The concept of capital rediscovered

As we have seen regarding Olivi and his followers (pages 80—84), the concept of capital sprang from the debate on usury and interest. The idea that interest was legitimate took a long time to develop, from the late Middle Ages through to the sixteenth century. The concept of capital evolved in the sixteenth century. Barbieri shows that, for the ecclesiastical thinking of that period, usurers' credit met with disapproval only when it financed consumption, not if it served for investment.9 In 1546 the jurist Charles Dumoulin took a decisive step. He put forward a brilliant and sharp criticism of the Aristotelian-scholastic condemnation of usury, and gave a definitive shape to the concept of monetary capital. To the main traditional argument, Dumoulin replies: 'Nor does it avail to say that money by itself does not fructify: for even fields do not fructify by themselves, without expense, labor, and the industry of men; money, likewise, even when it has to be returned after a time, yields meanwhile a considerable product through the industry of man'.10 In 1581 another brilliant figure, the Florentine merchant-humanist Bernardo Davanzati, calling on St Antonino and Cardinal Cajetan for support, defended the legitimacy of interest. Interest is useful for all people. It pays for the time that one has another's money at one's disposal.11

However, in the fifteenth century there was already a perceptive Neapolitan author, Diomede Carafa, who came up with the idea of the productive use of wealth, not through the question of interest but — as Starkey would do sixty years later — through the analysis of production and trade. In Carafa there are many arguments that would be typical of the mercantilists. He wrote that there was no need for exaggeration in expanding the treasure, because of the risk of depriving economic activities of input.12 The prince, he wrote, must take care first not to acquire wealth at the expense of his subjects, with excessive taxes or, even worse, by using legal quibbles to take possession of their property. Instead, he must help them as much as he can to get rich, because it is from the wealth of the subjects that the wealth of the state comes (pp. 285—86).13 Second, the prince must not become an entrepreneur himself, but must encourage the entrepreneurial activities of his subjects. Otherwise his business will prevent private individuals from carrying out their business activities, and what he earns will correspond to a loss for a hundred of his subjects (pp. 286—87).

The prince must promote trade, by giving protection to merchants, including foreigners; because there are examples of countries whose land is arid but who are very rich, thanks to the merchants' trade. He must build fleets for the trading of goods with other countries; encourage the spread of woollen manufactures; give stock to farmers, who will soon be able to repay him from their earnings. In fact, concludes Carafa, 'when the lord has rich vassals he cannot be poor' (pp. 290—91). Carafa's precious teaching does not seem to have reached the other authors. Much later, mercantilists rediscovered some of these truths for themselves.

The expression 'capital', in the sense of public capital, is already found in Lottini; but it was not accompanied by a new conception of the traditional idea of treasure.14 Lottini also condemns public aid because it discourages people from working, and advocates competition to stimulate an industrious spirit.15 Shortly afterwards the Italian Jesuit Giovanni Botero explained with the greatest clarity the transition from the concept of the reserves as a passive accumulation of money to the concept of the reserves as money to be invested productively, in other words, the concept of social capital.

Like Carafa, Botero thought that money remaining from State spending should not be exaggeratedly hoarded. The size of the reserves should be proportionate to the other conditions of the country. No State was ever ruined by lack of money. Excessive hoarding can ruin trade and industry. If the money entering a country is less than that leaving it, the answer is not to hoard, since that will ruin the State. Instead, labour and industriousness should be expanded, and money should be spent on improving production. Only expanded production, in fact, can increase the reserves.16 At the end of the century, Laffemas also maintained the necessity of putting money to use, not letting it stand idle. He added that in order to obtain even more, we must allow money to leave the kingdom.17

In Botero's time the scholastics were trying to update their analyses. At the beginning of the seventeenth century another Jesuit, the Flemish Leonard Lessius, extended the criterion of lucrum cessans — in its broadest sense — to professional money lenders.18 In the same years Malynes, in his Lex mercatoria, defines as 'stock or capital' the money or the goods employed by the merchant in his business.19 This work by Malynes was not theoretical. It was a practical commercial manual, which presumably confined itself to recording concepts already in use. At the beginning of the seventeenth century, then, the concept of individual capital had already freed itself of the purely monetary form; it had become more abstract, although no mention was yet made of the means of production.

It was on the relationship between foreign trade and the reserves that mercantilism overcame bullionism definitely in the 1610s. Serra, Monchretien and Moncada carried on the tradition of the late sixteenth century found in their respective countries, putting forward 'anti-bullionist' arguments more organically. In England, on the other hand, the dispute between mercantilists and bullionists focused on the problem of the export of money. To the bul-lionists' proposal to restrict this export, Mun, Houghton, Roberts, Roger Coke, etc. replied that exporting money was necessary if one wished to get a greater amount back.20

In 1638 the Genoan Peri provided a definitive modern version of the concept of capital.21 In his book on mercantile ethics and techniques, he first distinguishes between usury (in the modern sense of too high an interest) and interest. He condemns the first (I.18: 54—57), and defends the second, which is necessary for commerce (1.19: 66; III.6: 8—9). He then explains that money, taken in itself and 'alone', is not fruitful, but sterile. It becomes fruitful, however, when involved in mercantile industry. It is therefore man's skill and work that makes it fruitful, just as the farmer's work makes the wheat fruitful (II.8: 16—17). Thus he too uses the same effective metaphor which was proposed by Olivi.

As in the case of Carafa, Peri also failed to receive the attention he deserved. Putting new wine into old casks, the mercantilists continued to talk about 'treasure' when in fact by this time they meant monetary capital.22 Many of them, including Mun, Locke, Brewster, Decker and the German cameralists, sustained that the wealth of a nation is in proportion to the money it owns.23 This was certainly an unsophisticated statement compared to those of Botero, but it referred to what money, invested as capital, could procure. Similarly, the same authors stated that the wealth of a nation is labour, obviously referring to the goods that labour produces. So when Sir Dudley North, a hundred years after Botero, reintroduced the difference between passive and active conservation of wealth,24 he was expressing a concept which was already implicit in all of mercantilist thinking. In the same period, with Child, Locke and North himself, the final step was taken: they used a concept of social capital which included not only the monetary form of capital but also use values.25

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