precocious emergence of Florentine commercial capitalism, especially in the domain of international merchant banking? The dominant stream of answers emphasized by economic historians focuses on the invention in late medieval and Renaissance Italy of a variety of innovative business techniques—bills of exchange, double-entry bookkeeping, partnership contracts, commercial courts. If these impressive organizational inventions are interpreted as facets of a broader rise of efficient impersonal markets, then a tension emerges in Florentine, and indeed in European, historiography between economic historians and the research of social and political historians who emphasize the deeply personalistic—mainly familial and clientelistic—character of social relationships of the period. Were impressive early capitalist business techniques really signs of a teleological breakthrough of the market from its traditional social shackles, as the master narrative of modernization would have it? Or instead were economic relations in the market embedded in, and hence reflective of, the surrounding social and political networks of the time, as anthropologically oriented historians have argued?3 If evidence can be found in support of both propositions, then how are we to reconcile these seemingly contradictory interpretations?
In this article, we address these historical questions through both a statistical analysis of Florentine commercial credit in the early Quattrocento and a documentary study of business correspondence from the same time. Our conclusion will be that commercial credits among Florentine companies were indeed highly correlated with a wide range of noneconomic, social relationships among the partners of these companies. Correlations between economic and social relations were highest in the merchant-banking pinnacle of the Florentine economy—precisely in the industries where reliance on advanced capitalist business techniques was greatest. New business transactions did not displace the oligarchic social networks of the time, we argue; rather, they built on and formalized these relationships into markets. In particular, family and neighborhood provided strong traditional foundations to Renaissance Florentine credit markets. In addition, Florentine republicanism—especially through its elected city council—provided political scaffolding that allowed personalistic social networks, and the economic credit networks built on them, to “open out” topologically toward expansive liquidity and growth instead of closing inward into cliques and corruption. We identify two mechanisms through which republicanism influenced the emergence of economic credit markets: public certification of reputation (onore), through co-optative elections, and the incorporation of carefully filtered newcomers into expansive economic-cum-political networks of exchange.
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