Saturday, July 7, 2018

How the Medici became the most powerful family of Florence; because of the English!

During the late Middle Ages and the Renaissance, trade was a very important mean through which knowledge, art, goods of all kinds could travel throughout Europe, nations were much more connected than we could believe and often the great nation states exchanged raw materials for precious goods or loans, for example eastern England during the 14th and 15th centuries had a strong link with Florence through the Flanders, especially Bruges, the wool that made England rich was exchanged for eastern spices from Venice, stunning artworks and often... loans. It always amuses me to hear conspiracy theories about the Jews and especially the Rotschilds, when the great banking families that fuelled art, literature and especially war throughout Europe were... Tuscan and Venetian! Talking about which, there is an amusing historical anecdote from the 14th century about just this.
By 1310, Florence was a vibrating and rich city, filled with beautiful art, bustling with merchants and the most educated men of the time, it was also much larger than London; but Florence could have never been so grand, had it not been for what it was: a city of bankers, built by bankers, it's them that built the churches, commissioned the sculptures, frescoes and churches to Michelangelo, Botticelli, Raphael and Leonardo. Renaissance Florence was the Gilded Age New York of a hundred years ago.

By 1310, the most powerful banking families of Florence were the Bardi, the Peruzzi and the Acciaiuoli. They had branches at locations stretching from England to the Flanders and even North Africa and the Middle East, all key areas for Italian trade. Each family owned each operating capital, sometimes together with few close partners, but money was also received from outside deposits. Foreign branches were operated by Florentines sent abroad. These firms traded in agricultural commodities, industrial products, but more especially refined woollen textiles imported from England. They drew most of their profit from the fees levied on exchange of currency. Florentine bankers were the most trusted, because moving money abroad was risky, of course it was less so if you had a presence everywhere, therefore they also had more information than those they were dealing with.
Another significant portion of their profit came from extending credit, a risky activity in the 1340s, as these families discovered soon.
Both the Peruzzi and the Bardi made the mistake of lending vast sums to King Edward III of England during the 1330s as the Hundred Years' War was approaching. Sadly, the bankers soon realised that it is quite difficult to repay a lot of credit all at once, they just lent so much that they felt compelled to lend more, also because they needed royal licenses to export the precious wool. By 1343, it was clear the war would not have ended soon, the king repudiated his debts. The large amounts lost were of circa 600,000 gold florins owed to the Peruzzi and 900,000 to the Bardi, none of it ever repaid. This led to the 1345 economic crisis that eventually had a strong impact on all of Europe.

Of course, this was not the end of Florence, and eventually the Bardi and Peruzzi rose from their ashes and lived quite comfortable aristocratic lives: during the 15th century, smaller firms that survived the crash started to acquire more and more power, this was a new, greater era of Florentine banking, the names? Pazzi, Rucellai, Strozzi and the Medici. Florence and its economy were only bound to become greater, this led to such a flourishing time for the arts, culture, archeology, philosophy, sciences and even religion that became known as the Renaissance. Perhaps we can forgive that thief of a king then!

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