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Wednesday 18 March 2020 16.30 - 18.30
A-4 ECO04b Creditors, Debtors, and Financial Organizations in Early Modern Europe (c. 1300-1800) II
P.N. van Eyckhof 1, 003C
Network: Economic History Chair: Jaco Zuijderduijn
Organizers: Elise Dermineur, Jaco Zuijderduijn Discussant: Elise Dermineur
José Luis Peña-Mir : The Strength of the Contract vs. the Strength of the Story: Integration of Local Legal Orders and Contract Enforcement in Notarial Credit Markets in Early Modern Spain
This paper analyzes the interaction between local legal orders in early modern Spain in the context of notarial credit markets. More specifically I focus on those cases of defaults in which the creditor lived in one municipality –usually the capital of the judicial district and the place where the contract ... (Show more)
This paper analyzes the interaction between local legal orders in early modern Spain in the context of notarial credit markets. More specifically I focus on those cases of defaults in which the creditor lived in one municipality –usually the capital of the judicial district and the place where the contract was written- and the debtor lived in another one –in the same or another judicial district. I use data from credit contracts and litigation from the city of Málaga at the end of the eighteenth century. The economy of this place during this period was dominated by the export of agrarian commodities produced by the farmers from the surrounding villages, who received loans from the merchants of the city. On the one hand, I analyze the strategies of debtors in order to avoid prison, the execution of their properties and also achieve the restructuration of their debts. On the other hand, I analyze the strategies of creditors, notaries and authorities of Málaga to ensure the repayment of debts. The paper also discusses how jurisdictional fragmentation could increase the likelihood of default situations. Castilian law established that executory processes must be ruled by the authorities of the municipality where the debtors lived. Given that they were chosen by the inhabitants of the municipality, these authorities were biased and usually supported debtors. The analysis of the data suggests that debtors could take advantage of these mechanisms and loopholes and also of the solidarity of their neighbors (vecinos) in order to delay and restructure payments. Nevertheless, if creditors did not accept a new agreement, the judicial system –mainly represented by the courts of the capital of the judicial districts- usually supported them and created mechanisms to protect their property rights. (Show less)

Matteo Pompermaier : 'Wine and Cash': Inns, Bastioni and the Venetian Credit Market (18th Century)
In early modern Venice, wine and money were intrinsically linked through the activity of the innkeepers and the bastioneri (the managers of the bastioni, warehouses where wine was sold), who offered their customers an innovative pawnbroking service. They assumed the double roles of suppliers of basic goods and creditors, thereby ... (Show more)
In early modern Venice, wine and money were intrinsically linked through the activity of the innkeepers and the bastioneri (the managers of the bastioni, warehouses where wine was sold), who offered their customers an innovative pawnbroking service. They assumed the double roles of suppliers of basic goods and creditors, thereby becoming central economic figures in Venice's urban context - especially for the members of the poorest classes. One of the most innovative elements of this credit circuit lies in the way that interest on loans was collected: creditors benefited from the fact that one-third of the total value of the transaction was paid in wine. The low average value of the loans confirms that this service was mainly aimed at the lower classes of society, the main actors in what has been defined as 'the handkerchief economy'. Those who benefited the most from this kind of credit arrangement were essentially poor - but not 'too poor' - people, who had only modest reserves of money, and were thus more vulnerable due to the paucity and irregularity of their income. This paper focusses on the pawnbroking activity of Venetian innkeepers and bastioneri, with a twofold main objective: (a) to describe his origins and mode of operation and (b) to highlight his social and economic impact on 18th century Venice. (Show less)

Lisbeth Rodrigues : From Private to Public Credit Market: Institutional Creditors and Investment Patterns in Eighteenth-century Portugal
The role played by religious and charitable institutions in early modern financial markets hardly needs to be emphasised. Authors acknowledge that these institutions actively participated in the credit market, operating as relevant suppliers of private and public long-term credit. Still, most studies concerned with this topic tend not only to ... (Show more)
The role played by religious and charitable institutions in early modern financial markets hardly needs to be emphasised. Authors acknowledge that these institutions actively participated in the credit market, operating as relevant suppliers of private and public long-term credit. Still, most studies concerned with this topic tend not only to analyse the participation of these institutions in these two segments of the credit market separately but also to pay little attention to the problem of credit default.
This paper aims at articulating these two topics, and it addresses the question of to what extent non-performing loans affected the investment patterns of institutional creditors. The case study in this paper is the Lisbon Misericórdia, the major lay brotherhood in Portugal, which was also one of the main creditors in Lisbon during the eighteenth century. Drawing on different archival sources (credit contracts, lawsuits, and debt bonds), we compile a new dataset of credit transactions between 1690 and 1799, and it serves two related aims in this paper. First, we show the importance of the loans granted by the Misericórdia in the city’s private credit market. Then, we assess the problem of credit default, revealing not only its scale but also the quality of the law courts in solving nonperforming loans. Data show that despite the good quality of the law courts, neither was the default problem solved nor were the Misericórdia’s property rights protected. This situation might have undermined the efficiency of the Misericórdia’s credit activity, leading to its rationing in 1768, and, shortly after, in 1775, to its prohibition. We argue that a crowding out effect occurred due to the lack of protection granted by law courts to Misericórdia’s possessory interests since from 1775 onwards the brotherhood started to reallocate its funds from the private to the public credit market. (Show less)

Thomas Max Safley : Financial Markets and Financial Mediation in Eearly Modern Europe: Qestioning the Transition from Personalized to De-personalized Exchange
Financial markets in late medieval and early modern Europe suffered a lack of organizational development. Before the appearance of the first commodity exchange in early-sixteenth-century Antwerp, borrowers and lenders found one another and entered exchange based on “trust” that grew out of personal relationship. Before the creation of ... (Show more)
Financial markets in late medieval and early modern Europe suffered a lack of organizational development. Before the appearance of the first commodity exchange in early-sixteenth-century Antwerp, borrowers and lenders found one another and entered exchange based on “trust” that grew out of personal relationship. Before the creation of probability statistics in the early-seventeenth century, risk as a measurable fact of economic life did not exist, forcing borrowers and lenders to reckon the chances of failure empirically, that is, based on their experience of markets and agents. Before the creation of efficient legal mechanisms for the enforcement of contracts and the resolution of default, borrowers were subject to seizure of property by private execution and lenders were subject to opportunism with little recourse. Or, so the traditional history of finance would have us believe.

A close examination of surviving, archival sources raises many questions about this ideal-typical representation of pre-modern finance. While it is true that individuals and firms in the fifteenth and sixteenth centuries could not rely on fully articulated financial markets to meet their capital needs, forcing them to turn turned to family and friends, rudimentary money markets existed to help them locate individuals with disposable capital. Though lacking in banks and bourses, commercial centers were not entirely without an organizational basis for financial life. Tavern-keepers, for example, might play an intermediary role, such as Oscar Gelderblom has argued in the case of the hostelers in Bruges. Other officials and organizations, such as tax collectors or merchant guildhalls, could likewise assist in financial transactions through the provision of information, mediation and security.

My contribution would examine the records of bankruptcy resolution in early modern Augsburg to demonstrate how such local officials, individuals and organizations as the Unterkäufler (intermediaries, who served as customs officers), the Käuflerinnen (peddlers, who served as semi-official evaluators of second-hand goods), the Goldschmiede (goldsmiths, who served as proto-bankers) and the Herrentrinkstube (the meeting hall of the patrician corporation), provided impersonal financial services to borrowers and lenders alike, lending a degree of organizational stability and reliability to financial markets avant la lettre. The behaviors of bankrupts and their creditors raise questions about the supposed transition from “everyday communism” to “impersonal arithmetic”. They provide information about the efficiency of financial markets, their ability to protect borrowers and lenders and their reliance upon social relationships. Whether or not financial relations have become entirely “de-personalized”, they ceased to be entirely personal long before the articulation of so-called modern financial organizations and practices. (Show less)

Riina Turunen : Bill of Exchange as a De-personalizer of the Credit Markets? Evidence from a Late-comer Country
In deeply agrarian, poor and peripheral Finland credit markets started to modernize and de-personalize late in comparison to more central areas of Europe. My paper studies the shift from personalized to de-personalized credit markets in this late-comer country. Specifically, my focus is on the type of credit, namely bill of ... (Show more)
In deeply agrarian, poor and peripheral Finland credit markets started to modernize and de-personalize late in comparison to more central areas of Europe. My paper studies the shift from personalized to de-personalized credit markets in this late-comer country. Specifically, my focus is on the type of credit, namely bill of exchange and its moving from its original usage as a payment method in international trade into domestic credit markets (see eg. Ashton 1945; Denzel 2008) after the birth of Finnish commercial banks in the 1860s. These banks immediately started to discount the bills of exchange and based their lending on them. Soon more than half of the banks´ lending was given in bills. I argue that this shift was a crucial factor in moving from personalized to de-personalized exchange. This was because a credit relationship could easily subside into a credit relationship with a stranger as a bill of exchange was easily transferrable to a third or even a fourth party. The banks preferred lending in bills because it was short-term and secured by a strict legislation, thus, it was less risky. I go even further in my paper and ask what consequences did this change in the domestic credit market had. The evidence from bankruptcies shows that the widespread usage of the domestic bills of exchange caused more insolvency than before. This reflected at least how the methods for gaining fast and accurate information on a borrower´s solvency did not evolve parallel with the new, more de-personalized and short-term methods of lending. As credit information agencies and financial newspapers (see eg. Olegario 2006) were born only at the beginning of the 20th century in Finland, the last decades of the 19th century were the period of the collision of the old institutional and social settings of credit markets and new forms of credit. (Show less)



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