During the early modern age substantial innovations emerged in the mortgage system that played a pivotal role in the development of the credit market. The first decisive stimulus came from rural areas around the middle of the sixteenth century when steady demographic growth, combined with the increased availability of silver coming from the New World, caused the price revolution that affected most European countries. The steep rise in crop prices and the ballooning of land values led on the one hand to a concentration of capital investment in the agricultural sector and to a general land rush carried out by the urban aristocracy and well-to-do farmers, and on the other hand to an increase in the pressure on small rural landowners. These effects yielded different outcomes. Nobles, patricians, well-off merchants and members of the elites in general started to divert their capital from commercial and industrial activities, then the most profitable, to agriculture. Land became very attractive for those who had financial resources and ambition to improve their economic and social condition. Indeed, land, apart from continuing to represent a status symbol and a means pursued by homines novi to climb the social ladder and become part of the urban oligarchy, was the emblem that exemplified the dynamism and entrepreneurship of powerful and active individuals (Roveda, 2012, p. 16; Lanaro, 1992, p. 61). The increasing demand for land, as a consequence of population growth, led to the reclamation of new stretches of terrain that had once been barren, uncultivated or swampy. 1 In the second half of the sixteenth century, especially in northern Italy, large and important drainage projects were undertaken, which were accompanied by the introduction of irrigation systems, the building of artificial canals and in general by the improvement of the soil quality in order to gain new stretches of land and to increase productivity (Ventura, 1970; Ciriacono, 1994). In the Republic of Venice the land rush was paired with a parallel 'water rush' that manifested itself as a rise in the number of request for water concessions. 2 The price of land rose consistently. In the dominions of La Serenissima in the mid-sixteenth century a marshy plot of land cost between three and six ducats; sixty years later, after being reclaimed, it could sell for 120 ducats (Bolognesi, 1984, p, 83). 3 This return to land that characterized the sixteenth-century economy has long been regarded in much of the literature as a sort of fall-back choice. The actions of the most industrious bourgeoisie who diverted redirected their investments from business, trade and manufacturing activities to agriculture have usually been interpreted as an attempt by the emerging upper classes to imitate a more nobilium lifestyle, passively settling for rents. Likewise, aristocrats who invested in land (labelled a safe haven asset by historians) have often been seen as acting passively, or as pushed by non-economic motivations. More recent research, however, has shed new light on t...
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In 1740, the imperial nobleman Mattia Giuseppe Cresseri de Breitenstein of Trento borrowed 25,000 florins (125,000 Venetian lire) in a single transaction (Archivio di Stato di Trento, hereafter Astn, Archivio notarile, hereafter An, A. Ceschini folder, hereafter f., XVIII, 4388, 21 March 1740. 1 florin was worth 5 lire (or troni). 1 lira was equal to 20 soldi or to 240 denari). That nearly equaled the revenues of the tolls of Rovereto in the same year, 24,769 florins (Bonoldi, La fiera e il dazio. Economia e politica commerciale nel Tirolo del secondo Settecento. Società di studi trentini di scienze storiche, Trento, p. 67, 1999). The nobleman Leonardo Piomarta de Langenfeld, in one year (1760), lent more than 45,000 florins (225,000 lire) spread across a score of transactions, most to finance the surrounding rural communities and some as individual loans. These figures represent only a small portion of the sizable amount of capital mobilized by the informal credit market pivoted on notaries, at a time when banks did not yet exist. For years, a vast literature claimed that a country's economic development became possible only once banks, in the form of joint-stock companies, had been created (Cameron, Financing industrialization. Elgar, Aldershot, 1972). According to this view, which became common wisdom, only specialized formal credit institutions were able-acting as financial intermediaries-to mobilize considerable financial resources at low cost. As a consequence, preindustrial economies had been for long considered limited, characterized by a weak demand and by money exchanges that occurred within restricted personal relationships. On the whole, credit supply had been considered aimed at meeting only military expenses or at financing the growing bureaucratic apparatus of modern State [Debunking this traditional view, recent studies have proved the positive interplay between public debt and real economy in pre-industrial Italy where, in some cases, state bonds nurtured a lively financial market (De Luca, Government debt and financial markets: exploring pro-cycle effects in Northern Italy during the sixteenth and the seventeenth centuries. In: Piola Caselli F (ed) Government debts and financial markets in Europe.
The second half of the sixteenth century was a period of economic expansion that matched favourably the increasing financial demands on the Italian states, especially Milan and Genoa, stemming from their involvement in the geopolitical strategy of the Spanish Empire. The interplay of economics and politics fostered several financial innovations thatthough at different levelsnotably increased the collection of monies and tied financial capital to their processes of statebuilding. The innovations included the progressive substitution of bond issues for compulsory loans, the rise of a lively demand for state securities due to the earmarking of future tax income for interest payment, their easy transferability and their tax-free status. All these innovations constituted a kind of financial proto-revolution. Eventually, the emergence of the Besançon fairs (settled in Piacenza), operating under the Genoese as an international credit market with its own currency of account according to a mechanism that avoided the charge of usury, represented the other new crucial element of the sixteenth century. This kind of 'off shore' capital market was essential then for providing Spain with the increasing amount of financial resources raised from the savings of the urban and rural societies. In the more dynamic productive areas of Italy, public finance, private credit, and economic production ended up with a meaningful complementarity based essentially on the usefulness of sovereign debt as collateral for private financial ventures. In northern Italy public debt represented also a powerful instrument to link the different social classes of the state and the subject territories to the central 2 polities by engaging the local ruling elites and the territorial bodies in a mechanism of redistribution of income. At the turn of the seventeenth century a general spirit aimed at making money profitable without leaving it idle was progressively spreading not only among regular practitioners but also among wealthy citizens who found the investment of money convenient, especially because it was tax-free (De Luca 2011). 2. 1618-1648: The Thirty Years' War and the changes in the financial architecture The Thirty Years' War involved the Italian territories only marginally and mainly in two specific circumstances: in Valtellina and the war of succession in the Duchy of Mantua and Monferrato. Both these areas attracted the European monarchies for their strategic position. The Valtellina, part of the Spanish Lombardy, was a fertile valley at the south of the Alps and at the border of Switzerland. It represented a key passage thatthrough Milan-enabled the Spanish to reach the Tyrolean regions that were part of the same Habsburg dynasty (Parker 1972). Likewise, the Duchy of Mantua and Monferrato, under the Spanish monarchy as well, was a strategic area that connected Milan to Genoa. The conflict in Valtellina (1620-1639) broke out in the context of the Thirty Years' War. Caused initially by religious matters (between Catholics and reformed Christian...
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