Sixteenth-Century Trusts

NEITHER the trust nor the dread of trusts is essentially a new thing. That vast industrial expansion which marks the transition to what we call modern times brought with it instantly, four centuries ago, corners and combinations of capital much like those of to-day; proceeding by like methods to the same purpose ; evoking expressions of complaint and denunciation which Mr. Lloyd or Mr. Bryan might mistake for their own, and restrictive legislation framed like that of our own time ; and exhibiting much the same degree of sincerity and effectiveness.

But the early combinations, in contrast with those which we know, have this fact of added interest: they ran their course. The phenomenon may there be observed with tolerable completeness from its rise to its culmination, and then to its end, when it died by a sort of half suicide, as a huge accident hastened in their action the elements of death contained within the thing itself.

The whole process may be studied most conveniently in Germany. Frankfort was the greatest trading city of the earth, and Germany was the “chief central market for the commerce of the world.” Her traders reached out through the Rhine to the British Isles, through the Hanse to the whole north, westward into France, and, by a long chain of cities from Basel to Vienna, over the passes of the Alps to Italy and the Orient. The Venetian government gathered a considerable share of its revenue from the taxation of German merchants, who carried in or out of the port of Venice wares of a value which at that day seemed incredible. Fortunes grew with something like twentieth - century swiftness. The house of Fugger increased its capital, between 1511 and 1527, from 196,761 gulden to 2,021,202, and Count Anton Fugger possessed at his death, in 1548, 6,000,000 gulden in specie and paper, besides great possessions in real estate. This house was more wealthy by five times than the Florentine Medici, who had been the chief capitalists of the preceding century. It is said that the profit on mercantile capital for a trading season of only one hundred days in a year was not unfrequently 430 to 450 per cent.

Germany, which had been barbarous, now awakened the admiration of foreigners, who declared that she “ exceeded all other nations in greatness and power,” and that “ no other country had received in equal measure the favor of God.” The power of the great merchants and the great capitalist families was likened to that of princes. A writer of the times says of one of these men that “ the Pope saluted him as his son; the cardinals stood in his presence ; emperors, kings, princes, and lords send ambassadors to him ; all the merchants of the world declare his magnificence, and even the heathen regard him with wonder.”

A good understanding united the capitalists of Germany with those of other countries, especially Italy, so that they were enabled to call on one another for aid in emergencies. The world-wide “ money power ” of those days, with its compactness and organization, thus had at its disposal a force which no potentate could defy. These men held a mortgage on the revenues of the Church ; their agents traveled with the sellers of indulgences in the days of Luther, and half the receipts from this source throughout a third of Germany were theirs. We well know the results of those excesses to which their demands urged on this traffic. They overthrew the democracy of Augsburg, and replaced it with an oligarchy. They decided the imperial election of 1519, by withdrawing credit from one candidate, and purchasing electoral votes for another, so that Charles V., the greatest ruler of a thousand years, was their appointee.

A new swiftness and eagerness of movement and action in the townspeople was matter of common remark. That was the age, as Professor Lamprecht observes, when men began to entertain “ the modern conception of time.” The conscious need for a more careful account of the flying hours called forth from a Nuremberg youth of twenty the invention of pocket clocks, impelled by springs, and in the city of Nuremberg four clocks on towers struck the quarter hours ; giving notice a hundred times daily that the age of leisurely, half-indolent labor was ended, — a hundred times repeating the admonition to hasten, for the day was passing, or the warning that a new day of activity was approaching. Then, also, Sebastian Franck, the scholar, announced that “ time is a precious commodity, which we should employ with the sharpest economy.”

In this age of strenuous activity, intensified competition, and swelling wealth, the power conferred by combination in business could not be overlooked, and the discipline of lengthening business experience soon gave aptitude for combination. Peasants, nobles, clergy, and smaller tradespeople united in protest against the great companies. “ Who is so stupid,” wrote Luther, “ as not to see that the companies are nothing but downright monopolies, which even the worldly, heathen laws forbid ? For they have brought all kinds of wares under their control, and do with them as they will, and boldly make these things rise or fall, according to their fancy, and oppress and destroy all the small merchants, as the pike devours the little fish in the water.” A complaint of the Knights in 1523 declared that the companies “ without doubt rob the German nation more within a year, under cover, than the other robbers of the highway in ten years; yet they are not called to account, but are held in honor.” Representatives of the hereditary Hapsburg dominions complained at Innsbruck, in 1518, that the trading companies were so powerful as to “ make prices at will,” and the peasants of the Inn valley repeatedly petitioned for help against the destruction of all small artisans and merchants by the monopolies of the great.

Attempts at monopoly were sometimes local; sometimes they extended to wider areas, especially to foreign trade. In some instances, wealthy merchants or companies bought up commodities of all sorts by outbidding in the market place, or even intercepting goods before they had passed into the town. These were the “ forestallers ” or “ engrossers ” of English industrial history, “ cheats, who flayed the people, taking not only unnecessary foreign rubbish, but also what is indispensable to life, as corn, flesh, and wine ; screwing up prices according to their greed and covetousness, and fattening themselves on the cruel labor of the poor.” Sometimes the producers of one kind of goods in a town entered into an agreement to fix prices ; most frequently, of course, in trades where considerable capital was needed for implements or materials. There were many such instances among the fishermen, bakers, and butchers, and at Nuremberg the city established municipal breweries to check the extortion of the brewers’ trust.

The combinations which, in their magnitude and methods, most nearly resembled the trusts of the present day were corners in foreign trade, or in domestic commodities like the metals, which had a limited area of production. They were made possible by two facts then new in business life : capital had accumulated so that a few persons were enabled to undertake large enterprises, and the habit of faithful coöperation had reached a certain rough perfection without which it would have been impossible for even a few men to act concertedly.

In the foreign trade, especially, great wealth was necessary, not only for making large purchases, but also to defray traveling expenses and provide depots en route. As early as the first half of the fifteenth century, merchants sometimes purchased, particularly at Venice, quantities of Oriental wares, — spices, silks, gold brocade, ginger, cinnamon, pepper, etc., — and, after consulting the chief merchants of the empire, fixed a price for each commodity. This method was later applied also to domestic commodities, such as hardware, leather, tallow, and agricultural products. Tradesmen who refused to enter into this arrangement were crushed out by a sudden lowering of prices. When competition had been stifled, prices rose again.

Attempts to repress the monopolists were frequent. The city council of Cologne, in 1505, commanded all the agents of the great south German trading company to leave the city, “ because they brought no benefit or advantage to the common man or the city, but only great damage.” If any of these persons wished to remain, he must become a citizen, and take oath not to carry on trade with any capital but his own. This enactment was evaded, and after a time another order forbade all persons to deal with the offenders. No better success attended similar legislation by the diets of states or the empire. In 1512, the imperial diet, in session at Cologne, made its first attack on the trading companies. It was “ ordained and established that their pernicious business [of monopoly] be forbidden and cease, and that no one carry on or practice the same. Yet whoever shall do so in future, his property and chattels shall be confiscated and forfeited to the government having jurisdiction.” The several states were commanded to proceed vigorously against the offenders, and were themselves made liable to the imperial authority for remissness in this duty. This prohibition was not enforced, in spite of querulous repetition at frequent intervals during the remainder of the century. The failure of all such legislation is, however, in no wise mysterious. One who has even a superficial acquaintance with our own economic society must understand how the influence of great wealth in that day could make itself felt, through fear or favor, by every class, with a pressure as penetrating as that of the atmosphere. Many of the monopolists held places in the councils of cities or of princes ; other officials were induced to make advantageous investments with the companies, or were purchased outright.

Of all these great trading combinations, the most famous was an attempt in 1498 at cornering copper. It united the resources of the Fuggers, the Herwarts, the Gossenbrots, and the Paumgartens, — a proportion of the world’s capital which few syndicates of the present day have been able to command. Yet it failed. By the terms of the agreement, which is still extant, each of the associates was bound to procure a certain weight of Hungarian and Tyrolese copper, and bring it to the great market in Venice, where the metal was to be sold for the profit of the partners, at prices between an agreed maximum and minimum, expenses being shared in proportion to the several holdings. Ulrich Fugger and his brothers were to act alone as “trustees” in managing the sale of the common stock. The Fuggers were soon eager to abandon the enterprise. In little more than a year from the first agreement they sold out to their partners, receiving for their copper only thirty-six and one third ducats per unit of weight, although the lowest price allowed under the original contract was forty-three ducats. They agreed to abstain from hampering their former associates by entering the Venetian market before the syndicate had disposed of its stock, but promptly offered a quantity of copper for sale in Venice, through their associates, the Thurzi, and justified themselves by asserting that they were not forbidden to sell copper, and could not prevent its then going to Venice. The enterprise as a whole was defeated by the abundant production of copper in Hungary, which made it impossible to maintain prices. Dr. Conrad Peutinger, of Augsburg, was appealed to for a decision between the parties in their quarrel. He condemned the Fuggers for their treachery, but affirmed the legitimacy of the pool by use of the distinction so familiar to-day between reasonable and unreasonable prices. The copper was to be sold quickly at a moderate price (a maximum having been fixed upon as well as a minimum), and the agreement was therefore not injurious to the public. The permanent significance of the whole enterprise was expressed by Peutinger, a few years later, in the conclusion that a monopoly of copper is impossible, because the source of supply is indefinitely great.

Disaster more dreadful befell the Hoechstetters in an attempt at cornering quicksilver, — a seemingly light task, as the metal came chiefly from a single small district in the Austrian dominions. A monopoly at this source was in fact secured, but the discovery of new deposits in Spain and Hungary entailed not merely the failure of that enterprise, but the utter ruin of the Hoechstetter house. Similarly, the Meyers of Augsburg are said to have expiated, by the loss of twenty casks of gold, their indiscretion in attempting a corner in tin. The family of the Welsers, which had been famous in war and peace for nearly seven glorious centuries, yielded to the baleful fascination of similar projects, and history has had no further concern with the broken house of Welser. The Elector August of Saxony entered into an association for monopolizing pepper as well as a great variety of drugs and spices. In the wreck which followed, two of his partners took refuge in suicide, while the elector himself gained prudence, which he exhibited in later years by resisting like temptation from other venturesome spirits.

The monopolies of the fifteenth and sixteenth centuries probably caused occasional hardship, when articles for sale in local markets were bought up and held at advanced prices ; but the commodities most commonly dealt in were not those of indispensable use. Luxuries of foreign origin were most frequently chosen for attempts at monopoly ; and with regard to these, it is not difficult to argue in justification of agreements to secure high prices. The commerce of that time was beset with dangers by land and sea, and its losses occasionally fell with terrible force upon the trader. High prices were needed to compensate for these losses, by way of insurance.

The points of resemblance between the industrial combinations of that time and this are sufficiently obvious, and the points of unlikeness are no less easy to indicate. Not only were the grounds of complaint against them the same then as now, but the division between those who fiercely condemned and those who partially or quite condoned the action of the companies followed then, as it does in America to-day, a sectional line. The “ populism ” of that generation had its home in Germany, which was still new in its industrial greatness. There lay the European “ wild west; ” there the rural population still contributed powerfully to public opinion, and there the denunciation of monopolies was the loudest; while in Italy — industrially more mature — the urban influence was predominant, and the capitalistic régime was regarded with entire complacency.

What we call trusts — combinations of manufacturers, like the Nuremberg beer combine — were merely local in the earlier period ; capital had not accumulated in sufficient amount, and there was too little communication between towns to allow a wide consolidation. The monopolies of spectacular size were commercial monopolies, “ corners.” Yet the one great generalization deducible from one period holds also of the other. Corners in a world market rarely, if ever, succeed; the relatively successful combinations are the trusts in which protection against competition is, in some degree, secured by the control of highly specialized and costly appliances for production, as in the sugar trust, or (what is essentially the same thing) of appliances for transportation, like the pipe lines of the great oil company.

About the close of the sixteenth century, the opinion was pretty generally accepted that attempts at commercial monopoly were unprofitable. The great capitalists abandoned a form of enterprise which had been discredited by continued failure, and turned their attention to banking operations. It is possible, however, that the monopolies of the sixteenth century might have been more successful if the experiment had been allowed to work itself out unhampered. The ventures of this class which are best known to us failed not wholly because of any necessary impracticability of their own. In the later instances, at least, their ruin was part of a vast tragedy, the death of a nation.

The commerce of Europe, in antiquity, had moved chiefly along the southern periphery of the continent. In the “ mediæval ” period it had penetrated to the interior, as travel became safer and towns arose. That was the age of great capitalists and great commercial enterprises in central Europe. But after some generations there came another gradual revolution, bringing incalculable blessings to nine tenths of the world, but to the heart of Europe incalculable disaster. Its cause was the improvement of shipbuilding and the rise of the new science of navigation. For thousands of years preceding the age of Columbus there had been no improvement in the methods by which the sailor guided his course. The Venetian mariners, whom Petrarch pitied for their hazardous life (“ How right was that poet who called sailors wretched! ”), had no better devices for determining their own position or directing their pathway in the water than those of the fabulous ages when Ulysses wandered blindly on his raft, “ gazing on the Pleiads, on Boötes which sets late, and on the Bear which men also call Wagon,” and from these guessing helplessly, without knowledge for exact calculation, without compass or chart, “ some god our guide.” When the fourteenth century ended, to pass far from familiar landmarks was still as then to lose one’s self. Shipbuilding lagged in less degree. Ships were so small and fragile that merchants went in small numbers, and fearfully, beyond Gibraltar and up into the rough northern waters, which were fit only for Scandinavian pirates, who attached no value to human life.

In the fifteenth century, almost at a stroke navigation became a science: the compass came into common use ; charts were made to exhibit sea routes ; and, with the invention of new instruments and new methods for calculation, the determination of a ship’s position by means of the sun and stars changed from guesswork to certainty. Vessels were enlarged, their models given new and stronger lines ; masts were lengthened and sail space was increased. The danger of losing one’s way on the sea was removed, and the chances of shipwreck on an ocean voyage were greatly diminished. The ocean became part of man’s dominion; Madeira, the Azores, America, and the Cape were discovered or rediscovered.

As a highway, the ocean was now not only possible, but preferable; for it is a simple fact of physics that a vehicle moves with less friction, and thus less expenditure of effort, on water than over the best roadways. The ancient roads through Germany and over the Alps were now hardly more than superfluous ; their service of communication between north and south, Europe and the Orient, was usurped by the ocean water ways, and the invigorating stream of the world’s trade once again swept along the circumference of Europe, fertilizing with its deposits, like another Nile, France, England, and the Netherlands. Grass grew in the streets of German towns, where once the morning and evening tramp of workmen had been compared to the march of great armies. The beggar replaced the merchant prince. Even the country districts declined, and in some places money went out of use, and the primitive method of barter reappeared, while a moderate serfdom gave way to downright slavery. Germany, as one of her own historians says, became the “ Cinderella of nations.” Germany was a “ swamp,” said Goethe. The Fugger dwindled ; the Welser could no longer withstand the shocks of trade. Capital in abundance and highly perfected business organization, which had made great corporations and combinations possible, disappeared in the general ruin.

Ambrose Paré Winston.