Mae Woods Bell

Mae Woods Bell

Fugger’s efforts help define capitalism

By Mae Woods Bell
Book Reviewer

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Perhaps calling him “The Richest Man Who Ever Lived” (Simon and Schuster; $27.95) might be a bit of a stretch, but Greg Steinmetz writes that by the time of his death in 1525, Jacob Fugger’s self-made fortune amounted to more than 2 percent of all of Europe’s gross national product. Not only was Fugger the wealthiest man in Europe, but he also played a role in creating the Hapsburg Empire, crowning two Hapsburgs as Holy Roman emperor and inadvertently creating a climate that led to the Protestant Reformation and the rise of Martin Luther. Steinmetz’s narrative is a fascinating look at how business was conducted in medieval times, and how Fugger played a role in the development of capitalism.

As Steinmetz gives us a look into the life of Fugger, he begins with the milieu in which his subject grew up. His father, who died when Jacob Fugger was 10, had made a fortune in textile trading, and records show the elder Fugger was one of the biggest taxpayers in Augsburg, a thriving textile town.

Young Jacob Fugger was the seventh son. That far down in the birth lineup, he likely would have ended up in a monastery rather than in business if it hadn’t been for a resourceful and strong mother. At first, she wanted him to become a priest, but she reconsidered when he was 14. Deciding she could use him in the family business which she ran after her husband died, Fugger’s mother persuaded the church to release him from his contract, freeing him to become an apprentice.

For the apprenticeship, she sent Fugger to Venice, the most commercially minded city in all of Europe. During his time there, Fugger learned about banking. Years later, when Fugger was fabulously rich – an industrialist, a trader, a speculator, a counselor – someone asked him how much longer he was going to keep on working. Fugger’s answer was that no amount of money would satisfy him, and he would keep on making money as long as he could.

Fugger was deceitful, ruthless, selfish, egocentric and often cruel. But, Steinmetz writes, “He turned at least one of those flaws – a tendency to trumpet his own achievements – into an asset. His boasts were good advertising; by letting visitors know what he paid for a diamond or how much money he could conjure for a loan, he broadcast his ability to do more for clients than other bankers.”

Fugger’s older brothers, like their father, were successful in the cloth business and banking. In 1487, they asked Jacob to help them increase the efficiency of their investments. He urged them to invest in more copper mines after they had taken an interest in one as security for a loan to a Catholic archbishop. Fugger increased the efficiency of their mines and invested in more of them in what now is Slovakia. Copper was traded for spices from the Orient, so Fugger interests were soon multinational. From then on, he used his guile, new found talent and property to influence kings and the church hierarchy.

He befriended kings, to whom he made loans to raise their armies, and used them as tools to further his networking, which kept him in the know as to who needed his financing. Fugger money intimately was intertwined with the established Roman Catholic Church in its effort to fight off Northern German states that were beginning to consider becoming Protestant. Fugger also succeeded in having Pope Leo X overturn the church’s ban on money lending, changing the definition of interest by calling it “processing fees,” “gifts” or “loss charges.” He also kept providing loans to church leaders and kept his influence alive by suggesting they sell indulgences and church offices to the highest bidder.

From then on there was no stopping him. Fugger made his fortune by being smart in an era when there was no one to enforce his loan agreements; he had to rely on nerve and guile when dealing with indebted rulers. A genuinely religious Catholic, Fugger did spend some money on charitable causes such as housing for the poor. His final business decision, two days before his death on Dec. 30, 1525, was to reject a loan request from Duke Albrecht of Prussia, who left a Catholic order to become a Lutheran.

Fugger was a perfect model for enlightened self-interest. As narrated in this well-researched, far-reaching, page-turning biography, Fugger played an important role in the development of capitalism; advanced modern banking techniques such as double-entry bookkeeping; introduced the notion of a world news network; and issued the first government bonds.

Greg Steinmetz spent 15 years as a journalist for a number of publications, including Newsday and The Wall Street Journal, where he served as chief of its Berlin and London bureaus. He currently works as a security analyst in New York.