The Middle Ages (600 – 450 AD)

Artificial wealth comprises the things which of themselves satisfy no natural need, for example money, which is a human contrivance.

—St. Thomas Aquinas

If the Axial Age saw the emergence of complementary ideals of commodity markets and universal world religions, the Middle Ages were the period in which those two institutions began to merge.

Everywhere, the age began with the collapse of empires. Eventually, new states formed, but in these new states, the nexus between war, bullion, and slavery was broken; conquest and acquisition for their own sake were no longer celebrated as the end of all political life. At the same time, economic life, from the conduct of international trade to the organization of local markets, came to fall increasingly under the regulation of religious authorities. One result was a widespread movement to control, or even forbid, predatory lending. Another was a return, across Eurasia, to various forms of virtual credit money.

Granted, this is not the way we’re used to thinking of the Middle Ages. For most of us, “Medieval” remains a synonym for superstition, intolerance, and oppression. Yet for most of the earth’s inhabitants, it could only be seen as an extraordinary improvement over the terrors of the Axial Age.

One reason for our skewed perception is that we’re used to thinking of the Middle Ages as something that happened primarily in Western Europe, in territories that had been little more than border outposts of the Roman Empire to begin with. According to the conventional wisdom, with the collapse of the empire, the cities were largely abandoned and the economy “reverted to barter,” taking at least five centuries to recover. Even for Europe, though, this is based on a series of unquestioned assumptions that, as I’ve said, crumble the moment one starts seriously poking at them. Chief among them is the idea that the absence of coins means the absence of money. True, the destruction of the Roman war machine also meant that Roman coins went out of circulation; and the few coins produced within the Gothic or Frankish kingdoms that established themselves over the ruins of the old empire were largely fiduciary in nature.[555] Still, a glance at the “barbarian law codes” reveals that even at the height of the Dark Ages, people were still carefully keeping accounts in Roman money as they calculated interest rates, contracts, and mortgages. Again, cities shriveled, and many were abandoned, but even this was something of a mixed blessing. Certainly, it had a terrible effect on literacy; but one must also bear in mind that ancient cities could only be maintained by extracting resources from the countryside. Roman Gaul, for instance, had been a network of cities, connected by the famous Roman roads to an endless succession of slave plantations, which were owned by the urban grandees.[556] After around 400 ad, the population of the towns declined radically, but the plantations also disappeared. In the following centuries, many came to be replaced by manors, churches, and even later, castles—where new local lords extracted their own dues from the surrounding farmers. But one need only do the math: since Medieval agriculture was no less efficient than ancient agriculture (in fact, it rapidly became a great deal more so), the amount of work required to feed a handful of mounted warriors and clergymen could not possibly have been anything like that required to feed entire cities. However oppressed Medieval serfs might have been, their plight was nothing compared with that of their Axial Age equivalents.

Still, the Middle Ages proper are best seen as having begun not in Europe but in India and China, between 400 and 600 ad, and then sweeping across much of the western half of Eurasia with the advent of Islam. They only really reached Europe four hundred years later. Let us begin our story, then, in India.

Medieval India (Flight into Hierarchy)

I left off in India with Aśoka’s embrace of Buddhism, but I noted that ultimately, his project foundered. Neither his empire nor his church was to endure. It took a good deal of time, however, for this failure to occur.

The Mauryans represented a high watermark of empire. The next five hundred years saw a succession of kingdoms, most of them strongly supportive of Buddhism. Stupas and monasteries sprang up everywhere, but the states that sponsored them grew weaker and weaker; centralized armies dissolved; soldiers, like officials, increasingly came to be paid by land grants rather than salaries. As a result, the number of coins in circulation steadily declined.[557] Here too, the early Middle Ages witnessed a dramatic decline of cities: where the Greek ambassador Megasthenes described Aśoka’s capital of Patna as the largest city in the world of his day, Medieval Arab and Chinese travelers described India as a land of endless tiny villages.

As a result, most historians have come to write, much as they do in Europe, of a collapse of the money economy; of commerce becoming a “reversion to barter.” Here too, this appears to be simply untrue. What vanished were the military means to extract resources from the peasants. In fact, Hindu law-books written at the time show increasing attention to credit arrangements, with a sophisticated language of sureties, collateral, mortgages, promissory notes, and compound interest.[558] One need only consider how the Buddhist establishments popping up all over India during these centuries were funded. While the earliest monks were wandering mendicants, owning little more than their begging bowls, early Medieval monasteries were often magnificent establishments with vast treasuries. Still, in principle, their operations were financed almost entirely through credit.

The key innovation was the creation of what were called the “perpetual endowments” or “inexhaustible treasuries.” Say a lay supporter wished to make a contribution to her local monastery. Rather than offering to provide candles for a specific ritual, or servants to attend to the upkeep of the monastic grounds, she would provide a certain sum of money—or something worth a great deal of money—that would then be loaned out in the name of the monastery, at the accepted 15-percent annual rate. The interest on the loan would then be earmarked for that specific purpose.[559] An inscription discovered at the Great Monastery of Sanci sometime around 450 ad provides a handy illustration. A woman named Harisvamini donates the relatively modest sum of twelve dinaras to the “Noble Community of Monks.”[560] The text carefully inscribes how the income is to be divided up: the interest on five of the dinaras was to provide daily meals for five different monks, the interest from another three would pay to light three lamps for the Buddha, in memory of her parents, and so forth. The inscription ends by saying that this was a permanent endowment, “created with a document in stone to last as long as the moon and the sun”: since the principal would never be touched, the contribution would last forever.[561]

Some of these loans presumably went to individuals, others were commercial loans to “guilds of bamboo-workers, braziers, and potters,” or to village assemblies.[562] We have to assume that in most cases the money is an accounting unit: what were really being transacted were animals, wheat, silk, butter, fruit, and all the other goods whose appropriate rates of interest were so carefully stipulated in the law-codes of the time. Still, large amounts of gold did end up flowing into monastic coffers. When coins go out of circulation, after all, the metal doesn’t simply disappear. In the Middle Ages—and this seems to have been true across Eurasia—the vast majority of it ended up in religious establishments, churches, monasteries, and temples, either stockpiled in hoards and treasuries or gilded onto or cast into altars, sanctums, and sacred instruments. Above all, it was shaped into images of gods. As a result, those rulers who did try to put an Axial Age–style coinage system back into circulation—invariably, to fund some project of military expansion—often had to pursue self-consciously anti-religious policies in order to do so. Probably the most notorious was one Harsa, who ruled Kashmir from 1089 to 1101 ad, who is said to have appointed an officer called the “Superintendent for the Destruction of the Gods.” According to later histories, Harsa employed leprous monks to systematically desecrate divine images with urine and excrement, thus neutralizing their power, before dragging them off to be melted down.[563] He is said to have destroyed more than four thousand Buddhist establishments before being betrayed and killed, the last of his dynasty—and his miserable fate was long held out as an example of where the revival of the old ways was likely to lead one in the end.

For the most part, then, the gold remained sacrosanct, laid up in the sacred places—though in India, over time these were increasingly Hindu ones, not Buddhist. What we now see as traditional Hindu-village India appears to have been largely a creation of the early Middle Ages. We do not know precisely how it happened. As kingdoms continued to rise and fall, the world inhabited by kings and princes became increasingly distant from that of most people’s everyday affairs. During much of the period immediately following the collapse of the Mauryan empire, for instance, much of India was governed by foreigners.[564] Apparently, this increasing distance allowed local Brahmins to begin reshaping the new—increasingly rural—society along strictly hierarchical principles.

They did it above all by seizing control of the administration of law. The Dharmaśāstra, law-codes produced by Brahmin scholars between roughly 200 bc and 400 ad, give us a good idea of the new vision of society. In it, old ideas like the Vedic conception of a debt to gods, sages, and ancestors were resuscitated—but now, they applied only and specifically to Brahmins, whose duty and privilege it was to stand in for all humanity before the forces that controlled the universe.[565] Far from being required to attain learning, members of the inferior classes were forbidden to do so: the Laws of Manu, for instance, set down that any Sudra (the lowest caste, assigned to farming and material production) who so much as listened in on the teaching of the law or sacred texts should have molten lead poured into their ears; on the occasion of a repeat offense, have their tongues cut out.[566] At the same time Brahmins, however ferociously they guarded their privileges, also adopted aspects of once-radical Buddhist and Jain ideas like karma, reincarnation, and ahimsa. Brahmins were expected to refrain from any sort of physical violence, and even to become vegetarians. In alliance with representatives of the old warrior caste, they also managed to win control of most of the land in the ancient villages. Artisans and craftsmen fleeing the decline or destruction of cities often ended up as suppliant refugees, and, gradually, low-caste clients. The result were increasingly complex local patronage systems in the countryside—jajmani systems, as they came to be known—where the refugees provided services for the landowning castes, who took on many of the roles once held by the state, providing protection and justice, extracting labor dues, and so on—but also protected local communities from actual royal representatives.[567]

This latter function is crucial. Foreign visitors were later to be awed by the self-sufficiency of the traditional Indian village, with its elaborate system of landowning castes, farmers, and such “service castes” as barbers, smiths, tanners, drummers, and washermen, all arranged in hierarchical order, each seen as making its own unique and necessary contribution to their little society, all of it typically operating entirely without the use of metal currency. It was only possible for those reduced to the status of Sudras and Untouchables to have a chance of accepting their lowly position because the exaction of local landlords was, again, on nothing like the same scale as that under earlier governments—under which villagers had to support cities of upwards of a million people—and because the village community became an effective means of holding the state and its representatives at least partially at bay.

We don’t know the mechanisms that brought this world about, but the role of debt was surely significant. The creation of thousands of Hindu temples alone must have involved hundreds of thousands, even millions, of interest-bearing loans—since, while Brahmins were themselves forbidden to lend money at interest, temples were not. We can already see, in the earliest of the new law-codes, the Laws of Manu, the way that local authorities were struggling to reconcile old customs like debt peonage and chattel slavery with the desire to establish an overarching hierarchical system in which everyone knew their place. The Laws of Manu carefully classify slaves into seven types depending on how they were reduced to slavery (war, debt, self-sale …) and explain the conditions under which each might be emancipated—but then go on to say that Sudras can never really be emancipated, since, after all, they were created to serve the other castes.[568] Similarly, where earlier codes had established a 15-percent annual rate of interest, with exceptions for commercial loans,[569] the new codes organized interest by caste: stating that one could charge a maximum of 2 percent a month for a Brahmin, 3 percent for a Ksatriya (warrior), 4 percent for a Vaisya (merchant), and 5 percent for a Sudra—which is the difference between 24 percent annually on the one extreme and a hefty 60 percent on the other.[570] The laws also identify five different ways interest can be paid, of which the most significant for our concerns is “bodily interest”: physical labor in the creditor’s house or fields, to be rendered until such time as the principal is cleared. Even here, though, caste considerations were paramount. No one could be forced into the service of anyone of lower caste; moreover, since debts were enforceable on a debtor’s children and even grandchildren, “until the principal is cleared” could mean quite some time—as the Indian historian R.S. Sharma notes, such stipulations “remind us of the present practice according to which several generations of the same family have been reduced to the position of hereditary plowmen in consideration of some paltry sum advanced to them.”[571]

Indeed, India has become notorious as a country in which a very large part of the working population is laboring in effective debt peonage to a landlord or other creditor. Such arrangements became even easier over time. By about 1000 ad, restrictions on usury by members of the upper castes in Hindu law-codes largely disappeared. On the other hand, 1000 ad was about the same time that Islam appeared in India—a religion dedicated to eradicating usury altogether. So at the very least we can say that these things never stopped being contested. And even Hindu law of that time was far more humane than almost anything found in the ancient world. Debtors were not, generally speaking, reduced to slavery, and there is no widespread evidence of the selling of women or children. In fact, overt slavery had largely vanished from the countryside by this time. And debt peons were not even pawns, exactly; by law, they were simply paying interest on a freely contracted agreement. Even when that took generations, the law stipulated that even if the principal was never paid, in the third generation, they would be freed.

There is a peculiar tension here: a kind of paradox. Debt and credit arrangements may well have played a crucial role in creating the Indian village system, but they could never really become their basis. It might have made a certain sense to declare that, just as Brahmins had to dispatch their debts to the gods, everyone should be, in a certain sense, in debt to those above them. But in another sense, that would have completely subverted the very idea of caste, which was that the universe was a vast hierarchy in which different sorts of people were assumed to be of fundamentally different natures, that these ranks and grades were fixed forever, and that when goods and services moved up and down the hierarchy, they followed not principles of exchange at all but (as in all hierarchical systems) custom and precedent. The French anthropologist Louis Dumont made the famous argument that one cannot even really talk about “inequality” here, because to use that phrase implies that one believes people should or could be equal, and this idea was completely alien to Hindu conceptions.[572] For them to have imagined their responsibilities as debts would have been profoundly subversive, since debts are by definition arrangements between equals—at least in the sense that they are equal parties to a contract—that could and should be repaid.[573]

Politically, it is never a particularly good idea to first tell people they are your equals, and then humiliate and degrade them. This is presumably why peasant insurrections, from Chiapas to Japan, have so regularly aimed to wipe out debts, rather than focus on more structural issues like caste systems, or even slavery.[574] The British Raj discovered this to their occasional chagrin when they used debt peonage—superimposed on the caste system—as the basis of their labor system in colonial India. Perhaps the paradigmatic popular insurrection was the Deccan riots of 1875, when indebted farmers rose up to seize and systematically destroy the account books of local money-lenders. Debt peonage, it would appear, is far more likely to inspire outrage and collective action than is a system premised on pure inequality.

China: Buddhism and the Economy of Infinite Debt

By Medieval standards, India was unusual for resisting the appeal of the great Axial Age religions, but we observe the basic pattern: the decline of empire, armies, and cash economy, the rise of religious authorities, independent of the state, who win much of their popular legitimacy through their ability to regulate emerging credit systems.

China might be said to represent the opposite extreme. This was the one place where a late Axial Age attempt to yoke empire and religion together was a complete success. True, here as elsewhere, there was an initial period of breakdown: after the collapse of the Han dynasty around 220 ad, the central state broke apart, cities shrank, coins disappeared, and so on. But in China this was only temporary. As Max Weber long ago pointed out, once one sets up a genuinely effective bureaucracy, it’s almost impossible to get rid of it. And the Chinese bureaucracy was uniquely effective. Before long, the old Han system reemerged: a centralized state, run by Confucian scholar-gentry trained in the literary classics, selected through a national exam system, working in meticulously organized national and regional bureaus where the money supply, like other economic matters, was continually monitored and regulated. Chinese monetary theory was always chartalist. This was partly just an effect of size: the empire and its internal market were so huge that foreign trade was never especially important; therefore, those running the government were well aware that they could turn pretty much anything into money, simply by insisting that taxes be paid in that form.

The two great threats to the authorities were always the same: the nomadic peoples to the north (who they systematically bribed, but who nonetheless periodically swept over and conquered sections of China) and popular unrest and rebellion. The latter was almost constant, and on a scale unknown anywhere else in human history. There were decades in Chinese history when the rate of recorded peasant uprisings was roughly 1.8 per hour.[575] What’s more, such uprisings were frequently successful. Most of the most famous Chinese dynasties that were not the product of barbarian invasion (the Yuan or Qing) were originally peasant insurrections (the Han, Tang, Sung, and Ming). In no other part of the world do we see anything like this. As a result, Chinese statecraft ultimately came down to funneling enough resources to the cities to feed the urban population and keep the nomads at bay, without causing a notoriously contumacious rural population to rise up in arms. The official Confucian ideology of patriarchal authority, equal opportunity, promotion of agriculture, light taxes, and careful government control of merchants seemed expressly designed to appeal to the interests and sensibilities of a (potentially rebellious) rural patriarch.[576]

One need hardly add that in these circumstances, limiting the depredations of the local village loan shark—the traditional bane of rural families—was a constant government concern. Over and over we hear the same familiar story: peasants down on their luck, whether due to natural disaster or the need to pay for a parent’s funeral—would fall into the hands of predatory lenders, who would seize their fields and houses, forcing them to work or pay rent in what had once been their own lands; the threat of rebellion would then drive the government to institute a dramatic program of reforms. One of the first we know about came in the form of a coup d’état in 9 ad, when a Confucian official named Wang Mang seized the throne to deal (so he claimed) with a nationwide debt crisis. According to proclamations made at the time, the practice of usury had caused the effective tax rate (that is, the amount of the average peasant’s harvest that ended up being carried off by someone else) to rise from just over 3 percent, to 50 percent.[577] In reaction, Wang Mang instituted a program reforming the currency, nationalizing large estates, promoting state-run industries—including public granaries—and banning private holding of slaves. Wang Mang also established a state loan agency that would offer interest-free funeral loans for up to ninety days for those caught unprepared by the death of relatives, as well as long-term loans of 3 percent monthly or 10 percent annual income rates for commercial or agricultural investments.[578] “With this scheme,” one historian remarks, “Wang was confident that all business transactions would be under his scrutiny and the abuse of usury would be forever eradicated.”[579]

Needless to say, it was not, and later Chinese history is full of similar stories: widespread inequality and unrest followed by the appointment of official commissions of inquiry, regional debt relief (either blanket amnesties or annulments of all loans in which interest had exceeded the principal), cheap grain loans, famine relief, laws against the selling of children.[580] All this became the standard fare of government policy. It was very unevenly successful; it certainly did not create an egalitarian peasant utopia, but it prevented any widespread return to Axial Age conditions.

We are used to thinking of such bureaucratic interventions—particularly the monopolies and regulations—as state restriction on “the market”—owing to the prevailing prejudice that sees markets as quasi-natural phenomena that emerge by themselves, and governments as having no role other than to squelch or siphon from them. I have repeatedly pointed out how mistaken this is, but China provides a particularly striking example. The Confucian state may have been the world’s greatest and most enduring bureaucracy, but it actively promoted markets, and as a result, commercial life in China soon became far more sophisticated, and markets more developed, than anywhere else in the world.

This despite the fact that Confucian orthodoxy was overtly hostile to merchants and even the profit motive itself. Commercial profit was seen as legitimate only as compensation for the labor that merchants expended in transporting goods from one place to another, but never as fruits of speculation. What this meant in practice was that they were pro-market but anti-capitalist.

Again, this seems bizarre, since we’re used to assuming that capitalism and markets are the same thing, but, as the great French historian Fernand Braudel pointed out, in many ways they could equally well be conceived as opposites. While markets are ways of exchanging goods through the medium of money—historically, ways for those with a surplus of grain to acquire candles and vice versa (in economic shorthand, C-M-C’, for commodity-money-other commodity)—capitalism is first and foremost the art of using money to get more money (M-C-M’). Normally, the easiest way to do this is by establishing some kind of formal or de facto monopoly. For this reason, capitalists, whether merchant princes, financiers, or industrialists, invariably try to ally themselves with political authorities to limit the freedom of the market, so as to make it easier for them to do so.[581] From this perspective, China was for most of its history the ultimate anti-capitalist market state.[582] Unlike later European princes, Chinese rulers systematically refused to team up with would-be Chinese capitalists (who always existed). Instead, like their officials, they saw them as destructive parasites—though, unlike the usurers, ones whose fundamentally selfish and antisocial motivations could still be put to use in certain ways. In Confucian terms, merchants were like soldiers. Those drawn to a career in the military were assumed to be driven largely by a love of violence. As individuals, they were not good people; but they were also necessary to defend the frontiers. Similarly, merchants were driven by greed and basically immoral; yet if kept under careful administrative supervision, they could be made to serve the public good.[583] Whatever one might think of the principles, the results are hard to deny. For most of its history, China maintained the highest standard of living in the world—even England only really overtook it in perhaps the 1820s, well past the time of the Industrial Revolution.[584]

Confucianism is not precisely a religion, perhaps; it is usually considered more an ethical and philosophical system. So China too could be considered something of a departure from the common Medieval pattern, whereby commerce was, almost everywhere, brought under the control of religion. But it wasn’t a complete departure. One need only consider the remarkable economic role of Buddhism in this same period. Buddhism had arrived in China through the Central Asia caravan routes and in its early days was largely a religion promoted by merchants, but in the chaos following the collapse of the Han dynasty in 220 ad, it began to take popular roots. The Liang (502–557) and Tang (618–907) dynasties saw outbreaks of passionate religious fervor, in which thousands of rural young people across China would renounce their farms, shops, and families to seek ordination as Buddhist monks and nuns; where merchants or landed magnates pledged their entire fortunes to the propagation of the Dharma; building projects hollowed out whole mountains to create bodhisattvas and giant statues of the Buddha; and pageants where monks and devotees ritually burned their heads and hands or, in some instances, set themselves on fire. By the mid–fifth century, there were dozens of such spectacular suicides; they became, as one historian put it “a macabre kind of fashion.”[585]

Historians differ over their meaning. Certainly the passions unleashed provided a dramatic alternative to the staid orthodoxy of the Confucian literati, but it’s also surprising, to say the least, to see this in a religion promoted above all by the commercial classes. The French Sinologist Jacques Gernet observes:

It is clear that these suicides, so contrary to traditional morality, aimed to redeem the sins of all beings, to compel the gods and men at one and the same time. And they were staged: usually, in the fifth century, a pyre was erected on a mountain. The suicide took place in the presence of a large crowd uttering lamentations and bringing forward rich offerings. People of all social ranks attended the spectacle together. After the fire had burned out, the ashes of the monk were collected and a stupa, a new place of worship, was created to house them.[586]

Gernet’s picture of dozens of Christ-like redeemers seems overstated, but the precise meaning of these suicides was unclear—and widely debated—even in the Middle Ages. Some contemporaries saw them as the ultimate expression of contempt for the body; others as recognition of the illusory nature of the self and all material attachments; yet others, as the ultimate form of charity, the giving of that which can only be most precious, one’s very physical existence, as a sacrifice to the benefit of all living things; a sentiment that one tenth-century biographer expressed in the following verses:

To give away the thing that is difficult to part with,

Is the best offering among the alms.

Let this impure and sinful body,

Turn into something like a diamond.[587]

That is, an object of eternal value, an investment that can bear fruit for all eternity.

I draw attention to this because this sentiment provides an elegant illustration of a problem that seems to have first appeared in the world with notions of pure charity that always seemed to accompany Axial Age religions, and which provided endless philosophical conundrums. In human economies, it does not appear to have occurred to anyone that any act could be either purely selfish or purely altruistic. As I noted in chapter five, an act of absolute selfless giving can only also be absolutely antisocial—hence in a way, inhuman. It is merely the mirror image of an act of theft or even murder; hence, it makes a certain sort of sense that suicide be conceived as the ultimate selfless gift. Yet this is the door that necessarily opens as soon as one develops a notion of “profit” and then tries to conceive its opposite.

This tension seems to hang over the economic life of Medieval Chinese Buddhism, which, true to its commercial origins, retained a striking tendency to employ the language of the marketplace. “One purchases felicity, and sells one’s sins,” wrote one monk, “just as in commercial operations.”[588] Nowhere was this so true as in those schools, such as the School of the Three Stages, that adopted the notion of “karmic debt”—that each of the sins of one’s accumulated past lives continues as a debt needing to be discharged. An obscure and unusual view in classical Indian Buddhism, the notion of karmic debt took on a powerful new life in China.[589] As one Three Stages text puts it, we all know that insolvent debtors will be reborn as animals or slaves; but in reality, we are all insolvent debtors, because acquiring the money to repay our temporal debts necessarily means acquire new, spiritual ones, since every means of acquiring wealth will necessarily involve exploiting, damaging, and causing suffering to other living beings.

Some use their power and authority as officials in order to bend the law and seize wealth. Some prosper in the marketplace … They engage in an excess of lies and cheat and extort profits from others. Still others, farmers, burn the mountains and marshes, flood the fields, plow and mill, destroying the nests and burrows of animals …

There is no avoiding the fact of our past debts, and it is difficult to comprehend the number of separate lives it would require if you wanted to pay them one by one.[590]

As Gernet remarks, the idea of life as an endless burden of debt would surely have struck a chord with Chinese villagers, for whom this was all too often literally true; but, as he also points out, like their counterparts in ancient Israel, they were also familiar with that sense of sudden liberation that came with official amnesties. There was a way to achieve that too. All that was required was to make regular donations to some monastery’s Inexhaustible Treasury. The moment one does so, the debts from every one of one’s past lives are instantly blotted out. The author even provides a little parable, not unlike Jesus’s parable of the ungrateful servant, but far more optimistic. How, it might be asked, would a poor man’s tiny contribution possibly have such cosmic effects?

Answer: In a parable it is like a poor man burdened by a debt of one thousand strings of coins to another person. He always suffers from his debt, and the poor man is afraid whenever the debt-master comes to collect.

He visits the rich man’s house and confesses he is beyond the time-limit and begs forgiveness for his offense—he is poor and without a station in life. He tells him that each day he makes a single coin he will return it to the rich man. On hearing this, the rich man is very pleased and forgives him for being overdue; moreover, the poor man is not dragged away to jail.

Giving to the Inexhaustible Storehouse is also like this.[591]

One might almost call this salvation on the installment plan—but the implication is that the payments shall be made, like the interest payments on the wealth when it is subsequently loaned out, for all eternity.

Other schools concentrated not on karmic debt, but on one’s debt to one’s parents. Where Confucians built their system of morality above all on filial piety to fathers, Chinese Buddhists were primarily concerned with mothers; with the care and suffering required in raising, feeding, and educating children. A mother’s kindness is unlimited, her selflessness absolute; this was seen to be embodied above all in the act of breastfeeding, the fact that mothers transform their very flesh and blood into milk; they feed their children with their own bodies. In doing so, however, they allow unlimited love to be precisely quantified. One author calculated that the average infant absorbs precisely 180 pecks of mother’s milk in its first three years of life, and this constitutes its debt as an adult. The figure soon became canonical. To repay this milk debt, or indeed one’s debt to one’s parents more generally, was simply impossible. “If you stacked up jewels from the ground up to the twenty-eighth heaven,” wrote one Buddhist author, “it would not compare” with the value of your parent’s nurturance.[592] Even if you were to “cut your own flesh to offer her three times a day for four billion years,” wrote another, “it would not pay back even a single day” of what your mother did for you.[593]

The solution, however, is the same: donating money to the Inexhaustible Treasuries. The result was an elaborate cycle of debts and forms of redemption. A man begins with an unpayable milk-debt. The only thing of comparable value is the Dharma, the Buddhist truth itself. One can thus repay one’s parents by bringing them to Buddhism; indeed, this can be done even after death, when one’s mother will otherwise wind up as a hungry ghost in hell. If one makes a donation to the Inexhaustible Treasuries in her name, sutras will be recited for her; she will be delivered; the money, in the meantime, will be put partly to work as charity, as pure gift, but partly, too, as in India, as interest-bearing loans, earmarked for specific purposes for the furtherance of Buddhist education, ritual, or monastic life.

The Chinese Buddhist approach to charity was nothing if not multifaceted. Festivals often led to vast outpourings of contributions, with wealthy adherents vying with one another in generosity, often driving their entire fortunes to the monasteries, in the forms of oxcarts laden with millions of strings of cash—a kind of economic self-immolation that paralleled the spectacular monastic suicides. Their contributions swelled the Inexhaustible Treasuries. Some would be given to the needy, particularly in times of hardship. Some would be loaned. One practice that hovered between charity and business was providing peasants with alternatives to the local moneylender. Most monasteries had attendant pawnshops where the local poor could place some valuable possession—a robe, a couch, a mirror—in hock in exchange for low-interest loans.[594] Finally, there was the business of the monastery itself: that portion of the Inexhaustible Treasury turned over to the management of lay brothers, and either put out at loan or invested. Since monks were not allowed to eat the products of their own fields, the fruit or grain had to be put on the market, further swelling monastic revenues. Most monasteries came to be surrounded not only by commercial farms but veritable industrial complexes of oil presses, flour mills, shops, and hostels, often with thousands of bonded workers.[595] At the same time, the Treasuries themselves became—as Gernet was perhaps the first to point out—the world’s first genuine forms of concentrated finance capital. They were, after all, enormous concentrations of wealth managed by what were in effect monastic corporations, which were constantly seeking new opportunities for profitable investment. They even shared the quintessential capitalist imperative of continual growth; the Treasuries had to expand, since according to Mahayana doctrine, genuine liberation would not be possible until the whole world embraced the Dharma.[596]

This was precisely the situation—huge concentrations of capital interested in nothing more than profit—that Confucian economic policy was supposed to prevent. Still, it took some time for Chinese governments to recognize the threat. Government attitudes veered back and forth. At first, especially in the chaotic years of the early Middle Ages, monks were welcomed—even given generous land grants and provided with convict laborers to reclaim forests and marshes, and tax-exempt status for their business enterprises.[597] A few emperors converted, and while most of the bureaucracy kept the monks at arm’s length, Buddhism became especially popular with court women, as well as with eunuchs and many scions of wealthy families. As time went on, though, administrators turned from seeing monks as a boon to rural society to its potential ruination. Already, by 511 ad, there were decrees condemning monks for diverting grain that was supposed to be used for charitable purposes to high-interest loans, and altering debt contracts—a government commission had to be appointed to review the accounts and nullify any loans in which interest was found to have exceeded principal. In 713 ad we have another decree, confiscating two Inexhaustible Treasuries of the Three Stages sect, whose members they accused of fraudulent solicitation.[598] Before long there were major campaigns of government repression, at first often limited to certain regions, but over time, more often empire-wide. During the most severe, carried out in 845 ad, a total of 4,600 monasteries were razed along with their shops and mills, 260,000 monks and nuns forcibly defrocked and returned to their families—but at the same time, according to government reports, 150,000 temple serfs released from bondage.

Whatever the real reasons behind the waves of repression (and these were no doubt many), the official reason was always the same: a need to restore the money supply. The monasteries were becoming so large, and so rich, administrators insisted, that China was simply running out of metal:

The great repressions of Buddhism under the Chou emperor Wu between 574 and 577, under Wu-tsung in 842–845, and finally in 955, presented themselves primarily as measures of economic recovery: each of them provided an opportunity for the imperial government to procure the necessary copper for the minting of new coins.[599]

One reason is that monks appear to have been systematically melting down strings of coins, often hundreds of thousands at a time, to build colossal copper or even gilded copper statues of the Buddha—along with other objects such as bells and copper chimes, or even such extravagances as mirrored halls or gilded copper roof tiles. The result, according to official commissions of inquiry, was economically disastrous: the price of metals would soar, coinage disappear, and rural marketplaces cease to function, even as those rural people whose children had not become monks often fell deeper into debt to the monasteries.

It perhaps stands to reason that Chinese Buddhism, a religion of merchants that then took popular roots, should have developed in this direction: a genuine theology of debt, even perhaps a practice of absolute self-sacrifice, of abandoning everything, one’s fortune or even one’s life, that ultimately led to collectively managed finance capital. The reason that the result seems so weird, so full of paradoxes, is that it is again an attempt to apply the logic of exchange to questions of Eternity.

Recall an idea from earlier in the book: exchange, unless it’s an instantaneous cash transaction, creates debts. Debts linger over time. If you imagine all human relations as exchange, then insofar as people do have ongoing relations with one another, those relations are laced with debt and sin. The only way out is to annihilate the debt, but then social relations vanish too. This is quite in accord with Buddhism, whose ultimate aim is indeed the attainment of “emptiness,” absolute liberation, the annihilation of all human and material attachments, since these are all ultimately causes of suffering. For Mahayana Buddhists, however, absolute liberation cannot be achieved by any one being independently; the liberation of each depends on all the others; therefore, until the end of time, such matters are in a certain sense always in suspension.

In the meantime, exchange dominates: “One purchases felicity, and sells one’s sins, just as in commercial operations.” Even acts of charity and self-sacrifice are not purely generous; one is purchasing “merit” from the bodhisattvas.[600] The notion of infinite debt comes in when this logic slams up against the Absolute, or, one might perhaps better say, against something that utterly defies the logic of exchange. Because there are things that do. This would explain, for instance, the odd urge to first quantify the exact amount of milk one has absorbed at one’s mother’s breast, and then to say that there is no conceivable way to repay it. Exchange implies interaction between equivalent beings. Your mother, on the other hand, is not an equivalent being. She created you out of her own flesh. This is exactly the point that I suggested the Vedic authors were subtly trying to make when they talked about “debts” to the gods: of course you cannot really “pay your debt to the universe”—that would imply that (1) you and (2) everything that exists (including you) are in some sense equivalent entities. This is clearly absurd. The closest you can come to repayment is to simply recognize that fact. Such recognition is the true meaning of sacrifice. Like Rospabé’s original money, a sacrificial offering is not a way to pay a debt, but a way to acknowledge the impossibility of the idea that there could ever be repayment:

The parallel was not missed in certain mythological traditions. According to one famous Hindu myth, two gods, the brothers Kartikeya and Ganesha, had a quarrel over who should be the first to marry. Their mother Parvati suggested a contest: the winner would be the one to most quickly circle the entire universe. Kartikeya set off on the back of a giant peacock. It took him three years to transverse the limits of the cosmos. Ganesha bided his time, then, finally, walked in a circle around his mother, remarking, “You are the universe to me.”

I’ve also argued that any system of exchange is always necessarily founded on something else, something that, in its social manifestation at least, is ultimately communism. With all those things that we treat as eternal, that we assume will always be there—our mother’s love, true friendship, sociality, humanity, belonging, the existence of the cosmos—no calculation is necessary, or even ultimately possible; insofar as there is give and take, they follow completely different principles. What, then, happens to such absolute and unlimited phenomena when one tries to imagine the world as a set of transactions—as exchange? Generally, one of two things. We either ignore or deify them. (Mothers, and caregiving women in general, are a classic case in point.) Or we do both. What we treat as eternal in our actual relations with one another vanishes and reappears as an abstraction, an absolute.[601] In the case of Buddhism, this was framed as the inexhaustible merit of bodhisatt-vas, who exist, in a certain sense, outside of time. They are at once the model for the Inexhaustible Treasuries, and also their practical foundation: one can only repay one’s endless karmic debt, or one’s infinite milk-debt, by drawing on this equally infinite pool of redemption, which, in turn, becomes the basis for the actual material funds of the monasteries, which are equally eternal—a pragmatic form of communism, in fact, since they were vast pools of wealth collectively owned and collectively managed: the center of vast projects of human cooperation, which were assumed to be similarly eternal. Yet at the same time—here I think Gernet is right—this communism became the basis, in turn, of something very much like capitalism. The reason was, above all, the need for constant expansion. Everything—even charity—was an opportunity to proselytize; the Dharma had to grow, ultimately, to encompass everyone and everything, in order to effect the salvation of all living beings.

The Middle Ages were marked by a general move toward abstraction: real gold and silver ended up largely in churches, monasteries, and temples, money became virtual again, and at the same time, the tendency everywhere was to set up overarching moral institutions meant to regulate the process and, in particular, to establish certain protections for debtors.

China was unusual in that it was one place where an Axial Age empire managed to survive—though at first, only barely. Chinese governments did manage to keep coins in circulation in most places most of the time. This was made easier by their reliance exclusively on small-denomination coins made of bronze. Even so, it clearly took enormous efforts.

As usual, we don’t know a lot about how everyday economic transactions took place, but what we do know suggests that in small-scale transactions, coins were probably most often used in dealing with strangers. As elsewhere, local shopkeepers and merchants extended credit. Most accounts seem to have been kept through the use of tally sticks, strikingly similar to those used in England, except that rather than hazelwood they were usually made of a split piece of notched bamboo. Here, too, the creditor took one half, and the debtor held the other; they were joined at the moment of repayment, and often broken afterwards to mark the cancellation of the debt.[602] To what degree were they transferable? We don’t really know. Most of what we do know is from casual references in texts that are mainly about something else: anecdotes, jokes, and poetic allusions. The great collection of Taoist wisdom, the Leizi, probably written during the Han dynasty, contains one such:

There was a man of Sung who was strolling in the street and picked up a half tally someone had lost. He took it home and stored it away, and secretly counted the indentations of the broken edge. He told a neighbor: “I shall be rich any day now.”[603]

Rather like someone who finds a key and figures “just as soon as I can figure out which lock …”[604] Another story tells of how Liu Bang, a bibulous local constable and future founder of the Han dynasty, used to go on all-night drinking binges, running up enormous tabs. Once, while he lay collapsed in a drunken stupor in a wine-shop, the owner saw a dragon hovering over his head—a sure sign of future greatness—and immediately “broke the tally,” forgiving him his accumulated drinking debts.[605]

Tallies weren’t just used for loans, but for any sort of contract—which is why early paper contracts also had to be cut in half and one half kept by each party.[606] With paper contracts, there was a definite tendency for the creditor’s half to function as an IOU and thus become transferable. By 806 ad, for instance, right around the apogee of Chinese Buddhism, merchants moving tea over long distances from the far south of the country and officials transporting tax payments to the capital, all of them concerned with the dangers of carrying bullion over long distances, began to deposit their money with bankers in the capital and devised a system of promissory notes. They were called “Flying Cash,” also divided in half, like tallies, and redeemable for cash in their branches in the provinces. They quickly started passing from hand to hand and operated something like currency. The government first tried to forbid their use, then a year or two later—and this became a familiar pattern in China—when it realized that it could not suppress them, switched gears and established a bureau empowered to issue such notes themselves.[607]

By the early Song dynasty (960–1279 ad), local banking operations all over China were running similar operations, accepting cash and bullion for safekeeping and allowing depositors to use their receipts as promissory notes, as well as trading in government coupons for salt and tea. Many of these notes came to circulate as de facto money.[608] The government, as usual, first tried to ban the practice, then control it (granting a monopoly to sixteen leading merchants), then, finally, set up a government monopoly—the Bureau of Exchange Medium, established in 1023—and before long, aided by the newly invented printing press, was operating factories in several cities employing thousands of workers and producing literally millions of notes.[609]

At first, this paper money was meant to circulate for a limited time (notes would expire after two, then three, then seven years), and was redeemable in bullion. Over time, especially as the Song came under increasing military pressure, the temptation to simply print money with little or no backup became overwhelming—and, moreover, Chinese governments were rarely completely willing to accept their own paper money for tax purposes. Combine this with the fact that the bills were worthless outside China, and it’s rather surprising that the system worked at all. Certainly, inflation was a constant problem and the money would have to be recalled and reissued. Occasionally the whole system would break down, but then people would resort to their own expedients: “privately issued tea checks, noodle checks, bamboo tallies, wine tallies, etc.”[610] Still, the Mongols, who ruled China from 1271 to 1368 ad, chose to maintain the system, and it was only abandoned in the seventeenth century.

This is important to note because the conventional account tends to represent China’s experiment with paper money as a failure, even, for Metalists, proof that “fiat money,” backed only by state power, will always eventually collapse.[611] This is especially odd, since the centuries when paper money was in use are usually considered the most economically dynamic in Chinese history. Surely, if the United States government was eventually forced to abandon the use of federal reserve notes in 2400 ad, no one would be arguing that this showed that the very idea was always intrinsically unworkable. Nonetheless, the main point I’d like to emphasize here is that terms like “fiat money,” however common, are deceptive. Almost all of the new forms of paper money that emerged were not originally created by governments at all; they were simply ways of recognizing and expanding the use of credit instruments that emerged from everyday economic transactions. If it was only China that developed paper money in the Middle Ages, this was largely because only in China was there a government large and powerful enough, but also, sufficiently suspicious of its mercantile classes, to feel it had to take charge of such operations.

The Near West: (Capital as Credit)

Prices depend on the will of Allah; it is he who raises and lowers them.

—Attributed to the Prophet Mohammed

The profit of each partner must be in proportion to the share of each in the adventure.

—Islamic legal precept

For most of the Middle Ages, the economic nerve center of the world economy and the source of its most dramatic financial innovations was neither China nor India, but the West, which, from the perspective of the rest of the world, meant the world of Islam. During most of this period, Christendom, lodged in the declining empire of Byzantium and the obscure semi-barbarous principalities of Europe, was largely insignificant.

Since people who live in Western Europe have so long been in the habit of thinking of Islam as the very definition of “the East,” it’s easy to forget that, from the perspective of any other great tradition, the difference between Christianity and Islam is almost negligible. One need only pick up a book on, say, Medieval Islamic philosophy to discover disputes between the Baghdad Aristoteleans and the neo-Pythagoreans in Basra, or Persian Neo-Platonists—essentially, scholars doing the same work of trying to square the revealed religion tradition beginning with Abraham and Moses with the categories of Greek philosophy, and doing so in a larger context of mercantile capitalism, universalistic missionary religion, scientific rationalism, poetic celebrations of romantic love, and periodic waves of fascination with mystical wisdom from the East.

From a world-historical perspective, it seems much more sensible to see Judaism, Christianity, and Islam as three different manifestations of the same great Western intellectual tradition, which for most of human history has centered on Mesopotamia and the Levant, extending into Europe as far as Greece and into Africa as far as Egypt, and sometimes farther west across the Mediterranean or down the Nile. Economically, most of Europe was until perhaps the High Middle Ages in exactly the same situation as most of Africa: plugged into the larger world economy, if at all, largely as an exporter of slaves, raw materials, and the occasional exotica (amber, elephant tusks …), and importer of manufactured goods (Chinese silks and porcelain, Indian calicoes, Arab steel). To get a sense of comparative economic development (even if the examples are somewhat scattered over time), consider the following table:[612]

Populations and Tax Revenue, 350 BC–1200 AD

What’s more, for most of the Middle Ages, Islam was not only the core of Western civilization; it was its expansive edge, working its way into India, expanding in Africa and Europe, sending missionaries and winning converts across the Indian Ocean.

The prevailing Islamic attitude toward law, government, and economic matters was the exact opposite of that prevalent in China. Confucians were suspicious of governance through strict codes of law, preferring to rely on the inherent sense of justice of the cultivated scholar—a scholar who was simply assumed to also be a government official. Medieval Islam, on the other hand, enthusiastically embraced law, which was seen as a religious institution derived from the Prophet, but tended to view government, more often than not, as an unfortunate necessity, an institution that the truly pious would do better to avoid.[613]

In part this was because of the peculiar nature of Islamic government. The Arab military leaders who, after Mohammed’s death in 632 ad, conquered the Sassanian empire and established the Abbasid Caliphate, always continued to see themselves as people of the desert, and never felt entirely part of the urban civilizations they had come to rule. This discomfort was never quite overcome—on either side. It took the bulk of the population several centuries to convert to the conqueror’s religion, and even when they did, they never seem to have really identified with their rulers. Government was seen as military power—necessary, perhaps, defend the faith, but fundamentally exterior to society.

In part, too, it was because of the peculiar alliance between merchants and common folk that came to be aligned against them. After Caliph al-Ma’mom’s abortive attempt to set up a theocracy in 832 ad, the government took a hands-off position on questions of religion. The various schools of Islamic law were free to create their own educational institutions and maintain their own separate system of religious justice. Crucially, it was the ulema, the legal scholars, who were the principal agents in the conversion of the bulk of the empire’s population to Islam in Mesopotamia, Syria, Egypt, and North Africa in those same years.[614] But—like the elders in charge of guilds, civic associations, commercial sodalities, and religious brotherhoods—they did their best to keep the government, with its armies and ostentation, at arm’s length.[615] “The best princes are those who visit religious teachers,” one proverb put it, “the worst religious teachers are the those who allow themselves to be visited by princes.”[616] A Medieval Turkish story brings it home even more pointedly:

The king once summoned Nasruddin to court.

“Tell me,” said the king, “you are a mystic, a philosopher, a man of unconventional understandings. I have become interested in the issue of value. It’s an interesting philosophical question. How does one establish the true worth of a person, or an object? Take me for example. If I were to ask you to estimate my value, what would you say?”

“Oh,” Nasruddin said, “I’d say about two hundred dinars.”

The emperor was flabbergasted. “What?! But this belt I’m wearing is worth two hundred dinars!”

“I know,” said Nasruddin. “Actually, I was taking the value of the belt into consideration.”

This disjuncture had profound economic effects. It meant that the Caliphate, and later Muslim empires, could operate in many ways much like the old Axial Age empires—creating professional armies, waging wars of conquest, capturing slaves, melting down loot and distributing it in the form of coins to soldiers and officials, demanding that those coins be rendered back as taxes—but at the same time, without having nearly the same effects on ordinary people’s lives.

Over the course of the wars of expansion, for example, enormous quantities of gold and silver were indeed looted from palaces, temples, and monasteries and stamped into coinage, allowing the Caliphate to produce gold dinars and silver dirhams of remarkable purity—that is, with next to no fiduciary element, the value of each coin corresponding almost precisely to its weight in precious metal.[617] As a result, they were able to pay their troops extraordinarily well. A soldier in the Caliph’s army, for example, received almost four times the wages once received by a Roman legionary.[618] We can, perhaps, speak of a kind of “military-coinage-slavery” complex here—but it existed in a kind of bubble. Wars of expansion, and trade with Europe and Africa, did produce a fairly constant flow of slaves, but in dramatic contrast to the ancient world, very few of them ended up laboring in farms or workshops. Most ended up as decoration in the houses of the rich, or, increasingly over time, as soldiers. Over the course of the Abbasid dynasty (750–1258 ad) in fact, the empire came to rely, for its military forces, almost exclusively on Mamluks, highly trained military slaves captured or purchased from the Turkish steppes. The policy of employing slaves as soldiers was maintained by all of the Islamic successor states, including the Mughals, and culminated in the famous Mamluk sultanate in Egypt in the thirteenth century, but historically, it was unprecedented.[619] In most times and places slaves are, for obvious reasons, the very last people to be allowed anywhere near weapons. Here it was systematic. But in a strange way, it also made perfect sense: if slaves are, by definition, people who have been severed from society, this was the logical consequence of the wall created between society and the Medieval Islamic state.[620]

Religious teachers appear to have done everything they could to prop up the wall. One reason for the recourse to slave soldiers was their tendency to discourage the faithful from serving in the military (since it might mean fighting fellow believers). The legal system that they created also ensured that it was effectively impossible for Muslims—or for that matter Christian or Jewish subjects of the Caliphate—to be reduced to slavery. Here al-Wahid seems to have been largely correct. Islamic law took aim at just about all the most notorious abuses of earlier, Axial Age societies. Slavery through kidnapping, judicial punishment, debt, and the exposure or sale of children, even through the voluntary sale of one’s own person—all were forbidden, or rendered unenforceable.[621] Likewise with all the other forms of debt peonage that had loomed over the heads of poor Middle Eastern farmers and their families since the dawn of recorded history. Finally, Islam strictly forbade usury, which it interpreted to mean any arrangement in which money or a commodity was lent at interest, for any purpose whatsoever.[622]

In a way, one can see the establishment of Islamic courts as the ultimate triumph of the patriarchal rebellion that had begun so many thousands of years before: of the ethos of the desert or the steppe, real or imagined, even as the faithful did their best to keep the heavily armed descendants of actual nomads confined to their camps and palaces. It was made possible by a profound shift in class alliances. The great urban civilizations of the Middle East had always been dominated by a de facto alliance between administrators and merchants, both of whom kept the rest of the population either in debt peonage or in constant peril of falling into it. In converting to Islam, the commercial classes, so long the arch-villains in the eyes of ordinary farmers and townsfolk, effectively agreed to change sides, abandon all their most hated practices, and become instead the leaders of a society that now defined itself against the state.

It was possible because from the beginning, Islam had a positive view toward commerce. Mohammed himself had begun his adult life as a merchant; and no Islamic thinker ever treated the honest pursuit of profit as itself intrinsically immoral or inimical to faith. Neither did the prohibitions against usury—which for the most part were scrupulously enforced, even in the case of commercial loans—in any sense mitigate against the growth of commerce, or even the development of complex credit instruments.[623] To the contrary, the early centuries of the Caliphate saw an immediate efflorescence in both.

Profits were still possible because Islamic jurists were careful to allow for certain service fees, and other considerations—notably, allowing goods bought on credit to be priced slightly higher than those bought for cash—that ensured that bankers and traders still had an incentive to provide credit services.[624] Still, these incentives were never enough to allow banking to become a full-time occupation: instead, almost any merchant operating on a sufficiently large scale could be expected to combine banking with a host of other moneymaking activities. As a result, credit instruments soon became so essential to trade that almost anyone of prominence was expected to keep most of his or her wealth on deposit, and to make everyday transactions, not by counting out coins, but by inkpot and paper. Promissory notes were called sakk, “checks”, or ruq’a, “notes.” Checks could bounce. One German historian, picking through a multitude of old Arabic literary sources, recounts that:

About 900 a great man paid a poet in this way, only the banker refused the check, so that the disappointed poet composed a verse to the effect that he would gladly pay a million on the same plan. A patron of the same poet and singer (936) during a concert wrote a check in his favor on a banker for five hundred dinars. When paying, the banker gave the poet to understand that it was customary to charge one dirham discount on each dinar, i.e., about ten per cent. Only if the poet would spend the afternoon and evening with him, he would make no deduction …

By about 1000 the banker had made himself indispensable in Basra: every trader had his banking account, and paid only in checks on his bank in the bazaar.…[625]

Checks could be countersigned and transferred, and letters of credit (suftaja) could travel across the Indian Ocean or the Sahara.[626] If they did not turn into de facto paper money, it was because, since they operated completely independent of the state (they could not be used to pay taxes, for instance), their value was based almost entirely on trust and reputation.[627] Appeal to the Islamic courts was generally voluntary or mediated by merchant guilds and civic associations. In such a context, having a famous poet compose verses making fun of you for bouncing a check was probably the ultimate disaster.

When it came to finance, instead of interest-bearing investments, the preferred approach was partnerships, where (often) one party would supply the capital, the other carry out the enterprise. Instead of fixed return, the investor would receive a share of the profits. Even labor arrangements were often organized on a profit-sharing basis.[628] In all such matters, reputation was crucial—in fact, one lively debate in early commercial law was over the question of whether reputation could (like land, labor, money, or other resources) itself be considered a form of capital. It sometimes happened that merchants would form partnerships with no capital at all, but only their good names. This was called “partnership of good reputation.” As one legal scholar explained:

As for the credit partnership, it is also called the “partnership of the penniless” (sharika al-mafalis). It comes about when two people form a partnership without any capital in order to buy on credit and then sell. It is designated by this name partnership of good reputations because their capital consists of their status and good reputations; for credit is extended only to him who has a good reputation among people.[629]

Some legal scholars objected to the idea that such a contract could be considered legally binding, since it was not based on an initial outlay of material capital; others considered it legitimate, provided the partners make an equitable partition of the profits—since reputation cannot be quantified. The remarkable thing here is the tacit recognition that, in a credit economy that operates largely without state mechanisms of enforcement (without police to arrest those who commit fraud, or bailiffs to seize a debtor’s property), a significant part of the value of a promissory note is indeed the good name of the signatory. As Pierre Bourdieu was later to point out in describing a similar economy of trust in contemporary Algeria: it’s quite possible to turn honor into money, almost impossible to convert money into honor.[630]

These networks of trust, in turn, were largely responsible for the spread of Islam over the caravan routes of Central Asia and the Sahara, and especially across the Indian Ocean, the main conduit of Medieval world trade. Over the course of the Middle Ages, the Indian Ocean effectively became a Muslim lake. Muslim traders appear to have played a key role in establishing the principle that kings and their armies should keep their quarrels on dry land; the seas were to be a zone of peaceful commerce. At the same time, Islam gained a toehold in trade emporia from Aden to the Moluccas because Islamic courts were so perfectly suited to provide those functions that made such ports attractive: means of establishing contracts, recovering debts, creating a banking sector capable of redeeming or transferring letters of credit.[631] The level of trust thereby created between merchants in the great Malay entrepôt Malacca, gateway to the spice islands of Indonesia, was legendary. The city had Swahili, Arab, Egyptian, Ethiopian, and Armenian quarters, as well as quarters for merchants from different regions of India, China, and Southeast Asia. Yet it was said that its merchants shunned enforceable contracts, preferring to seal transactions “with a handshake and a glance at heaven.”[632]

In Islamic society, the merchant became not just a respected figure, but a kind of paragon: like the warrior, a man of honor able to pursue far-flung adventures; unlike him, able to do so in a fashion damaging to no one. The French historian Maurice Lombard draws a striking, if perhaps rather idealized, picture of him “in his stately town-house, surrounded by slaves and hangers-on, in the midst of his collections of books, travel souvenirs, and rare ornaments,” along with his ledgers, correspondence, and letters of credit, skilled in the arts of double-entry book-keeping along with secret codes and ciphers, giving alms to the poor, supporting places of worship, perhaps, dedicating himself to the writing of poetry, while still able to translate his general creditworthiness into great capital reserves by appealing to family and partners.[633] Lombard’s picture is to some degree inspired by the famous Thousand and One Nights description of Sindbad, who, having spent his youth in perilous mercantile ventures to faraway lands, finally retired, rich beyond dreams, to spend the rest of his life amid gardens and dancing girls, telling tall tales of his adventures. Here’s a glimpse, from the eyes of a humble porter (also named Sindbad) when first summoned to see him by the master’s page:

He found it to be a goodly mansion, radiant and full of majesty, till he brought him to a grand sitting room wherein he saw a company of nobles and great lords seated at tables garnished with all manner of flowers and sweet-scented herbs, besides great plenty of dainty viands and fruits dried and fresh and confections and wines of the choicest vintages. There also were instruments of music and mirth and lovely slave girls playing and singing. All the company was ranged according to rank, and in the highest place sat a man of worshipful and noble aspect whose bearded sides hoariness had stricken, and he was stately of stature and fair of favor, agreeable of aspect and full of gravity and dignity and majesty. So Sindbad the Porter was confounded at that which he beheld and said in himself, “By Allah, this must be either some king’s palace, or a piece of Paradise!”[634]

It’s worth quoting not only because it represents a certain ideal, a picture of the perfect life, but because there’s no real Christian parallel. It would be impossible conceive of such an image appearing in, say, a Medieval French romance.

The veneration of the merchant was matched by what can only be called the world’s first popular free-market ideology. True, one should be careful not to confuse ideals with reality. Markets were ever entirely independent from the government. Islamic regimes did employ all the usual strategies of manipulating tax policy to encourage the growth of markets, and they periodically tried to intervene in commercial law.[635] Still, there was a very strong popular feeling that they shouldn’t. Once freed from its ancient scourges of debt and slavery, the local bazaar had become, for most, not a place of moral danger, but the very opposite: the highest expression of the human freedom and communal solidarity, and thus to be protected assiduously from state intrusion.

There was a particular hostility to anything that smacked of price-fixing. One much-repeated story held that the Prophet himself had refused to force merchants to lower prices during a shortage in the city of Medina, on the grounds that doing so would be sacrilegious, since, in a free-market situation, “prices depend on the will of God.”[636] Most legal scholars interpreted Mohammed’s decision to mean that any government interference in market mechanisms should be considered similarly sacrilegious, since markets were designed by God to regulate themselves.[637]

If all this bears a striking resemblance to Adam Smith’s “invisible hand” (which was also the hand of Divine Providence), it might not be a complete coincidence. In fact, many of the specific arguments and examples that Smith uses appear to trace back directly to economic tracts written in Medieval Persia. For instance, not only does his argument that exchange is a natural outgrowth of human rationality and speech already appear both in both Ghazali (1058–1111 ad), and Tusi (1201–1274 ad); both use exactly the same illustration: that no one has ever observed two dogs exchanging bones.[638] Even more dramatically, Smith’s most famous example of division of labor, the pin factory, where it takes eighteen separate operations to produce one pin, already appears in Ghazali’s Ihya, in which he describes a needle factory, where it takes twenty-five different operations to produce a needle.[639]

The differences, however, are just as significant as the similarities. One telling example: like Smith, Tusi begins his treatise on economics with a discussion of the division of labor; but where for Smith, the division of labor is actually an outgrowth of our “natural propensity to truck and barter” in pursuit of individual advantage, for Tusi, it was an extension of mutual aid:

Let us suppose that each individual were required to busy himself with providing his own sustenance, clothing, dwelling-place and weapons, first acquiring the tools of carpentry and the smith’s trade, then readying thereby tools and implements for sowing and reaping, grinding and kneading, spinning and weaving … Clearly, he would not be capable of doing justice to any one of them. But when men render aid to each other, each one performing one of these important tasks that are beyond the measure of his own capacity, and observing the law of justice in transactions by giving greatly and receiving in exchange of the labor of others, then the means of livelihood are realized, and the succession of the individual and the survival of the species are assured.[640]

As a result, he argues, divine providence has arranged us to have different abilities, desires, and inclinations. The market is simply one manifestation of this more general principle of mutual aid, of the matching of, abilities (supply) and needs (demand)—or to translate it into my own earlier terms, it is not only founded on, but is itself an extension of the kind of baseline communism on which any society must ultimately rest.

All this is not to say that Tusi was in any sense a radical egalitarian. Quite the contrary. “If men were equal,” he insists, “they would all perish.” We need differences between rich and poor, he insisted, just as much as we need differences between farmers and carpenters. Still, once you start from the initial premise that markets are primarily about cooperation rather than competition—and while Muslim economic thinkers did recognize and accept the need for market competition, they never saw competition as its essence[641]—the moral implications are very different. Nasruddin’s story about the quail eggs might have been a joke, but Muslim ethicists did often enjoin merchants to drive a hard bargain with the rich so they could charge less, or pay more, when dealing with the less fortunate.[642]

Ghazali’s take on the division of labor is similar, and his account of the origins of money is if anything even more revealing. It begins with what looks much like the myth of barter, except that, like all Middle Eastern writers, he starts not with imaginary primitive tribesmen, but with strangers meeting in an imaginary marketplace.

Sometimes a person needs what he does not own and he owns what he does not need. For example, a person has saffron but needs a camel for transportation and one who owns a camel does not presently need that camel but he wants saffron. Thus, there is the need for an exchange. However, for there to be an exchange, there must be a way to measure the two objects, for the camel-owner cannot give the whole camel for a quantity of saffron. There is no similarity between saffron and camel so that equal amount of that weight and form can be given. Likewise is the case of one who desires a house but owns some cloth or desires a slave but owns socks, or desires flour but possesses a donkey. These goods have no direct proportionality so one cannot know how much saffron will equal a camel’s worth. Such barter transactions would be very difficult.[643]

Ghazali also notes that there might also be a problem of one person not even needing what the other has to offer, but this is almost an afterthought; for him, the real problem is conceptual. How do you compare two things with no common qualities? His conclusion: it can only be done by comparing both to a third thing with no qualities at all. For this reason, he explains, God created dinars and dirhams, coins made out of gold and silver, two metals that are otherwise no good for anything:

Dirhams and dinars are not created for any particular purpose; they are useless by themselves; they are just like stones. They are created to circulate from hand to hand, to govern and to facilitate transactions. They are symbols to know the value and grades of goods.[644]

They can be symbols, units of measure, because of this very lack of usefulness, indeed lack of any particular feature other than value:

A thing can only be exactly linked to other things if it has no particular special form or feature of its own—for example, a mirror that has no color can reflect all colors. The same is the case with money—it has no purpose of its own, but it serves as medium for the purpose of exchanging goods.[645]

From this it also follows that lending money at interest must be illegitimate, since it means using money as an end in itself: “Money is not created to earn money.” In fact, he says, “in relation to other goods, dirhams and dinars are like prepositions in a sentence,” words that, as the grammarians inform us, are used to give meaning to other words, but can only do because they have no meaning in themselves. Money is a thus a unit of measure that provides a means of assessing the value of goods, but also one that operates as such only if it stays in constant motion. To enter in monetary transactions in order to obtain even more money, even if it’s a matter of M-C-M’, let alone M-M’, would be, according to Ghazali, the equivalent of kidnapping a postman.[646]

Whereas Ghazali speaks only of gold and silver, what he describes—money as symbol, as abstract measure, having no qualities of its own, whose value is only maintained by constant motion—is something that would never have occurred to anyone were it not in an age when it was perfectly normal for money to be employed in purely virtual form.

Much of our free-market doctrine, then, appears to have been originally borrowed piecemeal from a very different social and moral universe.[647] The mercantile classes of the Medieval Near West had pulled off an extraordinary feat. By abandoning the usurious practices that had made them so obnoxious to their neighbors for untold centuries before, they were able to become—alongside religious teachers—the effective leaders of their communities: communities that are still seen as organized, to a large extent, around the twin poles of mosque and bazaar.[648] The spread of Islam allowed the market to become a global phenomenon, operating largely independent of governments, according to its own internal laws. But the very fact that this was, in a certain way, a genuine free market, not one created by the government and backed by its police and prisons—a world of handshake deals and paper promises backed only by the integrity of the signer—meant that it could never really become the world imagined by those who later adopted many of the same ideas and arguments: one of purely self-interested individuals vying for material advantage by any means at hand.

The Far West: Christendom (Commerce, Lending, and War)

Where there is justice in war, there is also justice in usury.

—Saint Ambrose

Europe, as I mentioned, came rather late to the Middle Ages and for most of it was something of a hinterland. Still, the period began much as it did elsewhere, with the disappearance of coinage. Money retreated into virtuality. Everyone continued to calculate costs in Roman currency, then, later, in Carolingian “imaginary money”—the purely conceptual system of pounds, shillings, and pence used across Western Europe to keep accounts well into the seventeenth century.

Local mints did gradually come back into operation, producing coins in an endless variety of weight, purity, and denominations. How these related to the pan-European system, though, was a matter of manipulation. Kings regularly issued decrees revaluing their own coins in relation to the money of account, “crying up” the currency by, say, declaring that henceforth, one of their ecus or escudos would no longer be worth 1/12 but now 1/8 of a shilling (thus effectively raising taxes) or “crying down” the value of their coins by doing the reverse (thus effectively reducing their debts).[649] The real gold or silver content of coins was endlessly readjusted, and currencies were frequently called in for re-minting. Meanwhile, most everyday transactions dispensed with cash entirely, operating through tallies, tokens, ledgers, or transactions in kind. As a result, when the Scholastics came to address such matters in the thirteenth century, they quickly adopted Aristotle’s position that money was a mere social convention: that it was, basically, whatever human beings decided that it was.[650]

All this fit the broader Medieval pattern: actual gold and silver, such of it as was still around, was increasingly laid up in sacred places; as centralized states disappeared, the regulation of markets was increasingly in the hands of the Church.

At first, the Catholic attitudes toward usury were just as harsh as Muslim ones, and attitudes toward merchants, considerably harsher. In the first case, they had little choice, as many Biblical texts were quite explicit. Consider Exodus 22:25:

If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest.

Both the Psalms (15:5, 54:12) and Prophets (Jeremiah 9.6, Nehemiah 5:11) were explicit in assigning usurers to death and hellfire. What’s more, the early Christian Fathers, who laid the foundation of Church teachings on social issues in the waning years of the Roman empire, were writing amid the ancient world’s last great debt crisis, one that was effectively in the process of destroying the empire’s remaining free peasantry.[651] While few were willing to condemn slavery, all condemned usury.

Usury was seen above all as an assault on Christian charity, on Jesus’s injunction to treat the poor as they would treat the Christ himself, giving without expectation of return and allowing the borrower to decide on recompense (Luke 6:34–35). In 365 ad, for instance, St. Basil delivered a sermon on usury in Cappadocia that set the standard for such issues:

The Lord gave His own injunction quite plainly in the words, “from him that would borrow of thee turn not thou away.”[652]

But what of the money lover? He sees before him a man under stress of necessity bent to the ground in supplication. He sees him hesitating at no act, no words, of humiliation. He sees him suffering undeserved misfortune, but he is merciless. He does not reckon that he is a fellow-creature. He does not give in to his entreaties. He stands stiff and sour. He is moved by no prayers; his resolution is broken by no tears. He persists in refusal …[653]

That is, until the suppliant mentions “interest.”

Basil was particularly offended by the crass dishonesty by which moneylenders operated; their abuse of Christian fellowship. The man in need comes seeking a friend, the rich man pretends to be one. In fact he’s a secret enemy, and everything he says is a lie. Witness, St. Basil said, how the rich man will always at first swear mighty oaths that he has no money to his name:

Then the suppliant mentions interest, and utters the word security. All is changed. The frown is relaxed; with a genial smile he recalls old family connection. Now it is “my friend.”

“I will see,” says he, “if I have any money by me. Yes, there is that sum which a man I know has left in my hands on deposit for profit. He stipulated a very heavy rate of interest. However, I shall certainly take something off, and give it to you on better terms.” With pretenses of this kind and talk like this he fawns on the wretched victim, and induces him to swallow the bait. Then he binds him with a written security, adds loss of liberty to the trouble of his pressing poverty, and is off. The man who has made himself responsible for interest that he cannot pay has accepted voluntary slavery for life.[654]

The borrower, coming home with his newfound money, at first rejoices. But quickly, “the money slips away,” interest accumulates, and his possessions are sold off. Basil grows poetic in describing the debtor’s plight. It’s as if time itself has become his enemy. Every day and night conspires against him, as they are the parents of interest. His life becomes a “sleepless daze of anxious uncertainty,” as he is humiliated in public; while at home, he is constantly hiding under the couch at every unexpected knock on the door, and can barely sleep, startled awake by nightmare visions of his creditor standing over his pillow.[655]

Probably the most famous ancient homily on usury, though, was Saint Ambrose’s De Tobia, pronounced over several days in Milan in 380 bc. He reproduces the same vivid details as Basil: fathers forced to sell their children, debtors who hanged themselves out of shame. Usury, he observes, must be considered a form of violent robbery, even murder.[656] Ambrose, though, added one small proviso that was later to have enormous influence. His sermon was the first to carefully examine every Biblical reference to moneylending, which meant that he had to address the one problem later authors always had to struggle with—the fact that, in the Old Testament, usury is not quite forbidden to everyone. The key sticking point is always Deuteronomy 23:19–20:

Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury.

Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury.

So who then is this “stranger” or (a better translation of the Hebrew nokri, “foreigner”)? Presumably, one against whom robbery and murder would have been justified as well. After all, the ancient Jews lived amid tribes like the Amalekites, on whom God had specifically instructed them to make war. If by extracting interest one is, as he puts it, fighting without a sword, then it is only legitimate to do so from those “whom it would not be a crime to kill.”[657] For Ambrose, living in Milan, all this was something of a technicality. He included all Christians and all those subject to Roman law as “brothers”; there weren’t, then, lot of Amalekites around.[658] Later, the “Exception of St. Ambrose,” as it came to be known, was to become extremely important.

All of these sermons—and there were many of them—left certain critical questions unanswered. What should the rich man do when receiving a visit from his troubled neighbor? True, Jesus had said to give without expectation of return, but it seemed unrealistic to expect most Christians to do that. And even if they did, what sort of ongoing relationships would that create? St. Basil took the radical position. God had given us all things in common, and he had specifically instructed the rich to give their possessions to the poor. The communism of the Apostles—who pooled all their wealth, and took freely what they needed—was thus the only proper model for a truly Christian society.[659] Few of the other Christian Fathers were willing to take things this far. Communism was the ideal, but in this fallen and temporary world, they argued, it was simply unrealistic. The Church must accept existing property arrangements, but also come up with spiritual arguments to encourage the rich to nonetheless act with Christian charity. Many of these employed distinctly commercial metaphors. Even Basil was willing to indulge in this sort of thing:

Whenever you provide for the destitute on account of the Lord, it is both a gift and a loan. It is a gift because you entertain no hope in recovering it, a loan because of our Lord’s munificence in paying you back on his behalf, when, having taken a small sum for the poor, he will give you back a vast sum in return. “For he who takes pity on the poor, lends to God.”[660]

Since Christ is in the poor, a gift of charity is a loan to Jesus, to be repaid with interest inconceivable on earth.

Charity, however, is a way of maintaining hierarchy, not undermining it. What Basil is talking about here really has nothing to do with debt, and playing with such metaphors seems ultimately to serve only to underline the fact that the rich man doesn’t owe the poor suppliant anything, any more than God is in any way legally bound to save the soul of anyone who feeds a beggar. “Debt” here dissolves into a pure hierarchy (hence, “the Lord”) where utterly different beings provide each other utterly different kinds of benefit. Later theologians were to explicitly confirm this: human beings live in time, noted St. Thomas Aquinas, so it makes sense to say that sin is a debt of punishment we owe to God. But God lives outside of time. By definition, he cannot owe anything to anyone. His grace can therefore only be a gift given with no obligation.[661]

This, in turn, provides an answer to the question: What are they really asking the rich man to do? The Church opposed usury, but it had little to say about relations of feudal dependency, where the rich man provides charity and the poor suppliant shows his gratitude in other ways. Neither, when these kinds of arrangements began to emerge across the Christian West, did the Church offer significant objections.[662] Former debt peons were gradually transformed into serfs or vassals. In some ways, the relationship was not much different, since vassalage was, in theory, a voluntary, contractual relationship. Just as a Christian has to be able to freely choose to submit himself to “the Lord,” so did a vassal have to agree to make himself someone else’s man. All this proved perfectly consonant with Christianity.

Commerce, on the other hand, remained a problem. There was not much of a leap between condemning usury as the taking of “whatever exceeds the amount loaned” and condemning any form of profit-taking. Many—Saint Ambrose among them—were willing to take that leap. Where Mohammed declared that an honest merchant deserved a place by the seat of God in heaven, men like Ambrose wondered if an “honest merchant” could actually exist. Many held that one simply could not be both a merchant and a Christian.[663] In the early Middle Ages, this was not a pressing issue—especially since so much commerce was conducted by foreigners. The conceptual problems, however, were never resolved. What did it mean that one could only lend to “strangers”? Was it just usury, or was even commerce tantamount to war?

Probably the most notorious, and often catastrophic, way that this problem worked itself out in the High Middle Ages was in relations between Christians and Jews. In the years since Nehemiah, Jewish attitudes toward lending had themselves changed. In the time of Augustus, Rabbi Hillel had effectively rendered the sabbatical year a dead letter, by allowing two parties to place a rider on any particular loan contract agreeing that it would not apply. While both the Torah and the Talmud stand opposed to loans on interest, exceptions were made in dealing with Gentiles—particularly as, over the course of the eleventh and twelfth centuries, European Jews were excluded from almost any other line of work.[664] This in turn made it harder to contain the practice, as witnessed in the common joke, current in twelfth-century ghettos to justify usury between Jews. It consisted, it is said, of reciting Deuteronomy 23:20 in interrogative tones to make it mean the opposite of its obvious sense: ‘Unto a foreigner thou mayest lend upon usury, but unto thy brother thou shalt not lend upon usury?’[665]

On the Christian side, in 1140 ad the “Exception of Saint Ambrose” found its way into Gratian’s Decretum, which came to be considered the definitive collection of canon law. At the time, economic life fell very much under the jurisdiction of the Church. While that might appear to leave Jews safely outside the system, in reality, matters were more complicated. For one thing, while both Jews and Gentiles would occasionally attempt to make recourse to the Exception, the prevailing opinion was that it only really applied to Saracens or others with whom Christendom was literally at war. After all, Jews and Christians lived in the same towns and villages. If one were to concede that the Exception allowed Jews and Christians the right to lend to each other at interest, it would also mean that they had the right to murder one another.[666] No one really wanted to say that. On the other hand, real relations between Christians and Jews often did seem to skate perilously close to this unfortunate ideal—though obviously the actual murder (apart from mere economic aggression) was all on one side.

In part this was due to the habit of Christian princes of exploiting, for their own purposes, the fact that Jews did sit slightly outside the system. Many encouraged Jews to operate as moneylenders, under their protection, simply because they also knew that protection could be withdrawn at any time. The kings of England were notorious in this regard. They insisted that Jews be excluded from merchant and craft guilds, but granted them the right to charge extravagant rates of interest, backing up the loans by the full force of law.[667] Debtors in Medieval England were regularly thrown in prisons until their families settled with the creditor.[668] Yet the same regularly happened to the Jews themselves. In 1210 ad, for example, King John ordered a tallage, or emergency levy, to pay for his wars in France and Ireland. According to one contemporary chronicler “all the Jews throughout England, of both sexes, were seized, imprisoned, and tortured severely, in order to do the king’s will with their money.” Most who where put to torture offered all they had and more—but on that occasion, one particularly wealthy merchant, a certain Abraham of Bristol, who the king decided owed him ten thousand marks of silver (a sum equivalent to about a sixth of John’s total annual revenue), became famous for holding out. The king therefore ordered that one of his molars be pulled out daily, until he paid. After seven had been extracted, Abraham finally gave in.[669]

John’s successor, Henry III (1216–1272 ad), was in the habit of turning over Jewish victims to his brother the Earl of Cornwall, so that, as another chronicler put it, “those whom one brother had flayed, the other might embowel.”[670] Such stories about the extraction of Jewish teeth, skin, and intestines are, I think, important to bear in mind when thinking about Shakespeare’s imaginary Merchant of Venice demanding his “pound of flesh.”[671] It all seems to have been a bit of a guilty projection of terrors that Jews had never really visited on Christians, but that had been directed the other way around.

The terror inflicted by kings carried in it a peculiar element of identification: the persecutions and appropriations were an extension of the logic whereby kings effectively treated debts owed to Jews as ultimately owed to themselves, even setting up a branch of the Treasury (“the Exchequer of the Jews”) to manage them.[672] This was of course much in keeping with the popular English impression of their kings as themselves a group of rapacious Norman foreigners. But it also gave the kings the opportunity to periodically play the populist card, dramatically snubbing or humiliating their Jewish financiers, turning a blind eye or even encouraging pogroms by townsfolk who chose to take the Exception of Saint Ambrose literally, and treat moneylenders as enemies of Christ who could be murdered in cold blood. Particularly gruesome massacres occurred in Norwich in 1144 ad, and in France, in Blois in 1171. Before long, as Norman Cohn put it, “what had once been a flourishing Jewish culture had turned into a terrorized society locked in perpetual warfare with the greater society around it.”[673]

One mustn’t exaggerate the Jewish role in lending. Most Jews had nothing to do with the business, and those who did were typically bit players, making minor loans of grain or cloth for a return in kind. Others weren’t even really Jews. Already in the 1190s, preachers were complaining about lords who would work hand in glove with Christian moneylenders claiming they were “our Jews”—and thus under their special protection.[674] By the 1100s, most Jewish moneylenders had long since been displaced by Lombards (from Northern Italy) and Cahorsins (from the French town of Cahors)—who established themselves across Western Europe, and became notorious rural usurers.[675]

The rise of rural usury was itself a sign of a growing free peasantry (there had been no point in making loans to serfs, since they had nothing to repossess). It accompanied the rise of commercial farming, urban craft guilds, and the “commercial revolution” of the High Middle Ages, all of which finally brought Western Europe to a level of economic activity comparable to that long since considered normal in other parts of the world. The Church quickly came under considerable popular pressure to do something about the problem, and at first, it did try to tighten the clamps. Existing loopholes in the usury laws were systematically closed, particularly the use of mortgages. These latter began as an expedient: as in Medieval Islam, those determined to dodge the law could simply present the money, claim to be buying the debtor’s house or field, and then “rent” it back to the debtor until the principal was repaid. In the case of a mortgage, the house was in theory not even purchased but pledged as security, but any income from it accrued to the lender. In the eleventh century this became a favorite trick of monasteries. In 1148 it was made illegal: henceforth, all income was to be subtracted from the principal. Similarly, in 1187 merchants were forbidden to charge higher prices when selling on credit—the Church thereby going much further than any school of Islamic law ever had. In 1179 usury was made a mortal sin and usurers were excommunicated and denied Christian burial.[676] Before long, new orders of itinerant friars like the Franciscans and Dominicans organized preaching campaigns, traveling town to town, village to village, threatening moneylenders with the loss of their eternal souls if they did not make restitution to their victims.

All this was echoed by a heady intellectual debate in the newly founded universities, not so much as to whether usury was sinful and illegal, but precisely why. Some argued that it was theft of another’s material possessions; others that it constituted a theft of time, charging others for something that belonged only to God. Some held that it embodied the sin of Sloth, since like the Confucians, Catholic thinkers usually held that a merchant’s profit could only be justified as payment for his labor (i.e., in transporting goods to wherever they were needed), whereas interest accrued even if the lender did nothing at all. Soon the rediscovery of Aristotle, who returned in Arabic translation (and the influence of Muslim sources like Ghazali and Ibn Sina), added new arguments: that treating money as an end in itself defied its true purpose; that charging interest was unnatural, in that it treated mere metal as if it were a living thing that could breed or bear fruit.[677]

But as the Church authorities soon discovered, when one starts something like this, it’s very hard to keep a lid on it. Soon, new popular religious movements were appearing everywhere, and many took up the same direction so many had in late Antiquity, not only challenging commerce but questioning the very legitimacy of private property. Most were labeled heresies and violently suppressed, but many of the same arguments were taken up among the mendicant orders themselves. By the thirteenth century, the great intellectual debate was between the Franciscans and the Dominicans over “apostolic poverty”—basically, over whether Christianity could be reconciled with property of any sort.

At the same time, the revival of Roman law—which, as we’ve seen, began from the assumption of absolute private property—put new intellectual weapons in the hands of those who wished to argue that, at least in the case of commercial loans, usury laws should be relaxed. The great discovery in this case was the notion of interesse, which is where our word “interest” originally comes from: a compensation for loss suffered because of late payment.[678] The argument soon became that if a merchant made a commercial loan even for some minimal period (say, a month), it was not usurious for him to charge a percentage for each month afterwards, since this was a penalty, not rental for the money, and it was justified as compensation for the profit he would have made, had he placed it in some profitable investment, as any merchant would ordinarily be expected to do.[679]

The reader may be wondering how it could have been possible for usury laws to move in two opposite directions simultaneously. The answer would seem to be that politically, the situation in Western Europe was remarkably chaotic. Most kings were weak, their holdings fractured and uncertain; the Continent was a checkerboard of baronies, principalities, urban communes, manors, and church estates. Jurisdictions were constantly being renegotiated—usually by war. Merchant capitalism of the sort long familiar in the Muslim Near West only really managed to establish itself—quite late, compared with the situation in the rest of the Medieval world—when merchant capitalists managed to secure a political foothold in the independent city-states of northern Italy—most famously, Venice, Florence, Genoa, and Milan—followed by the German cities of the Hanseatic League.[680] Italian bankers ultimately managed to free themselves from the threat of expropriation by themselves taking over governments, and by doing so, acquiring their own court systems (capable of enforcing contracts) and even more critically, their own armies.[681]

What jumps out, in comparison with the Muslim world, are these links of finance, trade, and violence. Whereas Persian and Arab thinkers assumed that the market emerged as an extension of mutual aid, Christians never completely overcame the suspicion that commerce was really an extension of usury, a form of fraud only truly legitimate when directed against one’s mortal enemies. Debt was, indeed, sin—on the part of both parties to the transaction. Competition was essential to the nature of the market, but competition was (usually) nonviolent warfare. There was a reason why, as I’ve already observed, the words for “truck and barter” in almost all European languages were derived from terms meaning “swindle,” “bamboozle,” or “deceive.” Some disdained commerce for that reason. Others embraced it. Few would have denied that the connection was there.

One need only examine the way that Islamic credit instruments—or for that matter, the Islamic ideal of the merchant adventurer—were eventually adopted to see just how intimate this connection really was.

It is often held that the first pioneers of modern banking were the Military Order of the Knights of the Temple of Solomon, commonly known as the Knights Templar. A fighting order of monks, they played a key role in financing the Crusades. Through the Templars, a lord in southern France might take out a mortgage on one of his tenements and receive a “draft” (a bill of exchange, modeled on the Muslim suftaja, but written in a secret code) redeemable for cash from the Temple in Jerusalem. In other words, Christians appear to have first adopted Islamic financial techniques to finance attacks against Islam.

The Templars lasted from 1118 to 1307, but they finally went the way of so many Medieval trading minorities: King Phillip IV, deep in debt to the order, turned on them, accusing them of unspeakable crimes; their leaders were tortured and ultimately killed, and their wealth was expropriated.[682] Much of the problem was that they lacked a powerful home base. Italian banking houses such as the Bardi, Peruzzi, and Medici did much better. In banking history, the Italians are most famous for their complex joint-stock organization and for spearheading the use of Islamic-style bills of exchange.[683] At first these were simple enough: basically just a form of long-distance money-changing. A merchant could present a certain amount in florins to a banker in Italy and receive a notarized bill registering the equivalent in the international money of account (Carolingian derniers), due in, say, three months’ time, and then after it came due, either he or his agent could cash it for an equivalent amount of local currency in the Champagne fairs, which were both the great yearly commercial emporia, and great financial clearing houses, of the European High Middle Ages. But they quickly morphed into a plethora of new, creative forms, mainly a way of navigating—or even profiting from—the endlessly complicated European currency situation.[684]

Most of the capital for these banking enterprises derived from the Mediterranean trade in Indian Ocean spices and Eastern luxuries. Yet unlike the Indian Ocean, the Mediterranean was a constant war zone. Venetian galleys doubled as both merchant vessels and warships, replete with cannon and marines, and the differences between trade, crusade, and piracy often depended on the balance of forces at any given moment.[685] The same was true on land: where Asian empires tended to separate the sphere of warriors and merchants, in Europe they often overlapped:

All up and down Central Europe, from Tuscany to Flanders, from Brabant to Livonia, merchants not only supplied warriors—as they did all over Europe—they sat in governments that made war and, sometimes, buckled on armor and went into battle themselves. Such places make a long list: not only Florence, Milan, Venice, and Genoa, but also Augsburg, Nuremberg, Strasbourg, and Zurich; not only Lübeck, Hamburg, Bremen, and Danzig, but also Bruges, Ghent, Leiden, and Cologne. Some of them—Florence, Nuremberg, Siena, Bern, and Ulm come to mind—built considerable territorial states.[686]

The Venetians were only the most famous in this regard. They created a veritable mercantile empire over the course of the eleventh century, seizing islands like Crete and Cyprus and establishing sugar plantations that eventually—anticipating a pattern eventually to become all too familiar in the New World—came to be staffed largely by African slaves.[687] Genoa soon followed suit; one of their most lucrative businesses was raiding and trading along the Black Sea to acquire slaves to sell to the Mamluks in Egypt or to work mines leased from the Turks.[688] The Genoese republic was also the inventor of a unique mode of military financing, which might be known as war by subscription, whereby those planning expeditions sold shares to investors in exchange for the rights to an equivalent percentage of the spoils. It was precisely the same galleys, with the same “merchant adventurers” aboard, who would eventually pass through the pillars of Hercules to follow the Atlantic coast to Flanders or the Champagne fairs, carrying cargoes of nutmeg or cayenne, silks and woolen goods—along with the inevitable bills of exchange.[689]

It would be instructive, I think, to pause a moment to think about this term, “merchant adventurer.” Originally it just meant a merchant who operated outside his own country. It was around this same time, however, at the height of the fairs of Champagne and the Italian merchant empires, between 1160 and 1172, that the term “adventure” began to take on its contemporary meaning. The man most responsible for it was the French poet Chretien de Troyes, author of the famous Arthurian romances—most famous, perhaps, for being the first to tell the story of Sir Percival and the Holy Grail. The romances were a new sort of literature featuring a new sort of hero, the “knight-errant,” a warrior who roamed the world in search of, precisely, “adventure”—in the contemporary sense of the word: perilous challenges, love, treasure, and renown. Stories of knightly adventure quickly became enormously popular, Chretein was followed by innumerable imitators, and the central characters in the stories—Arthur and Guinevere, Lancelot, Gawain, Percival, and the rest—became known to everyone, as they are still. This courtly ideal of the gallant knight, the quest, the joust, romance and adventure, remains central to our image of the Middle Ages.[690]

The curious thing is that it bears almost no relation to reality. Nothing remotely like a real “knight-errant” ever existed. “Knights” had originally been a term for freelance warriors, drawn from the younger or, often, bastard sons of the minor nobility. Unable to inherit, many were forced to band together to seek their fortunes. Many became little more than roving bands of thugs, in an endless pursuit of plunder—precisely the sort of people who made merchants’ lives so dangerous. Culminating in the twelfth century, there was a concerted effort to bring this dangerous population under the control of the civil authorities: not only the code of chivalry, but the tournament, the joust—all these were more than anything else ways of keeping them out of trouble, as it were, in part by setting knights against each other, in part by turning their entire existence into a kind of stylized ritual.[691] The ideal of the lone wandering knight, in search of some gallant adventure, on the other hand, seems to have come out of nowhere.

This is important, since it lies at the very heart of our image of the Middle Ages—and the explanation, I think, is revealing. We have to recall that merchants had begun to achieve unprecedented social and even political power around this time, but that, in dramatic contrast to Islam, where a figure like Sindbad—the successful merchant adventurer—could serve as a fictional exemplar of the perfect life, merchants, unlike warriors, were never seen as paragons of much of anything.

It’s likely no coincidence that Chretien was living in Troyes, at the very heartland of the Champagne fairs that had become, in turn, the commercial hub of Western Europe.[692] While he appears to have modeled his vision of Camelot on the elaborate court life under his patron Henri the Liberal (1152–1181), Count of Champagne, and his wife Marie, daughter of Eleanor of Aquitaine, the real court was staffed by low-born commerçants, who served as serjeants of the fairs—leaving most real knights in the role of onlookers, guards, or—at tournaments—entertainers.

This is not to say that tournaments did not become a kind of economic focus in their own right, according to one early twentieth-century Medievalist, Amy Kelly:

The biographer of Guillaume le Marechal gives an idea of how this rabble of courtly routiers amused itself on the jousting fields of western Europe. To the tournaments, occurring in a brisk season about twice a month from Pentecost to the feast of St John, flocked the young bloods, sometimes three thousand strong, taking possession of the nearest town. Thither also flocked horse dealers from Lombardy and Spain, from Brittany and the Low Countries, as well as armorers, haberdashers for man and beast, usurers, mimes and story-tellers, acrobats, necromancers, and other gentlemen of the lists, the field, the road. Entertainers of every stripe found liberal patronage … There were feasts in upper chambers, and forges rang in the smithies all night long. Brawls with grisly incidents—a cracked skull, a gouged eye—occurred as the betting progressed and the dice flew. To cry up their champions in the field came ladies of fair name and others of no name at all.

The hazards, the concourse, the prizes, keyed men to the pitch of war. The stakes were magnificent, for the victor held his prize, horse and man, for ransom. And for these ransoms fiefs went in gage or the hapless victim fell into the hands of usurers, giving his men, and in extremity, himself, as hostages. Fortunes were made and lost on the point of a lance and many a mother’s son failed to ride home.[693]

So, it was not only that the merchants supplied the materials that made the fairs possible; Since vanquished knights technically owed their lives to the victors, merchants ended up, in their capacity as moneylenders, making good business out of liquidating their assets. Alternately, a knight might borrow vast sums to outfit himself in magnificence, hoping to impress some fair lady (with handsome dowry) with his victories; others, to take part in the continual whoring and gambling that always surrounded such events. Losers would end up having to sell their armor and horses, and this created the danger that they would go back to being highwaymen, foment pogroms (if their creditors were Jews) or, if they had lands, make new fiscal demands on those unfortunate enough to live on them.

Others turned to war, which itself tended to drive the creation of new markets.[694] In one of the most dramatic of such incidents, in November 1199, a large number of knights at a tournament at the castle of Écry in Champagne, sponsored by Henry’s son, Theobald, were seized by a great religious passion, abandoned their games, and swore a vow to instead retake the Holy Land. The crusader army then proceeded to commission the Venetian fleet for transport in exchange for a promise of a 50-percent share in all resulting profits. In the end, rather than proceeding to the Holy Land, they ended up sacking the (much wealthier, Orthodox) Christian city of Constantinople after a prolonged and bloody siege. A Flemish count named Baldwin was installed as “Latin Emperor of Constantinople,” but attempting to govern a city that had been largely destroyed and stripped of everything of value ensured that he and his barons soon ended up in great financial difficulties. In a gigantic version of what was happening on the small scale in so many tournaments, they were ultimately reduced to stripping the metal off the church roofs and auctioning holy relics to pay back their Venetian creditors. By 1259, Baldwin had sunk to the point of taking out a mortgage on his own son, who was taken back to Venice as security for a loan.[695]

All this does not really answer the question: Whence, then, this image of the solitary knight-errant, wandering the forests of a mythic Albion, challenging rivals, confronting ogres, fairies, wizards, and mysterious beasts? The answer should be clear by now. Really, this is just a sublimated, romanticized image of the traveling merchants themselves: men who did, after all, set off on lonely ventures through wilds and forests, whose outcome was anything but certain.[696]

And what of the Grail, that mysterious object that all the knights-errant were ultimately seeking? Oddly enough, Richard Wagner, composer of the opera Parzifal, first suggested that the Grail was a symbol inspired by the new forms of finance.[697] Where earlier epic heroes sought after, and fought over, piles of real, concrete gold and silver—the Nibelung’s hoard—these new ones, born of the new commercial economy, pursued purely abstract forms of value. No one, after all, knew precisely what the Grail was. Even the epics disagree: sometimes it’s a plate, sometimes a cup, sometimes a stone. (Wolfram von Eschenbach imagined it to be a jewel knocked from Lucifer’s helmet in a battle at the dawn of time.) In a way it doesn’t matter. The point is that it’s invisible, intangible, but at the same time of infinite, inexhaustible value, containing everything, capable of making the wasteland flower, feeding the world, providing spiritual sustenance, and healing wounded bodies. Marc Shell even suggested that it would best be conceived as a blank check, the ultimate financial abstraction.[698]

What, Then, Were the Middle Ages?

Each of us is a mere symbolon of a man, the result of bisection, like the flat fish, two out of one, and each of us is constantly searching for his corresponding symbolon.

—Plato, The Symposium

There is one way that Wagner got it wrong: the introduction of financial abstraction was not a sign that Europe was leaving the Middle Ages, but that it was finally, belatedly, entering it.

Wagner’s not really to blame here. Almost everyone gets this wrong, because the most characteristic Medieval institutions and ideas arrived so late in Europe that we tend to mistake them for the first stirrings of modernity. We’ve already seen this with bills of exchange, already in use in the East by 700 or 800 ad, but only reaching Europe several centuries later. The independent university—perhaps the quintessential Medieval institution—is another case in point. Nalanda was founded in 427 ad, and there were independent institutions of higher learning all over China and the Near West (from Cairo to Constantinople) centuries before the creation of similar institutions in Oxford, Paris, and Bologna.

If the Axial Age was the age of materialism, the Middle Ages were above all else the age of transcendence. The collapse of the ancient empires did not, for the most part, lead to the rise of new ones.[699] Instead, once-subversive popular religious movements were catapulted into the status of dominant institutions. Slavery declined or disappeared, as did the overall level of violence. As trade picked up, so did the pace of technological innovation; greater peace brought greater possibilities not only for the movement of silks and spices, but also of people and ideas. The fact that monks in Medieval China could devote themselves to translating ancient treatises in Sanskrit, and that students in madrasas in Medieval Indonesia could debate legal terms in Arabic, is testimony to the profound cosmopolitanism of the age.

Our image of the Middle Ages as an “age of faith”—and hence, of blind obedience to authority—is a legacy of the French Enlightenment. Again, it makes sense only if you think of the “Middle Ages” as something that happened primarily in Europe. Not only was the Far West an unusually violent place by world standards, the Catholic Church was extraordinarily intolerant. It’s hard to find many Medieval Chinese, Indian, or Islamic parallels, for example, to the burning of “witches” or the massacre of heretics. More typical was the pattern that prevailed in certain periods of Chinese history, when it was perfectly acceptable for a scholar to dabble in Taoism in his youth, become a Confucian in middle age, then become a Buddhist on retirement. If there is an essence to Medieval thought, it lies not in blind obedience to authority, but rather in a dogged insistence that the values that govern our ordinary daily affairs—particularly those of the court and marketplace—are confused, mistaken, illusory, or perverse. True value lay elsewhere, in a domain that cannot be directly perceived, but only approached through study or contemplation. But this in turn made the faculties of contemplation, and the entire question of knowledge, an endless problem. Consider for example the great conundrum, pondered by Muslim, Christian, and Jewish philosophers alike: What does it mean to simultaneously say that we can only know God through our faculties of Reason, but that Reason itself partakes of God? Chinese philosophers were struggling with similar conundrums when they asked, “Do we read the classics or do the classics read us?” Almost all the great intellectual debates of the age turned on this question in one way or another. Is the world created by our minds, or our minds by the world?

We can see the same tensions within predominant theories of money. Aristotle had argued that gold and silver had no intrinsic value in themselves, and that money therefore was just a social convention, invented by human communities to facilitate exchange. Since it had “come about by agreement, therefore it is within our power to change it or render it useless” if we all decide that that’s what we want to do.[700] This position gained little traction in the materialist intellectual environment of the Axial Age, but by the later Middle Ages, it had become standard wisdom. Ghazali was among the first to embrace it. In his own way he took it even further, insisting that the fact that a gold coin has no intrinsic value is the basis of its value as money, since this very lack of intrinsic value is what allows it to “govern,” measure, and regulate the value of other things. But at the same time, Ghazali denied that money was a social convention. It was given us by God.[701]

Ghazali was a mystic, and a political conservative, so one might argue that he ultimately shied away from the most radical implications of his own ideas. But one could also ask whether, in the Middle Ages, arguing that money was an arbitrary social convention was really all that radical a position. After all, when Christian and Chinese thinkers insisted that it was, it was almost always as a way of saying that money is whatever the king or the emperor wished it to be. In that sense, Ghazali’s position was perfectly consonant with the Islamic desire to protect the market from political interference by saying that it fell properly under the egis of religious authorities.

The fact that Medieval money took such abstract, virtual forms—checks, tallies, paper money—meant that questions like these (“What does it mean to say that money is a symbol?”) cut to the core of the philosophical issues of the day. Nowhere is this so true as in the history of the word “symbol” itself. Here we encounter some parallels so extraordinary that they can only be described as startling.

When Aristotle argued that coins are merely social conventions, the term he used was symbolon—from which our own word “symbol” is derived. Symbolon was originally the Greek word for “tally”—an object broken in half to mark a contract or agreement, or marked and broken to record a debt. So our word “symbol” traces back originally to objects broken to record debt contracts of one sort or another. This is striking enough. What’s really, remarkable, though, is that the contemporary Chinese word for “symbol,” fu, or fu hao, has almost exactly the same origin.[702]

Let’s start with the Greek term “symbolon.” Two friends at dinner might create a symbolon if they took some object—a ring, a knucklebone, a piece of crockery—and broke it in half. Any time in the future when either of them had need of the other’s help, they could bring their halves as reminders of the friendship. Archaeologists have found hundreds of little broken friendship tablets of this sort in Athens, often made of clay. Later they became ways of sealing a contract, the object standing in the place of witnesses.[703] The word was also used for tokens of every sort: those given to Athenian jurors entitling them to vote, or tickets for admission to the theater. It could be used refer to money too, but only if that money had no intrinsic value: bronze coins whose value was fixed only by local convention.[704] Used for written documents, a symbolon could also be passport, contract, commission, or receipt. By extension, it came to mean: omen, portent, symptom, or finally, in the now-familiar sense, symbol.

The path to the latter appears to have been twofold. Aristotle fixed on the fact that a tally could be anything: what the object was didn’t matter; all that mattered was that there was a way to break it in half. It is exactly so with language: words are sounds we use to refer to objects, or to ideas, but the relation is arbitrary: there’s no particular reason, for example, that English-speakers should choose “dog” to refer to an animal and “god” to refer to a deity, rather than the other way around. The only reason is social convention: an agreement between all speakers of a language that this sound shall refer to that thing. In this sense, all words were arbitrary tokens of agreement.[705] So, of course, is money—for Aristotle, not only worthless bronze coins that we agree to treat as if they were worth a certain amount, but all money, even gold, is just a symbolon, a social convention.[706]

All this came to seem almost commonsensical in the thirteenth century of Thomas Aquinas, when rulers could change the value of currency simply by issuing a decree. Still, Medieval theories of symbols derived less from Aristotle than from the Mystery Religions of Antiquity, where “symbolon” came to refer to certain cryptic formulas or talismans that only initiates could understand.[707] It thus came to mean a concrete token, perceptible to the senses, that could only be understood in reference to some hidden reality entirely beyond the domain of sensory experience.[708]

The theorist of the symbol whose work was most widely read and respected in the Middle Ages was a sixth-century Greek Christian mystic whose real name has been lost to history, but who is known by his pseudonym Dionysius the Areopagite.[709] Dionysius took up the notion in this latter sense to confront what was to become the great intellectual problem of the age: How is it possible for humans to have knowledge of God? How can we, whose knowledge is confined to what our senses can perceive of the material universe, have knowledge of a being whose nature is absolutely alien to that material universe—“that infinity beyond being,” as he puts it, “that oneness that is beyond intelligence”?[710] It would be impossible were it not for the fact that God, being all-powerful, can do anything, and therefore, just as he places his own body in the Eucharist, so can he reveal himself to our minds through an endless variety of material shapes. Intriguingly, Dionysius warns us that we cannot begin to understand how symbols work until we rid ourselves of the notion that divine things are likely to be beautiful. Images of luminous angels and celestial chariots are only likely to confuse us, since we will be tempted to imagine that that’s what heaven is actually like, and in fact we cannot possibly conceive of what heaven is like. Instead, effective symbols are, like the original symbolon, homely objects selected apparently at random; often, ugly, ridiculous things, whose very incongruity reminds us that they are not God; of the fact that God “transcends all materiality,” even as, in another sense, they are God.[711] But the notion that they are in any sense tokens of agreement between equals is gone entirely. Symbols are gifts, absolute, free, hierarchical gifts, presented by a being so far above us that any thought of reciprocity, debt, or mutual obligation is simply inconceivable.[712]

Compare the Greek dictionary above to the following, from a Chinese dictionary:

FU. To agree with, to tally. The two halves of a tally.

• evidence; proof of identity, credentials

• to fulfill a promise, to keep one’s word

• to reconcile

• the mutual agreement between Heaven’s appointment and human affairs

• a tally, a check

• an imperial seal or stamp

• a warrant, a commission, credentials

• like fitting the two halves of a tally, in exact agreement

• a symbol, a sign …[713]

The evolution is almost exactly the same. Like symbola, fu can be tallies, contracts, official seals, warrants, passports, or credentials. As promises, they can embody an agreement, a debt contract, or even a relation of feudal vassalage—since a minor lord agreeing to become another man’s vassal would split a tally just as he would if borrowing grain or money. The common feature seems to be a contract between two parties that begin as equal, in which one agrees to become subordinate. Later, as the state became more centralized, we mainly hear about fu presented to officials as a means of conveying order: the official would take the left half with him when posted to the provinces, and when the emperor wished to send an important command, he would send the right half with the messenger to make sure that the official knew it was actually the imperial will.[714]

We’ve already seen how paper money seems to have developed from paper versions of such debt contracts, ripped in half and reunited. For Chinese theorists, of course, Aristotle’s argument that money was simply a social convention was hardly radical; it was simply assumed. Money was whatever the emperor established it to be. Though even here there was a slight proviso, as evidenced in the entry above, that “fu” could also refer to “the mutual agreement between heaven’s appointment and human affairs.” Just as officials were appointed by the emperor, the emperor was ultimately appointed by a higher power, and he could only rule effectively as long as he kept its mandate, which is why propitious omens were called “fu,” signs that heaven approved of the ruler, just as natural disasters were a sign that he had strayed.[715]

Here Chinese ideas did grow a bit closer to the Christian ones. But Chinese conceptions of the cosmos had one crucial difference: since there was no emphasis on the absolute gulf between our world and the one beyond it, contractual relations with the gods were by no means out of the question. This was particularly true in Medieval Taoism, where monks were ordained through a ceremony called “rending the tally,” ripping apart a piece of paper that represented a contract with heaven.[716] It was the same with the magical talismans, also called “fu,” which an adept might receive from his master. These were literally tallies: the adept kept one; the other half was said to be retained by the gods. Such talismanic fu took the form of diagrams, said to represent a form of celestial writing, comprehensible only to the gods, which committed them to assist the bearer, often giving the adept the right to call on armies of divine protectors with whose help he could slay demons, cure the sick, or otherwise attain miraculous powers. But they could also become, like Dionysius’ symbola, objects of contemplation, by which one’s mind can ultimately attain some knowledge of the invisible world beyond our own.[717]

Many of the most compelling visual symbols to emerge from Medieval China trace back to such talismans: the River Symbol, or, for that matter, the yin-yang symbol that seems to have developed out of it.[718] Just looking at a yin-yang symbol, it is easy enough to imagine the left and right (sometimes, too, called “male” and “female”) halves of a tally.

A tally does away with the need for witnesses; if the two surfaces agree, then everyone knows that the agreement between the contracting parties exists as well. This is why Aristotle saw it as a fit metaphor for words: word A corresponds to concept B because there is a tacit agreement that we shall act as if it does. The striking thing about tallies is that even though they might begin as simple tokens of friendship and solidarity, in almost all the later examples, what the two parties actually agree to create is a relation of inequality: of debt, obligation, subordination to another’s orders. This is in turn what makes it possible to use the metaphor for the relation between the material world and that more powerful world that ultimately gives it meaning. The two sides are the same. Yet what they create is absolute difference. Hence for a Medieval Christian mystic, as for Medieval Chinese magicians, symbols could be literal fragments of heaven—even if for the first, they provided a language whereby one could have some understanding of beings one could not possibly interact with; while for the second, they provided a way of interacting, even making practical arrangements, with beings whose language one could not possibly understand.

On one level, this is just another version of the dilemmas that always arise when we try to reimagine the world through debt—that peculiar agreement between two equals that they shall no longer be equals, until such time as they become equals once again. Still, the problem took on a peculiar piquancy in the Middle Ages, when the economy became, as it were, spiritualized. As gold and silver migrated to holy places, ordinary transactions everywhere came to be carried out primarily through credit. Inevitably, arguments about wealth and markets became arguments about debt and morality, and arguments about debt and morality became arguments about the nature of our place in the universe. As we’ve seen, the solutions varied considerably. Europe and India saw a return to hierarchy: society became a ranked order of Priests, Warriors, Merchants, and Farmers (or in Christendom, just Priests, Warriors, and Farmers). Debts between the orders were considered threatening because they implied the potential of equality, and they often led to outright violence. In China, in contrast, the principle of debt often became the governing principle of the cosmos: karmic debts, milk-debts, debt contracts between human beings and celestial powers. From the point of view of the authorities, all these led to excess, and potentially to vast concentrations of capital that might throw the entire social order out of balance. It was the responsibility of government to intervene constantly to keep markets running smoothly and equitably, thus avoiding new outbreaks of popular unrest. In the world of Islam, where theologians held that God recreated the entire universe at every instant, market fluctuations were instead seen as merely another manifestation of divine will.

The striking thing is that the Confucian condemnation of the merchant, and the Islamic celebration of the merchant, ultimately led to the same thing: prosperous societies with flourishing markets, but where the elements never came together to create the great merchant banks and industrial firms that were to become the hallmark of modern capitalism. It’s especially striking in the case of Islam. Certainly, the Islamic world produced figures who would be hard to describe as anything but capitalists. Large-scale merchants were referred to as sĀhib al-mĀl, “owners of capital,” and legal theorists spoke freely about the creation and expansion of capital funds. At the height of the Caliphate, some of these merchants were in possession of millions of dinars and seeking profitable investment. Why did nothing like modern capitalism emerge? I would highlight two factors. First, Islamic merchants appear to have taken their free-market ideology seriously. The marketplace did not fall under the direct supervision of the government; contracts were made between individuals—ideally, “with a handshake and a glance at heaven”—and thus honor and credit became largely indistinguishable. This is inevitable: you can’t have cutthroat competition where there is no one stopping people from literally cutting one another’s throats. Second, Islam also took seriously the principle, later enshrined in classical economic theory but only unevenly observed in practice, that profits are the reward for risk. Trading enterprises were assumed to be, quite literally, adventures, in which traders exposed themselves to the dangers of storm and shipwreck, savage nomads, forests, steppes, and deserts, exotic and unpredictable foreign customs, and arbitrary governments. Financial mechanisms designed to avoid these risks were considered impious. This was one of the objections to usury: if one demands a fixed rate of interest, the profits are guaranteed. Similarly, commercial investors were expected to share the risk. This made most of the forms of finance and insurance that were to later develop in Europe impossible.[719]

In this sense the Buddhist monasteries of early Medieval China represent the opposite extreme. The Inexhaustible Treasuries were inexhaustible because, by continually lending their money out at interest and never otherwise touching their capital, they could guarantee effectively risk-free investments. That was the entire point. By doing so, Buddhism, unlike Islam, produced something very much like what we now call “corporations”—entities that, through a charming legal fiction, we imagine to be persons, just like human beings, but immortal, never having to go through all the human untidiness of marriage, reproduction, infirmity, and death. To put it in properly Medieval terms, they are very much like angels.

Legally, our notion of the corporation is very much a product of the European High Middle Ages. The legal idea of a corporation as a “fictive person” (persona ficta)—a person who, as Maitland, the great British legal historian, put it, “is immortal, who sues and is sued, who holds lands, has a seal of his own, who makes regulations for those natural persons of whom he is composed”[720]—was first established in canon law by Pope Innocent IV in 1250 ad, and one of the first kinds of entities it applied to were monasteries—as also to universities, churches, municipalities, and guilds.[721]

The idea of the corporation as an angelic being is not mine, incidentally. I borrowed it from the great Medievalist Ernst Kantorowicz, who pointed out that all this was happening right around the same time that Thomas Aquinas was developing the notion that angels were really just the personification of Platonic Ideas.[722] “According to the teachings of Aquinas,” he notes, “every angel represented a species.”

Little wonder then that finally the personified collectives of the jurists, which were juristically immortal species, displayed all the features otherwise attributed to angels … The jurists themselves recognized that there was some similarity between their abstractions and the angelic beings. In this respect, it may be said that the political and legal world of thought of the later Middle Ages began to be populated by immaterial angelic bodies, large and small: they were invisible, ageless, sempiternal, immortal, and sometimes even ubiquitous; and they were endowed with a corpus intellectuale or mysticum [an intellectual or mystical body] which could stand any comparison with the “spiritual bodies” of the celestial beings.[723]

All this is worth emphasizing because while we are used to assuming that there’s something natural or inevitable about the existence of corporations, in historical terms, they are actually strange, exotic creatures. No other great tradition came up with anything like it.[724] They are the most peculiarly European addition to that endless proliferation of metaphysical entities so characteristic of the Middle Ages—as well as the most enduring.

They have, of course, changed a great deal over time. Medieval corporations owned property, and they often engaged in complex financial arrangements, but in no case were they profit-seeking enterprises in the modern sense. The ones that came closest were, perhaps unsurprisingly, monastic orders—above all, the Cistercians—whose monasteries became something like the Chinese Buddhist ones, surrounded by mills and smithies, practicing rationalized commercial agriculture with a workforce of “lay brothers” who were effectively wage laborers, spinning and exporting wool. Some even talk about “monastic capitalism.”[725] Still, the ground was only really prepared for capitalism in the familiar sense of the term when the merchants began to organize themselves into eternal bodies as a way to win monopolies, legal or de facto, and avoid the ordinary risks of trade. An excellent case in point was the Society of Merchant Adventurers, charted by King Henry IV in London in 1407, who, despite the romantic-sounding name, were mainly in the business of buying up British woolens and selling them in the Flanders fairs. They were not a modern joint-stock company, but a rather old-fashioned Medieval merchant guild, but they provided a structure whereby older, more substantial merchants could simply provide loans to younger ones, and they managed to secure enough of an exclusive control over the woolen trade that substantial profits were pretty much guaranteed.[726] When such companies began to engage in armed ventures overseas, though, a new era of human history might be said to have begun.