It’s a time of dramatic social change, and this is destabilizing all politics, even birthing a new world. The aristocracy is losing power to a new commercial class of innovators. The new creed is not to rule, but to serve.

To be royal once meant to run the world, but no more. The royals now are out of money and they turn to the new wealth of a class of creatures who have seized on new technologies. These new technologies have, in turn, created new opportunities for unprecedented ways of making money. Instead of making things, these people are providing services people need, and this is making them enormously rich.

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But every once in the while, the Black Death comes along to ruin it.

That’s because the above description pertains to the 1400s in Italy, a time given beautiful cinematic life in the new series on Netflix, Medicis: Masters of Florence. The first season deals with the second generation of bankers during the lifetime of the founder of the empire, Cosimo di Giovanni de’ Medici (1389-1464). His two sons struggled for the control of the growing empire.

Here was a period when modern commercial finance was born. More than that, we see here the birth of modern commercial culture – a new system of social organization that overturned ancient expectation and norms about who rules and who obeys. Commerce was a new force in society, one that liberated the masses of people from the old order. Feudalism was becoming a thing of the past, as waves of the European population picked up and moved from historic lands to new commercial centers such as Florence. Commerce changed everything, from art to architecture to music to sexual norms. Everything people once thought were permanent features of life came into question.

The Medicis labored under two burdens inherited from the old world.I was disappointed that the series didn’t have much banking in it, since this was my primary interest. The focus instead might be predictable: the loves, emotional conflicts, and personal lives of the main characters. However, if you stick with it, the big economic themes do make an appearance, and accurately so.

You gain a clear delineation between the forces of reaction and the forces progress. The Medicis labored under two burdens inherited from the old world. First, they were merchants, and the merchants had never been highly regarded in society. Second, they were constantly under fire for the suspicion of usury, which was then condemned by the Catholic Church.

Permit me a quick departure on the second question.

The Usury Question

The Netflix series shows the Medici family scrupulously avoiding what was considered to be Usury. This was condemned from the earliest years of the faith, but this condemnation ended in the 16th century, liberalized in law by the 18th century, and is today not even an issue. It is hardly talked about at all apart from perfunctory warnings against usury (and what the difference between interest and usury is precisely has never been spelled out).

As even the 1912 Catholic Encyclopedia said: the Church “permits the general practice of lending at interest, that is to say, she authorizes the impost, without one’s having to enquire if, on lending his money, he has suffered a loss or deprived himself of a gain, provided he demand a moderate interest for the money he lends.”

This view amounts to a complete reversal of a view that prevailed from the Patristic age until the high middle ages. During all these years, the Church stood squarely against the institution of interest – as opposed as Islam, or even more so. This only began to change with the development of sophisticated monetary institutions in the Medici period. These allowed theologians to consider the topic more carefully and come to realize that interest is no different from any price on the market – something to be freely negotiated by the parties involved and reflecting the changing conditions of supply and demand.

One of the earliest statements against interest comes from the Council of Nicea, which sought to crack down on avaricious practices among the clergy, among which was lending money at a profit. The Council condemned this and other attempts at “dishonourable gain.”

It was surely a wise teaching, necessary to stop corruption, but there was a slight problem. The Council broadened its mandate beyond the priesthood and implied that the practice was universally wrong. It added scriptural proof from the Psalmist that interest itself was immoral. “He that hath not put out his money to usury [interest], nor taken bribes against the innocent: He that doth these things shall not be moved for ever.” The implication was that the rule pertaining to clergy really reflected a general social principle.

The war against interest was a war against basic economic logic.And thus began a long tragic history of the Catholic Church’s 1000-year war against interest and the money-lending profession. And it is a strange war indeed, one undertaken with little to no substantive basis from scripture (the above hardly suffices). Attacking lenders as heretics contradicts normal commercial dealings. It even contradicts Jesus’s own parable of the talents, which presumes and praises the existence of money lenders and condemns the failure to give them idle money as profligacy itself.

The war against interest was a war against basic economic logic. Present goods are more valuable than future goods, so it makes sense that the person who wants something earlier rather than later, but doesn’t have the money now, is likely to pay a premium. Furthermore, lending is always risky so it makes sense that there should be a reward attached to undertaking that risk. Finally, money that is lent out is not otherwise employed by the owner and, therefore, there is an opportunity cost that will be paid and compensation for this sought. For all these reasons and many more, interest is a normal part of peaceful commercial society.

Chickens and Eggs

To understand this, it is helpful to consider the case of barter in a desperately poor society. Let’s say you have two chickens but only need one. A fellow comes along and wants the other one but has no money. He offers a potato – a pretty shabby deal overall for straight one-for-one trade. But, even so, you want him to have the chicken and you aren’t currently in need, so you propose a deal. He can have it if he gives you some eggs from the chicken for a period of one month. After that, he can have the chicken.

You are happy. He is happy. Everyone wins. But why the egg premium? He wanted the chicken now and you didn’t need it now. So he pays to feed his more urgent need, and you are glad to relinquish control of your chicken provided there is a stream of income coming out of it. This is the way interest works in a barter economy. True, there is no money involved, but the principle is the same as that which is considered a normal part of commercial life today.

And truly, the Church never objected to this sort of deal. After all, on what possible grounds could

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