Evolution of money and Capital pt 1

EVOLUTION OF MONEY &
CAPITAL
IDEAS THAT WILL CHANGE THE 21ST
CENTURY

LECTURE 1
THE MESOPOTAMIANS, MONEY AND CAPITAL

LECTURE 1. THE MESOPOTAMIANS,
MONEY & CAPITAL
• MESOPOTAMIA (GREEK: “THE LAND BETWEEN THE
RIVERS”)(ARABIC: “AL JAZIRAH”: THE ISLAND)
• AGE OF COPPER (5900BCE:CITIES,LITERATURE)
THE WHEEL, HOURS-MINUTES&SECONDS, MATHEMATICS
FOR TOWN PLANNING.)
• SUMERIANS 3500BCE:LIBRARIES,CITY STATES,
INDUS VALLEY, HAMMURABI,BABYLON
• 3100 BCE; CLAY TOKENS & SILVER.
• MONEY IN INDUSTRY & TRADE: TAM KARU.
• THE “WALL STREET” OF UR: BANKING & DIVERSIFICATION
• SOCIAL & HUMAN CAPITAL : ZIGGURAT OF
ETEMENANKI,BABYLON

INTRODUCTION
THIS AREA HAD HUMAN HABITATION FROM 10,000
BCE BUT ADVANCES IN AGE OF COPPER,5900 BCE –
3200BCE (SUMERIANS):
+CITIES
+LITERATURE
+INVENTION OF THE WHEEL
+EARLY MATHEMATICS:DIVISION OF HOUR INTO
MINUTES;SIMPLE ALGEBRA & GEOMETRY FOR
CITY PLANNING;TABLES OF SQUARES & SQUARE
ROOTS ON ABACUS FOR MERCHANTS,
GEOMETRY FOR SURVEYING TO ASSESS TAXES;
(MONUMENTS USED AS CALENDARS)

A SUMERIAN CITY: PROBABLY
BABYLON

INTRODUCTION CONT.
• MOVED FROM THEOCRACIES TO KINGS 3500 BCE.
PERSONAL SEALS ON IMPORTANT DOCUMENTS.
START OF BRONZE AGE,AND THE CITY STATE: AKKAD
BASE FOR AKKADIAN EMPIRE:
+ LIBRARY 20,000 CUNIEFORM TABLETS
+MULTIPLE KINGDOMS, CITY STATES
+COLONISATION HARAPPA CITY, INDUS RIVER
+1792BCE. HAMMURABI, KING OF BABYLON
+ HAMMURABI LEGAL CODE, 282 ITEMS
+BABYLON CENTRE OF MESOPOTAMIAN CULTURE

SUMERIAN CUNIEFORM CLAY TABLET:
PROBABLY COMMERCIAL DOCO.

BABYLON IN 3D: CENTRE OF
CIVILISATION. 600 BCE & REBUILT

DIGITAL IMAGING OF HANGING
GARDENS OF BABYLON

INTRODUCTION CONT.
• 538 BCE BABYLON (&MESOPOTAMIA) CONQUERED BY
CYRUS II OF PERSIA
• 331 BCE PERSIANS DEFEATED BY ALEXANDER THE
GREEK. MUCH WAS LOST INCL. CUNIEFORM WRITING
• 116 BCE FRAGMENTED GREEK MESOPOTAMIA
CONQUERED BY ROMANS: LAW & CULTURE
• 600 AD ARAB CONQUERERS: ISLAMIC
LAW,LANGUAGE, RELIGION & CULTURE
• TODAY: MOUNDS OF EARTH & BRICKS & A ONCE
FERTILE VALLEY TURNING INTO A WASTELAND. ISIS vs.
WESTERN POWERS.

RUINS OF DARA: REMNANTS OF A
CIVILISATION

MATHEMATICS OF MESOPOTAMIAN
MONEY
• MATHEMATICS IS AT THE HEART OF EVERY
CIVILISED ECONOMY & TRADING CULTURE &
FLOWERED UNDER BABYLONIANS:
1. PRIESTS BEGAN IT(ASTRONOMY) – 1 HOUR=
60 MINUTES = 1 MINUTE (60 SECONDS)
=TRIGONOMETRICAL DEGREES
2. BABYLONIAN ALGEBRA HEAVY ON
GEOMETRY = “ZIGGURAT” BUILDING &
MAPPING

MAP OF NIPPUR ON CLAY TABLET:
NOTE PRECISION IN ROAD OUTLINES

MONEY MATHEMATICS IN
MESOPOTAMIA (FROM PRIESTS)
• THOUSANDS OF SMALL MERCHANTS IN BIG CITIES BORROWED
MATHEMATICAL IDEAS
1. BARTER SYSTEM IN PLACE: “…ONE PAIR OF SANDALS EQUALS
TEN DATES, EQUALS ONE QUARTER OF WHEAT, EQUALS 2
QUARTS OF BITUMEN & SO ON.” A STANDARD PRICING SYSTEM
NEEDED.
2. CLAY ACCOUNTING TOKENS: 16 TOKENS & MANY SUB-TOKENS.
SEPARATE FOR HONEY,TRUSSED DUCK, SHEEP’S MILK,ROPE,
BREAD
3. CALCULATION OF COMPOUND INTEREST ON BORROWED
MONEY. CLAY TABLET: HOW LONG FIXED SUM TO DOUBLE ITSELF
AT 20% - (1 + 0.2)t WHERE t = lapse of time. THE EXPONENTIAL
FUNCTION, TABLES PROVIDED FOR MONEYLENDERS.

CLAY TABLET SHOWING 9 TIMES
TABLES

EARLY MONEY
• 3100 BCE SILVER BECOMES MEDIUM OF
EXCHANGE & IT IS AGE OF COPPER
• COINAGE VALUED BY WEIGHT. 1 SILVER = 180
COPPER
• IMPROVED SMELTING = GREATER PURITY OF
SILVER, & CAST INTO INGOTS FROM WHICH
COINS CUT INTO HOLLU (RINGS) OR HASSIYU
(MINIATURE AXE HEADS). MORE VALUABLE &
WEIGHING ERRORS MINIMISED – DID NOT
MATTER WITH TIN, COPPER OR BRONZE BUT
STILL ILLEGAL.

SUMERIAN SILVER COINS: 3000 BCE

EARLY MONEY CONT.
• A STANDARD CURRENCY IS ESSENTIAL FOR A
SOPHISTICATED TRADING SYSTEM
• THE MESOPOTAMIANS ADOPTED THE SHEKEL:
EQUIVALENT TO 1/3RD OUNCE OF SILVER
• COINAGE FIRST USED IN WAREHOUSES OF
MERCHANTS & THEN COIN OF THE REALM IN
MESOPOTAMIAN CITY STATES
• RULERS USED SHEKEL FOR LEVYING TAXES,FINES
& TRIBUTE USING SHEKEL – GIVEN A STANDARD
WEIGHT.

MONEY IN INDUSTRY & TRADE OF
MESOPOTOMIA
• THE MESOPOTAMIANS BROUGHT AN
AGRICULTURAL REVOLUTION: INTENSIVE
CULTIVATION; MONO-CROPPING;
IRRIGATION & A LABOUR FORCE WITH
SPECIALISED SKILLS
• CLOSER SETTLEMENT
• STAPLE CROPS: BARLEY, WHEAT,
FLAX,DATES,APPLES, PLUMS & GRAPES

TIGRIS & EUPHRATES RIVERS
SUPPORTED & LIMITED AGRICULTURE WATER
PLENTIFUL FOR STORAGE BUT MAJOR SALT
INCURSIONS FROM FLOODS (TIGRIS 1930s)

“UR OF THE CHALDEES”. LAND OF
ABRAM’S FATHER, TERAH
• CITY & DISTRICT: POPULATION 6000, CULTIVATING 12
SQUARE KMs OF LAND: DID NOT USE INTENSIVE
FARMING
• WEALTHY FARMERS SUPPORTED TEMPLES, RULING
ELITE & SMALL FARMERS. 2000 BCE INTRODUCED
HORSE TO FARMWORK
• CENTRE OF TRADE LIKE ALL CITY STATES.
CONTROLLED BY FINANCIERS IN SPECIAL DISTRICTS
EG. “WALL STREET” OF UR:BORROW AT LOW
INTEREST & LEND TO MERCHANT RISK TAKERS AT
HIGH INTEREST EG: LONG DISTANCE TRADE.
FINANCIERS’ MULTIPLE BUSINESS INTERESTS

LEGAL CODE OF HAMMURABI (LAWS
OF JUSTICE, BY KING HAMMURABI)
• CODE OF JUSTICE CONTAINING 282 LAWS, APPLIED IN BABYLON, AND ELSEWHERE IN
MESOPOTAMIA. EXAMPLES:
“NO.3. IF ANY ONE BRING AN ACCUSATION OF CRIME BEFORE THE ELDERS, AND DOES NOT PROVE
WHAT HE HAS CHARGED,HE SHALL, IF IT BE A CAPITAL OFFENCE CHARGED,HE BE PUT TO
DEATH.
“NO. 64. IF ANY ONE HAND OVER HIS GARDEN TO A GARDENER TO WORK, THE GARDENER SHALL PAY
TO ITS OWNER TWO THIRDSOF THE PRODUCE OF THE GARDEN, FOR SO LONG AS HE HAS IT IN
HIS POSSESSION, AND THE OTHER THIRD SHALL HE KEEP.
“NO.117. IF ANY ONE FAIL TO MEET A CLAIM FOR DEBT, AND SELL HIMSELF, HIS WIFE, HIS SON, AND
DAUGHTER FOR MONEY OR GIVE THEM AWAY, TO FORCED LABOUR THEY SHALL WORK FOR
THE THREE YEARS IN THE HOUSE OF THE MAN WHO BOUGHT THEM, OR THE PROPRIETOR,
AND IN THE FOURTH YEAR THEY SHALL BE SET FREE.
“NO. 196. IF A MAN PUT OUT THE EYE OF ANOTHER MAN, HIS EYE SHALL BE PUT OUT.”
DURING ITS TENURE THIS LEGAL CODE COVERED EVERY ASPECT OF LIFE IN THE KINGDOM. THIS
INCLUDED THE FIXING OF WAGES & PRICES

BABYLONIAN MERCHANT CLASS
OPENED TRADE ROUTES

WARAD BUHAZAM, TAM KARU,
BABYLON, 1792 B.C., MAKING A SALE

TAM KARU: MERCHANTS & THE
KING’S AGENTS
• THESE MERCHANTS TRAVELLED THE VERY LONG DISTANCES,
OFTEN AS AGENTS FOR THEIR KING
• THEY WERE TOUGH AND ABLE TO COPE WITH THE HIGH RISK
VENTURES. THE FORERUNNERS OF ENTREPRENEURS &
INNOVATORS OF MONEY & CAPITAL FOR 7000 YEARS.
• THEY TRADED IN HIGH VALUE GOODS & WERE PATRONISED BY
THE ELITE.
• THEY FORMED THEMSELVES INTO akiu (GUILDS) FOR MUTUAL
SUPPORT & THE SPREADING OF RISKS
• RISKS WERE ALSO ASSESSED BY THE DIVINATION OF EXPERTS
WHO WERE AT THE PINNACLE OF SOCIETY & PERFORMED TEMPLE
RITUALS (methodology of Oracle of Delphi, later?)
• AT THE BOTTOM OF THE HEIRARCHY WERE THE SCRIBES WHO
WERE IMPORTANT RECORD KEEPERS & ADMINISTRATORS

WARAD BUHAZAM, PLUM TRADER =
WARREN BUFFETT, INVESTOR
• WARAD BUHAZAM: BUSINESS DIARY, IN CUNIEFORM
ON CLAY TABLETS. WARREN BUFFETT: MANY BOOKS
& ARTICLES.
• AS ENTREPRENEURS THEY HAD SIMILAR MIND SETS:
1. LONERS IN BUSINESS. BUHAZAM LEFT HIS GUILD
(AKIU) & BUFETT LEFT PARTNERSHIPS IN 1956 TO
INVVEST ON OWN ACCOUNT.
2. ENCYCLOPEDIC KNOWLEDGE OF A FEW MARKETS OF
INTEREST. BUHAZAM: PLUMS & PRUNES & BUFFETT
LONG TERM INVESTOR IN SMALL NUMBER OF
COMPANIES.

BUHAZAM = BUFFETT. CONT.
3. WILLING TO TAKE BIG RISKS ON COMMODITY PRICES.
BUHAZAM WORKED OUT A CHILLING PROCES FOR 55
DAYS (ICE CAVERNS) PICKED AT COLOR BREAK STAGE.
FOR EXPORT TO INDIA & EGYPT, ADD TO PRUNE
EXPORTS (NATUROPATHY) & BUFFETT’S BIG BET ON
COCOA BEAN PRICES, IN SHARE PURCHASE.
4.SUCCESSFUL INNOVATOR. BUHAZAM PROBABLY HELPED
TO ESTABLISH PUNJAB’S (INDIA) PLUM INDUSTRY
(MESOPOTAMIAN CONDITIONS). BUFFETT HAD A GREAT
SKILL IN TAKEOVER & RESTRUCTURING OF COMPANIES.
5. SAGES. BUHAZAM CONSULTANT TO DIVINATION EXPERTS
WHO ADVISED KING. BUFFETT ADVISED PRESIDENT
OBAMA

THE UNIVERSAL ENTREPRENEUR
(DEFINED BY J.A. SCHUMPETER)
• “FOR ACTIONS WHICH CONSIST INCARRYING OUT INNOVATIONS WE
RESERVE THE TERM ENTERPRISE; THE INDIVIDUALS WHO CARRY THEM
OUT WE CALL ENTREPRENEURS.”
• “NEVERTHELESS, WE HAVE LITTLE DIFFICULTY IN IDENTIFYING
ENTREPRENEURSHIP IN TIMES OF COMPETITIVE CAPITALISM. THE
ENTREPRENEUR WILL THERE BE FOUND AMONG THE HEADS OF FIRMS,
MOSTLY AMONG THE OWNERS.”
• “IT IS LEADERSHIP RATHER THAN OWNERSHIP THAT MATTERS.”
• “(ENTREPRENEUR’S PROFIT) …IT IS THE PREMIUM PUT UPON
SUCCESSFUL INNOVATION IN CAPITALIST SOCIETY, AND IS TEMPORARY
BY NATURE: IT WILL VANISH IN THE SUBSEQUENT PROCESS OF
COMPETITION AND ADAPTATION.”
• “TAKING INDUSTRY AS A WHOLE, THERE IS ALWAYS AN INNOVATING
SPHERE WARRING WITH AN ‘OLD’ SPHERE, WHICH SOMETIMES TRIES TO
SECURE PROHIBITION OF THE NEW WAYS OF DOING THINGS…”

SLAVES
• SLAVES WERE INTRODUCED INTO THE MESOPOTAMIAN
ECONOMIES BY THE SUMERIANS – MOSTLY FROM
MILITARY CONQUESTS & PURCHASE FROM OTHER SLAVE
SOCIETIES. SLAVERY ALSO OCCURRED WHEN DEBTS WERE
UNPAID, & COULD INCLUDE THE DEBTOR’S FAMILY.
• SLAVES WERE PROPERTY, COULD BE BOUGHT & SOLD,
WERE BRANDED & COULD BE SEVERELY PUNISHED IF THEY
ESCAPED
• WHILST SOME MADE IT TO HIGH OFFICE DUE TO LUCK OR
INTELLIGENCE, MOST REMAINED AT THE LOWEST LEVEL
OF THE COMPLEX PYRAMID THAT WAS THE HUMAN
CAPITAL STRUCTURE FOR THE MESOPOTAMIANS (WOMEN
WERE ALSO SOLD INTO CONCUBINAGE -SEXUAL SLAVERY-
TO THE SLAVE OWNER).

SOCIAL & HUMAN CAPITAL OF
MESOPOTAMIA
• THERE WAS A HUGE & COMPLEX SET OF SOCIAL
ASSETS CREATED BY THE MESOPOTAMIAN
CIVILISATION WHICH WAS DESTINED TO
DISAPPEAR INTO THE DESERTS OF IRAQ AND
THE MIDDLE EASTERN COUNTRIES.
• BUT THE CIVILISATION CREATED MANY GIFTED
ARCHITECTS, ENGINEERS & CRAFTSMEN, WHO
CREATED THEIR CITIES OUT OF THE ONLY
PLENTIFUL BUILDING MATERIAL AVAILABLE TO
THEM – CLAY.

CLAY
“ THE DOMESTIC ARCHITECTURE OF
MESOPOTAMIA GREW OUT OF THE SOIL
UPON WHICH IT STOOD”

TOWER OF BABEL (SEE ABOVE)
• THE FAMOUS TEMPLES OR ZIGGURATS WERE COMPLEX
STEPPED PYRAMIDS OF CLAY BRICKS (CUT VERY
PRECISELY), RISING HUNDREDS OF FEET INTO THE SKY.
• AT THE TIME OF NEBUCHADNEZZAR II, IN 605 BCE,
BABYLON WAS AT THE HEIGHT OF ITS POWER. THE
CONQUERED PEOPLE OF PALESTINE WERE BROUGHT TO
BABYLON TO BUILD THE TEMPLES. ESPECIALLY THE
ZIGGURAT OF ETEMENANKI (“THE TEMPLE FOUNDATION
OF HEAVEN & EARTH”), AND IS BUILT BY SLAVES FROM
MANY LANDS INCL. PALESTINE. BELIEVED TO BE THE
“TOWER OF BABEL” OF THE BIBLE.
• THE STRUCTURE IS 48,400 SQUARE YARDS AT ITS BASE,
RISING TO 8 TOWERS IN THE SKY.

HUMAN CAPITAL
IMMENSE, VARIED & HEIRARCHICAL:
• POWER WAS WITH THE KING & HIS ENTOURAGE
• PRIESTS ( SANGAS) PROVIDED THE KNOWLEDGE BASE. AT
THE TOP OF THEIR PYRAMID WERE THE ‘WISE MEN’ WHO
RULED OVER THE ‘SCRIBES’ (CIVIL ADMINISTRATORS:
SOME IN THE KING’S ENTOURAGE)
• FREE MEN & WOMEN IN COMPLEX SOCIAL NETWORKS:
1. FARMERS WITH A STRONG SKILL BASE
2. MERCHANT CLASS
3. MULTIPLICITY OF TRADESMEN & CRAFTSMEN
• ARMY OF SLAVES (AVERAGE OF 2 - 3 PERHOUSEHOLD,
WITH AT LEAST 1 IN POOR HOUSEHOLDS)

BABYLONIAN SCRIBE WRITING
CUNEIFORM ON A CLAY STELE

LECTURE 2: ANCIENT ASIAN & ARABIC
MONEY: FROM 4000BC INTERACTION

THE BEGINNINGS
• 3500 BCE MESOPOTAMIAN COLONY AT HARAPPA OUTREACH TO
SUB-CONTINENT & EGYPT (IVORY, PRECIOUS STONES, MONKEYS,
SANDALWOOD,SPICES)
• 2000 BCE BEGINNINGS OF CHINA TRADE WITH EMPIRES OF
CENTRAL ASIA ( INDO-ARYANS, SCYTHIANS ETC.)
• FROM 330 BCE GREEK TRADE & CULTURE FOLLOWED ALEXANDER
TO BACTRIA & OTHER PLACES.
• FROM 200 BCE MARITIME TRADE ROUTES LINKED WITH LAND
ROUTES.
• ROUTES CARRIED TRADE, MIGRANTS, POSTAL, ARMIES, DISEASES,
RELIGION, KNOWLEDGE, MONEY & CAPITAL
• MONGOL INVASIONS (1207 – 1360 AD) OF EASTERN EUROPE
BROUGHT LAW & ORDER TO LAND ROUTES & CULTURAL ETC
TRANSFERS TO EASTERN EUROPE

MATHEMATICS OF ASIAN TRADE:
NUMBERING SYSTEM
CHINESE NUMBERING SYSTEM FORMED BASISOF
SCIENCE & ENGINEERING EG: HYDRAULICS FOR
FLOOD CONTROL. IT WAS A PLACE VALUE SYSTEM
USING REPETITIVE NUMERIC SCRIPT:
• I II III IIII T ETC.
• A ZERO SYMBOL FROM INDIA, 8TH CENTURY AD WAS
ADDED.
• COUNTING SYSTEM WAS FACILITATED BY USE OF THE
CHINESE ABACUS – SUANPAN (“COUNTING TRAY”)
• BECAME STANDARD TOOL OF COMPUTATION FOR ALL
MERCHANTS & TAUGHT IN SCHOOLS.

CHINESE COUNTING BOARD:
EXPORTED TO EUROPE
(“EXCHEQUER”)

CHINESE TREATMENT OF RANDOM
EVENTS
• DIVINATION OF RANDOM EVENTS, ESPECIALLY DICE
GAMES.
• I CHING: MATHEMATICAL TREATISE USING YIN &
YANG TO PRODUCE VARIOUS COMBINATIONS OF
HEADS & TAILS. 1500 BCE.
• PRODUCED LONG NUMBERING SEQUENCES: HH TH
HT ETC. (MODERN CODE-BREAKING?, COMPUTER
HACKING?)
• PRECURSOR OF “PASCAL’S TRIANGLE” (1654 AD)
WHICH TOOK FROM ARAB MATHEMATICIANS WHO
CALLED IT “CHINESE TRIANGLE” (1303 AD)
• NO TRADING USAGE.

CHINESE PAPER MONEY
• STANDARD MEDIUM OF EXCHANGE FOR
CHINESE MERCHANTS WAS GOLD, SILVER, SILK
(LARGE TRANSACTIONS) & BRONZE UNTIL 105
AD, AND INVENTION OF PAPER.
• “PAPER MONEY” BEGAN AS LETTERS OF CREDIT
FOR MERCHANTS ON LONG & DANGEROUS
JOURNEYS.
• BECAME KNOWN AS “FLYING MONEY”.
• UNDERWRITTEN BY MONGOLS. NON-
ACCEPTANCE/COUNTERFEIT = DEATH

ENTER LEONARDO OF PISA A.K.A.
LEONARDO FIBONACCI
• WEALTHY ITALIAN MERCHANT BASED IN
BUGIA NORTH AFRICA WHERE HE LEARNED
ABOUT CHINESE, MUSLIM, HINDU
MATHEMATICAL SCHOLARS.
• 1202 AD HE WROTE LIBER ABACI (BOOK OF
ABACUS OR BOOK OF CALCULATION) ABOUT
THE CHINESE, ARAB, HINDU NUMBERING
SYSTEM

FIBONACCI SEQUENCE
• THIS NUMBER SEQUENCE REVOLUTIONISED THE
EUROPEAN METHOD OF COUNTING NUMBERS,
WHICH WAS STILL LOCKED INTO ROMAN NUMBERS.
• THE FIBONACCI SEQUENCE WAS BASED ON THE ASIAN
SYSTEM:
• 1 1 2 3 5 8 13 21….
.. .. (1+1) (2+1)(3+2)(5+3)(8+5) (13+8)
• MODERN MATHEMATICAL FINANCE HAS
EXPERIMENTED WITH THIS SEQUENCE EG: 1930s
ELLIOTT WAVE FOR FORECASTING SHARE PRICES.

INDIAN MATHEMATICS FOR TRADING
• INDIA HOSTED MESOPOTAMIAN COLONY OF
HARAPPA FROM 3500 BCE
• DECIMALS OF GREAT ACCURACY WERE
DEVELOPED FOR WEIGHTS & MEASURES
USED IN ENGINEERING & COMMERCE EG.
BRONZE ROD MARKED IN PRECISE UNITS OF
0.367 INCHES FOR TOWN PLANNING,
ARCHITECTURE & ROAD BUILDING OF FIXED
WIDTHS, DIRECTIONS & DRAINAGE

HARAPPA CIVILISATION ON THE
INDUS RIVER FROM 3500 BCE.

INDIAN VEDIC PERIOD 1000 BCE
• ESTABLISHED THE INDO-ARYAN INVADERS’
CULTURE ON THE SUB-CONTINENT
• LAND ACQUISTION FOR AGRICULTURAL
SETTLEMENT BY COLONISERS.
• ARITHMETIC & GEOMETRY FOR BOUNDARY
SETTING; TAXATION & IRRIGATION RIGHTS

SULVA-SUTRA BAUDHAYAMA 800BC
INSPIRED PYTHAGOREAN THEOREM

9TH CENTURY TRADING SYSTEM ON
SUB-CONTINENT INDIA
• ASTRONOMY FOR NAVIGATION
• MATHEMATICS OF BORROWING & LENDING
• BARTER GOODS MATHEMATICS
• SIMPLE & COMPOUND INTEREST
• WEIGHTS & MEASURES
• TRAVEL TIMES
• PAYMENT OF WAGES
• VOLUMETRIC MEASURES OF LIQUIDS

CELESTIAL NAVIGATION I: THE
EARTH/CELESTIAL SPHERE

GOLDEN AGE OF ISLAMIC
SCHOLARSHIP: 9TH & 10TH CENTURY
• THE SCHOLARS GAVE EUROPEAN SCHOLARS
MATHEMATICS, SCIENCE & LITERATURE
WHICH THEY HAD DERIVED FROM GREECE
AND ASIA. THEY TRAVELLED WITH THE
CONQUERING ARAB ARMIES ACROSS NORTH
AFRICA & INTO CONTINENTAL EUROPE.
MUCH OF THEIR WORK STILL LIES BURIED,
WITHOUT STUDY, IN PRIVATE COLLECTIONS
OR NEGLECTED CORNERS OF LEARNING.

EUCLID’S ELEMENTS: BASIC TEXT
MUSLIM UNIVERSITIES- PICKED UP BY
PASCAL 1665

Al-jabr w ‘ al-muqabala (restoration
and reduction: algebra)
• ISLAMIC SCHOLAR AL-KHWARIZMI IN HIS EXPOSITION
COMPENDIUM BOOK ON CALCULATION AND
BALANCING, BUILDING ON THE WORK OF GREEK,
DIOPHANTUS:
“ IT IS IMPORTANT TO UNDERSTAND JUST HOW
SIGNIFICANT THIS NEW IDEA WAS. IT WAS A
REVOLUTIONARY MOVE AWAY FROM THE GREEK
CONCEPT OF MATHEMATICS, WHICH WAS
ESSENTIALLY GEOMETRY…IT GAVE MATHEMATICS A
WHOLE NEW DEVELOPMENT PATH SO MUCH
BROADER IN CONCEPT TO THAT WHICH HAD EXISTED
BEFORE, AND PROVIDED A VEHICLE FOR THE FUTURE
DEVELOPMENT OF THE SUBJECT.”

AL-KHWARIZMI’S ALGEBRA
(THE QUADRATIC EQUATION)

OMAR KHAYYAM’S MATHEMATICS
THE GREAT SUFI POET/PHILOSOPHER
DERIVATION OF PASCAL’S TRIANGLE &
FIBONACCI’S IDEAS

VENICE: QUEEN OF THE ADRIATIC
• DESTINIES OF VENICE & CONSTANTINOPLE WERE TIED.
• CONSTANTINOPLE BECAME CAPITAL OF BYZANTINE EMPIRE 324 AD WHICH
RULED & TRADED MEDITERRANEAN WITH LARGE FLEET EQUIPPED WITH “GREEK
FIRE” ARTILLERY.
• 568 AD VENICE BECAME PART OF BYZANTINE EMPIRE – THE “ESCARCHATE OF
RAVENNA” BUT BECAME INCREASINGLY INEPENDENT & IN 726 ESTABLISHED
OWN DOGE – FROM LATIN DUX WHO WAS A GOVERNOR APPOINTED BY
CONSTANTINOPLE.
• FROM 9TH TO 12TH CENTURIES VENICE BECAME A REPUBLIC, SEIZING ADRIATIC
PORTS FROM PIRATES
• BUILT A POWERFUL FLEET (36,000 SAILORS & 3300 SHIPS) TO CONTROL
MEDITERRANEAN TRADE – BUT STILL STRONG TRADE CONNECTIONS WITH
CONSTANTINOPLE – WHICH REMAINED THE MAIN ENTREPOT FOR ASIAN
TRADED GOODS & SLAVES
• 1202-1204 VENETIAN FLEET INVADED CONSTANTINOPLE WITH 4TH (NORMAN)
CRUSADERS & BECAME AN IMPERIAL POWER IN MEDITERRANEAN
• IN 1453 CONSTANTINOPLE FELL TO THE SARACENS BUT VENICE SURVIVED &
CONDUCTED 30 YEAR WAR WITH AGAINST OTTOMAN TURKS.

VENETIAN INNOVATIONS IN
COMMERCIAL PRACTICES
• INSURANCE
• PATENT PROTECTION
• CONTROL OF EUROPE’S MONEY MARKET
• DOUBLE-ENTRY BOOK-KEEPING. FIRST
CODIFIED BY THE FRANCISCAN FRIAR LUCA
PACIOLI, IN SUMMA DE ARITHMETICA,
GEOMETRIA,PROPORTIONALITA

SUMMA DE ARITHMETICA,
GEOMETRIA,PROPORTIONALITA

THE COLLEGANZA
• PRECURSOR OF THE JOINT STOCK COMPANY.
• IN ALL TRADING VENTURES ORGANISED BY COLLEGANZA THERE
WERE AT LEAST 2 PARTIES TO A TRADING CONTRACT: THE
“SEDENTARY” MERCHANT (USUALLY A MEMBER OF RULING ELITE)
& THE “TRAVELLING” MERCHANT, WHO OFTEN BANDED
TOGETHER WITH OTHER MERCHANTS TO MINIMISE PHYSICAL
RISKS.
• THE CONTRACT REQUIRED A BALANCING BETWEEN 2
CONTRACTORS – WITH HIGH POWERED INCENTIVES – TO COVER
SHARED RISKS OF FAILURE
• CONTRACTS SPECIFIED PORTS TO BE VISITED & CARGOS CARRIED.
• THE MAIN PORT OF CALL USUALLY CONSTANTINOPLE AND ASIAN
TRADE

VENICE’S SOCIAL & HUMAN CAPITAL
BY THE 17TH CENTURY VENICE HAD BEEN BY-
PASSED AS A TRADING CENTRE, AS
PORTUGUESE, SPANISH, DUTCH, FRENCH &
BRITISH EXPLORERS OPENED OCEAN ROUTES
TO THE AMERICAS & ASIA. BUT IT REMAINED
A CULTURAL CENTRE DESPITE SETBACKS &
INVASIONS. MUCH OF THIS IS THE RESULT OF
THE MAGNIFICENT SOCIAL CAPITAL LEFT
BEHIND IN EARLIER ERAS.

CANALS OF VENICE – CITY OF
ENGINEERING SOLUTIONS

VENICE’S HUMAN CAPITAL: JEWISH
FINANCIERS
• 1497: JEWISH POPULATION OF SPAIN & PORTUGAL
EXPELLED, AND MOVE TO CONSTANTINOPLE,
ESTABLISHING TRADE WITH VENICE.
• 1509: JEWISH POPULATION OF CONSTANTINOPLE SOUGHT
REFUGE IN VENICE. AUTHORITIES SAW THEM AS USEFUL
FOR MONEY, FINANCIAL SERVICES & TAXATION
• 1516: VENICE AUTHORITIES GAVE THEM RESIDENCE IN A
GHETTO, RENEWING THEIR RESIDENCE EVERY 5 YEARS
• 1590: BIG INFLUX OF 2500 JEWS LED TO HIGH RISE
DEVELOPMENT IN THE GHETTO
• VENICE’S FINANCIAL DISTRICT BUILT BY JEWS: THE RIALTO
BRIDGE

LECTURE 4. THE MONEY OF IMPERIAL
ROME

THE MAKING OF IMPERIAL ROME
• 1500 BCE: ROME WAS A COLLECTION OF TRIBES
(“LATINI”) IN THE TERRITORY OF LATIUM TRADING ON
THE TIBER RIVER. LIKE ALL PRIMITIVE SOCIETIES LED
BY A KING, SUPPORTED BY NOBLES. POWERFUL
NEIGHBORING ETRUSCANS GAVE THEM A CULTURE &
STRONG ECONOMIC BASE.
• 509 BCE: REPUBLICAN RULE WAS CREATED IN ROME.
300 NOBLES & THEIR WEALTHY CLIENTELE
ADMINISTERED ROME. RELATIONSHIP BETWEEN
CLIENT & NOBLE PATRON BECAME FOUNDATION OF
ROMAN SOCIETY & ITS LEGAL SYSTEM.

ROME 753 BCE (COMPARE WITH MAP
HANDOUT)

FOUNDATION OF THE ROMAN ARMY
• CREATION OF A STANDING ARMY – “SOLDI”:
THIS WAS THE COINAGE PAID TO THEM
DURING THEIR PERIOD OF SERVICE. THEY
WERE CITIZENS WHO WERE SIGNED ON FOR
THE DURATION OF THE CONFLICT.
• THIS ARMY CONQUERED ROME’S
NEIGHBOURS –SABINES, AEQUI AND VOSCI.
• 407 BCE. INVASION OF ETRUSCAN CITY, VEII.
DESTROYED & POPULATION ENSLAVED.

THE GAULS
• 390 BCE: 8 TRIBES OF GAULS SETTLED IN
NORTHERN ITALY, DEFEATED A ROMAN
ARMY, AND SACKED ROME ITSELF.
• THEY WERE BOUGHT OFF WITH A RANSOM &
RETURNED TO THEIR NORTHERN LANDS, TO
BE KNOWN AS CISALPINE GAUL.
• THERE WERE OCCASIONAL INCURSIONS, BUT
THESE DID NOT THREATEN ROME.

ROME’S CONQUEST OF ITALY
• 509 BCE TO 265 BCE: ROME EXPANDED ITS TERRITORY FROM 50 SQUARE MILES
TO 10,000 SQUARE MILES. (SEE MAP)
• ROMAN ARMY WAS “MOTHER HOUSE OF MODERN ARMIES.”
• CREATED BY SERVIUS TULLIUS 580 BCE. EARLY REPUBLIC ORGANISED INTO 5
MILITARY CLASSES, DRAWN FROM PROPERTY OWNING CITIZENS (ABOUT 1000,
8% OF POPULATION). HIGHEST 3 PROVIDED OFFICERS FOR HEAVY INFANTRY;
LOWEST 2 LIGHT INFANTRY. ORIGINALY CAVALRY (MINOR ROLE) BY FOREIGNERS.
• EVERY CITIZEN HAD OBLIGATION TO RENDER MILITARY SERVICE, ANNUAL INTAKE
BEING 4 LEGIONS & 4 LEVIED FROM ROME’S ALLIES.
• FIELD ARMY COMPRISED MEN 17 TO 46 YEARS DRAWN FROM THE PLEBEIANS.
• WHILST A “PEOPLE’S ARMY”, SOME LONG SERVICE VETERANS WERE RETAINED
TO MAINTAIN STANDARDS
• HEADS OF STATE WERE “CONSULS” & HAD TO HAVE AN ESTABLISHED MILITARY
RECORD OF 10 MILITARY CAMPAIGNS. SOME WERE VERY GOOD WAR FIGHTING
GENERALS – BUT SOME WERE INCOMPETENT
• A CONSUL IN THE FIELD CARRIED AN IMPERIUM – TOTAL CONTROL & LIFE AND
DEATH POWER OVER THE ARMY.

ROMAN SOLDIERS (“ERMINE STREET
GUARD”)

ROME’S DESTRUCTION OF CARTHAGE
201 BCE
• CARTHAGE HAD EXISTED SINCE 725 BCE, AFTER THE BREAK-UP OF THE
PHOENICIAN SETTLEMENTS IN NORTH AFRICA.
• IT RULED THE TRADE ROUTES IN THE MEDITERRANEAN, WITH A SUPERB NAVY &
A MERCENARY ARMY. IF THIS WAS WELL PAID & WELL LED IT WAS INVINCIBLE.
• CARTHAGE HAD BECOME ROME’S RIVAL FOR POWER IN THE MEDITERRANEAN,
AND HAD TO BE DESTROYED.
• IN 311 BCE ROME CREATED A NAVY TO RIVAL CARTHAGE AFTER CAPTURING &
COPYING A WARSHIP.
• IN THE SECOND PUNIC WAR BETWEEN 218 BCE TO 201 BCE ROME SUFFERED
CATASTROPHIC DEFEATS WHICH KILLED MANY VETERAN LEGIONS & BROUGHT
ROME CLOSE TO DESTRUCTION.
• BUT IN 201BCE, A BRILLIANT ROMAN GENERAL, SCIPIO AFRICANUS DEFEATED
THE BRILLIANT CARTHAGINIAN, HANNIBAL, AT THE BATTLE OF ZAMA.
• CARTHAGE WAS DESTROYED COMPREHENSIVELY IN THE BATTLE OF CARTHAGE
IN 149 BCE, & ITS FERTILE FIELDS DESTROYED WITH SALT PLOUGHED INTO THE
SOIL.

SALTING THE FIELDS OF CARTHAGE TO
KILL THE SOIL

ROME’ CONQUEST OF THE NEAR
EAST. 200 BCE – 167 BCE
• 201 BCE WAR BETWEEN PHILLIP OF MACEDON &
GREEK STATES BROUGHT ROME ON THE SIDE OF
GREEKS.
• 197 BCE ROME DEFEATED MACEDON
• GREECE WAS MADE A COLONY OF ROME
• 167 BCE 3RD MACEDONIAN WAR, ROME WON,
DIVIDED MACEDONIA INTO 4 PARTS, & TOOK ITS
MASSIVE WEALTH TO ROME.
• THE EASTERN MEDITERRANEAN NOW
BELONGED TO ROME.

THE MACEDONIAN PHALANX –
BROKEN BY THE ROMAN ARMY

MAINTENANCE OF ROME’S
MEDITERRANEAN EMPIRE 264 – 60
BCE• THE PRICE TO BE PAID BY ROME FOR ITS IMPERIAL EXPANSION
WAS AN END TO THE REPUBLIC & THE BEGINNING OF THE
“KLEPTOCRACIES” RULED BY EMPERORS & MILITARY DICTATORS.
• 264 BCE – 133 BCE:
+RAPID GROWTH OF LATIFUNDIA (GREAT ESTATES) OWNED
BY OLD SENATORIAL CLASSES OF ROME. FINANCED BY
WEALTH & SLAVES TAKEN FROM CONQUERED LAND.
+BANKING & COMMERCE RUN BY “NEW MEN”.
ENTREPRENEURS OF NO PEDIGREE WHO ACQUIRED
GREAT WEALTH & BOUGHT INTO SENATORIAL CLASSES
+NO MIDDLE CLASS
+POOR OF BIG CITIES & TOWNS WHO MIGRATED FROM
RURAL AREAS
+ SLAVES TAKEN FROM CONQUERED LANDS: AVERAGE OF 3
– 5 PER HOUSEHOLD

ROME’S SOCIAL CLASSES ACCORDING
TO CLOTHING OF THE MEN & WOMEN
WOMEN++++++++++++++++++++++++
++++++++++++++

BY 133 BC REPUBLICAN ROME’S
ECONOMIC BASE WAS SHAKY
1. THE PRIMARY SOURCE OF ROME’S WEALTH WAS LOOT FROM ITS CONQUESTS.
2. THE WEALTH WAS SIPHONED OFF BY A SMALL MINORITY OF CITIZENS WHO
OCCUPIED KEY POSITIONS IN THE REPUBLIC.
3. THE POPULARLY ELECTED PUBLIC OFFICES (ASSEMBLIES & MAGISTRACIES)
WERE MOSTLY HELD BY VENAL & INCOMPETENT CLIENTS OF THOSE WITH
POLITICAL POWER.
4. MILITARY BURDENS OF THE EMPIRE WERE INCREASING WHILE MILITARY
RESOURCES WERE DECLINING.
5. MILITARY LAW WAS NOT PERMITTED WITHIN CITY BOUNDARIES, BUT THERE
WERE NO CIVIL POLICE TO CONTROL VIOLENCE, ESPECIALLY MOB VIOLENCE,
ARISING FROM FOOD SHORTAGES ETC. CONSPICUOUS CONSUMPTION BY THE
WEALTHY EXACERBATED THIS SITUATION.
6. THE RULING ELITE EXTENDED THEIR CLIENTELE TO KEY OFFICIALS IN
CONQUERED LANDS, TO EXPAND THEIR INFLUENCE IN ROME – ONLY TO CAUSE
DISSENSION.
7. SOME CONQUERED LANDS BECAME UNGOVERNABLE.

GALLIC SLAVES IN A ROMAN COAL
MINE

ROME’S CONTRIBUTION TO MODERN
CIVILISATION: BASIS FOR LAWS
• MOSTLY IN THE REPUBLICAN ERA IT ESTABLISHED A LEGAL SYSTEM THAT
SURVIVED TO FORM A BASIS FOR LEGAL SYSTEMS IN DEVELOPED
ECONOMIES WHERE RULE OF LAW IS A PARAMOUNT REQUIREMENT,
AND ONE OF THE PILLARS OF MODERN CAPITALISM.
• 449 BCE: A COMMITTEE OF 10 ROMANS – THE DECEMVIR .
• THEY ESTABLISHED 12 CODES PROMULGATED FROM 450-449 BCE. SOME
CODES HAVE NOT SURVIVED , BUT AS FAR AS IS KNOWN THEY ONLY
COVERED PRIVATE RIGHTS & PROCEDURES.
• REDRESS BETWEEN 2 PARTIES WAS SETTLED BEFORE A JUDGE (IUDEX
PRIVATUS ). THE TWO PARTIES APPOINTED A SUITABLE JUDGE FROM A
LIST (ALBUM IUDICUM ). IF THE CASE WAS OF PUBLIC INTEREST 5 JUDGES
WERE APPOINTED
• THE JUDGE, BEING A PRIVATE PERSON, HAD A JURIST APPOINTED TO
CONSULT ON POINTS OF LAW. IF THE DISPUTE WAS UNRESOLVED IT
WENT TO AN EXTRA ORDINUM PROCEDURE, BEFORE A MAGISTRATE,
WHO MADE A JUDGMENT. HIS DECISION COULD BE APPEALED TO A
HIGHER MAGISTRATE.

REPUBLICAN ROME’S LEGAL SYSTEM
CONT.
• AS THE ROMAN EMPIRE EXPANDED, THE LEGAL SYSTEM BECAME MORE
COMPLEX. THE TWELVE TABLES COULD NOT COVER ALL CASES & MORE
FLEXIBILITY WAS NEEDED.
• PRAETORS WERE APPOINTED TO ACHIEVE THIS FLEXIBILITY – SENIOR
PUBLIC OFFICIALS FIRST ELECTED IN 366 BCE WHOSE FUNCTIONS WERE
BOTH MILITARY & JUDICIAL. THEY HAD THE POWER TO INFLICT
PUNISHMENTS, INCL. DEATH PENALTIES.
• UNTIL 200 AD, PRAETORS ANNOUNCED THE RULES & PROCEDURES HE
WOULD FOLLOW DURING HIS TENURE. AFTER 200 AD A STANDARD SET
OF PROTOCOLS FOR PRAETORS WAS ISSUED.
• THE PRAETORIAL EDICTS ALL BECAME SUBJECTS OF GREAT STUDY
AMONG JURISTS. AMONG TTHE MOST INFLUENTIAL WAS QUINTUS
MUCIUS SCAEVOLA WHO WROTE THE DEFINITIVE TREATISE.

THE BUSINESS INFRASTRUCTURE
DURING THE REPUBLICAN ERA (1)
• IN THE ERA OF THE REPUBLIC OF ROME (509 BCE – 27 BCE) A SUBSTANTIAL
FINANCE INFRASTRUCTURE WAS DEVELOPED BY THOSE WISHING TO PROSPER
FROM THE GROWING WEALTH OF ROME.
• THE INFRASTRUCTURE WAS BASED ON THE DEVELOPMENTS IN THE CASE LAW
OF ROME’S LEGAL SYSTEM.
• WITHIIN THIS SYSTEM EVEN SLAVES COULD ACCUMULATE WEALTH AND POWER.
AS LEGAL “CHATTELS’’ OF THE OWNER. THEY COULD BE APPOINTED AS AGENTS
FOR THE OWNER IN ANY COMMERCIAL TRANSACTION.
• THE FLEXIBILITY ALLOWED IN THE LEGAL SYSTEM ALLOWED THE REPUBLIC TO
CONTRACT OUT PUBLIC SERVICES – TO THE PUBLICANI – HOLDERS OF PUBLIC
LEASES. THEY BECAME WEALTHY “NEW MEN” AND DEVELOPMENT A NEW
CLASS, KNOWN AS EQUITES (KNIGHTS). THEY EXPANDED THEIR BUSINESSES INTO
CONQUERED LANDS AS GOVERNMENT REVENUE COLLECTORS
• AS THESE BUSINESSES GREW IN SIZE THEY WERE ALLOWED TO FORM SOCIETAS
PUBLICANORUM - COMPANIES OF PARTNERS OR SHAREHOLDERS.

THE BUSINESS STRUCTURE DURING
THE REPUBLICAN ERA (2)
• THIS EARLY FORM OF JOINT STOCK COMPANY ALLOWED
INVESTORS TO ACQUIRE SHARES – PARTES – WITHOUT
INCURRING ANY LIABILITIES OF THE BUSINESS
• THE BUSINESS COULD ALSO: PROSECUTE OTHERS FOR
MALFEASANCE,ITSELF OWN PROPERTY & INHERIT WEALTH
• BECAUSE MOST POLITICAL OFFICES WERE TIME LIMITED, IT
PREVENTED THE ESTABLISHMENT OF ENTRENCHED
BUREAUCRACIES, AND A MAXIMUM OF PRIVATISATION
• THE EXCEPTION WAS THE PUBLIC TREASURY – AERARIUM –
WHICH HANDLED ALL OF THE REPUBLIC’S FINANCES. THIS
ORGANISATION WAS MANAGED BY TWO QAESTORS RESPONSIBLE
TO THE SENATE FOR AUDITING & POLICING ROME’S FINANCES

THE BUSINESS OF SLAVERY IN
REPUBLICAN ROME
• SLAVES FORMED A SIGNIFICANT PART OF THE ROMAN EMPIRE’S SOCIAL CAPITAL. BY 100 AD,
ITALY HAD ABOUT 2 – 3 MILLION SLAVES, 40% OF THE POPULATION. THE EMPIRE HAD ABOUT 5
MILLION, OR 15% OF THE EMPIRE’S POPULATION.
• THE PATRICIAN CLASS (ABOUT 2%) OWNED ABOUT HALF THE SLAVES. MOST HAD ABOUT 5 – 6
SLAVES, NOT COUNTING LABOURERS IN THE ESTATES. MOST HOUSEHOLDS HAD 1 OR 2 SLAVES.
• NON-LITERATE SLAVES WERE PUT TO WORK IN LABOURING JOBS, MANY OF WHICH GAVE THEM
LIVES WHICH WERE SHORT, NASTY AND BRUTISH.
• WHEN LABOUR SHORTAGES DEVELOPED DUE TO MILITARY RECRUITMENT DRIVES, SLAVES WERE
USED TO FILL THE GAPS.
• EDUCATED SLAVES, ESPECIALLY GREEKS, MADE A VALUABLE CONTRIBUTION TO HOUSEHOLD &
BUSINESS ADMINISTRATION.
• SLAVES WERE ALLOWED TO ACCUMULATE PECULIUM, OR AN ALLOWANCE SET ASIDE FOR THE
DAY THEY RECEIVED THEIR FREEDOM. FREE MEN EMPLOYED SLAVES AS MANAGERS ENTRUSTED
TO CARRY OUT TRANSACTIONS AS AGENTS FOR THEIR OWNERS. FINANCIAL TRANSACTIONS
WERE LABELLED AS PECULIUM.
• THIS LED TO CAREER OPPORTUNITIES FOR EDUCATED & MOTIVATED SLAVES TO MANAGE THEIR
MASTER’S AFFAIRS. FREE MEN OF LIMITED MEANS SOMETIMES SOLD THEMSELVES AND THEIR
FAMILIES INTO SLAVERY TO ENTER THIS EXCLUSIVE MARKET FOR MANAGERIAL TALENT.

THE DECLINE AND FALL OF THE
ROMAN EMPIRE (1)
• ON 15 MARCH 44 BCE, JULIUS CAESAR WAS ASSASSINATED BY HIS RIVALS
FOR OFFICE ON THE FLOOR OF THE ROMAN SENATE.
• IN THE CIVIL WAR WHICH FOLLOWED, A VERY CLEVER NEPHEW,AND
LEGAL HEIR, OF CAESAR, OCTAVIANUS (SURNAMED CAESAR)
PRECIPITATED A CIVIL WAR
• IN THE WAR WHICH FOLLOWED: “WITH ITS POWER, THE SENATE LOST ITS
DIGNITY; MANY OF THE MOST NOBLE FAMILIES WERE EXTINCT. THE
REPUBLICANS OF SPIRIT AND ABILITY HAD PERISHED ON THE FIELD OF
BATTLE , OR IN PROSCRIPTION. THE DOOR OF THE ASSEMBLY HAD BEEN
DESIGNEDLY LEFT OPEN FOR A MIXED MULTITUDE OF MORE THAN A
THOUSAND PERSONS, WHO REFLECTED DISGRACE UPON THEIR RANK
INSTEAD OF DERIVING HONOUR FROM IT.” ( EDWARD GIBBON)
• AT THE HEAD OF 44 LEGIONS OF LOYAL WELL-PAID TROOPS, OCTAVIANUS
DECLARED HIMSELF FATHER OF ROME, AND TOOK OVER THE SENATE OF
ROME.

OCTAVIANUS ADDRESSES THE SENATE
OF ROME

OCTAVIANUS CAESAR – “PRINCE OF
THE SENATE” (27 BCE – 14 AD)
• HE EXPELLED SENATORS WHOSE VICES WERE
NOTORIOUS OR WHO OPPOSED HIM, INSISTED THAT
200 OTHERS RESIGN, INCREASED THE WEALTH
THRESHHOLD FOR OFFICE OF SENATOR, & CREATED
NEW PATRICIAN FAMILIES.
• “ BUT WHILST HE THUS RESTORED THE DIGNITY, HE
DESTROYED THE INDEPENDENCE OF THE SENATE. THE
PRINCIPLES OF A FREE CONSTITUTION ARE
IRRECOVERABLY LOST WHEN THE LEGISLATIVE POWER
IS NOMINATED BY THE EXCECUTIVE.” ( EDWARD
GIBBON) – A FUNDAMENTAL POINT THAT JOH BJELKE
PETERSEN DID NOT UNDERSTAND!

OCTAVIANUS CAESAR – MASTER OF
ROME

OCTAVIANUS – MASTER OF ROME
• HE PRESERVED HIS MILITARY COMMAND BY THE APPLICATION OF A MILITARY OATH WHICH WAS
APPLIED TO ALL HIS LEGIONS BUT WHICH HE EXTENDED TO MAGISTRATES, SENATORS, THE
EQUESTRIAN ORDER OF SOCIETY, AND OTHERS WHO WISHED TO ADVANCE THEMSELVES WITH
HOMAGE & FLATTERY. HITLER DID THIS TOO!
• HE CREATED A PERSONAL BODYGUARD OF PRAETORIANS. UP TO 15,000 SOLDIERS, ORIGINALLY
THE BEST BUT LATER RECRUITED BY FAMILY CONNECTIONS (COMPARE HITLER’S SS). THE
PRAETORIANS LATER SOUGHT TO RULE ROME
• OCTAVIANUS HAD SUBVERTED THE CONSTITUTION OF ROME BY MAKING THE SENATE A USEFUL
TOOL FOR HIS RULE. BUT THEY WERE ABLE TO: CONFER ON WAR & PEACE; WERE THE SUPREME
COURT OF APPEAL; JUDGED CRIMINAL MATTERS. ON 2 TO 3 DAYS EACH MONTH (THE CALENDS )
THEY MET & DEBATED WITH RELATIVE FREEDOM, AND THE EMPERORS FROM OCTAVIANUS
ONWARDS WERE GIVEN SENATORIAL RANK TO SIT, VOTE AND DIVIDE WITH THEIR EQUAL
SENATORS.
• AS A FINAL ACT OF AUTHORITY, OCTAVIANUS REDEFINED THE REPUBLICAN MILITARY CONCEPT
OF IMPERIUM. IN THIS NEW DEFINITION IMPERIUM RESIDED IN ONE PERSON – HIMSELF. HE
HELD TWO OFFICES, AT THE SENATE’S AGREEMENT:
1. IMPERATUR (EMPEROR)
2. AUGUSTUS (“REVEREND”: AN EXALTED STATUS, A LITTLE BEYOND A MORTAL MAN
(COMPARE THE AYATOLLAH.)

ROME BECOMES WORLD’S FIRST
KLEPTOCRACY
• KLEPTES = THIEF
• KRATOS = POWER, RULE
• KLEPTES KRATOS = RULE OF THIEVES.
• EMPIRE’S TREASURY AS A SOURCE OF PERSONAL
WEALTH FOR RULER & CRONIES TO SPEND ON
LUXURY GOODS AND EXTRAVAGANCES.
• ROME’S IMPERIAL HOUSEHOLD & CRONIES
FROM 133 BC. BECAME PROGRESSIVELY WORSE.

ROME IN THE ERA OF THE
PRINCIPIATE (27 BCE – 222 AD)
• BEGINNING WITH CAESAR AUGUSTUS THIS PERIOD IN THE
DEVELOPMENT OF THE LEGAL SYSTEM IS KNOWN AS THE
PRINCIPIATE.
• IT IS SEEN AS A GOLDEN ERA IN THE DEVELOPMENT OF ROMAN
CIVIL LAW, EVEN THOUGH IT WAS DEVELOPED UNDER THE RULE
OF 19 ROMAN EMPERORS OF VARYING MENTAL STABILITY,
VENALITY AND RUTHLESSNESS.
• THE ERA OF THE PRINCIPIATE GAVE THE LAW:
+ THE JURISTS WITH GREAT LITERARY & PRACTICAL KNOWLEDGE
+ THE JURISTS GAVE LEGAL OPINIONS, ADVISED MAGISTRATES & PRAETORS ON
POINTS OF LAW
+ HELPED THE PRAETORS TO DRAFT EDICTS
+ DEVELOPED THE DISTINCTION BETWEEN CONTRACT AND TORT (CIVIL
WRONGS)
+ DEFINED THE STANDARD TYPES OF CONTRACTS: SALE, WORK, HIRE,
PROVISION OF SERVICES.

ROME IN THE SHIFT FROM
PRINCIPIATE TO THE DOMINATE
• WHEN MARCUS AURELIUS DIED IN 180 AD, THE ROMAN EMPIRE WAS AT
ITS MAXIMUM SIZE THROUGH CONQUEST, COLONISATION AND TRADE.
ESTABLISHED ORIGINALLY BY CAESAR AUGUSTUS, THE ARMY PLAYED A
KEY ROLE IN PAX ROMANA.
• WHEN AURELIUS DIED, THE ROMAN ARMY CONSISTED OF 25 LEGIONS:
150,000 MEN NOT COUNTING NON-COMBATANTS. BY THE THIRD
CENTURY AD THE ARMY HAD GROWN TO 400,000. MOST WERE
GARRISON TROOPS MANNING ACONTINUOUS LINE OF FORTIFICATIONS
& STRONGPOINTS CONNECTED BY LIMITES – MILITARY ROADS TO
PERMIT RAPID DEPLOYMENT OF TROOPS IN EMERGENCIES.
• AS GARRISON TROOPS THEY LOST THEIR FITNESS & SENSE OF PURPOSE,
AND FAILED TO HOLD THE FORTS AGAINST BARBARIAN INVADERS
• FINALLY, CONSTANTINE I, A CHRISTIAN EMPEROR TRANSFERRED THE
ROMAN CAPITAL TO BYZANTIUM, AND LEFT ROME TO THE BARBARIANS.

ROMAN BANKING
• ROME’ S WEALTH STRUCTURE SURVIVED FOR A LONG TIME BECAUSE OF ITS BANKING SYSTEM.
THIS WAS DEVELOPED IN THE REPUBLICAN ERA, AND SURVIVED DURING THE PRINCIPIATE AND
DOMINATE ERAs.
• THE ARGENTARI (BANKERS) TOOK PEOPLE’S WEALTH & STORED IT IN A SAFE PLACE.
• CUSTOMERS DREW ON THEIR DEPOSITED WEALTH (DEPOSITUM) TO PAY THEIR BILLS WITH A
DRAFT FROM THE BANK
• THE DEPOSITII COULD NOT BE USED TO LEND TO OTHERS. INSTEAD BANKERS USED THE
CREDITUM: AN INTEREST BEARING DEPOSIT WHICH ALLOWED THE BANKER TO LEND TO OTHERS
AT A PROFIT.
• INTEREST RATES WERE ESTABLISHED, BASED ON A SIMPLE 1/12TH PER YEAR – BASED ON THE
ROMAN DUODECIMAL SYSTEM – WHICH WAS BASED ON THE WEIGHTS & MEASURES SYSTEM &
WAS SIMPLE TO APPLY.
• THIS 1/12TH PER YEAR WAS EQUIVALENT TO AN ANNUAL INTEREST RATE OF 8 1/3RD PER YEAR.
• FROM THE PRINCIPIATE ONWARDS LARGE IMPERIAL BUREAUCRACIES EMPLOYED MENSARII TO
ADMINISTER PUBLIC MONEY & MAKE LOANS ON BEHALF OF THE STATE TO DISTRESSED
CITIZENS.
• SOME EMPERORS USED THE TEMPLES OF WORSHIP AS SAFE DEPOSITS FOR THEIR WEALTH –
SINCE STEALING FROM TEMPLES MEANT A VERY MESSY EXECUTION FOR PERPETRATORS.

ROMAN NUMBERING SYSTEM
A MAJOR IMPEDIMENT TO SOPHISTICATION IN
THE MATHEMATICS OF FINANCE WAS THE
ROMAN NUMBERING SYSTEM (THIS HAD TO
WAIT FOR THE HINDU-ARABIC SYSTEM)
THE ROMAN NUMERIC SYSTEM PERSISTED INTO
THE 14TH CENTURY AD IN EUROPE BECAUSE IT
COULD EASILY BE USED BY UNLETTERED PEOPLE.
THERE WERE ONLY FOUR LETTER-NUMBERS TO
REMEMBER – V,X,L AND C. THESE MADE
STRAIGHTFORWARD ARITHMETICAL
COMPUTATIONS ONLY.

DECLINING INTEGRITY OF ROME’S
CURRENCY (1)
• THE BEST ECONOMIC INDICATOR OF THE DECLINE & FALL
OF THE ROMAN EMPIRE IN THE WEST WAS THE DECLINE
IN THE INTEGRITY OF ITS CURRENCY – WHICH IN
ECONOMICS IS SEEN AS THE STORE OF VALUE IN ANY
ECONOMY.
• WHERE SILVER OR GOLD IS USED IN THE CURRENCY
(COINS), ITS INTEGRITY IS MEASURED BY THE AMOUNT OF
GOLD OR SILVER IN EACH COIN.
• AT ITS WEALTHIEST, IN 187 BCE, 1 POUND OF SILVER
COULD BE DIVIDED INTO 72 DENARII, EACH COIN
WEIGHING 4.55 GRAMS OF SILVER.
• EACH DENARIUS WAS WORTH 10 AS. = 54 GRAMS OF
BRONZE WEIGHING 54 GRAMS

CURRENCY (2)
• THE DECLINE BEGAN WITH THE RISE OF THE PRINCIPIATE, WITH JULIUS CAESAR’s
COMMAND OF THE ROMAN ARMY, REWARDING LEGIONARIES WITH GOLD
AUREI. EACH OF THESE COINS CONTAINED 8.19 GRAMS OF GOLD. THEY WERE
ALSO ALLOCATED SLAVES TO SELL ON THE OPEN MARKET.
• THIS GENEROSITY OF CAESAR WAS EXTENDED TO THE CITIZENS OF ROME, WITH
FEASTS, GAMES, FREE FOOD & ENTERTAINMENT.
• OCTAVIANUS, HIS SUCCESSOR, ALSO BOUGHT THE LOYALTY OF ROME’S 44
LEGIONS WITH MONEY.
• HE REMOVED HINDRANCES TO HIS SPENDING BY BRINGING THE MINTING OF
GOLD & SILVER COINS UNDER CONTROL OF HIS IMPERIAL OFFICE. BRONZE
COINAGE REMAINED UNDER THE CONTROL OF THE SENATE. BUT HE DID NOT
APPRECIATE THE FACT THAT METAL PRICES ON THE OPEN MARKET WERE BOUND
TO EACH OTHER, MAKING THE MONETARY SYSTEM VULNERABLE TO COLLAPSES
IN THE METAL MARKET PRICES.
• HE ALSO DECREED THAT ROMAN COINAGE SHOULD BE ESTABLISHED IN ALL
PARTS OF THE EMPIRE – MAKING THE MONETARY SYSTEM EVEN MORE
VULNERABLE.

CURRENCY (3)
• EMPEROR NERO ( 54 – 68 AD) BROUGHT ABOUT THE
FIRST MAJOR CURRENCY DEVALUATION – THE GOLD
AUREUS WAS REDUCED FROM 7.96 GRAMS OF GOLD
TO 7.29 GRAMS. THE DENARIUS FROM 3.9 GRAMS OF
SILVER TO 3.4 GRAMS.
• CONTINUED DEVALUATIONS TO FINANCE WARS &
OSTENTATIOUS SPENDING CONTINUED UNTIL
EMPEROR DIOCLETIAN (284 -305 AD) ATTEMPTED TO
REFORM THE SYSTEM (READ FROM INTERNET). BY
THIS TIME GOLD COINS OF AN EARLIER ERA WERE
BEING HOARDED, BUT NO ONE KNEW THE PRECISE
VALUE BECAUSE OF ADULTERATION OF THE GOLD
CONTENT.

SOCIAL ASSETS BEQUEATHED BY
ROME
PERHAPS THE GREATEST LEGACY TO HUMAN
CIVILISATION MADE BY IMPERIAL ROME HAS
BEEN THE SOCIAL ASSETS WHICH HAVE
SURVIVED THE SOCIAL INSTITUTIONS WHICH
PERISHED WITH THE COLLAPSE OF THE
WESTERN EMPIRE. THIS INCLUDES THE
BUILDINGS SHOWN IN THE MAP HANDOUT
& 400,000 KILOMETRES OF ROADS, THE BEST
OF WHICH WERE MILITARY ROADS PAVED
WITH STONE.

ROMAN ROAD OF TALL AQIBRIN
(SYRIA)

LECTURE 5. NULLUS CHRISTIANUS
DEBET ESSE MERCATOR
VIRGIL IN HELL NEGOTIATING PUNISHMENT OF
USURERS (CANTO XI. INFERNO)

CHRISTIAN CANON LAW ON “USURY”
“ No Christian may be (avaricious) in (dealing with) a trading debt
(incurred by others to him”). ENSHRINED IN CANON 17. CANONS
PRODUCED BY COUNCIL OF BISHOPS, NICAEA. 325 A.D.) (SAINT
AUGUSTINE. BISHOP OF HIPPO, REGIUS. 354 – 430 AD)
“(ARISTOTLE STATED, BCE321) THE WORST FORM OF MONEYMAKING
IS THAT WHICH USES MONEY ITSELF AS THE SOURCE OF
ACCUMULATION:USURY. MONEY IS INTENDED TO BE USED IN
EXCHANGE, BUT NOT TO INCREASE AT INTEREST; IT IS BY NATURE
BARREN; THROUGH USURY IT BREEDS, AND THIS MUST BE THE
MOST UNNATURAL OF ALL WAYS OF MAKING MONEY.”
• THIS IS HOW CHRISTIAN CANON LAW INFLUENCED MONEY & ITS
USE IN THE EARLY MIDDLE AGES IN EUROPE.
• 1917 CODE OF CANON LAW ALLOWED THE INVESTMENT OF
INTEREST-BEARING SECURITIES AT THE LEGAL RATES OF INTEREST,
BY LOCAL PARISHES & DIOCESES.

RELIGION & THE RISE OF CAPITALISM
“ THE INNUMERABLE FABLES OF THE USURER WHO WAS
PRESUMABLY CARRIED TO HELL, OR WHOSE MONEY
TURNED TO WITHERED LEAVES IN HIS STRONG BOX, OR
WHO (AS THE SCRUPULOUS RECORDER REMARKS),
‘ABOUT THE YEAR 1240’, ON ENTERING THE CHURCH TO
BE MARRIED, WAS CRUSHED BY A STONE PILLAR FALLING
FROM THE PORCH, WHICH PROVED BY THE GRACE OF
GOD TO BE THE CARVING OF ANOTHER USURER AND HIS
MONEYBAGS BEING CARRIED OFF TO THE DEVIL’, ARE
MORE ILLUMINATING THAN THE REFINEMENTS OF
LAWYERS.”
(R H TAWNEY. “RELIGION AND THE RISE OF CAPITALISM”)

EUROPE 500 AD – TO 1000 AD: THE
AWAKENING: MEDIA AETAS
• THE IDEA OF THE MIDDLE AGES WAS INVENTED BY ST.AUGUSTINE IN HIS “CITY OF GOD” WHICH
CAME INTO BEING AFTER THE COLLAPSE OF THE ROMAN EMPIRE IN EUROPE, FROM ABOUT 500
AD.
• IT WAS ALSO THE START OF A MASSIVE CONVERSION OF A PAGAN EUROPE TO CHRISTIANITY, THE
ESTABISHMENT OF ITS INSTITUTIONS & ITS POLITICAL STRUCTURES. ALL WERE EXCLUDED FROM
CHRISTIAN EUROPE EXCEPT JEWS, VISITORS AND SLAVES.
• IN A EUROPE TORN BY WAR BETWEEN WARLORDS, SELF-APPOINTED KINGS & OTHER MEN OF
VIOLENCE, THE CHURCH ESTABLISHED ORDER BASED UPON THEIR OWNERSHIP OF CHURCH
LANDS, CENTRES OF LEARNING (MONASTRIES) AND A MULTI-LAYERED SOCIAL INFRASTRUCTURE
EG. INNS,HOSPITALS, UNIVERSITIES, POOR HOUSES, & HOSPITALS.
• THE CHURCH LANDS WERE ALSO RENTED OUT TO FARMERS AND WERE OFTEN THE REMAINS OF
THE ROMAN LATIFUNDIA. THE CHURCH ALSO DEALT IN JOINT VENTURES WITH PRIVATE
INDIVIDUALS OF WEALTH, TO DEVELOP THEIR PROPERTY PORTFOLIOS.
• THE CHURCH ALSO RETAINED THE ROMAN CUSTOM OF BENEFICIUM WHERE GIFTS OF LAND
(PRECARII) WERE GIVEN AS REWARDS FOR SERVICE.
• SOME ESTMATES ARE THAT 1/3RD OF EUROPE’S LAND MASS BELONGED TO THE CHURCH BY 1500.

600 AD – 900 AD: THE SLAV PLOUGH
COMES TO EUROPE
• THE SLAV PLOUGH WAS A HEAVY, WHEELED PLOUGH THAT COULD
PLOUGH SOIL DEEPLY, WHICH BROUGHT LARGE AREAS OF
PREVIOUSLY NON-ARABLE LAND INTO FOOD PRODUCTION.
• OXEN WERE USED TO HAUL THE PLOUGH, ALLOWING BIGGER
FIELDS PLOUGHED IN RECTANGLES (INSTEAD OF SMALL SQUARES).
• THREE COMMONS FIELDS BECAME THE NORM FOR EACH VILLAGE,
ENFORCING CO-OPERATIVE FARMING, FOR COMMERCIAL GAIN,
INSTEAD OF SUBSISTENCE.
• BY 1000 AD, AGRICULTURAL PRODUCTIVITY HAD INCREASED BY
50%
• OTHER INNOVATIONS WERE THE SCYTHE (REPLACING THE SICKLE),
HORSESHOES, BETTER HARNESS, AND THE WHIPPLETREE OAK
• NEW CROPS, FROM ARABIC SOURCES, WERE INTRODUCED: RICE &
LARGE-SCALE VEGETABLE PRODUCTION IN SPAIN BASED ON
IRRIGATION

MEDIEVAL CASTLE IN TUSCANY (ON
1500 ACRES TODAY, ONCE A
MONASTERY)

EUROPE 500 AD – 1000 AD:
ECONOMIC LIFE IN THE BEGINNING
• ECONOMIC LIFE WAS VERY BASIC, AFTER THE DEMISE OF THE ROMAN EMPIRE.
OWNERS OF LATIFUNDIA HUNG ON AS LONG AS FAMILIES SURVIVED. SOME
ROMAN TOWNS NEVER RECOVERED.
• BARBARIANS, VANDALS & WARLORDS ROAMED THE LAND WITHOUT
HINDRANCE.
• THE EXISTING MONETARY SYSTEM WAS MOSTLY REPLACED BY BARTER.
• MOST PEOPLE ATE BREAD, A COARSE PORRIDGE & DRANK BADLY BREWED BEER.
• LIFE EXPECTANCY AT BIRTH WAS 30 YEARS ON AVERAGE
• AGRICULTURE WAS THE MAINSTAY OF MOST OF THE PEOPLE BUT IT WAS
SUBSISTENCE LEVEL. “THE ANIMALS WHO LIVED WITH THE STUNTED & SCURVY –
RIDDEN TENANTS OF THE DARK AGE LANDSCAPE WERE THEMSELVES UNDER-
NOURISHED AND UNDERSIZED. FOR FAT , THE BETTER-OFF PEASANT DEPENDED
UPON THE PIG,OR, IN THE SOUTH , ON OLIVE OIL.” (J M ROBERTS)
• WITH VASTLY INCREASED FOOD PRODUCTION, EUROPE’S POPULATION RAPIDLY
EXPANDED TO ABOUT 40 MILLION IN 1000 AD.

MEDIEVAL EUROPE: PROSPEROUS
PEASANTS

EMERGENCE OF EUROPE’S
LANDOWNING CLASS
• APART FROM THE CHURCH A LANDOWNING CLASS EMERGED IN
EUROPE: DESCENDANTS OF WARLORDS, THOSE FAVOURED BY
KINGS, AND THE CHURCH. THEY ACQUIRED THE STATUS OF
NOBILITY, WHICH ALSO GAVE HEREDITARY TITLE TO THE LAND.
• IN RETURN KINGS INTRODUCD THE CONCEPT OF ‘VASSALAGE”:
REQUIRING THE LORD TO PRESENT HIMSELF (WITH 20 ‘LANCES’)
WHEN THE KING WENT TO WAR. THE 20 LANCES WERE VASSALS
TO THE LORD, AND IN TURN WOULD HAVE VASSALS TO ATTEND
THE ‘LANCER’.
• MUCH OF EUROPE WAS THUS DIVIDED INTO FEUDA – FIEFDOMS,
WITH COMPLEX OBLIGATIONS BETWEEN EACH STRATUM OF
SOCIETY, AND THE RULER OF THE FIEFDOM.

1000 AD – 1500 AD: SUSTAINABLE
ECONOMIC GROWTH
• THE CHANGES TO 1000 AD LAUNCHED EUROPE ON A
TRAJECTORY OF ECONOMIC GROWTH WHICH CONTINUES
TODAY.
• POPUATION EXPANDED TO REACH A PEAK OF 73 MILLION
IN 1300, AS FOOD SUPPLIES EXPANDED & NEW LAND
BROUGHT UNDER CULTIVATION. IN 1300 NEW LAND
SETTLEMENT PEAKED.
• ESTATE OWNERS LEVIED ‘CUSTOMS’ OR TAXES ON
PEASANT FARMERS THUS DIVERTING MUCH OF THE
INCREASING WEALTH INTO THEIR COFFERS.
• PEASANT FARMERS, ON AVERAGE, LIVED ON ABOUT 2000
CALORIES A DAY – ABOUT THE SAME AS A MODERN
SUDANESE VILLAGER

GROWTH OF TRADE: 1000 AD – 1500
AD & THE NEW MERCHANT CLASS
• WITHIN THE ESTABLISHED CLASS STRUCTURE OF EUROPE, THERE DEVELOPED A NEW CLASS – THE MERCHANT
CLASS..
• THIS CLASS RULED THE NEW TOWNS WHICH WERE DEVELOPING ALONG THE TRADE ROUTES OF EUROPE:
“THE COMMUNES AND WITHIN THEM THE GUILDS WERE ASSOCIATIONS OF FREE MEN FOR A LONG TIME ISOLATED
IN A WORLD OF THE UNFREE. THE BURGHER – THE ‘BOURGEOIS’ -, THE DWELLER IN THE BOURG OR BOROUGH –
WAS A MAN WHO STOOD UP FOR HIMSELF IN A UNIVERSE OF DEPENDENCE, A CITIZEN IN THE MAKING, AS
WELL AS A SUBJECT.”
(J M ROBERTS)
• “SOON THEY EVOLVED THEIR OWN SOCIAL FORMS - GUILDS, ‘MYSTERIES’, CORPORATIONS – WHICH GAVE
NEW DEFINITION TO THEIR SOCIAL ROLE AND NEW SATISFACTION TO BURGEONING ASPIRATIONS OF STATUS.”
(J M ROBERTS)
• THE GREAT CITIES OF EUROPE BEGAN TO EMERGE ( LONDON HAD 35,000 POPULATION IN 1300; PARIS 80,000 IN
1340)
• BY 1500, EVERY TOWN HAD ITS POPULATION OF CRAFTSMEN AND TECHNOLOGISTS IN EVERY FIELD OF
SPECIALISATION, INCLUDING MANUFACTURING, BUT ALSO THE REPAIR OF MACHINERY, AND THE
IMPROVEMENT OF MACHINERY.
• 14TH CENTURY EUROPE WAS A DISASTROUS 100 YEARS:
+ ONSLAUGHTS OF THE ISLAMIC ARMIES ON BYZANTINE EMPIRE DESTROYED THE EASTERN TRADE.
+THE “BLACK DEATH” (1348 – 1350) KILLED A THIRD OF EUROPE (ABOUT 40 MILLION)
+ THERE WERE PEASANT REVOLTS AGAINST LANDOWNERS WITH GREAT LOSS OF LIFE
+ THERE WERE WARS, INCL. KING EDWARD III IN 1330s, WHO PRECIPITATED THE 100 YEARS WAR WITH
FRANCE. WHEN HE RENEGED ON HIS DEBTS TO THE FLORENTINE BANKS, THE EUROPEAN FINANCIAL
SYSTEM COLLAPSED.

EUROPEAN BANKING; 1000 AD – 1500
AD (1)
• AS WE SAW IN LECTURE 3, BY ABOUT 1000 AD, VENICE HAD
BECOME THE MAIN COMMERCIAL HUB OF EUROPE FOR TRADE
WITH THE EAST. AND IT WAS HERE THAT MOST OF THE
COMMERCIAL INNOVATIONS BEGAN TAKING PLACE. FLORENCE &
GENOA WERE TO BECOME IMPORTANT RIVALS IN THE NEXT 500
YEARS, AND THEN SURPASS THAT CITY AS LONG DISTANCE
SEABORNE TRADING BECAME ESTABLISHED.
• AS THE PRIMITIVE VILLAGES OF 500 AD GREW INTO TOWNS &
TOWNS BECAME MORE SOPHISTICATED COMMERCIAL CENTRES,
BARTERING FOR GOODS & SERVICES GAVE WAY TO COINAGE, AS A
CURRENCY OF EXCHANGE FOR GOODS & SERVICES PURCHASED. IT
WAS ALSO A STORE OF VALUE, BASED ON THE PRECIOUS METAL
CONTENT OF THE COINAGE.

EUROPEAN BANKING: 1000 AD – 1500
AD (2)
• THE MOST COMMON COIN WAS THE SILVER PENNY
(DENARIUS LATIN; DENIER FRENCH; DENARI ITALIAN;
PENNINGEN DUTCH; PENNY ENGLISH)
• IN THE 13TH CENTURY THE GROAT WAS ISSUED (A
LARGE PENNY = 4 STANDARD PENNIES)
• THE FIRST GOLD COIN WAS STRUCK IN 1252 IN
FLORENCE – THE FLORIN
• THE SILVER PENNY WITH THE HIGHEST FINE WEIGHT
WAS THAT OF ENGLAND 1.35 GRAMS IN 1160; THE
LOWEST WAS VENICE WITH ONLY 0.09 GRAMS,
INDICATING A HIGH LEVEL OF DEBASEMENT IN THE
LATTER

MINTING OF COINS IN EUROPE
• THROUGHOUT EUROPE THE MINTING OF COINS WAS
DONE BY BISHOPS AND LORDS (SEIGNORAGE) WHO
BECAME THE LOCAL MONETARY AUTHORITIES.
• CENTRALISATION OF THIS FUNCTION CAME SLOWLY.
ENGLAND BEGAN, WITH ONLY 70 LOCAL MINTS.
• THERE WAS GREAT VARIABILITY IN PRECIOUS METAL
CONTENT IN THE LATE 1200s: VENICE’S GOLD DUCAT
HAD ONLY 3.5 GRAMS OF GOLD; FRANCE’S GOLD
ROYALE, 6.97 GRAMS; ENGLAND’S NOBLE, 8.8 GRAMS
• COINAGE TECHNOLOGY WAS RESTRICTED TO
HAMMER & SHEARS, LIMITING THE PRODUCTION OF
HEAVY COINS.

MONEY OF ACCOUNT
• MONEY OF ACCOUNT WAS USED FOR ACCOUNTING
REASONS AS A METHOD OF RECORDING
COMMERCIAL AND OTHER LARGE TRANSACTIONS
BETWEEN INDIVIDUALS. IF A CUSTOMER WANTED IT,
THE MONEY ON ACCOUNT COULD BE CONVERTED TO
COINS BY A MONEY CHANGER.
• THE MONEYS ON ACCOUNT WERE: THE POUND IN
ENGLAND( LIBRA IN LATIN); THE LIRA IN ITALY; THE
LIVRE IN FRANCE; THE PFUND IN GERMANY. THIS
COMMONALITY FACILITATED INTER-COUNTRY TRADE.

BANCIERI: MONEYCHANGERS & EARLY
BANKERS
• IN FLORENCE & OTHER NORTH ITALIAN TOWNS THE MONEY
CHANGERS FLOURISHED IN THE MARKETPLACES – DOING WHAT
THEIR ROMAN FOREBEARS HAD DONE
• MONEYCHANGERS NOW PROVIDED ASSAYS OF COINS TO WORK
OUT THEIR REAL VALUE. THEY ALSO HAD STRONGBOXES, AND
WERE PRIMITIVE BOOKKEEPERS WHEN THEY BECAME DEPOSIT-
HOLDERS. THEY CHARGED FEES FOR THESE SERVICES BASED ON
THE QUANTITY OF MONEY INVOLVED.
• ONE OF THE LARGEST MARKETS WAS THE VATICAN IN ROME
WHICH TOOK IN VAST SUMS OF A VARIETY OF COINAGE FROM ALL
OVER THE HOLY ROMAN EMPIRE.
• IN THE 1300s FAMILIES THROUGHOUT MEDITERRANEAN ALSO
GOT INVOLVED IN PRIMITIVE BANKING WHERE FAMILY
INDIVIDUALS HAD THE SKILLS NEEDED: ABILITY TO RAISE MONEY;
KEEP & TRACK MONEY AND LEND MONEY.

MEDIEVAL MUM & DAD
MONEYCHANGERS

LEADING EUROPEAN FAMILY BANKS
IN 1300s
• SOME FAMILY BANKS WHICH HAD AMBITIONS GREW INTO LARGE INSITUTIONS.
SOME OF THESE WERE THE NORTHERN ITALIAN BANKS OWNED BY THE FAMILIES:
BARDI, PERUZZI AND ACCIAIUOLI. THE LATTER TWO WERE BIG ENOUGH TO HAVE
BRANCHES IN ENGLAND, HOLLAND, NORTH AFRICA & MIDDLE EAST.
• WHILST THESE BANKS WERE FAMILY OWNED THEY HAD OUTSIDE PARTNERS & A
WIDE RANGE OF ACTIVITIES: TRADE IN AGRICULTURAL COMMODITIES;
INDUSTRIAL GOODS ESP. WOOLLEN TEXTILES; AND CURRENCY EXCHANGE
(PROVIDING A LEGAL MASKING FOR INTEREST CHARGED ON LOANS – IN BREACH
OF USURY LAWS OF THE CHURCH.)
• THE BANKS HAD A BIG ADVANTAGE OF GOOD COMMERCIAL INTELLIGENCE.
• EDWARD III OF ENGLAND LAUNCHED THE HUNDRED YEARS WAR IN 1330s
FINANCED BY THE BIG BANKS. HE SOUGHT LOANS FROM THE BIG ITALIAN
BANKS, TRADING AS COLLATERAL ROYAL LICENCES FOR THE EXPORT OF ENGLISH
WOOL. THE WAR BECAME A BOTTOMLESS PIT OF MONEY. EDWARD KEPT
BORROWING & THE BANKS KEPT LENDING. HE THEN REPUDIATED HIS DEBTS &
BLAMED THE EXTORTIONS OF THE FOREIGN BANKS
• THE BARDI BANK LOST 900,000 GOLD FLORINS; THE PERUZZI BANK LOST 600,000
GOLD FLORINS. BOTH BANKS WENT INTO BANKRUPTCY & PRECIPITATED A
RECESSION

EDWARD III OF ENGLAND’S 100 YEAR
WAR SENDS THE BANKERS BROKE

THE MEDICIS
• 1340s. THE BRANCIERI MEDICI BEGAN AT A BANCA (A BENCH &
TABLE) A SHORT WALK FROM THE LARGE SCALE FLORENTINE
WOOL MARKET. THEY WERE MEMBERS OF THE ARTE DE CAMBIO
(MONEYCHANGERS GUILD). THEY WERE ALSO THUGS &
STANDOVER MEN, WITH SERIOUS CRIMINAL RECORDS.
• IN 1385 GIOVANNI DI BICCI DE’ MEDICI DECIDED TO LEGITIMISE
THE FAMILY BUSINESS, WENT INTO CURRENCY TRADING IN ROME,
BECOMING ACCREDITED MONEYCHANGER TO THE VATICAN.
• 1397 GIOVANNI RETURNED TO FLORENCE WHERE THE BUSINESS
GREW, SO HE PASSED THE BUSINESS TO HIS SON COSIMO
• COSIMO ESTABLISHED BRANCHES OF THE MEDICI BANK IN
VENICE, GENEVA, PISA, LONDON, AVIGNON. 2 WOOL FACTORIES
WERE ALSO PURCHASED IN FLORENCE.

OUTSIDE A MEDICI BANK IN 1400s

BRANCH BANKING SYSTEM CREATED
BY MEDICI BANK
• BRANCH BANKING WAS RE-INVENTED BY THE
MEDICIS. BRANCH MANAGERS WERE MADE
PARTNERS & SHARED THE BRANCH’S PROFITS.
• THE AVERAGE BRANCH WAS CAPITALISED AT
20,000 FLORINS. BETWEEN 1397 & 1420 THE
BRANCH MADE PROFITS OF 6,326 FLORINS PER
YEAR, A RETURN OF 32%. THE ROME BRANCH
EARNED OVER 30% PROFIT PER YEAR.
• GIOVANNI MEDICI HAD ASSETS WORTH 91,000
FLORINS IN 1427.

“COSIMO MEDICI IS KING”. 1458
• THE GROWTH OF EUROPEAN FAMILY BANKING REACHED ITS FULL
FLOWERING WITH THE MEDICIS, AND WOULD BE REPEATED MANY
TIMES IN THE CENTURIES AHEAD, WITH OTHER BANKING FAMILIES.
• GIOVANNI’S SON, COSIMO DE’ MEDICI WAS THE EFFECTIVE RULER OF
FLORENCE. THE POPE SAID OF HIM “…HE IS KING IN EVERYTHING BUT
NAME.”
• COSIMO’S GRANDSON WAS LORENZO THE MAGNIFICENT WHO TOOK
OVER IN 1469, AND ESTABLISHED THE ITALIAN BANKING SYSTEM FOR
THE REST OF EUROPE
• BUT IT WAS A PRECARIOUS INHERITANCE IN THE BEGINNING, THROUGH
TO 1537 (WHEN COSIMO DE’ MEDICI – THE YOUNGER - WAS MADE
DUKE OF TUSCANY: A TITLE THAT STAYED IN THE FAMILY FOR 200 YEARS):
BAD LOANS TO WARRING NOBILITY; VOLATILE TRADE; EXCESSIVE DOWRY
PAYMENTS FOR DAUGHTERS; CONFISCATION & EXPULSION OF FAMILY; IN
1497, GIROLAMO SAVONAROLA (THE MAD MONK) BLAMED MEDICIs
FOR GOD’S WRATH & SUPERVISED “A BONFIRE OF THE VANITIES” OF THE
MEDICI PALACE & BANKING RECORDS.

BILLS OF EXCHANGE
• INSTEAD OF FACE-TO-FACE TRADING AT LOCAL FAIRS ETC. “DISTANCE” TRADING CAME INTO
IMPORTANCE.
• EXAMPLE: A MERCHANT IN FLORENCE KNOWS WELL A MERCHANT IN BRUGES. THEY
COMMUNICATE BY LETTER ON BUSINESS CONDITIONS, & EACH HAS A “FACTOR” (BUSINESS
AGENT) IN THE OTHER’S TOWN. A DEAL IS DONE BY EXCHANGE OF LETTERS. THE GOODS ARE
MOVED BY PROFESSIONAL TRANSPORTERS. NO MONEY IS INVOLVED. THE AMOUNT OF THE
TRANSACTION IS RECORDED ON A “BILL OF EXCHANGE” & MOVED FROM ONE BANK TO
ANOTHER
• TRANSACTION JOURNALS KEEP TRACK OF EACH TRANSACTION, BUT THIS HAD FAILINGS –
ESPECIALLY IF UNRECORDED LOANS TO FAMILIES ETC. WERE MADE.
• PROBLEMS OCCURRED WHEN WARS OR OTHER CATASTROPHES BETWEEN DIFFERENT STATES
ALTERED VALUES OF LOCAL CURRENCIES.
• BILLS OF EXCHANGE ACQUIRED VALUES IN THEIR OWN RIGHT AND COULD BE TRADED & BECAME
A MEDIUM OF EXCHANGE – LIKE COINS – AFTER 1500
• THE PAPERWORK NOW NEEDED BY SUCCESSFUL MERCHANTS MEANT HIGH STANDARDS OF
LITERACY & NUMERACY – AND A SOPHISTICATION – THAT TOOK THE MERCHANT, HIS FAMILY, HIS
EMPLOYEES AND ALL WHO DID BUSINESS WITH HIM TO A NEW LEVEL.
• BY 1500 THE WARLORDS, WARRING NOBLES & ENTRENCHED RELIGIOUS INSTITUTIONS WERE
BEING LEFT BEHIND IN EUROPE AS A NEW CAPITALIST SYSTEM EMERGED.

SAINT THOMAS AQUINAS:
SCHOOLMAN OF CAPITALISM
• THE “SCHOOLMEN” WERE THE EDUCATED MEN (AND
OCCASIONALLY WOMEN) TO BE FOUND IN THE
MONASTRIES & CENTRES OF LEARNING SUPPORTED BY
THE CHURCH.
• AQUINAS WAS A DOMINICAN SCHOLAR WHO WROTE
WIDELY (8 MILLION WORKS) ON THEOLOGICAL SUBJECTS.
• UNLIKE MOST SCHOOLMEN WHO CONDEMNED THE
PRINCIPLES OF TRADE AS UNCHRISTIAN, AQUINAS
BELIEVED THAT THE CHURCH HAD COME TO TERMS WITH
THE FACT THAT THEY WERE THE BIGGEST LANDOWNERS
IN EUROPE, AND WERE INCREASINGLY INVOLVED IN THE
PROSPERITY OF CHRISTIAN EUROPE, BASED ON TRADE.

SAINT THOMAS AQUINAS CONT.
• FOR AQUINAS, PROPERTY OWNERSHIP WAS
NEITHER GOOD NOR BAD. IT WAS THE
MANAGEMENT OF THE PROPERTY FOR GOOD
OR EVIL THAT MATTERED – AND TO THE
COMMUNITY IN WHICH IT LIVED.
• THIS IDEA WAS TRANSLATED BY MANY
LANDOWNING NOBLES TO ADOPT THE
CONCEPT “NOBLESSE OBLIGE”

• ANOTHER NECESSARY EVIL IN THE WORLD OF MEN WAS
“TRADE”. FOR AQUINAS, A TRADER’S PROFIT WAS
REWARD FOR WORK DONE, SO LONG AS A “JUST PRICE”
WAS CHARGED TO THE BUYERS OF GOODS AND SERVICES.
• A”JUST PRICE” WOULD BE ONE THAT REFLECTED THE
INTRINSIC WORTH OF THE GOODS & SERVICES TRADED
(FIRST PUT FORWARD BY ARISTOTLE): THE PRICE BEING
THE SUSTAINABLE VALUE OF LABOUR USED IN THE
PRODUCTION OVER TIME (POOR TRANSPORT, ISOLATION
OF MARKET ETC ALLOWED MONOPOLY PRICING)
• AS ECONOMIES OF CHRISTIAN EUROPE GREW IN SIZE &
COMPLEXITY MANY SCHOOLMEN ACCEPTED THAT
“MARKET FORCES” MADE IT DIFFICULT TO REGULATE
PRICES , BASED ON CANON LAW.

• AQUINAS LOOKED AT CANON LAW ON “USURY”. WHEN
MONEY ( A BARREN COMMODITY USED IN EXCHANGE)
WAS USED TO CREATE MORE MONEY IT WENT AGAINST
NATURE. BUT MONEY SHOULD BE CONSUMED IN USE
ONLY.
• SIMPLISTIC IDEAS SUCH AS THIS WORKED WELL WITH THE
OLD ROMAN NUMERICAL SYSTEM IN USE BY THE
CHURCH. IT REQUIRED THE HINDU-ARABIC NUMBERING
SYSTEM TO CALCULATE COMMERCIAL “RISK” IN A
METHODICAL & SCIENTIFIC WAY EG: DOMINUM
EMERGENS (INTEREST CHARGED IN ANTICIPATION OF A
LOSS BY THE LENDER, CALCULATED BY THE LENDER’S
ASSESSMENT OF THE POSSIBLE LOSS).

CHURCH RECORD ON “USURY”
• MARCH 1179: THIRD LATERAN COUNCIL’S
CANON 25 DECREED EXCOMMUNICATION FOR
USURERS.
• 1311. POPE CLEMENT V DECLARED USURERS AS
HERETICS
• 1580s POPE SIXTUS V WROTE AN ENCYCLICAL
(AIMED AT THE TUDORS OF ENGLAND) ON THE
CHARGING OF INTEREST FOR RISKY SEA
VOYAGES AS “…DETESTABLE TO GOD AND MAN.”

VIX PERVENIT. NOV. 1745.
ENCYCLICAL TO BISHOPS BY BENEDICT
XIV
“THE NATURE OF THE SIN CALLED USURY HAS ITS
PROPER PLACE AND ORIGIN IN THE LOAN
CONTRACT. THE FINANCIAL CONTRACT
BETWEEN CONSENTING PARTIES DEMANDS, BY
ITS VERY NATURE, THAT ONE RETURN TO
ANOTHER ONLY AS MUCH AS HE HAS RECEIVED.
THE SIN RESTS ON THE FACT THAT SOMETIMES
THE CREDITOR DEMANDS MORE THAN HE HAS
GIVEN. THEREFORE HE CONTENDS SOME GAIN IS
OWED HIM BEYOND WHICH HE HAS LOANED,
BUT ANY GAIN WHICH EXCEEDS THE AMOUNT
HE GAVE IS ILLICIT AND USURIOUS.”

USURY CONT.
• JULY 1836. GREGORY XVI EXPANDED VIX
PERVENIT TO ENCOMPASS THE WHOLE
CATHOLIC CHURCH, DESPITE THE INCREASING
SOPHISTICATIONS IMPOSED ON MONEY
MARKETS BY INDUSTRIAL REVOLUTION.
• 1917. CODE OF CANON LAW ALLOWED
INVESTMENT IN INTEREST-BEARING
SECURITIES, AT LEGAL RATES OF INTEREST, BY
LOCAL PARISHES AND DIOCESES.

BENEDICT XVI: “CARITAS IN VERITATE”
ENCYCLICAL 2009
“BOTH THE REGULATION OF THE FINANCIAL SECTOR, SO AS
TO SAFEGUARD WEAKER PARTIES AND DISCOURAGE
SCANDALOUS SPECULATION, AND EXPERIMENTATION
WITH NEW FORMS OF FINANCE,DESIGNED TO SUPPORT
DEVELOPMENT PROJECTS, ARE POSITIVE EXPERIENCES
THAT SHOULD BE FURTHER EXPLORED AND ENCOURAGED,
HIGHLIGHTING THE RESPONSIBILITY OF THE
INVESTOR…THIS IS ALL THE MORE NECESSARY IN THESE
DAYS WHEN FINANCIAL DIFFICULTIES CAN BECOME
SEVERE FOR MANY OF THE MORE VULNERABLE SECTORS
OF THE POPULATION WHO SHOULD BE HELPED TO
DEFEND THEMSELVES AGAINST USURY…IN ORDER TO
DISCOURAGE THE EXPLOITATION THAT IS POSSIBLE.”

THE CHURCH’S SOCIAL CAPITAL
FORMATION

SOCIAL CAPITAL OF KINGS, NOBLES &
LANDOWNERS

LECTURE 6. EUROPE’S GREAT
AWAKENING

MONEY & EUROPE’S GREAT
AWAKENING
• “ALL THIS MAY BE SUMMED UP BY SAYING THAT
EUROPEANS HAD CHANGED THE WORLD AND THAT
MODERN HISTORY HAD BEGUN (1500 AD – 1800 AD)” (JM
ROBERTS)
• GERARDUS MERCATOR 1569 & MASS PRINTING
• ARAB MEDICINE: HEALTHIER & LONGER – POPULATION
DOUBLED TO 140 MILL.
• 1419. PORTUGUESE EXPLORERS (QUOTES)
• RISE OF “MERCANTILISM”. (MERCANTILE CAPITALISM)
• SPANISH COLONIAL SILVER SPENT WITH PROFLIGACY
• FINANCIAL INSTITUTIONS 1500-1700. VENICE CENTRE OF
TRADE & BANKING & THEN AMSTERDAM

THE RENAISSANCE
“ THE RENAISSANCE MARKS A MUCH DEEPER BREAK IN THE HISTORY
OF THE WESTERN WORLD THAN IS SUGGESTED BY THE NAME. THE
MEDIEVAL CONCEPTION OF THE WORLD AS A UNIVERSAL
COSMOS WAS SHATTERED. THE ONE EMPIRE GAVE WAY TO A
MULTIPLICITY OF NATIONAL TERRITORIES AND STATES; AND THE
THEORY OF THE STATE, NO LONGER A CHAPTER IN APPLIED
RELIGIOUS ETHICS, BECAME A FIELD OF KNOWLEDGE…THE
NATIONAL STATE WAS, IN A SENSE, THE HOME IN WHICH
BOURGEOIS SOCIETY AND CAPITALIST ECONOMY GREW UP.”
(EDUARD HEIMANN. “HISTORY OF ECONOMIC THOUGHT”)
(THOUGHT FOR THE DAY: ARE WE MOVING TO THE NEXT BIG STEP –
“THE CORPORATE STATE”?)

SALON OF THE ENLIGHTENMENT
1600 - 1800

COPERNICUS (HERETIC)
“ THAT THE EARTH IS NOT THE
CENTRE OF THE PLANETARY SYSTEM,
ONLY OF THE MOON’S ORBIT AND OF
TERRESTRIAL GRAVITY.” 1543.
HERESY

GERARDUS MERCATOR (1569)
MARITIME READY RECKONER
MIMICKING LOXODROMICS CURVES

PORTUGUESE SEA VOYAGES
• MASS PRINTING OF MAPS = EVERY NAVIGATOR
HAD A MERCATOR MAP (but secret charts)
• SINCE 1420 HENRY THE NAVIGATOR
ESTABLISHED OBSERVATORY & SCHOOL FOR
NAVIGATORS & PILOTS – COMPILED ROTEIROS
(SEA CHARTS). EARLY ONES WERE JEWS TRAINED
IN ARAB SCHOOLS
• 1522.PORTUGUESE SEAFARERS HAD
KNOWLEDGE OF ALL CONTINENTS EXCL.
ANTARTICA & AUSTRALIA (?)
• TRADE HAD BEGUN WITH SOME CONTINENTS.

EUROPE’S ECONOMIC TAKE-OFF
1500 - 1700
• 1500 – EUROPE’S POPULATION 80 MILLION
• 1700 – EUROPE’S POPULATION 140 MILLION DUE TO:
+ FALLING DEATH RATES DUE TO BETTER (ARAB)
MEDICINE
+ SELF – SUFFICIENCY IN FOOD DUE TO BETTER
AGRICULTURAL PRODUCTIVITY
+ SHIFT OF POPULATION TO CITIES & TOWNS INTO
MANUFACTURING TRADES & RISE OF IRONWORKS FOR
MILITARY & COLONIAL
+ MASSIVE TECHNOLOGY TRANSFER FROM ASIA &
MIDDLE EAST (EG: CHINA – GUNPOWDER & CANNONS –
GALILEO & SCIENCE OF BALLISTICS)

THE NEW MERCHANT CLASS
BOURGEOIS/BURGEOISIE
• A NEW CLASS OF PEOPLE BETWEEN OLD ARISTOCRACIES &
“LOWER ORDERS”
• ONE SUB-GROUP WERE MERCHANT – MANUFACTURERS
AS MIDDLEMEN IN THE VERLAG (PUTTING OUT OR SUB-
CONTRACTING: CONTRACTOR ORGANISED OTHERS TO
WORK AT HOME). SURVIVED INTO 21ST CENTURY
• MOST IMPORTANT BOURGEOIS WERE PROMINENT
MERCHANTS IN INTERNATIONAL TRADE. THEY DEFINED
THE NEW “CAPITALISM”: DEFINED NATION STATES &
ENSURED POLITICAL POWER WORKED FOR BENEFIT OF
TRADE. (Later targets for Karl Marx where his bourgeoisie
was used as a term of abuse)

BOURGEOIS CONT.
“ TO THE MERCHANTS WHO WISHED TO DEVELOP
A PARTICULAR MANUFACTURE THE POSSESSION
OF A MONOPOLY APPEARED THE BEST POSSIBLE
WAY. THE TRADITION OF MEDIEVAL THOUGHT
WAS FAVOURABLE TO CAREFULLY DEFINED
PRIVILEGE, AND, WHAT WAS MORE IMPORTANT,
MONOPOLY ITSELF WAS A NECESSARY FORM OF
TRADING AT A TIME WHEN BOTH LUST FOR
ADVENTURE AND RISK WAS GREAT.”
(ERIC ROLL. “A HISTORY OF ECONOMIC
THOUGHT”)

BOURGEOIS CONT.- “THE LUST FOR
ADVENTURE & RISK”:GREAT VOYAGES
• 1419: FIRST TENTATIVE VOYAGES INTO THE ATLANTIC BY
PORTUGUESE.
• 1460s: LISBON MERCHANTS IMPORTING ½ TON OF GOLD
EACH YEAR FROM W. AFRICA
• LATE 1400s: PLANTATIONS SET UP IN BRAZIL. 10,000
SLAVES WOULD BE SENT FROM W. AFRICA TO WORK
PLANTATIONS
• 1497: VASCO DA GAMA PIONEERS ROUTE TO INDIA VIA
CAPE OF GOOD HOPE.
• 1500s: PORTUGUESE CONTROL SEA ROUTES & FORTIFIED
TRADING POSTS IN AMERICAS, AFRICA, ASIA
• 1600s: AGGRESSIVE DUTCH,FRENCH & ENGLISH TRADING
COMPANIES COMPETE WITH PORTUGUESE INTEREST

BANCE ISLAND W. AFRICA (ALSO A
SLAVE PORT)

BRITISH EAST INDIA COMPANY
• DECEMBER 1602: QUEEN ELIZABETH ISSUES A
ROYAL WARRANT LAUNCHING BRITISH EAST
INDIA COMPANY (AGENT & TRADER FOR
BRITAIN EAST OF SUEZ UNTIL ABOLISHED IN
1858)(SEE NOTES)
• LARGEST TRADING COMPANY IN WORLD
HISTORY – EXPLOITING ASIAN RESOURCES &
ESTABLISHING BRITAIN AS COLONIAL POWER.
• CREATED A MASSIVE WEALTH BASE FOR GENTRY
IN ENGLAND. 1858 A TRADING REVENUE OF $22
BILLION ($A. 2008)

ROBERT CLIVE MEETS RULER OF AN
INDIAN STATE

IDEAS OF MERCANTILISM
• A GROUP OF IDEAS KNOWN AS
“MERCANTILISM” ENTERED EUROPE 1500 –
1700 SWEEPING AWAY OLD IDEAS.
FIRST IDEA
“MERCANTILE CAPITALISM”: DUTY OF THE STATE
WAS TO PROTECT MERCHANTS FROM
MERCHANTS ETC. OF OTHER NATIONS (NAVAL
POWER); CLEAR AWAY INSTITUTIONS LIKE THE
CHURCH, BLOCKING TRADE; REGULATE TRADE
WITHIN THE STATE

MERCANTILISM CONT.
SECOND IDEA
WEALTH ACCUMULATED BY MERCHANTS OF THE
STATE SHOULD BE STORED AS MONEY – MAINLY
GOLD BULLION.
THE TRADING MONOPOLIES USED SILVER BULLION
AS WORKING CAPITAL MOSTLY
THIRD IDEA
AS A POLICY THE STATE SHOULD CREATE A
PERMANENT EXPORT SURPLUS – TRADE IS A
GAIN TO EXPORTER & LOSS TO IMPORTER
(DENOUNCED TASTES OF NOUVEAU RICHES)

MERCANTILISM CONT.
FOURTH IDEA
RATES OF INTEREST ON BORROWED CAPITAL
SHOULD BE KEPT LOW TO BOOST AMOUNT
OF MONEY IN CIRCULATION IN
MARKETPLACE.
CHURCH GAVE TACIT SUPPORT DESPITE
INJUNCTION ON USURY BECAUSE INTEREST
RATES LOW.

THE SPANISH CASE: FALLACY OF
BULLIONISM & MERCANTILISM
• NOWHERE IN THE HISTORY OF THIS PERIOD IS THE FALLACY OF
BULLIONISM AND MERCANTILISM BETTER ILLUSTRATED THAN THE
DECLINE & FALL OF SPAIN 1500-1700.
• HUGE EMPIRE IN AMERICAS, AFRICA & ASIA, BASED ON SILVER
MINED IN SOUTH AMERICA.
• 1531-1580: 2.6 MILLION KILOS IMPORTED
• SILVER WAS TURNED INTO MONEY & SPENT WITH GREAT
PROFLIGACY, WARS IN EUROPE & COLONIAL EXPANSION.
• LIKE ROME, SPAIN TURNED INTO A BRUTAL KLEPTOCRACY WHEN
SILVER RAN OUT
• POOR SPANIARDS EMIGRATED TO SPAIN’S COLONIES

DEBASED SPANISH VELLON: MOSTLY
COPPER, TRACE OF SILVER –
WORTHLESS (20 REALES)

FINANCIAL INSTITUTIONS OF 1500-
1700: VENICE
• BEGINNINGS IN VENICE (SEE LECTURE 3 ) AS
ENTREPOT FOR ASIAN TRADE.
• DEPOSIT BANKS ON THE RIALTO: MONEYCHANGERS
TURNED BANKERS – SAFE STORAGE OF COINS –
DOCUMENT VALIDATING VALUE.
• DOZENS CAME INTO BUSINESS - NO QUALIFICATIONS
– 6000 FAILURES IN 1500.
• 80,000 VENETIANS – REGARDED BANKS WITH
SUSPICION = BANKERS “MERELY WRITING 2 LINES IN
A BOOK, AND CAN BUY ESTATES OR ENDOW A CHILD
WITHOUT ANY ACTUAL DISBURSEMENT.” (JK
GALBRAITH)

VENICE CONT.
• 1171. GOVERNMENT OF VENICE CREATED BANK OF
VENICE: BANKING FOR INDUSTRY & WEALTHY &
PRIVILEGED
• TOOK IN MONEY FOR GOVT BY INVESTORS PAID 4%
PER YEAR BUT DID NOT REDEEM PRINCIPAL.
• TRADED IN THESE TO OTHERS, AS “BILLS OF
EXCHANGE”
• 1587 BECAME A GOVERNMENT BANK – BANCO DEL
PIAZZA DEL RIALTO
• BUT COMMERCIAL CENTRE MOVING AWAY FROM
VENICE, NORTHWARDS.
• THE MEDICI BANK (REFER SLIDES 147-151)

BANCO DEL PIAZZA DEL RIALTO
(BROWN BUILDING RIGHT OF
RIALTO)

BERENBERG BANK: HAMBURG 1590
• HANS & PAUL (HANSEATIC PROTESTANTS
FROM ANTWERP)MAJOR CLOTH MERCHANTS
IN BOOMING NORTHERN EUROPEAN
INDUSTRY.
• FINANCIAL SERVICES TO MERCHANTS &
MANUFACTURERS.
• CREATED EUROPEAN DYNASTY.
• TODAY 1300 EMPLOYEES & ANNUAL
REVENUE 4.5 BILLION EUROS.

AMSTERDAM EXCHANGE BANK: 1609
- 1791
• FORMED UNDER PROTECTION OF AMSTERDAM: PRINCIPAL
COMMERCIAL CITY STATE IN EUROPE
• WORLD’S FIRST CENTRAL BANK: “BANK MONEY” CREDITS FOR SMALLER
CITY STATES (VENICE, GENOA ETC.)
• COIN ASSAY VARIABILITY IN COINS – MELTED DOWN – DEPOSITOR
CREDITED WITH VALUE BASED ON METAL CONTENT. MANAGEMENT FEE.
• DEPOSITS COULD BE TRADED
• BULLION DEPOSITS FOR A FEE
• BAD INVESTMENT IN DUTCH EAST INDIA COMPANY, BANK INSOLVENT &
CLOSED.AMSTERDAM GOVT TOOK OVER. PREVENTED RUN ON BANK BY
PLACING METALLIC VALUE OF DEPOSITS = BOOK VALUE OF DEPOSITS.
• TO TAKE LARGE VOLUMES OF COINS OUT OF CIRCULATION AMSTERDAM
BANK INNOVATED WITH CHEQUES, DIRECT DEBITS & TRANSFERS.

BANK OF ENGLAND: A CAUTIONARY
TALE
• FOUNDED 1694 BY WILLIAM PATERSON TO BACK A
BRITISH COLONY ON ISTHMUS OF PANAMA. ROYAL
CHARTER WOULD ALLOW 1.2 MILLION POUNDS CAPITAL
• MONEY TO BE LENT TO WILLIAM OF ORANGE TO PAY WAR
DEBTS WITH A PROMISE BY HIM TO PAY MONEY BACK
WITH INTEREST, BY A NOTE ISSUE.
• GOVT APPOINTED A BOARD OF DIRECTORS, ASSISTED BY
17 CLERKS & 2 DOORMEN, & A TOTAL ANNUAL EXPENSE
OF 25 POUNDS.
• PATERSON QUARRELLED WITH THE DIRECTORS & SET UP
HIS COLONISATION SCHEME. 1200 SETTLERS DIED IN
PANAMA, & INVESTORS LOST ALL THEIR MONEY

BANK OF ENGLAND CONT.
• BANK STRUGGLED FOR 15 YEARS
• 1709. GOVERNMENT MONOPOLY FOR
CORPORATE BANKING & AGENT OF THE CROWN
– CAPITAL INJECTION
• 1720. SOUTH SEA COMPANY CHALLENGED BANK
OF ENGLAND AS GOVT BANKER. BUSINESS
PROMOTER JOHN BLUNT.
• ARMY OF PROMOTERS SETTING UP
SPECULATIVE VENTURES EG: TO DRAIN THE RED
SEA WITH A VIEW TO RECOVERING TREASURE
LEFT BY EGYPTIANS.

“ AGAIN THE BANK OF ENGLAND WAS CAPTURED
BY THE SPIRIT OF THE TIMES AND DID NOT CURB
THE MORE INSANE LENDING OF THE BANKS. IT’S
THE OLD QUESTION : WHO REGULATES THE
REGULATORS? WHO IS KING IN THE WORLD OF
THE BLIND WHEN THERE ISN’T EVEN A ONE
EYED MAN? THE PROBLEM WILL RECUR.” (J K
GALBRAITH)
AS WE SHALL SEE LATER, IT DID IN THE GLOBAL
FINANCIAL CRISIS

SOUTH SEA BUBBLE 1720
• SOUTH SEA COMPANY PUT TO THE GOVT. – IT WOULD CONVERT GOVT
WAR DEBT INTO EQUITY HOLDINGS IN SOUTH SEA COMPANY
• GOVT WOULD GIVE IT A CHARTER TO MONOPOLISE TRADE WITH
SPANISH COLONIES IN STH AMERICA
• FROM JUNE TO SEPT 1720 COMPANY SHARES ROSE BY 300% IN
ANTICIPATION.
• BANK OF ENGLAND MADE A COUNTER-BID WITH PARLIAMENTARY
SUPPORT
• SOUTH SEA COMPANY COUNTERED WITH BRIBES TO OTHER
PARLIAMENTARIANS (SECRETARY OF TREASURY MADE 249,000 POUNDS
IN SHARE OPTIONS)
• 190 COMPANIES NOW JOINED SOUTH SEA COMPANY
• STOOGES IN PARLIAMENT PASSED THE BUBBLE ACT TO STOP THE 190
COMPANIES
• SOUTH SEA BUBBLE BURST IN JULY 1720 WHEN INSIDE TRADERS IN THE
COMPANY CLEARED ALL THEIR HOLDINGS FOR BIG PROFITS

LECTURE 7. 1775 AND THE BIRTH OF
MODERN CAPITALISM

THE ENLIGHTENMENT & THE AGE OF
REVOLUTION IN EUROPE
“ IN THE 18TH CENTURY A DARING AND DRAMATICALLY NEW
INTELLECTUAL & CULTURAL MOVEMENT AROSE IN WESTERN
EUROPE. OF ITS MAIN CHARACTERISTICS – AUDACITY,WIT, AN
INTEREST IN THE PRACTICAL AND APPLIED – NONE WAS MORE
IMPORTANT THAN ITS CRITICAL BITING EDGE. THIS OPINIONATED
MOVEMENT CALLED FOR ENLIGHTENMENT – FOR NEW THINKING
ABOUT ONCE UNQUESTIONED TRUTHS AND EVENTUALLY FOR
NEW ACTIONS. BEST CHARACTERISED BY THE METAPHOR OF
LIGHT, THE ENLIGHTENMENT HAS RETAINED THE NAME IT
ACQUIRED EARLY IN THE 18TH CENTURY. IN VARIOUS EUROPEAN
LANGUAGES AROUND 1700, THE FASHION AROSE OF PRAISING
SOME PEOPLE FOR BEING “ENLIGHTENED”: IN FRENCH ‘ECLAIRE’;
IN GERMAN ‘AUFGEKLART’; IN DUTCH ‘VERLICHTE’. AS PRAISE IT
MEANT THAT THE PERSON WAS NO TIMID FOLLOWER OF THE
CLERGY OR BELIEVER IN MAGIC.” (M. C. JACOB)

RENEE DESCARTES AT A SOIREE IN
THE HOME OF LADY MARY MONTAGU

THE AMERICAN REVOLUTION 1776
• THE ENLIGHTENED INTELLECTUAL GAME CHANGER WAS
THOMAS PAINE, AN ENGLISH POLITICAL PHILOSOPHER
AND QUAKER. BRANDED BY THE CHURCH AS AN
“INFIDEL”. SELF-EXILE TO AMERICA WHERE HE WROTE
PAMPHLETS, COMMONSENSE, ADVOCATING THE
OVERTHROW OF BRITISH COLONIAL RULE. (SEE NOTES)
• IN 1776 13 AMERICAN COLONIES OF THE BRITISH EMPIRE
DECLARED THEIR INDEPENDENCE FROM BRITAIN. THESE
COLONIES CONTAINED 2.5 MILLION PEOPLE; 800,000
SQUARE MILES; COST THE LIVES OF 25,000 AMERICANS,
AND 30,000 WOUNDED; DEVASTATED THE COLONIES
ECONOMICALLY; FORCED BRITAIN TO RE-APPRAISE ITS
COLONIAL POLICIES – ONE CONSEQUENCE BEING THE
PENAL COLONY OF N.S.W. IN 1788.

THE 13 REVOLUTIONARY COLONIES IN
1776

THE FRENCH REVOLUTION 1789
• THIS REVOLUTION OVERTHREW THE ANCIEN
REGIME, WITH REVERBARATIONS
THROUGHOUT EUROPE. WITHIN 2 YEARS, IT
HAD SPARKED RADICAL MOVEMENTS IN
BRITAIN, HAITI, AND THEN IRELAND & EGYPT.
• AN UNINTENDED CONSEQUENCE WAS THE
OVERTHROW OF THE REVOLUTIONARY
GOVERNMENT & THE MILITARY
DICTATORSHIP OF NAPOLEON UNTIL 1814.

ADAM SMITH & “THE THEORY OF
MORAL SENTIMENTS”. 1759
LIKE MANY SCOTTISH SOCIAL PHILOSOPHERS
OF THE TIME SET UP HIS VERSION OF MODEL
OF POLITICAL ECONOMY BASED UPON
SOCIAL HARMONY ARISING FROM
HUMANKIND’S ENDOWMENT OF ALTRUISM.
IN THE PROCESS HE ESTABLISHED AN ETHICAL
FOUNDATION FOR HIS “WEALTH OF
NATIONS”.

“THEORY OF MORAL SENTIMENTS”
CONT.
“ AS THE VIOLATION OF JUSTICE IS WHAT MEN
WILL NEVER SUBMIT TO FROM ONE ANOTHER,
THE PUBLIC MAGISTRATE IS UNDER A NECESSITY
OF EMPLOYING THE POWER OF THE
COMMONWEALTH TO ENFORCE THE PRACTICE
OF THIS VIRTUE. WITHOUT THIS PRECAUTION,
CIVIL SOCIETY WOULD BECOME A SCENE OF
BLOODSHED AND DISORDER, EVERY MAN
REVENGING HIMSELF AT HIS OWN HAND
WHENEVER HE FANCIED HE WAS INJURED.”

“WEALTH OF NATIONS”: 9 RULES OF
MODERN CAPITALISM
RULE 1
“ …MAN IS LED BY AN INVISIBLE HAND TO
PROMOTE AN END WHICH WAS NO PART OF
HIS INTENTION.”.
BUT IF THIS INTEREST IS UNCHECKED (EG:
“GREED IS GOOD”) IT WILL DAMAGE THE
PUBLIC INTEREST & AND LEAD TO COLLAPSE
OF ECONOMIC COMPETITION

“WEALTH OF NATIONS” RULE 2
WHERE THERE IS EFFECTIVE COMPETITION, THE
PRICE OF ANY GOOD OR SERVICE IS
DETERMINED BY THE RATIO OF SUPPLY TO
DEMAND (MARKET PRICE). WHEN THIS RATIO
CHANGES SO DO PRICES – WHICH BECOME
THE REGULATOR OF ECONOMIC ACTIVITY IN
A FREE ECONOMY.

THERE IS A NATURAL (“REAL”) PRICE OF ANY
GOOD OR SERVICE BASED ON ITS COST OF
PRODUCTION. INCLUDES: COSTS OF LABOUR,
MATERIALS, TOOLS, RENT OF LAND & USE OF
CAPITAL IN THE FORM OF INTEREST PAID.
PRICES BELOW COST LEAD TO LOSSES. PRICES
ABOVE COST LEAD TO OPPORTUNITIES FOR
EXPANSION OR ENTRY OF COMPETITORS

BEHIND PRICE IS “VALUE”:
• TYPE 1. “VALUE IN USE”. IE: INTRINSICALLY USEFUL, &
A PRE-CONDITION FOR TYPE 2
• TYPE 2. “VALUE IN EXCHANGE”. THE CRITICAL ONE,
BECAUSE RELATED TO COST OF PRODUCTION.
• TYPE 1. & TYPE 2. PARADOX. MANY USEFUL THINGS
HAVE LOW EXCHANGE VALUE (BREAD, WATER, AIR)
WHILE LITTLE VALUE IN USE HAVE HIGH VALUE IN
EXCHANGE EG: JEWELS
(A QUESTION FOR SYMPOSIUM: HOW SHOULD
AIR/WATER POLLUTION BE VALUED?)

ADAM SMITH ADVOCATED THAT MARKET
IMPERFECTIONS OF 1776 BRITAIN BE FIXED:
1. CONCERTED ACTIONS BY WORKERS TO
IMPROVE WAGES/ LABOUR CONDITIONS
TREATED AS CRIMINAL CONSPIRACY.
2. NEW INDUSTRIES RIDDLED WITH PRICE
FIXING & MONOPOLISTIC TRADE PRACTISES

• JOINT STOCK COMPANIES & SIMILAR
CORPORATE ENTITIES MAY HAVE MANAGERS
WHO ACT AGAINST THE INTERESTS OF THE
BUSINESS EG: “MORAL HAZARD”.
• SMITH DID NOT LIKE GOVERNMENTS IN
BUSINESS EXCEPT: BANKING; INSURANCE; &
OPERATION OF CANALS AND WATERWORKS
(QUESTION FOR DISCUSSION: WHAT ARE THE
LEGITIMATE ACTIVITIES OF GOVERNMENT IN
TODAY’S CONTEXT?)

“WEALTH OF NATIONS” RULE 7.
“ FREE TRADE” NEEDS TO BE STRONGEST IN
THE AREA OF INTERNATIONAL TRADE –
WHERE THERE IS A FREE EXCHANGE OF
GOODS & SERVICES BETWEEN COUNTRIES
WHICH HAVE NATURAL ADVANTAGES IN
SOME OF THE GOODS &SERVICES – WHICH
ARE THEN IMPORTED/EXPORTED

MAN’S “NATURAL CONDITION” WAS THAT OF
“ECONOMIC MAN”: A PERSON WHO LIVES TO
MAXIMISE HIS MATERIAL ADVANTAGE IN HIS
POSITION IN SOCIETY, FOR GAIN IN MONEY &
ASSETS.
(NOTE: WE NOW CALL THESE PERSONS
“ASPIRATIONAL”. A SYMPOSIUM QUESTION:
IS THIS THE “NATURAL CONDITION” OF
PERSONS IN AN ECONOMY?)

THERE IS A CIRCULAR FLOW OF GOODS &
SERVICES IN THE ECONOMY, WHICH IS SELF
REGULATING & SELF CORRECTING THROUGH
THE MECHANISM OF PRICES.

LOMBARD & THREADNEEDLE STREET:
FINANCIAL CENTRE OF THE WORLD
WITH THE LAYING OF THE UNDERSEA TELEGRAPH
CABLE, IN AUGUST 1858, WALL ST. U.S.A. COULD
COMMUNICATE WITH LONDON’S FINANCIAL
CENTRE IN MINUTES. THE RAPID EXCHANGE OF
INFORMATION LED TO THEIR WORLD
DOMINANCE UP TO TODAY.
THE FINANCIAL HEART OF THE EMERGING BRITISH
EMPIRE BECAME THE BANK OF ENGLAND – THE
“OLD LADY OF THREADNEEDLE STREET” – AFTER
THE SHAKY START DESCRIBED IN LECTURE 6.

TRANSATLANTIC UNDERSEA CABLE
1858

BANK OF ENGLAND
• FROM 1720 TO 1780 THE “OLD LADY” MADE STRONG PROGRESS.
• PROGRESS WAS DUE TO ENTRY OF GOLDSMITHS FROM LOMBARD
STREET – MANY FROM LONDON’S JEWISH COMMUNITY WHO
PERFORMED AN INDISPENSABLE SERVICE TO BRITAINS’S GROWING
COLONIAL TRADE – BY-PASSING STRICTURES PLACED ON OTHERS BY
OLIVER CROMWELL’S PROTESTANT USURY ACT OF 1661.
• GOLDSMITHS CARRIED OUT MANY BANKING FUNCTIONS: DISTRIBUTION
NOTES & BILLS; BULLION TRADE;FOREIGN EXCHANGE;DISCOUNTING OF
BILLS.
• BANK OF ENGLAND’S PROFITS LODGED WITH BRITISH EXCHEQUER –
REVENUE COLLECTING DEPARTMENT FOR GOVT.
• 1672. BANKRUPT CHARLES II - LIKE SOME PREDECESSORS – CLEANED
OUT EXCHEQUER, BANKRUPTING MANY GOLDSMITHS
• 1694. PUBLIC OUTCRY AGAINST PROFLIGATE MONARCHS CREATED
GOVT. BANK OF ENGLAND & TOOK OVER FUNCTIONS PERFORMED BY
LOMBARD STREET (USURY ACT IN FORCE UNTIL 1854!! - EXCL B.O.E.)

GREAT HALL, BANK OF ENGLAND.
1800s

• BECAME BRITAIN’S GUARDIAN OF THE MONEY
SUPPLY & ITS FINANCES
• BY 1770, SOLE PRODUCER OF PAPER MONEY
AFTER REDEEMING NOTES ISSUED BY SMALLER
BANKS, FOR HARD CASH.
• SMALLER BANKS BECAME INSTITUTIONS OF
DEPOSIT FROM WHICH THEY CREATED LOANS &
FACILITATED TRANSACTIONS BY CREATING
CHEQUES.
• CIRCULAR FLOW OF MONEY (SEE RULE 9
DIAGRAM ABOVE)

• BRITAIN’S LOSS OF AMERICA FROM TREATY OF VERSAILLES. 1783.
• BRITAIN’S WARS AGAINST FRANCE IN EUROPE, NORTH AFRICA, ASIA. 1805 – 1815.
• PRIME MINISTER WILLIAM PITT USED BANK OF ENGLAND TO ARRANGE FINANCE FOR WARS.
• PITT WAS RELENTLESS IN GETTING BANK TO RAISE LOANS
• 1797. INEVITABLE CREDIT CRISIS, RESERVES DRIED UP & RUNS ON BANK WERE BECOMING
SERIOUS
• BANK STOPPED BACKING NOTE ISSUES WITH GOLD & SILVER
• DUKE OF WELLINGTON’S ARMY RAIDED SPANISH TREASURY, CLEANED OUT PIECES OF EIGHT &
OVER-STAMPED COINS WITH GEORGE III’s HEAD
• 1797. WHEAT & BREAD PRICES DOUBLED AS DID GOLD.
• 1811. SELECT COMMITTEE ON THE HIGH PRICE OF GOLD: RECOMMENDED BANK STABILISE NOTE
ISSUE TAKING EXCESS NOTES OUT OF CIRCULATION), THEY BECOME REDEEMABLE BY GOLD &
SILVER.
• FOR THE FIRST TIME MONEY MARKET “EXPERTS” CALLED IN TO GIVE EVIDENCE TO COMMITTEE.
AS TODAY, NO ONE CAN SAY WHO QUALIFIES AS AN EXPERT (EG: FINANCIAL PLANNERS)
• OTHER ISSUE STILL DEBATED:
“IN SHORT DOES MONEY INFLUENCE THE ECONOMY, OR DOES MONEY RESPOND TO THE
ECONOMY” (GALBRAITH) ( A QUESTION FOR THE SYMPOSIUM)

• EARLY INDUSTRIAL REVOLUTION. MANY PRIVATE
“BANKS”. SPECULATING.EG: AUSTRALIAN LAND.
MANY FAILED.DEPOSITORS TURNED TO
B.O.E.,FORCING IT TO CONTROL BANKS.
• 1825. B.O.E. BECAME “LENDER OF LAST RESORT” IN
FINANCIAL CRISES.
• NEW CENTRAL BANK FUNCTION : “OPEN MARKET
OPERATIONS” ON BANK RATE OF INTEREST. HAD TO
SUSPEND USURY LAWS.REMOVED FROM PRIVATE
BANKS ACCUMULATED RESERVES GOING INTO
SPECULATION.

GREAT FINANCE HOUSES OF
LOMBARD STREET
• SCHRODERS, BROWN,SHIPLEY &CO.,N.M. ROTHSCHILD &
SONS, CLYDESDALE BANK.
• “THE BRIEFEST AND TRUEST WAY OF DESCRIBING
LOMBARD STREET IS TO SAY THAT IT IS BY FAR THE
GREATEST COMBINATION OF ECONOMICAL POWER &
ECONOMICAL DELICACY THAT THE WORLD HAS EVER
SEEN…EVERYONE IS AWARE THAT ENGLAND IS THE
GREATEST MONEYED COUNTRY IN THE WORLD:
EVERYONE ADMITS THAT IT HAS MUCH MORE
IMMEDIATELY DISPOSABLE AND READY CASH THAN ANY
OTHER COUNTRY.” (WALTER BAGEHOT.1873)
• 1873. LONDON MONEY MARKET -120 MILL.PDS. ON
DEPOSIT – DOUBLE PARIS, NEW YORK & BERLIN
COMBINED.

CORNHILL & LOMBARD STREETS 1830
(FROM “THE POULTRY”)

IL N’EST PAS GEOMETRE
• 1654. 2 FRENCH MATHEMATICIANS BEGAN A CORRESPONDENCE ON
GAMBLING IN GAMES OF CHANCE: BLAISE PASCAL & PIERRE DE FERMAT.
• PASCAL HOBNOBBED WITH THE HIGH ROLLERS OF PARIS EG: CHEVALIER
DE MERE.MADE HIS MONEY - FAVORABLE ODDS ON AT LEAST 1 SIX IN 4
TOSSES OF FAIR DICE & BLEW THE LOT BETTING ON AT LEAST 1 DOUBLE-
SIX IN 24 DOUBLE TOSSES.
• PASCAL + FERMAT: WANT A METHODOLOGY FOR GAMBLERS ON
SIMPLE GAMES OF CHANCE FOR HIGH ROLLERS – DICE, ROULETTE, 52
PACK CARDS & STATE LOTTERIES.
• PASCAL’S TRIANGLE OF NUMBERS DREW ON KHAYYAM & EARLIER
CHINESE MATHEMATICIANS
• FERMAT WORKED ON PROBLEM ALGEBRAICALLY
• OUTCOME WAS THEORY OF PROBABILITY (SEE JOHN GOLDBERG’S
PAPER)
• BECAME WIDELY USED IN ALL FIELDS OF HUMAN ENQUIRY, ESPECIALLY
SOCIAL SCIENCES.

USE OF PROBABILITY ANALYSIS
LANCELOT HOGBEN: “THERE ARE AT LEAST 3 CURRENT VIEWS ABOUT
THE RELEVANCE OF A MATHEMATICAL – THEORY OF PROBABILITY
TO SUCH QUESTIONS (REFERENCE TO USE IN MEDICAL RESEARCH).
ONE SCHOOL, REPRESENTED BY A WALD & J NEYMAN, HAVE
MADE AN OVERDUE ATTEMPT TO FORMULATE ISSUES IN TERMS
WHICH DO NOT INVOKE THE DOCTRINE OF INVERSE PROBABILITY;
BUT THIS LEADS TO CERTAIN MATHEMATICAL DIFFICULTIES AS YET
UNSOLVED. WHILE ONE MUST RECOGNISE THE USEFULNESS OF A
MATHEMATICAL THEORY OF PROBABILITY IN THE DOMAINS OF
PHYSICS & GENETICS ONE MAY LEGITIMATELY QUESTION
WHETHER IT CAN CONTRIBUTE MUCH TO THE ADVANCEMENT OF
MEDICINE, PSYCHOLOGY AND THE SOCIAL SCIENCES”

USE OF PROBABILITY ANALYSIS CONT.
J.M. KEYNES (‘TREATISE ON PROBABILITY’ 1921):
PROBABILITY WAS ESSENTIALLY A RELATIONSHIP
THAT WAS LOGICAL - RATHER THAN
NUMERICAL, AS IN CLASSICAL THEORY –
BETWEEN AVAILABLE EVIDENCE & A
HYPOTHESIS DERIVED OR IMPLIED FROM THE
EVIDENCE. THIS ALLOWED HIM TO PUT
FORWARD THE CONCEPT OF “UNCERTAINTY”
WHICH IS ESSENTIALLY IMPOSSIBLE TO
QUANTIFY, BUT IN WHOSE DOMAIN MANY
MANAGEMENT DECISIONS FALL.

IN PRACTICAL TERMS WHAT DOES THIS MEAN? IT
PROBABLY MEANS THAT THE MENTAL
PROCESSES OF THE SUCCESSFUL PLUM
MERCHANT, OVER 4000 YEARS AGO, IN
PREDICTING THE PRICE OF NEXT YEARS’ PLUMS
ARE ESSENTIALLY THE SAME AS THOSE OF
WARREN BUFFETT. IF THE PLUM MERCHANT
HAD FOLLOWED MOST OF HIS COLLEAGUES HE
MAY HAVE LOST A FORTUNE. LIKEWISE WARREN
BUFFETT. (SEE HIS “THOUGHT EXPERIMENT”)

BUFFETT’S “THOUGHT EXPERIMENT”
1. ASSUME POPULATION OF MAJOR U.S.
STATES OF 225 MILLION IN A COIN TOSSING
CONTEST – BETTING $1 THEY COULD CALL IT.
2. BECAUSE ALL TOSSES RANDOM – AFTER 10
TOSSES EACH, 220,000 LEFT = $1000 EACH.
3. AFTER 20 RANDOM TOSSES, ONLY 215 LEFT
= MORE THAN $1,000,000 EACH.

DANIEL BERNOULLI(1700) (“EXPOSITION OF A NEW THEORY ON THE
MEASUREMENT OF RISK”:
“FOR THE FIRST TIME IN HISTORY BERNOULLI IS APPLYING MEASUREMENT
TO SOMETHING THAT CANNOT BE COUNTED. HE HAS ACTED AS THE GO-
BETWEEN IN THE WEDDING BETWEEN INTUITION AND MEASUREMENT.
CARDANO, PASCAL AND FERMAT PROVIDED A METHOD FOR FIGURING
THE RISKS IN EACH THROW OF THE DICE, BERNOULLI INTRODUCES US TO
THE RISK-TAKER – THE PLAYER WHO CHOOSES HOW MUCH TO BET OR
WHETHER TO BET AT ALL. WHILE PROBABILITY THEORY SETS UP THE
CHOICES BERNOULLI DEFINES THE MOTIVATIONS OF THE PERSON WHO
DID THE CHOOSING. THIS IS AN ENTIRELY NEW AREA OF STUDY AND
BODY OF THEORY. BERNOULLI LAID THE INTELLECTUAL GROUNDWORK
FOR MUCH OF WHAT WAS TO FOLLOW, NOT JUST IN ECONOMICS, BUT IN
THEORIES ABOUT HOW PEOPLE MAKE DECISIONS AND CHOICES IN EVERY
ASPECT OF LIFE.”
(PETER BERNSTEIN. 1998) ( A SYMPOSIUM TOPIC: WHAT CHOICES ARE
BEING MADE BY INDIVIDUALS IN THIS GAMING HOUSE IN PARIS?)

UTILITY THEORY
UTILITY THEORY AS DEVELOPED BY ECONOMISTS IN THE 19TH AND
20TH CENTURIES IS NOW FIRMLY PART OF THE FINANCIAL
DECISION MAKING MODELS WHICH DRIVE THE INVESTMENT
MARKETS OF THE WORLD, AND THE WAY CHOICES ARE MADE
BETWEEN DIFFERENT INVESTMENTS. BUT THE WORLD OF TODAY
IS VASTLY DIFFERENT FROM THE CERTAINTIES WHICH APPLIED IN
BERNOULLI’S TIME: ITS STRUCTURE & WORKINGS ARE SUCH THAT
RANDOM EVENTS IN ONE ECONOMICALLY BACKWARD COUNTRY
CAN CAUSE CHAOS IN THE DEVELOPED WORLD’S MONEY
MARKETS WHICH MUST RESPOND IN A CRISIS SITUATION, WHERE
ITS RESPONSES MAY HAVE SWIFT & UNCERTAIN OUTCOMES.
(DISCUSSION:1. WHAT IF NORTH KOREA ACCIDENTALLY SENDS A
NUCLEAR MISSILE INTO JAPAN?
2. WHAT ARE LONG TERM ECONOMIC IMPACTS OF
BASHAR ASSAD?

EDMUND HALLEY: “THE CHANCES OF
MORTALITY OF ALL AGES”
• 1690 ASTRONOMER HALLEY SET HIS MIND TO THE ISSUE OF PROBABILITY &
HUMAN LIFE & WORKED WITH CASPAR NEUMANN (BRESLAU SCIENTIST &
CLERGYMAN)
• METICULOUS COUNCIL RECORDS OF BIRTHS & DEATHS.
• HALLEY’S PAPER TO ROYAL SOCIETY: TABLE RECORDING THE PRICE OF INSURING
LIVES AT DIFFERENT AGES, BASED ON THE ODDS OF DEATH OF INDIVIDUALS IN
EACH AGE GROUP.
• BRITISH GOVT TOOK UP THIS IDEA. HAD BEEN SELLING ANNUITIES TO PUBLIC TO
RAISE REVENUE.PROBLEM WAS THAT ANNUITIES MADE NO CONCESSIONS TO
THE AGE OF THE PERSON, LEADING EVENTUALLY TO GOVT. LOSSES.
• BRITISH GOVT. COTTONED ON TO A “NICE LITTLE EARNER”: LOTTERIES OFFERING
BIG MONEY PRIZES AGAINST VERY LONG ODDS.
• 1763. BUSINESS OF ANNUITIES & INSURANCE OF LIVES IN PRIIVATE COMPANIES.
RICHARD PRICE PAPER, “SHEWING THE PROBABILITIES OF LIFE AT
NORTHAMPTON”. BUT THE TABLES WERE BASED ON BAD INFORMATION EG:
BAPTISMAL REGISTERS. EQUITABLE LIFE INSURANCE CORPORATION USED THEM
ANYHOW & STILL MADE A PROFIT.

THE NEXT STEPS: DEALING WITH
COMPLEXITY
• IS COMPLEXITY ECONOMICS THE WAY TO GO? (SEE
WIKIPEDIA
• “ SO WHAT’S THE CONNECTION WITH ECONOMIC &
POLITICAL POLICY? WELL, IN A POLICY CONTEXT, IT MEANS
YOU OBSERVE, AND OBSERVE, AND OBSERVE, &
OCCASIONALLY STICK YOUR OAR IN & IMPROVE
SOMETHING FOR THE BETTER. IT MEANS THAT YOU SEE
REALITY FOR WHAT IT IS, AND REALIZE THAT THE GAME
YOU ARE IN KEEPS CHANGING, SO THAT IT’S UP TO YOU
TO FIGURE OUT THE CURRENT RULES OF THE GAME AS
IT’S BEING PLAYED.” (M.M. WALDROP)
• WHY DID THE STOCK MARKET CRASH CAUSE A MORE
THAN 500 POINTS ON A SINGLE MONDAY IN OCTOBER
1987?

LECTURE 8. MONEY & THE
INDUSTRIAL REVOLUTION: SPINNING

“THE IDEAS THAT INTERPRET MODERN ECONOMIC LIFE
TOOK FORM OVER A LONG SPAN OF TIME, AS DID THE
ECONOMIC INSTITUTIONS THAT THEY SEEK TO
EXPLAIN. BUT THERE IS A CONVENIENT AND
GENERALLY AGREED POINT AT WHICH ONE CAN
BEGIN. IN THE LAST HALF OF THE EIGHTEENTH
CENTURY, ECONOMIC LIFE IN BRITAIN , AND IN
LESSER MEASURE ELSEWHERE IN WESTERN EUROPE
AND SOON ALSO IN NEW ENGLAND WAS
TRANSFORMED BY A SUCCESSION OF MECHANICAL
INVENTIONS.”
(J K GALBRAITH)

INTRODUCTION
• THE INDUSTRIAL REVOLUTION IN EUROPE BUILT THE ATLANTIC
ECONOMY: BRITAIN – EUROPE – THEIR COLONIES – THE AMERICAS
• IRONBRIDGE WAS THE CRADLE OF THE INDUSTRIAL REVOLUTION.
1805: BRITAIN PRODUCED 250,000 TONS OF IRON; 1905 BRITAIN
PRODUCED 70 MILLION TONS OF STEEL INGOTS.
• STEAM POWER FOR RAILWAYS SAW WORLD’S RAILWAY MILEAGE
INCREASE FROM 4715 MILES IN 1840 TO 353,860 IN 1880.
• STEAMSHIPS ENABLED A MORE EFFICIENT OVERSEAS TRADE.
BRITAIN’S INCREASED FROM 74 MILLION POUNDS IN 1800 TO 375
MILLION POUNDS IN 1860.
• THIS MASSIVE GROWTH IN ECONOMIC ACTIVITY HAD TO BE
FINANCED. THE RELATIVELY UNSOPHISTICATED FINANCE
INDUSTRY OF 17TH AND 18TH CENTURY HAD TO RAPIDLY INNOVATE
TO MEET THE DEMANDS OF TRADERS & INVESTORS.

NEXT DEVELOPMENT STAGE OF
MONEY & CAPITAL: RISK
• IN 20TH CENTURY RISK MANAGEMENT TOOK A QUANTUM LEAP.
BUT IN 19TH CENTURY ITS MEASUREMENT & PRICING WAS
STRAIGHTFORWARD.
• BUT 19TH CENTURY PRACTITIONERS TURNED TO MATHEMATICS OF
PROBABILITY.
• YOU WILL RECALL THE LAST LECTURE WHERE WE LOOKED AT
PROBABILITY THEORY & ITS APPLICATION (INCL. RESERVATIONS
OF SOME MATHEMATICIANS). WE ALSO HAVE:
1. AN EXCELLENT PAPER BY JOHN GOLDBERG WHICH I URGE YOU
TO OBTAIN A COPY.
2. THE WIKIPEDIA DOWNLOAD WHICH I NOW CIRCULATE, FOR
ANYONE WISHING TO BORROW IT.
• WE THEN MOVED ON TO DANIEL BERNOULLI WHO INTRODUCED
THE IDEA OF DIFFERING UTILITY OF GOODS & SERVICES TO
DIFFERENT INDIVIDUALS

20TH CENTURY DECISION ANALYSIS:
WHERE BERNOULLI FINALLY LED US
• 1960s TAKE-OFF AS MAN-MACHINE SYSTEMS
DEVELOPED WITH THE START OF THE DIGITAL
AGE. BASIC INFORMATION WAS COLLATED,
DISSECTED & SUBJECTED TO JUDGMENT –
CALLED DECISION ANALYSIS.
• FOCUS WAS ON BUSINESS STRATEGY:
1. HOW TO CHOOSE THE DECISION PROBLEM?
2. HELP MANAGEMENT (THE DECISIONMAKERS)
TO CONCEPTUALISE PROBLEMS

DECISION ANALYSIS
• SYSTEMATIC SUBJECTIVISM AS THE MOST
STRAIGHTFORWARD ROUTE TO HEART OF A
BUSINESS PROBLEM (EG;: INVESTMENT, PRICING
ETC)
• THE PROCEDURE:
1. ESTIMATE SUBJECTIVE PROBABILITIES
(REMEMBER KEYNES, ABOVE)
2. ESTIMATE VALUES/UTILITIES
3. MAKE CHOICES AFTER DECISION ANALYSIS
(MATHEMATICAL TECHNIQUES)

THE EXCITING 21ST CENTURY STUFF
• THE BLACK-SCHOLES FINANCIAL MODEL:
1. REGARDED AS THE BIGGEST SUCCESS UNTIL
IT FAILED IN THE GLOBAL FINANCIAL CRISIS.
2. IT PURPORTED TO BE A “RISK-FREE”
MODELLING STRATEGY
3. BASED ON DERIVATIVES MARKETS: RAPID IN
THE UPTURNS & RAPID IN THE
DOWNTURNS

BACK TO BASICS: THE BIRTH OF
MODERN LIFE INSURANCE
• 1763: AN ESSAY TOWARDS SOLVING A PROBLEM IN THE DOCTRINE
OF CHANCES. REV. THOMAS BAYES, MATHEMATICIAN
&THEOLOGIAN. PUBLISHED BY RICHARD PRICE AFTER BAYES’
DEATH.
• BAYESIAN THEOREM: THEOREM ON THE CONDITIONAL
PROBABILITY THAT EVALUATES THE PROBABILITY OF AN EVENT (A
CAUSE) CONDITIONAL UPON ANOTHER EVENT (A CONSEQUENCE)
OF KNOWN PROBABILITY HAVING TAKEN PLACE.
• PRICE WAS ACTUARY FOR THE EQUITABLE INSURANCE COMPANY.
THEIR PREMIUMS BASED ON PRICE’S NORTHAMPTON LIFE
TABLES, BASED ON BAYESIAN PROBABILITY: THE PROBABILITY OF
ANY EVENT IS THE RATIO BETWEEN THE VALUE AT WHICH AN
EXPECTATION DEPENDING ON THE HAPPENING OF THE EVENT
OUGHT TO BE COMPLETED, AND THE CHANCE OF THE THING
EXPECTED UPON IT HAPPENING.

LIFE TABLES
• REMEMBER FROM THE PREVIOUS LECTURE WE NOTED
THAT PRICE’S TABLES WERE FAULTY – BASED ON
BAPTISMAL RECORDS. INSURANCE OF WORKING MEN
AGAINST PREMATURE DEATH.
• GOVT. ANNUITIES ALSO BASED ON LIFE TABLES
• ANOTHER CALCULATION WAS THE ACCURATE
CALCULATION OF THE NUMBER OF WIDOWS & ORPHANS
CREATED BY UNTIMELY DEATH OF POLICY HOLDERS.
• LIFE INSURANCE WAS MARKETED TO MIDDLE CLASS
WORKERS WHO COULD AFFORD IT. THEY ALSO GREW
HEALTHIER & LIVED LONGER
• FOR THE POOR THERE WERE ONLY CHARITIES &
WORKHOUSES

THE FACTORY FLOOR IN A WELL RUN
BUSINESS: WHO IS INSURED?

NON-LIFE INSURANCE
• WE SAW IN EARLIER LECTURES HOW
MERCHANTS & SHIPOWNERS COPED WITH THE
HEAVY LOSS OF SHIPS AT SEA (3 OUT OF 5)
BEFORE 19TH CENTURY.
• BY 19TH CENTURY SHIP LOSSES 10-15% BUT
MANY MORE SHIPS, CARGOS MORE, MORE
DIVERSE & LONGER DISTANCES: RISKS STORM &
PIRACY.
• LLOYD’S COFFEE HOUSE HAD STARTED IN 1652:
PLEASANT MEETING PLACE & PLACE TO DO
BUSINESS

LLOYD’S COFFEE HOUSE, TOWER
STREET, LONDON (CANOPIUS BREW)

LLOYD’S OF LONDON CONT.
• AN EARLY SERVICE WAS A FINDER’S FEE OF 1 GUINEA TO
INFORMANTS WHO PROVIDED INFORMATION ON
WATCHES STOLEN BY PICKPOCKETS FROM GENTLEMEN.
• 1771: 79 BUSINESS UNDERWRITERS (INSURANCE,
“VENTURE CAPITAL” ETC.) 100 POUNDS EACH. “SOCIETY
OF LLOYD’S”: UNINCORPORATED SO UNLIMITED RISK, BUT
STRICT MORAL CODES. BECAME “LLOYD’S NAMES”.
• NAMES PUBLISHED IN LLOYD’S REGISTER GAVE GREAT
COMMERCIAL STANDING.
• DEVELOPMENT OF BUSINESS FORECASTING BASED ON
SHARED INFORMATION & CONSENSUS JUDGEMENT.
• BRING ON THE MATHEMATICIANS

LLOYD’S TRANSACTIONS
• MERCHANTS WHO WISHED TO INSURE A
SHIP OR CARGO AGAINST LOSS AT SEA
WOULD APPOINT A BROKER, WELL KNOWN
IN COFFEE HOUSE CIRCLES TO GO FROM ONE
UNDERWRITER TO ANOTHER UNTIL THE RISK
OF LOSS OF SHIP & CARGO WAS COVERED.
• THE UNDERWRITERS WHO SIGNED THEIR
NAMES AT THE BOTTOM OF THE CONTRACT
WERE “LLOYD’S NAMES”.

PRINCES OF THE INDUSTRIAL
REVOLUTION
• JUST AS THE MEDICIs & OTHER MERCHANT
PRINCES MADE THE MEDITERRANEAN
ECONOMIES IN THE 15TH CENTURY SO THE
INDUSTRIAL REVOLUTION NEEDED THE
PRINCES OF FINANCE & INDUSTRY.
• THE GREATEST OF THESE WERE THE
ROTHSCHILDs LED BY NATHAN MEYER
ROTHSCHILD.

FINANCING BRITAIN’S WAR AGAINST
NAPOLEON & AFTERWARDS
• NAPOLEON PAID FOR HIS ARMIES MOSTLY BY SYSTEMATIC
LOOTING
• BRITAIN GOT INTO SERIOUS WAR DEBT BETWEEN 1793 – 1815 (IN
THIS YEAR IT REACHED 100% OF G.D.P.)
• TO FUND THIS DEBT BRITAIN CREATED “THE BRITISH CONSOL”:
PERPETUAL BONDS (NO MATURITY) COULD ONLY BE REDEEMED IF
MARKET PRICE GREATER THAN CONSOL’s FACE VALUE.
• ROTHSCHILD BANK BOUGHT A GREAT NUMBER OF CONSOLS &
MADE A BIG PROFIT WHEN MARKET VALUE INCREASED SHARPLY
AFTER WATERLOO (U.S. $600 MILLION)
• THIS LED TO CREATION OF LONDON BOND MARKET FOR THE
WORLD WITH BANK OF ROTHSCHILD PRINCIPAL TRADER.

YIELDS ON 2.5% CONSOL BONDS
1700 - 2005

AMERICAN PRINCES OF THE
INDUSTRIAL REVOLUTION
• THE INDUSTRIAL REVOLUTION WAS BROUGHT TO THE U.S. BY A
RELATIVELY SMALL GROUP OF INNOVATORS, WHO TOOK ADVANTAGE OF
THE RELATIVE LAWLESSNESS IN THE COUNTRY, THEIR CAPACITY TO
HARNESS LARGE AMOUNTS OF VENTURE CAPITAL, & TO MANIPULATE
THE POLITICAL SYSTEM.
• GALBRAITH CALLS THESE MEN “HIGH CAPITALISTS”, FOR THE ENORMOUS
WEALTH WHICH THEY ACQUIRED:”AND IN TIME IT BECAME EVIDENT
THAT THE INDUSTRIAL CAPITALISTS COULD GET RICH BEYOND THE
DREAMS OF LANDLORDS OR, FOR THAT MATTER OF KINGS…BY 1913,
JOHN D ROCKEFELLER, A SELF-MADE MAN , HAD ACCUMULATED
APPROXIMATELY $900 MILLION, HIS NET WORTH THAT YEAR.”
• THE ECONOMIST THORSTIEN VEBLEN CREATED THE TERM
“CONSPICUOUS CONSUMPTION” TO DEFINE THE WAY OF LIFE OF THE
“HIGH CAPITALISTS” AND THEIR FAMILIES.
(QUESTION FOR SYMPOSIUM: IS CONSPICUOUS CONSUMPTION BY THE
VERY WEALTHY A REWARD OR A CURSE?)

‘SOMETHINGLOVELYSTARTED’ POKER
MACHINE ROOM LAS VEGAS

INTEGRATION OF ATLANTIC CAPITAL
MARKETS: THE CABLE
• ON 26 JULY 1866 THE TRANSATLANTIC ,
UNDERSEA TELEGRAPH CABLE JOINED LONDON
& NEW YORK (SEE PREVIOUS MAP).
• WHAT TOOK 10 DAYS FOR CAPITAL & MONEY
MARKET INFORMATION TO TRAVEL, LEADING TO
ERRORS & GUESSWORK COULD BE
TRANSMITTED AT 8 WORDS PER MINUTE
(MORSE CODE – THE BINARY SYSTEM)( WILL BE
DONE IN 5 MILLISECONDS).
• THIS WAS THEN CONNECTED TO THE U.S.
OVERLAND TELEGRAPH.

Evolution of money and Capital pt 1

Evolution of money and Capital pt 1

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