Amid the military and financial crises of the early 1340s, a revolution had gripped Florence and a popular government lead by the middle and upper-middle class artisanal and merchant guilds seized power. The popular government quickly moved to address the central issue facing Florence: the debt. The government made significant and bold structural changes that, for a short time before the plague, allowed a new class of citizens to rise out of the depths of despair. First, on December 29, 1343 the commune’s debts were consolidated into a single lump sum. For hundreds of years after this date, the public debt would be referred to as the “mountain” or Monte. The mountain was made of nearly 800,000 florins of debt. Interest payments were halted and instead repayment of principal was initiated. In 1344, creditors were authorized to sell the now less valuable shares of debt on the market as well. Quickly, the debt decreased to 570,000 florins.[1]
This bold move was, in fact, a financially sound decision. According to a 2011 study in the Journal of Marketing Research, debt consolidation encourages debtors to decrease total debt instead of closing smaller debts and averting larger, more expensive debts. Although a truly optimal financial player would not need to consolidate debt in order to be optimal (by repaying the debt as quickly as possible), debt consolidation still forces sub-optimal players to decrease their inefficient behavior.[2] Thus, the popular Florentine government’s reform showed a true and total commitment to decreasing the total debt first and foremost regardless of their ability to optimize. This commitment, sparked by hard times, would be key to the survival and partial resurgence of some members of Florentine society. Reducing the debt would cost interest payments that would go to the already wealthy major creditors and eventually lower the burden of taxes on the non-elite classes. This commitment to the cause of those beneath the ultra-wealthy would inspire other reforms.
The revolutionary executive council composed of a used-cloth dealer, a butcher, a dyer, a notary, the father of a chronicler, and one member of the elite Machiavelli family proposed and implemented a radical plan to end principal repayments and instead pay 5% interest forever. This increased the time creditors would have to wait to recoup their principal, so debt credits rapidly decreased in value. In 1345, another new policy was enacted that allowed anyone to purchase Monte credits and be rewarded with handsome returns in the future. Due to the low prices, many average citizens with cash bought large sums of Monte credits and grew wealthy in the following years. The credits were popular among the people, as the debt decreased to 270,000 florins by 1358. These “new men” were the recipients of a large transfer of wealth from the elites. The numbers of creditors registered under elite family names decreased in the following decades as waves of new citizens rose to prominence.[3]
One such citizen was Paolo Morelli, a young merchant whose brothers died during the plague. Although his career was after 1363, he was able to use institutions created in the 1340s and climb an upward financial path:
Paolo, young, inexperienced, and alone…frightened by the death of his [brothers] and in fear of his own life, found himself in great confusion as a result of the need to collect credits worth thousands of florins. Many of the creditors and the employees of the company, who had their affairs in their heads, had died. Paolo had to search for these credits in Florence and the contado, and beyond, in Arezzo, Bogo, Siena, Pisa, and in other foreign parts…In addition to this, he was engaged in the manufacture of woolen cloth, as a partner of Tommaso di Guccio and others. He was also involved in Monte investments, in exchange and letters of credit, in the importation of French wool, and many other enterprises…
He administered all of his affairs prudently…and if it had pleased God to give him another ten years of life, he would have become rich and would have amassed a fortune of 50,000 florins…But just when his affairs were flourishing, he rendered his soul to God, on June 14, 1374…He was buried with great honors in S. Croce, in the tomb with his father and brothers…[4]
14th century Florence was chaotic, and Paolo was right to be scared. Economic devastation and disease had weakened the traditionally wealthy elites who once were the pillars of society. Yet the commercial economy of Florence gave Paolo a chance to live a full life as he traveled to foreign lands to piece together his family business and used the cash in his pocket to get involved in manufacturing and trade. He even took advantage of Monte credits, showing once more that the popular government created a system where anyone with even the slightest amount of cash in their pockets could engage in investment and be rewarded. Although his fortune was not that great, he was still buried in Santa Croce, a popular church for Florentines where it was tradition for honored members of the community to be buried. Thus, he was able to climb socially as well as financially. Paolo was truly a “new man” in Florence.
Throughout all the tumult of the 14th century, Florence was able to hold on to a tradition of economic mobility unlike other rigid, aristocratic societies in Europe at the time. Even during the crises, a bold government was able to help continue economic growth by spurring the fortunes of petty entrepreneurs and other people lower on the socioeconomic ladder. The collapse of the great companies and their consolidations of wealth created an opening for new people to rise. Not all hope was lost during this period, and even after the plague, success was still found, as seen by Paolo. When catastrophe struck Florence, its society structurally adapted in order to survive and continue flourishing.[5] Although after the plague it would not reach the same levels of wealth as it did before 1340, Florence did not perish, and its entrepreneurial spirit carried on through the centuries through its world-famous artists, writers, and culture. Florence had changed. The Monte would become a permanent fixture of society and Florence’s power gradually gave way to larger, centralized European empires, but the city of Florence survived and today is a jewel of the world.
[1] Najemy, A History of Florence, 139.
[2] Moty Amar et al., “Winning the Battle but Losing the War: The Psychology of Debt Management,” Journal of Marketing Research 48 (2011): S38–50.
[3] Najemy, A History of Florence, 139-141.
[4] Brucker, The Society of Renaissance Florence, 14-15.
[5] Michael Veseth, Mountains of Debt and the Heart of Florence (Oxford University Press, 1991), 25-26.
