John Hancock Institute for International Finance™

Once upon a time, when China was again in the grip of a famine, the Emperor sent his wisest official to a stricken province. "It's all the fault of the merchant Wang," the people told him. "He bought up all the grain and kept it in his vast storehouses so that he might sell it at a usurious price." Angrily, the Mandarin ordered the culprit to be brought before him in chains.

"How dare you keep back grain in order to sell it to the hungry people at an outrageous profit! You have been making money out of the misery of the starving!" shouted the Mandarin.

"Allow me to tell you the story of my actions," Wang the merchant replied. "Last year the harvest was exceptionally good. The grain remained in the fields; many would not even cut it because the price was so low that the work was hardly worth their while. The people were squandering their bread, which appeared to have lost all value. It was then that I began to buy grain. True, I paid a low price for it. But at least the peasants garnered it. Ought I to have paid more? Everybody was glad to see me buy grain at all.

"And then the harvest failed. All of a sudden there was no grain to be had. Apart from myself no one had laid in any reserves; everybody had felt sure that there would always be plenty. Then there was famine. People were beginning to come to me, saying, `Your granaries are full; give us grain.' But they still had enough to eat, they still would not see that only with extremely careful management could disaster be averted. Prices were still not high enough to teach them to bear some measure of hunger. Ought I to have opened all my granaries then? My modest reserves would have been eaten up within a few weeks; the people would have lived again as in the previous year, the year of a good harvest. I therefore held back, no matter how they insulted me, maligned me, and threatened me.

"The famine got worse. Only when the price had risen again did I open my first granary. It was soon emptied—at a good profit, I admit. The people were beginning to get used to the idea that there was always a reserve. `Wang has plenty of grain,' they would say. But soon the shortage was upon us again, and prices continued to rise. Once again I opened a granary. This time my profit was even greater. But ought I to have kept the price down? The people had to be made to realize that there was not enough grain available; they had to be taught to be even more economical, to restrict themselves even further. This they could learn only if everything was more expensive than it had been in the past.

"Eventually I opened my third and last granary. The price now was enormous. Everybody could see how scarce grain had now become. A lower price would have been self-deception.

"And now I was left without any reserves. But I kept this from the people to prevent panic and despair. Instead I sent out messengers to all provinces, to wherever I had friends. To all of them I wrote: Send grain; I will pay exceedingly high prices—only send grain!

"Everybody thought that I was tremendously rich-that was the only reason why my business friends promised to send grain. No doubt I shall have to sell it at an even higher price than I did my own grain—but the people will pay the price."

The Mandarin was angry. "You have no heart for the hungry," he said. "You have profited from their hunger. You waited for prices to rise merely because you wanted to make greater profits. And now you are trying to tell me that you were serving the people, that you were trying to save them from starvation. You shall die for this!"

The merchant Wang blenched. He bowed down before the Mandarin and said, "My lord! From all the points of the compass the caravans are setting out with the promised grain. When the merchants hear that I am no longer alive they will turn back. There is no grain left in this province. Unless supplies arrive soon all the people here will die."

"I will have it proclaimed on all the roads that I shall accept the grain and pay for it on behalf of the Emperor. What do I need you for?"

"You would have to pay at least the same price as I had to promise and that was higher than the price I was paid for the last of my own grain. Are you going to sanction the usurious prices which you say it was criminal of me to demand? Besides, how are you going to pay? In this entire province there is not enough ready money available."

"I shall use your fortune for payment!"

"I was not paid in ready cash. I was given land, mortgages on houses, promissory notes. I myself can use these things. The foreign merchants cannot. They trust only my word."

"They will have the same trust in the official of their Emperor."

"When they hear that you had me executed for demanding prices well below those which they must charge you they will take fright and turn back. There is famine in other provinces, too, even though not as great as in ours. They will have no difficulty in selling their grain elsewhere."

"Are you trying to say that you alone can save this province?"

Calmly the merchant regarded the Mandarin. "Yes, that is precisely what I am saying," he said with assurance. "They trust only me, they will send their grain to no one but me. I want to make a profit; I must make a profit. I am a merchant, not an official. If I lose through a miscalculation then I have failed as a merchant and that is the end of me. I want to make money—I must make money—by serving the community."

The Mandarin regarded the merchant in silence for a long time. Then he commanded: "Take off his chains. Let's hope he produces the grain he has promised."

Perhaps this imperial official was the first to understand what it means to be a merchant.

Trade has existed since time immemorial, probably since the earliest Stone Age. Flint tools were manufactured in certain localities in far greater quantities than could possibly be needed in that neighbourhood. And such cudgels and knives have, in fact, been found at great distances from their place of manufacture. How did they get there? Were they taken there by merchants? Probably not.

Trade without merchants exists to this day. The peasant woman who takes her eggs or vegetables to market in the near-by town in order to sell them there is undoubtedly engaged in trade. But that does not make her a merchant; she remains a peasant. In the old days, when a prince or a king sent his messengers abroad with a lump of silver or fine pieces of pottery with orders to buy precious weapons, glittering pieces of jewelry, choice fabrics, or rare animals, then these men were certainly engaged in trade. But that did not make them merchants. Their task performed, they returned to their former avocations: they served their master at his court, in his army, or on his estates.

The merchant, on the other hand, lives by trade, by profiting from wares which others, not he, have produced.

Columbus does not appear to have noticed at all that he found no merchants in America. True, the Indians came to meet him, peacefully, amicably, prepared to barter the few things they owned against the wonderful, unfamiliar articles which the strangers had with them. They gave of their food, their adornments, even, in so far as they had any, of their gold and silver in exchange for the truly miraculous things owned by the strangers. But when they had satisfied their curiosity and surrendered all the possessions they had brought with them they returned quite happily to their villages. After all, they were no merchants.

The Spaniards disembarked, settled down comfortably in their little fortress, and assumed, as a matter of course, that the Indians would continue to supply them with food until their own crops ripened. After all, did they not still possess a multitude of tempting articles, from bright glass beads to excellent steel tools such as knives, axes, and scissors? Surely all these things were precious in a country which had no iron and whose people were still, as a rule, using stone tools?

No doubt the American Indians would have been only too pleased to acquire these articles-but what were they to use for payment? They had nothing left to offer the strangers. That was due not so much to the poverty of these fishermen, hunters, and collectors of food, as to the fact that there were no merchants to bring in supplies from farther afield.

After a few weeks the Spaniards had eaten all their food and received no fresh supplies. As they could not believe this to be due to perfectly natural and comprehensible causes they suspected ill will, treachery, deliberate tactics. Yet all the time the poor naked Indians were sitting in their huts, scared, among their miserable Stone Age weapons; they were terrified of the invaders with their breastplates, their cross-bows, their swords, and their muskets. What were they to do? The strangers were ever more insistently demanding food and gold.

For a while they succeeded in satisfying the importunate strangers by surrendering their own scarce supplies, until they themselves were starving. But when the enraged Spaniards burst into their villages to take by force whatever they found there, they encountered open resistance, and there was much fighting which, in spite of their splendid equipment, frequently ended with the defeat of the Europeans. On his second voyage to America, Columbus found only the ruins of the settlement of the companions he had left behind. The unfortunate Indians were to be cowed into submission by a frightful retribution. What then was left to them but to flee to the mountains to escape the demands of their terrible enemies?

Columbus never asked himself why he encountered not a single merchant on the "Indian' coast. After all, he knew from the accounts he had studied so thoroughly, above all from Marco Polo's report, that a highly developed trade flourished on the East Asian coast. Thousands of ships of all sizes, the Venetian world traveler had reported, would call year after year at the powerful trading cities of the coast, bringing spices and precious fabrics from India, and loading silk and finely fashioned brass and pottery articles.

Nowhere in the letters of the great discoverer of America is there a single word of complaint about the absence of merchants. He never realized what caused the initial failure of his colonization plans.

Merchants were not known either to the local peoples of the Antilles or to the highly civilized inhabitants of the highlands—the Mexicans in North America, the Mayas in Central America, or the Incas in South America. True, they bartered among themselves a few of the goods in particular demand. The Mexicans went to the south to get the feathers of the quetzal bird for their feather cloaks, to get soconusso cocoa from what today is Guatemala, and to get murex, the shellfish yielding purple pigment, from the Gulf of Nicoya; the Chibchas carried the salt from their mines along a special salt route—the same route as that taken by the Spanish conquistadores when they marched on Bogota from the north.

When the Spaniards entered Tenochtitl n for the first time, as the friends and guests of the Aztec Emperor, they marched past countless market stalls piled high with fruit, vegetables, and fish. The market women were offering their wares, calling out to the buyers, eager to sell. "Just like back home in Medina del Campo on a great market-day," is how one of the conquistadores described the scene in an account extant to this day. Just as in Spain, the peasants had come to the capital from the neighbouring countryside to sell their produce; they had come as producers.

It is true that in the Aztec Empire there was a class of ‘merchants,' but these were highly respected powerful gentlemen, warriors who carried their weapons hidden under their clothes. When they set out beyond their frontiers they did carry some goods with them and offered them for barter, but their real task was to spy out the foreign land. At a favourable moment they would cast off their outer garments, draw their swords, and pounce upon their gullible ‘customers.' To regard them as merchants would be setting a very dangerous precedent.

When the proud Spanish hidalgos sailed to the New World in order to make their fortunes without much effort, when daring conquistadores acquired entire empires with no more than a handful of soldiers, they did not care much about merchants. But merchants were there, all the same, among that motley crowd.

Most of the ships leaving Sevilla were equipped and manned by Spanish or foreign merchant firms. The Welsers of Augsburg acquired and tried to exploit an entire colony—what is today Venezuela. The representative of the great Florentine merchant family of the Medici, Amerigo Vespucci, gave his name to the new continent: America. English merchants, too, took part in the voyages to the New World during the first few decades. But in all the numerous notes made by these merchants we never find the decisive observation: we found no merchants.

Oddly enough, the merchants themselves do not at first seem to have thought of engaging in trade in the new country. Each settlement cultivated whatever it needed for living. Only after the silver-mines had been discovered, first of all high up in the mountains of Peru, at Potosi, [Potosi is now part of Bolivia.] and later at Zapatecas, in Mexico, did a trade begin to flourish, supplying the workmen with meat, bread, draught animals, and tools over a distance of hundreds of miles.

How different might have been the opening up and colonization of America if trade by merchants had existed from the beginning. And yet there had been, in North America, long before the Spaniards, a far from inconsiderable barter trade. The Mohave Indians, who lived in the north-western part of the present state of Arizona, made regular journeys across the mountains to the Pacific coast in order to catch fish and collect the shells which they needed as ornaments for their elaborately woven garments. As a rule they brought with them far more shells than they required for themselves, and this surplus they bartered with their neighbours, the Hopi Indians, for fabrics.

These Hopi in turn traveled farther to the east, across high mountains and endless wastes, in order to obtain in what to-day is the state of Colorado the salt they needed. This they acquired in exchange for their woven fabrics. Yet another Indian tribe, the Hopewell, who lived in the basin of the Ohio, traveled as far as Lake Superior in their search for copper, and as far west as the Rocky Mountains in order to obtain obsidian stones for their weapons and bear-teeth for their clothes. The Hopewell Indians were renowned far and wide as skilled artisans; when other tribes needed articles fashioned from shells or copper they brought with them bear-teeth or rare feathers for the medicine-men's ceremonies. As a medium for barter the wampum, a string of shells, gradually gained universal currency instead of money. Even transactions between Indians and Europeans were settled with wampum. But invariably we find the same picture: the producers exchanging their own produce with one another direct.

And in what manner was this done?

Every few years the Indians from the north-western coast of North America, the Kwakiutl, would come in their boats to meet for certain festivals and to boast of their wealth. The initiator of a transaction would offer a copper dish for sale, suitably praising its value. But at the same time he would not omit to advertise his own wealth. Whenever one of the guests made an offer which did not come up to the value of the copper dish the vendor would jeer, "You haven't got it in you to acquire this copper dish! Its price must correspond to my own dignity!" And the pile of rugs offered in exchange would rise and rise, to some I6oo, and still the scoffs would continue: "This mountain of rugs very nearly touches the sky. Yet my name is that of the Kwakiutl, and you cannot measure yourselves with us." Presently a chieftain from the tribe of the vendor would rise and hold forth at length about the glory of his fellow tribesmen and his legendary ancestors. "I know how copper dishes are traded. You keep talking about your wealth, chief. But have you properly considered how much this dish is worth? Come, add another thousand rugs." Up and up went the price of the dish. Already 3200 rugs lay on a pile, and still the buyer had to add the valuable coffers in which the rugs were kept. Finally the vendor demanded, "Increase your own fame, you chiefs, by adding this boat!" And only when this demand too had been met would he declare himself satisfied.

And now the buyer would turn to the vendor. "But why were you so ready to accept my offer, chief? You accepted much too soon. Indeed, you must think me a very poor man. But I am a Kwakiutl, one of those who have given their name to tribes all over the world. You gave up before I had finished bartering. Evidently you are beneath us." And of his own free will the buyer would add a further 200 rugs, merely to demonstrate his pride and wealth.

This kind of grappling for reputation and dignity, this festivity called by the Indians potlatch, could easily lead to open quarrel if one party considered itself humiliated. The desire to impress could take on extreme forms: a chief might throw 40o rugs and seven valuable boats into the fire, merely to show his rivals what kind of a fellow he was. Another might pour oil on his house and burn it to the ground. Only when a further Zoo rugs had been consumed by the flames would the contending parties be satisfied.

This desire to impress is found to accompany the business of barter trade also with other primitive peoples. They do not exchange goods but bring presents. The recipient of such a `present' must then show that he is the nobler and the richer of the two; in other words, his present must be more valuable than the one he has received.

In former times the inhabitants of New Guinea and the near-by islands used to visit their neighbours with a large, carefully assembled fleet of many ships in order to bring them a `present,' at first perhaps no more than some foodstuffs of no particular value. The recipient replied by a return present, having learned from clever hints, flattery, and praise what his visitor would like to receive from him—maybe a bracelet he himself was wearing. Presently the value of the gifts exchanged would go up: finely polished stone axes or girdles adorned with shells would change ownership. But all this was merely the prelude. The real purpose of the voyage was the valuable kula, chains of small smooth discs made by the women from reddish shells. Ancient custom demanded that one kind of kula chain must pass only in the direction of east to west, whereas another—heavy bangles fashioned from a different kind of shell, and credited with secret masculine powers—must be given as ‘presents’ only from west to east. As the recipients would soon give away these ‘presents’ to other parties, they could cover considerable distances.

In the South Seas we find yet another form of this elegant exchange of goods which has nothing to do with trade proper—the wasi. After the harvest the inhabitants of the Trobriand Islands, who practice agriculture, meet together in order to make the fishermen a rich present of root and grain crops, the largest and finest garnered by them. They do not have to wait long for a present in return. A few weeks later, when the catch of fish has been particularly successful, the entire fishing fleet makes for the shore in order to bring fish to the waiting husbandmen. It is a sacred custom that this return present must reach at least the value of the fruits of the harvest; but in any event mere self-respect would prevent the fishermen from giving less. They do not want to be shamed by the farmers or to lower the value of another man's produce. Throughout these transactions there is never any mention of price.

In their outriggers the Polynesians sailed thousands of miles across the limitless vastnesses of the Pacific, from the north-eastern coast of Asia down to Tahiti and Easter Island, perhaps even occasionally to the coast of South America—but they never thought of engaging in trade, of profiting from their knowledge of foreign islands. Certainly they had information about their neighbours, but it did not occur to them to import from them goods in order to sell them at a profit.

In November 1778 Captain Cook landed in the Hawaiian Islands, which had been discovered by the Spaniards two centuries before but had long since been forgotten. He' was revered like a god by the people and heaped with presents, so that he was able to replenish his badly depleted supplies. Well provided with all he needed, he set sail again. However, unfavourable winds forced him to return to his former anchoring place. There he had an unpleasant surprise: the shore was deserted. In vain did the English implore their old friends to bring them food. The poor people had nothing left. No offer, however tempting, produced any results. The English thereupon tried to obtain food by force. There were arguments, quarrels, open resistance, and fighting. Cook tried to restore peace—in vain. Fighting, he retreated towards his boat. He was knee-deep in the water when he was struck from behind on the head with a cudgel. The great discoverer suffered the same fate as the first European settlers on the coasts of America—all because no merchants existed.

Traders, on the other hand, had been sailing to the Baltic coast since time immemorial in search of tin and golden amber. In exchange they offered copper vessels which, in the North, must have been as much a cause of wonder as European steel goods were in sixteenth- or seventeenth-century America. Yet the traders of the second millennium B.C., perhaps even of the latter part of the third millennium, had not been invited by anybody; they had not been lured by dazzling promises, but had set out of their own accord in order to seek the rare raw materials which did not exist on the coasts of the Mediterranean.

Why was it that in Central Europe at this very early date there was this extensive commerce to which archaeological finds testify? How was it that trade was known in the Old World so early when, many centuries later, there was still none in the New? And why did the Spaniards and even the Portuguese fail to notice this peculiarity of America; why did they never complain of it? This question is the more mysterious since, at about the same time, the Portuguese encountered flourishing trade organizations in the East Indies.

Before Vasco da Gama sailed for India, a Portuguese scout had found out that the whole Indian Ocean represented a fully developed trade area. To start with, this scout advised, the explorer should make for the port of Sofala, in the far south of the African east coast. There he would find enough people who knew the entire Indian Ocean, since countless ships set out from there towards all the important centres of the Orient. And this proved to be the case.

On the western coast of the East Indies Vasco da Gama found a surprisingly rich world of commerce. In all the ports there were countless traders, mostly Arabs, who at once posed the age-old questions of the merchant: What have you to offer? What are you after? What can we show you? What will you pay?

Whatever the Europeans wanted they could have: jewels and pearls, gold and silver, spices of all kinds, precious silks and skillfully woven cotton goods, and, of course, foodstuffs in unlimited quantities. The only source of annoyance was the price. What the first Portuguese traders had to offer was not very much. Apart from precious metal there was demand only for linen fabrics, so that the sailors sold even their shirts at a good profit. The rest was scarcely worth consideration in the eyes of the experienced Arab traders. Asia was not dependent on European goods.

This trade area extended from Sofala to the Moluccas, the Spice Islands, as far as the Chinese coast and the islands of Japan. Only on the African coast did the world trade of those days cross the equator; it reached as far as the island of Madagascar. Beyond, the world was once more dark and unknown. Nowhere did the natives of those areas attempt to penetrate farther, to open up new countries, or to increase the supply of merchandise. At the Moluccas the world ended because beyond there was no trade.

When Marco Polo, the great Venetian traveler, returning home aboard the proud fleet furnished in China by his imperial friend and patron the great Kublai Khan, was driven by winds to the island of Java he enquired what country lay beyond the horizon to the south. Everybody shrugged their shoulders. True, countless islands were rumoured to lie beyond; at times a ship might sail there, navigating by that strange constellation, the Southern Cross-but no one could say what these explorers had found. Adventurers may well have sailed the seas of the south, but hardly ever a merchant.

Chapter 2—First Journeys into the Unknown

On the eastern shore of the Mediterranean, immediately north of the spot where Beirut is situated to-day, two rivers run into the sea—the Nahr Ibrahim and the Nahr Feidar, known to the ancient Greeks by the names of Adonis and Phaedrus. In winter, when the rains start, roaring torrents of water rush down from the heights of the Lebanon, carrying with them boulders and stones torn from the mountainside.

In summer these rivers dry up almost completely. It is then that men collect from the riverbeds the strange stones and lumps of metal ore washed down by the rivers, pretty chunks of stone in bright colours. The Lebanon contains a great variety of metals, even though not in great quantities.

Thus, 5000 years ago, men may have wandered through this area—shepherds belonging to nomadic Bedouin tribes, farming folk from far-off Mesopotamia who were finding the space too cramped for them between the two rivers, just as some 1500 years later Abraham was to leave Ur of the Chaldees to seek a new home in Palestine.

It was about that time that the inhabitants of Mesopotamia, the Sumerians, made a series of important discoveries. They tamed the wild cattle, they tilled the soil, they planted the first strains of grain. They invented and built the wheel. Their cattle drew their wagons.

Instead of stone they began to use a metal, at first rarely, and then with increasing frequency-copper. Copper was in great demand; it could be melted and fashioned and hammered into weapons. Stone, on the other hand, remained hard and brittle. But in the very areas where the new civilization was springing up, in Mesopotamia and the Nile valley, there were hardly any copper ores.

We know that as early as 5000 years ago the malachite mines of the Sinai peninsula, in the middle of what must even then have been inhospitable desert, were being worked by the Egyptians. They shrank from no sacrifice of men or effort in order to obtain this precious metal.

But copper has one annoying property: though it is easy to shape, it remains soft, far too soft. For axes, hatchets, and weapons of war the hard stone continued to be superior to copper.

The people who picked up the copper ores washed down by the rivers Adonis and Phaedrus were particularly favoured by fortune. For upon smelting, these ores yielded a metal which had all the good qualities of copper but, at the same time, was unusually hard. The reason for this remained a mystery for a long time, even to the fortunate discoverers. Much later it was explained: what the waters had washed down from the mountains was not pure copper ore but ores containing a certain proportion of tin—in fact, that very proportion which yields bronze: one part in ten parts of copper. A strange coincidence. As far as we know, tin scarcely exists in the Middle East, in Western Asia, or in North-west Africa. Only here, on the Syrian coast, did a caprice of nature bring tin up to the surface, and, moreover, together with copper.

What the rivers had washed down from the mountains during the winter months was not much, but it was enough to assure the inhabitants of that area of an exceptional technical lead. With the new bronze axes it was possible to cut down the trees which grew on the slopes from the shores of the Mediterranean right up to the heights of the Lebanon: the mighty cedars, whose gigantic trunks had resisted the blunt stone axes and the soft copper tools alike.

Timber was the second source of wealth of the area. In Egypt there were no forests. For the building of houses, for the kilning of pottery, timber had to be brought over great distances, from the middle reaches of the Nile, where vegetation in those early days must have been more plentiful than now, or even across the Mediterranean.

The people of Mesopotamia collected their timber from the near-by mountains, chiefly from the Zagros range in the North-east. But such tremendous trunks as those of the Lebanon cedars did not exist anywhere else. For the great public buildings, for temples and palaces, they were indispensable. Hence emissaries would come to Syria from the East and from the far South, asking for timber. They brought with them presents to gain the goodwill of the population of the Lebanon—jewelry, household goods, and weapons, the precious manufactures of young civilizations.

Thus, at the estuary of the rivers Adonis and Phaedrus, there arose a settlement which soon became renowned and respected even in such highly developed countries as Egypt and Mesopotamia—the city of Byblos. Today it is difficult to establish who were its inhabitants, since no written records have survived. All we know from very early Egyptian inscriptions is that Byblos heads the list of all Asian principalities.

"Byblos" continued to be an important word for the Egyptians for thousands of years to come. It was from Byblos that those strange ships came which the Pharaohs sent out on the high seas, into the Red Sea, to the legendary countries along the Arabian and East African coasts, and to Punt, the land of frankincense. In old inscriptions these ships are represented by the sign for Byblos, the letters KBN, and the sign for ships. These passages are therefore to be read as "Byblos ships." Without them the Egyptians would not have been able to navigate the stormy Red Sea.

What kind of ships were they? They appear to have been ships with a keel—ships, that is, built upon one huge beam as the keel. Until then only flat-bottomed ships made of planks had been known. On keel ships one could venture out on the high seas. Even much later keel ships are found only where the type of the Byblos ship had been known.

In the north of Europe the Danish coast was inhabited by people living mainly by fishing. They must have sailed out on to the open sea, for their kitchen refuse, which they used to throw upon huge piles, contains the bones of high-sea fish. Moreover, rock-carvings of the early Bronze Age show such craft. But in all probability these were not proper ships but rafts. Several tree-trunks were lashed together—and what a tremendous amount of work the cutting of these huge trunks with miserable stone axes must have involved—and a deckhouse was fitted on top to provide better shelter from the waves.

Most primitive peoples know the dug-out canoe, a boat made by hollowing out a tree-trunk. This is done carefully by fire, and after a great deal of slow and laborious work some real masterpieces of boat-building are produced in the middle of the jungle. The boldest and most skillful navigators of the world, the Polynesians, used such hollowed out tree-trunks, either coupled in pairs for greater safety or fitted with outriggers, for sailing the vastnesses of the Pacific Ocean until the eighteenth century.

Boats were known also to the ancient Egyptians. They had been developed from earlier rafts. Sidewalls were fitted on to a flat bottom made from planks fastened together. These flat-bottomed boats were suitable for the shallow reed-grown waters of the Nile. Indeed they were safe enough on the wide river so long as it flowed quietly. But as soon as a storm sprang up they had to run for the nearest port or else make fast by the river-bank.

A characteristic type of ship was developed by the Chinese, the junk, capable of carrying hundreds of passengers and many tons of cargo. But the Chinese junk was a plank ship, not a keel ship. It had a flat bottom, although braced and reinforced, with the tall deckhouses and superstructures built upon it. For this reason the junks, in spite of their considerable size, had a relatively slight draught. In a gale they were not nearly so safe as the keel ships. No doubt this was the reason why Chinese shipping developed rather late, a long time after the Arabs with their superior keeled vessels had appeared in Chinese waters.

It was thanks to these keel ships and to the favourable position midway between Egypt and Mesopotamia that a merchant class arose in Byblos—that class which lives by acquiring merchandise and selling it at a profit. Wherever there are merchants in the world today they are the heirs of those who lived on the Syrian coast 5000 years ago.

We know, of course, that tens of thousands of years ago, in the Stone Age, certain objects traveled great distances. During the last glaciation some 10,000 years ago men painted pictures on the wall of a cave at Font de Gaume in Central France, including a huge old bison with enormous withers—a striking and unmistakable picture. Many years after this cave had been discovered, French scholars found a kind of sketch for this picture, a flat stone with an incised drawing, in another glacial cave in the département of Ain, approximately 200 miles away from Font de Gaume. How did the sketch get there? Clearly it was treated as a carefully guarded treasure. Had it been stolen? Had it been brought along by nomadic hunters? Or had it been bartered against some other article?

In Southern Russia scholars have found a spot with thousands of stone axes—far more than the few people who traveled past there could possibly use. No doubt the manufacturers exchanged them against other articles, for to this day these axes are found in all parts of Eastern Europe.

But barter is not the same thing as regular trade. Barter was practiced also by the American Indians among themselves; barter was practiced by the Polynesians and the natives of Australasia. In times of drought messengers or entire tribes traveled great distances in search of food. Joseph's brothers went to Egypt to buy corn. They appealed to the royal governor and "bowed down themselves before him with their faces to the earth," unaware that their own brother stood before them. Clearly Joseph's brethren were not merchants but peasants and herdsmen. When they made purchases they did so for their own consumption.

The inhabitants of Byblos, on the other hand, were neither peasants nor herdsmen, nor yet artisans. They earned their living chiefly through the exchange of merchandise which they had not manufactured themselves. And that is the decisive criterion.

Here we have the fundamental difference between the merchant who does not produce wares himself, and the manufacturer who may distribute his own manufactures, barter them, or sell them to a third party.

Byblos lived by its trade. After all, it was situated at the exact spot where two alien highly developed and mutually complementary civilizations touched—that of Egypt and that of Babylon. As the Egyptians journeyed northward, along the seashore, across the Sinai peninsula, and along the coast of Palestine, they arrived at a point where the dark mountains of the Lebanon descended right down to the Mediterranean. There the comfortable road ended. There lay Byblos.

From that point the travelers had to turn towards the interior of the country and to cross the Lebanon in those parts where today the railway runs from Beirut to Damascus or Aleppo, according to whether one wants to continue eastward and cross the Anti-Lebanon, or turn north between the two mountain-ranges.

We cannot tell what gave rise to the construction of the Byblos ships. But we believe we know the technical prerequisites. These were, first of all, the tall cedars of the Lebanon, which were particularly suitable for the building of the powerful new vessels. Some 1500 years later the Pharaoh of Egypt still sent his messenger to Byblos with a request for cedar trunks. In exchange he offered rich presents. We possess the account of an Egyptian who came to Byblos with such instructions. Unless we misinterpret the somewhat obscure text, this cunning Egyptian tried to cheat the ruler of Byblos out of these presents. He claimed that they had been lost en route, but the text does not make it quite clear whether they were supposed to have been lost in a shipwreck or stolen by thieves. He thus expected Byblos to supply the timber without any present in return, out of mere respect for the power of the Pharaoh and from humility towards his great gods. When the ruler of Byblos indignantly rejected such an imposition, the presents which had allegedly vanished suddenly reappeared and the transaction was concluded without further hitch. True, by that time the forests near Byblos had all been cut down, so that the ruler had to send his men up into the mountains. Teams of oxen dragged the long tree-trunks down to the coast.

Without the bronze axes it would hardly have been possible to cut down these powerful trees and fashion the timber adequately. It seems probable that bronze nails were used to fit these massive beams together more firmly than could have been done with the ropes made by the Egyptians from reeds and fibres.

Although the journey from Egypt to Byblos must have been difficult enough, that to the Euphrates offered truly tremendous difficulties. Nevertheless we find in this area routes going back to the earliest times, routes traveled by nomadic Bedouins, by tribes fleeing after defeat, and by great armies. It was along these routes that the merchants began to travel.

Everybody regarded the merchant with great suspicion. What was he up to? Was he trying to spy out the land where an attack could be staged? And even if he pursued peaceful aims, was he not out to cheat? A man who did not produce anything himself but was living from the work of others! Was it not better to kill him straight away?

But as soon as he spread out his treasures all hearts softened-above all, those of the women. There were sweetly smelling resins from the Lebanon which one could rub into one's skin and use for make-up; there were coloured unguents for beautifying one's eyes and cheeks. Modern cosmetics are based partly on alcoholic solutions, but in those days people loved fragrant oil.

The noble Egyptians used the resin and the oil of cedars for embalming their dead, so that their bodies should be preserved after death, because without a body there was no continued life for the soul. Their priests used resins for burning in the temples.

This barter with the produce of the Lebanon rapidly developed into an extensive trade in cosmetics and perfumes. From Asia Minor Syrian traders brought antimony, which was used by the elegant ladies of Egypt as an additive to the red pigment with which they outlined their eyes. Antimony was brought from what today is Armenia and was then called Na ri; the Egyptian name for antimony was naharin. Another beautifying substance was haru galban, which came from Persia.

From the earliest days the Egyptians were acquainted with laudanum, the resin of the cistus plant which grew along the shores of the Mediterranean. Laudanum was the ware sold by the merchants who, according to the Bible-story, bought Joseph as a slave.

The great boom in the perfume trade began when the merchants reached the Red Sea and made the acquaintance of myrrh and frankincense on the south coast of Arabia. The fragrant frankincense was carried by caravans from Hadramut, in Southern Arabia, over the long and tedious land route to Egypt, and across Syria to Mesopotamia. The quantities involved must have been enormous. In the temple of Ammon alone, in the sacred city of Thebes, 2i89 jars and 304,093 bushels of incense were burned in the twelfth century B.C. The Chaldeans burned incense to a value of 10,000 talents of silver annually—one talent being 55 lb.—in front of the altar of Baal.

The principal customers were the great ones of the earth-the Pharaohs and princes, who wanted to give precious presents to their womenfolk, and the priests who needed the fragrant perfumes for their rituals.

Since these were articles which did not exist at home, or only in small quantities, this trade did not worry the domestic producer. The stranger arriving with such merchandise was safe against violence and theft since he enjoyed the powerful protection of king and priests. Any act of theft would jeopardize the future journeys of the foreign traders. And what would the priests do in the temples then when there were no clouds of incense rising up during the ritual to glorify the deity? It was easy enough to induce the believers to make donations and pious contributions to be used for the purchase of the valuable incense. But how were the foreign merchants to be encouraged to come again unless they were assured of protection-and appropriate profit? Thus the merchants owed their first regular trade to the priests. Soon demand exceeded supplies from Southern Arabia. Merchants were compelled to travel farther afield and to seek new sources of resin, incense, and oils.

At the same time the demand for metals was growing. Copper was needed for weapons and vessels, gold and silver for ornaments—all of them metals rarely found in Egypt or Mesopotamia. Egypt mined its gold at a few sporadic locations in the desert east of the Nile and in Nubia. (The name of that country was derived from the Egyptian word nob, meaning gold.) But these deposits were soon inadequate. Copper supplies must have been more difficult still, until the discovery of the copper island of Cyprus. (Kupros is the Greek for copper.)

We know practically nothing about these first merchants; but we see how one island after another, one country after another, was engulfed by the rapidly swelling stream of trade. Byblos rose to power around the year 3000 B.C.; a few centuries later it was the turn of Cyprus. About the middle of the third millennium the Cretan civilization began to unfold; by the turn of the millennium it had spread as far as the Aegean Sea and led to the foundation of Troy in the strait leading to the Black Sea, and of Mycenae on Greek soil. But the rise of Mycenae did not begin until Crete had declined from the peak of its power-or should we say, its trade.

Rock-drawings dating back to the third millennium have been found on the island of Malta; these show ships which are quite unmistakably keel craft. All indications again point to the Eastern Mediterranean. About the end of the third millennium traders from the eastern Mediterranean must have discovered the Straits of Gibraltar and hence the exit from their limited sea. In Southern Spain, along the estuary of the Guadalquivir, an empire arose of which we have but vague reports from a much later date—the land of Tartessus. It was probably the rich copper deposits of this region which caused its rise to prosperity.

Not warriors but merchants forged the first trade links between the eastern and western Mediterranean. Besides, the inhabitants of the narrow coastal strip of Syria were not strong enough to maintain a fleet or numerous enough to found colonies—as later the Greeks did. Only when Assyrians and Babylonians, Egyptians and Persians, were pressing upon them did the inhabitants of the Syrian cities leave to settle in foreign lands.

How was it that the merchants could dare to travel to far-off countries inhabited by barbarians, by people who would receive any stranger landing on their coast with distrust, or who might even kill him as an enemy? The warrior relies on the power of his weapons. The shepherd knows how to defend his herd against wild beasts, and he can also defend it against enemies trying to steal the animals from him. When it is a case of gaining control of a watering-place urgently needed by his flock he will not ask whether he is entitled to it. Even the peasant is secure in his tenure not through law, but through custom and tradition, through the power of his village community. But any commercial transaction is first and foremost a legal transaction. There can be no trade without law.

The merchant sets out on his journey to foreign countries with a load of valuable merchandise; frequently others—friends, partners, or relations—may have entrusted to him wares to be sold on their behalf abroad. He has no wish to steal the possessions of others. If he were to resort to violence the inhabitants would instantly flee to their woods, swamps, and mountains, and nothing would induce them to display their. own wares, to disclose the secrets of their country, to supply the desired metal ores or the precious amber.

The law is based on the principle that the stranger, too, enjoys protection. He may be of different blood, of different skin-colour, he may worship a different god or speak an unintelligible language. Property is sacred. Promises must be honoured; obligations undertaken must be kept. If merchandise is accepted then the price asked by the owner must be paid. If no agreement can be reached the transaction cannot take place.

Herodotus, the Greek world traveler, reports at a much later date, the fifth century B.C., on how the "mute" trade on the African west coast was transacted—and no doubt things were similar at an earlier period in the western Mediterranean.

The Phoenicians did not converse with the shy and timid inhabitants of that inhospitable coast. They laid out their wares on the shore and returned on board their ships. Only then did the people come out of hiding; they inspected the goods closely and put down as much gold as they were prepared to give for them. Then they vanished into the bush. The following morning the Phoenicians once more disembarked and went on shore in order to see how much gold had been offered for their merchandise. If it was enough they took the gold and sailed away; if they were not satisfied they left the merchandise and the gold and again withdrew to their ships. During the night the natives came again, either to raise their offer—i.e., to put down some more gold—or to take back the gold they had put down in the first place. It was now up to the strangers either to leave their wares for a little longer, waiting to see whether the people would put down once more the original quantity of gold or else to depart without any business having been transacted. "Never does one party deceive the other and take both gold and merchandise," the Greek historian records with astonishment.

It is interesting to speculate on how long it must have taken for this kind of trade to develop to a point where each party knew approximately what the other expected of him. And, no doubt, another long period of time elapsed before the local people dared to talk to the strangers direct, before they felt reasonably sure that they had indeed come with peaceful intentions, to engage in trade only and not in pillage. It is necessary to have faith in an order, in a law which guarantees advantage to both sides.

Byblos was much too weak to stand up to Egypt or Mesopotamia by force of arms. When its merchants traveled there they put themselves under the protection of these countries. They enjoyed only such protection as was granted to them voluntarily. It was, in fact, in Mesopotamia that the law was developed in a most remarkable way.

We have an inscription from the third millennium B.C.—an inscription by the King of Lagash, by name of Urukagina, which offers us a glimpse of this ancient civilization with its strongly developed sense of law and justice:

“Urukagina built the palace and the temple. Dug the canal, erected the wall. Since olden days the sailors lived on their ships, the herdsmen slept by their asses. The priests measured out the corn. The goodly fields of the gods provided the living and the place of pleasure of the King. The asses and fair cattle were seized by the priests. To the men of the King they distributed the corn, clothes, fabrics, and bronze vessels. In the orchard of the poor the priest seized the trees and took away the fruit. When a dead man was laid in his grave the priest took seven urns of beer for his drink and 420 loaves and 120 measures of corn for his food, a garment, a young kid, and a bed for himself.

“Urukagina restored the old rules. From the ships he removed the sailors, from the asses and sheep the herdsmen, from the corn the controllers of the storehouse. The payment of money that was made in the absence of a white sheep or lamb he stopped. Within the frontiers of his realm down to the sea there were no more controllers. When a dead man was laid in his grave the priest now took three urns of beer for his drink, so loaves for his food, a bed, and a young kid. In no place did the priest enter the orchard of the poor any longer. If a good ass is born to a subject of the King, and his superior says unto him: ‘I will buy it from thee,’ if he do buy, let the other say to him. ‘Pay thou with good money!’ When the house of a great man is situated next to the house of a subject o£ the King, and the great man says: ‘I will buy it,’ if he do buy it, let the other say to him: ‘Pay thou with good money!’

“Urukagina spoke, and the children of Lagash he delivered from drought and theft and murder; he set up freedom for them. Neither to the orphan not to the widow is any injustice done by the powerful any more.”

Clearly and unambiguously the King here formulates the principle: payments and taxes are determined not arbitrarily by power, but by the law, and the protection of that law was undertaken by himself, even against the priests. The law stands above all considerations, social or divine; its order is subject to no other. It reposes on itself.

There are many social systems which do not acknowledge the law. They rest upon other principles: power, for instance. Such a society may be headed by a king, a chieftain, a priest, or a medicine-man. Everything is subject to his will; whatever he commands is supreme law. His arbitrary ruling continually refashions the order of precedence and the distribution of property. He takes whatever he likes for himself if he wants to show favour to some one he gives him something regardless of whether this article has until then ‘belonged' to him or to another—for this ‘belonging,' in the sense of possession, does not represent a legal claim or private ownership. And the people silently bow to the command imposed upon them.

Or elsewhere the principle may be that all land is ‘common property,' that the tools and means of production belong to the ‘community' and that household equipment may be used by everybody. But there is no such thing as ‘community'; even within the smallest circle, within the family, a certain order must rule. Hence a council of elders, or a ruler, apportions the land, tells the shepherd boy what task he has to do, and assigns the tools to the artisan. This order thus rests upon the wisdom and sense of justice of him who apportions all possessions, albeit for no more than a day or a few hours. Everybody else is dependent on him.

The right to the ownership of land and working tools, the right to dispose freely of one's own labour and time, is not tied to anybody's caprice but rests upon itself.

Could this ‘law' be extended also to those who did not belong to the tribe, to the nation, to the subjects of the king—extended, that is, to men of other faith, to heathens and heretics, to men with different skin-colour and strange language? This was by no means a matter of course. Only slowly did mankind accept this proposition.

"Pay thou with good money!" the Sumerian King urged some 4500 years ago. It was thanks to this attitude that the Syrians were able to develop an extensive trade. The Syrian merchant felt secure even in Mesopotamia; he was protected by a law which applied equally to everybody. He need not fear that anyone, whether king, priest, or footpad, would seize his wares, expel him from the country, or even kill him.

Only gradually did this idea of law and justice gain ground. One and a half millenniums later the savage inhabitants of the Crimea, the Scythians in Tauris, still slaughtered every stranger who was driven by the winds to their inhospitable coast. In the Mediterranean, on the other hand, merchants met with a friendly welcome at a relatively early date. This is attested by finds from excavations in Crete. On this island magnificent palaces existed at a very early date, during the latter half of the third millennium B.C., but they appear to have had no fortified walls whatever. Their occupants clearly did not live in permanent fear of attack by robbers. Nobody attacked them.

The merchants themselves, naturally, had no thought of war. Any hostile action would have immediately scared off the Cretans. And that was not the purpose of their trade voyages. The inhabitants were to be encouraged to produce their wares, above all such eagerly sought-after metals as copper and, at a later date, tin.

Cooperation between Crete and the Asian mainland, in particular the Syrian coast—i.e., Byblos—must have been entirely happy, scarcely interrupted by quarrel or war. A fleet of warships, superior to all others thanks to the keel construction, made the land secure against raids by barbarians. No adversary was a match for this fleet.

Gradually, however, the barbarians also learned how to build ships. They, too, had an ample supply of tree-trunks—powerful oaks which might well measure themselves against the cedars of Lebanon. The skill of metal-working, the smelting of copper, and the manufacture of bronze likewise began to spread; indeed, from the moment the barbarians manufactured weapons of iron they gained superiority over the inhabitants of the eastern Mediterranean.

Thus the"maritime people," as the Egyptians and Babylonians called the wild hordes, appeared off the coast—among them we can now identify Sards, the inhabitants of Sardinia, Sekelans, the inhabitants of Sicily, and the earliest Greeks.

The ‘golden’ age of the merchants was over, and the ‘iron' age of the heroes was beginning. All that had been built up by long, laborious, peaceful efforts now collapsed. The barbarians enforced the exchange of goods by the sword. Ships in the Mediterranean were threatened on all sides. Piracy was rife. Massive castles were built on the seashore, made of huge stone blocks, in Greece (Mycenae) and on the coast of Asia Minor, at Troy at the entrance to the Dardanelles, and on the Bosporus at the entrance to the Black Sea. The centre of gravity of commercial power began to shift towards Mycenae and Asia Minor about the middle of the second millennium. Crete had to deliver presents or tribute to the King of Egypt, "consisting of bars of gold and silver, silver rings, baskets filled with lapis lazuli, ornamental vessels (including some shaped like the heads of lions, bulls, dogs, griffins, and goats) made of gold, silver, copper, and silver-gilt, chains of red and blue pearls, and daggers." We are then told that the nobles of Retenu (in Syria) and Kefti (in Crete) "carry upon their backs the gifts of wine, garments, cattle, and incense."

If the Pharaoh of Egypt now wanted copper from Cyprus, the country of Alaschia, he no longer sent merchants but his messengers to the local king, his `brother,' requesting supplies.

No limit was set to the arbitrary power of the great rulers.

If it suited them they could reply to a present with other presents, or they could express a wish for rare articles. Since they were not living by commerce they did not have to obey its laws, rules, and usages. Had the legacy of the Syrians thus been frittered away? Was there no one to succeed Crete?

South of Byblos two new cities sprang up—Tyre and Sidon, cities inhabited by a new nation of traders who did not use the sword to enforce tribute but sought, in the spirit of ancient Byblos, to engage in a peaceful exchange of merchandise. Protected by tall walls and by the sea, they were able to resist all passing hostile armies, while Ugarit, also known as Ras Shamra, one of the most important trading cities on the northern coast of Syria, had been pillaged and utterly destroyed by the wild warrior hordes of Phrygians and Mysians from Asia Minor. The trade route from the Mediterranean to the Euphrates thus shifted towards the south: it now led via Tadmor, later known as Palmyra, to the middle Euphrates.

The position of Tyre and Sidon was based on the far-flung network of mercantile bases and trade settlements situated along the shores of the Mediterranean, the Black Sea, and even the Atlantic. To exclude competition the Phoenicians kept their voyages and their knowledge of foreign countries a secret. Whenever they offered their merchandise there were goods from strange, unknown, mysterious countries surrounded by an aura of danger. Fabulous beasts were said to inhabit them, enough to scare off any stranger who might take it into his head to travel to these lands himself. It is therefore not possible to establish with complete certainty to what parts the Phoenician merchants did in fact penetrate.

That they were busy sailing to Tartessus in Southern Spain we know from the Bible. The proud ships of Tarshish were positive symptoms of overweening pride to the ancient Jews. It is almost certain that the Phoenician ships also penetrated to the "tin islands" in the Atlantic; whether these were in fact the British Isles or merely the Channel Islands is unknown.

From the Canary Isles they collected the lichen or the dragon-tree, a pigment vastly superior to the Tyrian purple from the murex shellfish and responsible for the particular brilliance of the Phoenician fabrics. Later the Canary Isles were entirely forgotten, so that the West had to rediscover them in the fourteenth century. The Romans still knew about them, and the Elder Pliny reports a voyage which King Juba of Mauritania organized to them.

The Azores were unknown to Greeks and Romans alike. Yet on one of the smaller islands of this group, the island of Corvo, Carthaginian coins have been found. This means that prior to the destruction of Carthage in the second century B.C. ships from the Mediterranean must have penetrated that far.

If, on the other hand, it was possible to sail from the Mediterranean to the Azores, the question arises of whether ships from the Old World were able at that time to travel right across the Atlantic to America. Many indications seem to point that way, but there is no evidence of any sort.

That the Phoenicians accomplished astonishing feats of navigation we know from casual mention by Greek and Roman authors. Herodotus reports that the Phoenicians had sailed, at the behest of the Pharaoh, through the Red Sea and all around the coast of Africa. But Herodotus refused to believe the account himself, especially as the Egyptians had claimed that during their westward voyage the sun had been on their right. Did this not run counter to all experience? Surely, if you sailed westward the sun would be on your left? But that, of course, is true only of the northern hemisphere. The very reasons which caused Herodotus to doubt the circumnavigation of Africa by the Phoenicians seem to us to confirm it.

The extraordinary extent of the Phoenician trade in the first millennium B.C. is witnessed also by the words of the prophet Ezekiel:

“O Tyrus, thou bast said, I am of perfect beauty. Thy borders are in the midst of the seas, thy builders have perfected thy beauty. They have made all thy ship boards of fir trees of Senir they have taken cedars from Lebanon to make masts for thee. Of the oaks of Bashan have they made thine oars; the company of the Ashurites have made thy benches of ivory, brought out of the isles of Chittim.... All the ships of the sea with their mariners were in thee to occupy thy merchandise.... Tarshish was thy merchant by reason of the multitude of all kind of riches; with silver, iron, tin, and lead, they traded in thy fairs.... Syria was thy merchant by reason of the multitude of the wares of thy making: they occupied in thy fairs with emeralds, purple, and broidered work, and fine linen, and coral, and agate. Judah, and the land of Israel, they were thy merchants: they traded in thy market wheat of Minnith, and Pannag, and honey, and oil, and balm. Damascus was thy merchant in the multitude of the wares of thy making, for the multitude of all riches; in the wine of Helbon, and white wool.... The merchants of Sheba and Raamah, they were thy merchants: they occupied in thy fairs with chief of all spices, and with all precious stones, and gold. Haran, and Canneh, and Eden, the merchants of Sheba, Asshur, and Chilmad, were thy merchants. These were thy merchants in all sorts of things, in blue clothes, and broidered work, and in chests of rich apparel, bound with cords, and made of cedar, among thy merchandise. The ships of Tarshish did sing of thee in thy market: and thou wast replenished, and made very glorious in the midst of the seas. Thy rowers have brought thee into great waters.”

Chapter 3—Athens Lives By Its Grain Trade

After a long and terrible war, and a military and political collapse unprecedented in Greece, the harbour of Athens, Piraeus, slowly began to regain its former importance. Its external appearance had considerably changed since the days before the Peloponnesian Wars (431-404 B.C.). The famous "long walls," which had linked Athens with Piraeus so that supplies for the capital were secure even in times of war, had been razed to the ground under the terms of the peace treaty with Sparta. Athens was not allowed to retain any ‘allies.' It had lost its leadership of the Attic League. Since there was no longer an Athenian fleet in existence, pirates were lurking everywhere to capture the cargo of merchant ships and kill their crews or sell them into slavery. Many a respected Athenian met a pitiful end as a servant in a foreign land.

The merchants of Athens, however, sailed out in the face of all these dangers in order to import grain from the coastal cities on the Black Sea. Along the southern coast of what to-day is Russia the cultivation of grain had developed to such an extent during the preceding decades that vast quantities of wheat were exported from these granaries. Not only Greece, but the countries of the eastern Mediterranean lived off this wheat. One of these numerous "Black Sea sailors" was a certain Stratocles. Just before putting to sea he seems to have had doubts about the advisability of taking money across a sea made unsafe by pirates. In return for a suitable payment in Athens, the banker Pasion, who had evidently financed such grain purchases before, offered to give him a letter of credit for the distant land of the Scythians. This is the earliest record of a banker prepared to finance far-reaching commercial transactions. Unfortunately, we have to confess that he was not a very attractive character. Pasion was a metoikos—which means that he was neither a slave nor a full citizen, but half-free. As he had risen from lowly beginnings he possessed no fortune of his own. He depended therefore on the brokerage of other people's capital. But as he was scarcely known outside Athens, his name, of course, was not enough for a letter of credit. Pasion, however, had a client who was preeminently suited for such financial transactions—the son of Sopaios, then the all-powerful minister of Satyros I, King of the Crimea, from whose fertile fields the Greeks had been importing grain year after year to fill the storehouses in the harbour of Piraeus and feed the population of their cities. Stratocles handed his money over to the son of Sopaios, who was staying in Athens at the time; he, in turn, made out a payment order to be honoured by Sopaios in Trebizond. Nowadays we would say that the son had drawn a bill of exchange on his father. Armed with this paper, Stratocles sailed for the Black Sea. No sooner had he left Athens than disheartening news arrived at Piraeus: Sopaios had fallen into disgrace with his King. Wicked enemies had denigrated him to his master, and Satyros had stripped him of all his honours and offices and cast him into prison. At the same time Satyros had sent messengers to his Pontine subjects in Athens, ordering them to confiscate all monies from the son of Sopaios and to compel the young man himself to return to the Crimea at once. In case the Athenians should support the young stranger the King threatened diplomatic measures. That was a tough language. Athens was anxious, following its crushing defeat in the Peloponnesian War, to build up again the foreign trade by which it lived. It possessed no fleet of warships which might have ensured protection and lawful treatment for Athenian merchants abroad; commerce, in the final analysis, depended on the goodwill of one's business partners. Was Athens to court diplomatic difficulties and strained relations for the sake of a young man?

All this caused the son of Sopaios a great deal of worry. But he found a way out. He made over his money to the banker Pasion, and at the same time confirmed in writing that he had no claims whatever on him, and that he, Sopaios's son, was entirely destitute and of no means. At most Pasion was to pay a trifling sum to the emissaries of the Crimean King. The scheme appeared to work perfectly. The messengers from the Pontus declared themselves satisfied with the banker's explanation.

They had hardly departed when the son of Sopaios demanded his money back from Pasion in order to travel hurriedly to Byzantium. It was then that the banker showed his true colours. He flatly denied having any of his money in safe keeping. He simply referred to the declaration which the young man himself had made before the Pontine emissaries in order to protect himself from prosecution. In the midst of the young man's desperate efforts to get his money back from the fraudulent banker glad tidings arrived from the Black Sea: King Satyros I had restored all his honours to his minister, as the accusations against him had proved to be unfounded. Sopaios's influence and power were greater than ever. At last his son was able to take steps against the treacherous Pasion. And the reason why we are so well informed about this lawsuit is that counsel for the plaintiff' was none other than the famous orator Demosthenes.

The banker stubbornly refused to pay anything. He arranged for the slave Kittos, the only witness to his conversation with the young man, to disappear. How then was anybody going to prove that he had received any money? However, the skillful advocate succeeded in tracing the slave and making him give evidence. Pasion, cornered, declared himself prepared to repay the embezzled money, but asked to be permitted to do so secretly in Pontus so that nothing should leak out about it in Athens. Naturally he wanted to save his tarnished reputation as a businessman; or maybe his new move was again no more than the plot of a cunning rogue?

Agreement was reached, and King Satyros was appointed adjudicator. Pasion admitted his debt in writing and promised full repayment in the Pontine Kingdom. The document was to have been torn up the moment Pasion had paid up. In the event of his trying to evade payment King Satyros was to confiscate the banker's fortune in the Crimean Kingdom. His minister Sopaios, the creditor's father, was to see to it that Pasion was punished.

This important document was entrusted to a certain Pyron of Pherai, a man enjoying a great reputation as a Black Sea mariner; he was authorized to receive the repayment in the Pontine Kingdom. But even before he set out the document—allegedly so carefully kept—disappeared as if by magic. We do not know how the cunning debtor accomplished his trick; presumably he had hired somebody to steal the document. His subsequent conduct, at any rate, seems to point that way.

Once more Pasion thought he was out of the wood. He denied everything. Indeed he felt so sure of himself that, when the suit was resumed, he hit back vigorously at the plaintiff. He denounced the plaintiff, the son of Sopaios, as having engaged in illegal financial transactions in Athens. It was true that the Pontine citizen had repeatedly advanced money in respect of a shipload of freight and made an excellent profit from this business. Pasion now asserted that this ship had belonged to a man from Delos—and to lend Attic capital on ships from Delos was against the law. The Court had great difficulty in establishing the true state of affairs. When all these moves still proved of no avail the rogue Pasion turned to King Satyros himself—but the King would not hear of helping him. On the contrary, he summoned to himself all the Athenian masters of merchant ships who happened to be in the Crimea, or, as it was then called, the Kimmerian Bosporus, and instructed them to give what help they could to his subject in Athens. Moreover, he gave them a letter to the city of Athens, couched in similar terms. As far as we know, Pasion had to pay up in the end.

Sailing the seas was a great adventure, not only because the voyage was to strange countries but because the sea itself was swarming with pirates. The merchant Lykon, while voyaging from Piraeus to Libya, was attacked by pirates at the very gates of Attica and so severely wounded by an arrow that he died in Argos. Another merchant, Nicostatos by name, was taken prisoner by an enemy warship, a trireme, during the same year, 370 B.C., while pursuing escaping slaves, and was himself sold into slavery until his brother Deinon later bought him free.

We also have information about a few particularly feared pirates. One report mentions a certain Alexander of Pherae, an ‘ally' of Thebes, who by a daring coup actually gained possession of the port of Athens, Piraeus, even though only for a brief moment—but long enough to snatch up all the cash from the money-changers' tables.

How, then, was Athens to protect its merchants? For a war fleet of its own the city's modest means were insufficient, and allies were unreliable.

King Philip of Macedon was prepared to join in a struggle against the pirates, but the Athenians feared that the Macedonian officers were merely out to seize the most important islands along the trade route to the Pontus for their own King. After all, Athens lived by its grain trade; without it it would starve. Dare it put itself in the hands of an over-powerful neighbour? How well justified were these misgivings was shown before long when war broke out between Athens and Macedon. Then King Philip himself took part in the raids on the merchant ships. In the year 340 B.C. he succeeded in intercepting a fleet of Athenian merchant ships and warships at the Bosporus. One hundred and eighty vessels—according to other sources, even 230—fell into his hands, as well as 700 talents of silver, worth today nearly $1,400,000. The captured warships he had rebuilt as merchant ships, which again brought in good money. As the rapacious pirates were menacing commerce more and more, Athens was compelled to fortify Cape Sunium, on the south-eastern tip of Attica, in order to give some protection at least to ships leaving and arriving and to prevent an attack on the harbour of Piraeus itself. There are also frequent references to convoys. In the year 362 B.C., for instance, the triarch (or admiral) Apollodorus was called to the Hellespont to take over a convoy of grain ships from the Black Sea, the Pontus Euxinus, the "hospitable sea." Off the city of Hieron he had to wait 45 days for the stragglers; he then escorted the ships as far as Sestos in the Dardanelles (on the Gallipoli peninsula).

There the fleet found new orders awaiting it: it was to protect the grain ships on their voyage to Maronia, on the southern coast of Thrace. In the Aegean Sea the great convoy from the Black Sea dispersed. New, smaller groups were formed, and these sailed from island to island, always in fear of capture by pirates. Ships from the ports of Asia Minor would find protection all along the coast in friendly cities; the Athenians, on the other hand, had to cross the sea. The real threat to them began at Cape Sunium.

As the coast of Thrace was the most dangerous part of the journey, the triarch Apollodorus ordered a few fast triremes (ships with three banks of oars) to escort the freighters to Styrne with their cargo of grain, and, if necessary, to tow them there. Since Maronia and Thasos had been contesting control of this little harbour for several years, the task was not without danger. The inhabitants of Maronia might only too easily capture the convoy since it must pass close by. And the Athenians, to make matters worse, had in their convoy a few ships from Thasos. Bad weather delayed the voyage; eventually the fleet was forced by gales to drop anchor off Styrne. Officers and sailors began to grumble because they had not been paid punctually. In the end the sailors melted away in order to enter mercenary service on shore or to be hired by the merchant shippers of neighbouring Maronia or Thasos, who were promising them not only high wages but a cash advance. Admiral Apollodorus was unable to do anything as he had no money on board. Moreover, his own appointment as triarch had long expired. About all this he sent an impassioned complaint home, asking help of his friend and lawyer, the well-known Demosthenes.

It is easy to imagine how anxious the merchants in Athens must have been about their freight when unfavourable winds or pirates detained the ships in some foreign port without any news getting through to Athens. And the courage that must have been necessary for a man to entrust his fortune to a captain sailing to uncertain foreign parts! In the year 400 B.C., when a merchant named Eraton died in Athens, his creditor filed an action for repayment of a loan to the sum of two talents, or what today would be $4200. True, some property had been mortgaged to him, but after his debtor's death this no longer seemed enough to him. He sued the debtor's heirs, demanding repayment of the debt in full. At great personal sacrifice they had to dispose of their entire remaining possessions.

Of the three sons of Eraton only one was then living in Athens. The other two were away on business voyages at the time of the lawsuit and only returned three years later, safe and well and with substantial sums of money. They now filed a suit for compensation against the overanxious creditor who, they maintained, had forced their brother into unfavourable panic selling. They made the point that they were emporoi—i.e., merchants enjoying a privileged position and specific protection by the law against over-rash suits. The emporos was a merchant who carried his wares on board ships owned by others. A merchant who had his own ship and conducted his business by means of that ship, and hence as a rule traveled aboard it in order to buy and sell in foreign ports, was known as a naukleros.

In the fifth century B.C. the law used the term naukleroi only for the masters of ships. Subsequently the two terms began to be confused. The merchant who owned his ship continued to be referred to as an emporos on some occasions, but was always called naukleros when the emphasis was not on his trade but on his ownership of the vessel—i.e., his position as captain. The business of the naukleros, however, was not confined to the carriage of his own merchandise: he also transported goods belonging to others. According to another interpretation, the naukleros need not even be the owner of the ship, or even the captain or helmsman; he merely had to engage in commerce by means of a ship under his command. Such a naukleros, therefore, was not so much a merchant as a carrier, or forwarding agent, who might conduct his business also by means of chartered ships. His principal task consisted in taking on himself the very considerable transport risks and getting the ship with its cargo safely to its destination.

The news of King Philip of Macedon's victory over the Greeks in the battle of Chaeronea (338 B.C.) caused great excitement in the island of Rhodes. The emporoi and naukleroi—i.e., merchants as well as shipowners—hurriedly unloaded the grain they had just loaded for shipment to Athens, because they were afraid of its falling into the hands of the victorious Macedonians. Evidently the naukleroi, too, were responsible for the safety of the merchandise entrusted to them.

We have practically no records about the merchant families of Athens. The noble Athenians preferred to take up politics or philosophy rather than commerce, which in their hearts they despised. No wonder that the foreign trade was left to the slaves and the half-free. But as soon as these merchants engaged in lawsuits, the great gentlemen, the lawyers or politicians, were only too pleased to act for them, for these suits yielded fat fees for counsel. The law records and sentences which have come down to us represent the merchants less as entrepreneurs in charge of purchase and sale in foreign countries than as captains seeing their vessels with their valuable cargoes safely to their port of destination.

Having spent many years as a merchant on the seas then known, and having accumulated quite a nice fortune in the process, an old, experienced mariner would retire to somewhere near Piraeus and decide to let his money work for him; he might lend it to others, maybe to young men whom he himself had trained. One such retired sea captain, Parmenides by name, was visited one day by Aparaturios, who wanted to borrow money from him. Aparaturios was in difficulties, because he had borrowed 40 minx on his ship, and his impatient creditors were demanding it back at the very moment when he wanted to set sail. A political refugee from Byzantium, Parmenon, was prepared to lend him Io mime (about $336) provided the old captain Parmenides could find the balance of 30 minx. As the ex-captain did not at that moment have this amount in ready money he persuaded the banker Heracleides to lend him the sum; Parmenides undertook to stand surety for it. Rather a complicated financial transaction-and, as we shall see, it came to grief.

First of all, Parmenon and Aparaturios quarreled. Parmenon seemed to have greatly over-estimated his financial resources; in fact, he had scraped together a mere three minx (no more than $112) which he was now furiously demanding back. The old captain came to the rescue, buying off the Byzantine and taking upon himself the entire debt of Aparaturios. Pending repayment of his 40 minae he had the ownership of the vessel transferred to his name by contract. But even before the ship was able to leave harbour Heracleides's bank crashed. The cunning Aparaturios thereupon tried to sneak out of Athens quietly, complete with ship and crew. But Parmenides, the old sea-dog, had been on the look out. He knew human nature, and no doubt had been disillusioned before.

He at once obtained a court order to have the fugitive crew arrested and the ship put on a chain. He next handed the vessel over to the creditors of the crashed bank as a lien for his pledge; the entire crew, composed apparently of slaves, were simply confiscated. The sale of the vessel by distraint produced 40 minae, the exact amount of the captain's debt. Parmenides came off lightly, but the dishonest Aparaturios had lost a ship.

Business transactions in Piraeus were at times rather complicated, and a good portion of psychology and shrewdness were necessary if one was not to be cheated by the numerous rogues. We must be careful, however, not to generalize from a few individual cases, or cast aspersions on the probity of the Athenian merchants. Records of lawsuits invariably present a one-sided picture; they do, however, provide an excellent glimpse of the everyday life and anxieties of the merchants of the time—and not only of that time.

Another point that stands out clearly from all these accounts is the tremendous importance which the Black Sea had gained for Greek trade by the fourth century B.C. A hundred years earlier, when the great traveler Herodotus of Halicarnassus visited those areas, the great agricultural transformation was just beginning. Cattle-breeding and fishing were being supplanted by arable farming; thus Herodotus still encountered tribes of horsemen who lived as nomads with their herds. In his day the Greek merchants' main import from the Sea of Azov—the Maiotis, as they called it—was fish. The salt which was obtained in summer by the evaporation of sea-water on the foreshore was used for pickling it on the spot. Indeed it was fishing and the fish trade that gave rise to the first Greek cities in Colchis, the land where Iphigenia was kept a prisoner during the Trojan war, pining away with nostalgia for her native Greece.

Herodotus also reports merchants traveling from the shores of the Black Sea as far as the Baltic in order to buy precious amber on the Samland coast, or eastward to the Altai, passing north of the Caspian, in order to bring back gold. His account is still a colourful mixture of fairy-tales, legends, reports but improperly understood, and factual accounts of travel adventures and trade relations in this strange world. We are told about those fabulous people, the Hyperboreans, who slept throughout six months (an echo, no doubt, of the knowledge that the polar night lasts six months) or about gigantic ants which dug the gold from the ground in Central Asia.

A century later vast areas along the Sea of Azov had been turned by the plough. The Pontus became Greece's granary. To a large extent it offset the grain imports which used to come from Sicily, but had ceased since the Peloponnesian War, in which Athens had tried in vain to capture the city of Syracuse, the centre of the Sicilian grain trade. Carthage, that ancient Phoenician foundation (reputedly 814 B.C.), gradually became a dangerous rival to the Greeks' trade supremacy. During the war the Carthaginians succeeded in forcing the Greeks back from the western part of the Mediterranean and in blocking their passage through the Straits of Gibraltar, or, in the language of the day, past the Pillars of Hercules. Only the Carthaginians could sail out to the far islands in the Atlantic, to the Isles of the Blessed. Traders from the eastern Mediterranean were no longer able to call there.

In the eastern Mediterranean the victories of Alexander the Great shifted the centre of gravity of commerce from the Greek mainland to Rhodes and Delos, those important islands in the Aegean, to Alexandria, Alexander's magnificent foundation in Egypt, and to Antioch on the Orontes in Northern Syria, immediately south of today's Alexandretta.

During the years after Alexander's death the island of Rhodes experienced an astonishing rise to power; it became the true hub of world trade. Whenever the later Greek geographers drew a world map they began by ruling two lines which intersected in Rhodes. One of them ran from the Pillars of Hercules along the Algerian coast via Carthage to the southern tip of Sicily, and thence to the southern point of the Peloponnesus and to Rhodes; from there it followed the southern coast of Asia Minor and then ran, somewhat fancifully, along what was said to be a continuation of the Taurus mountains across Mount Elbrus to the Himalayas. The second line, also a little fancifully, came up from the south along the course of the Nile—which was considerably stretched for the purpose—and ran via Alexandria to Rhodes and thence along the Aegean coast of Asia Minor to Byzantium on the Bosporus, to the Danube estuary, and across Russia to the Baltic—the Russian rivers being all forced into a north-south direction, with the Dnieper, then known as the Borysthenes, being made to follow the meridian of Rhodes. These then were the co-ordinates of the known world. And at their intersection, right at the centre, lay the port sought out by heavily laden ships from all parts of the Mediterranean and the Black Sea. The ships which the Rhodians built in their shipyards, according to entirely new principles, were objects of amazement and wonder among all seafarers of the day. But the Rhodians guarded their secrets jealously; no stranger was allowed into their shipyards.

After Athens, Alexandria, and Pergamon, Rhodes was one of the most beautiful cities of the Greek world, and moreover a centre of Greek civilization. Rhodes at that time had three harbours, all of them artificially constructed. From the hills the city descended to the sea in the shape of a fan, like an amphitheatre. It was girdled by walls on all sides, even along the sea. From afar sailors would spot the enormous statue of Helios, the famous Colossus of Rhodes, one of the Seven Wonders of the World, which was destroyed by an earthquake. In the market, the deigma, merchandise was exhibited from many foreign lands.

The ancient world frequently admired the method by which Rhodes tried to solve its social problems. "The Rhodians," Strabo recorded,

“look after the demos, the people, although they are not ruled by them; they endeavour to ensure a livelihood for the masses of the poor. The people are therefore supplied with grain, and the prosperous support the needy as their forefathers did before them. Thus even the poor have enough to live on, and the city has its own requirements adequately satisfied, especially where shipping is concerned.”

Rhodes owned considerable territory on the near-by Asian mainland, and many a Greek city paid a large sum in order to enjoy the protection of the powerful Rhodian fleet.

This centre of world trade was ruled by a relatively small group of old-established families—wealthy merchants, bankers, landowners, proprietors of shops, and officers of the fleet. The island's most important achievement, without any doubt, was the development of a law of the sea, based on Syrian and Phoenician models. It soon gained acceptance throughout the entire Mediterranean area. Even the Roman emperors still pronounced judgment in accordance with "the law of Rhodes."

Relations between Rhodes and Syria were particularly lively. There were many Syrians living in Rhodes; they played an important part in the island's trade, in the exchange of Eastern for Western merchandise. Amphorae, those beautifully shaped pottery jugs for wine and oil, have been found in all the major trade-centres of the Hellenistic world—in Greece and in Asia Minor, in Egypt, Syria, and Palestine, as far as Seleucia on the Tigris, in Susa, Carthage, Southern Italy and Sicily, in Southern Russia and the western Black Sea ports, and even on the slopes of the Carpathians. The pattern of this trade and the composition of merchants and sea-captains had changed very little. Piracy, too, was much the same as before, even though the Rhodians maintained a considerable fleet to combat this menace. Besides, conditions were not much better in the western Mediterranean: merchant ships there were terrorized mainly by the Tyrrhenians, by which presumably is meant the Etruscans.

When one of the successors of Alexander the Great, the diadoch Demetrius Poliorcetes, the "destroyer of cities," as he was called by followers and enemies alike, attacked Rhodes he called upon all pirates in the Mediterranean to enter into his services. In return he promised them a considerable share in the loot of the merchant city. However, their hopes of rich booty were disappointed. The beleaguered city gallantly resisted all attacks.

Rhodes owed its rise to the emporoi, the import-export merchants of whom we know already from Athens. It was they who took upon themselves the risk of shipping valuable cargoes to all ports of the Mediterranean and the Black Sea; they were entitled to call on the fleet at any time, asking for convoy escort.

During his absence an emporos could not be sued in a court of law or sentenced; there were no restrictions on his leaving the country, and even in times of war he was allowed to move freely. An Athenian citizen, Leocrates, was accused of having left Athens secretly during the war against King Philip of Macedon, just before the decisive battle of Chaeronea. This, the Public Prosecutor Lycurgus declared, was tantamount to desertion. Leocrates, however, pointed out that he had left the city in his capacity as a merchant, and that this right could not be denied to him. All that Lycurgus could say in reply was that Leocrates's name was not included in the list of merchants regularly using the port of Piraeus. The lawsuits of emporoi were heard by special courts without delay; indeed, their entire activity was covered by special laws. At the same time, we find, rather surprisingly, that the business of an emporos, an import-export merchant, could be discharged by the half-free metoikoi, or even by slaves, who, as a result, gained special protection by law, whereas only full Attic citizens were allowed to engage in trade in the Athenian market.

We are faced here with a principle which runs through the whole history of commerce. For the long-distance trade—for the import and export of goods—the merchant, as an independent class, is indispensable. The sale of goods manufactured within the city, on the other hand, is the exclusive right of the manufacturers—i.e., the artisans. Why indeed should a middleman be allowed to step in and profit from such transactions? The simple artisan, the tailor or the shoemaker, was clearly distrustful of the smooth, slick, cunning Syrian, who might lure his customer away from him.

In the import-export trade, on the other hand, the main emphasis is on the risk, on the pleasure of doing business, and on the prospect of fat profits. It needed courage to furnish a ship, load it at great expense, and then wait for months, and sometimes years, until the captain returned with ship and merchandise. Courage, too, to risk an entire fortune in such an enterprise. A merchant needed confidence in himself, in his abilities, and in his knowledge of people. And he had to enjoy the confidence of others to get them to lend him money, and that, moreover, under the restrictive conditions of marine loans.

Wherever these merchants appeared their competitors grumbled. But their customers received them with open arms. They were delighted to be able to buy goods which did not exist in their own country: foodstuffs and indispensable raw materials, jewelry and ornaments, and sweetly smelling perfumes. Moreover, they could get rid of their own surpluses at excellent prices. That was just what annoyed the local consumer, the man in the weekly market, for naturally the prices rose steeply the moment the foreign buyers appeared. Rulers and police viewed every stranger with great distrust, in case he was a spy of a foreign power, a disguised pirate on reconnaissance, the political agent of a neighbour country, or the emissary of a group of discontented exiles engaged in subversive activity against their own city.

The oldest records show us the foreign merchants living in special quarters. The Assyrian merchants in the Hittite Empire had to live outside the city walls, where they were at the mercy of an enemy. Before Alexander the Great conquered Egypt the Greeks there inhabited their own port—Naucratis—where they lived as a self-contained colony. It seems probable that the Syrian merchants had lived abroad under similar conditions for hundreds and perhaps thousands of years. It is even possible that the Jewish ghetto, into which the Jews moved voluntarily, goes back to these historical conditions rather than to the religious reasons usually adduced in explanation.

From the Black Sea the Greek merchants advanced across the Danube area as far as Northern Europe; they pushed into Western Asia, along the ancient trade routes and through Persia and the Indus valley into India and Central Asia. Presently they succeeded in finding the way through Egypt to the Red Sea, to the east coast of Africa, and even to India.

Caravans would set out from Antioch on the Orontes: they might not be seen again for months or even years, until one day they reappeared on the eastern frontiers of the immense empire. Until then they were regarded as missing.

As a result of this intensive commerce daily life in the Mediterranean area underwent considerable changes. Sugar from sugar-cane, which grew only in India, was unknown in Hellenistic times. For a sweetening agent honey was used, and for fermentation grape-sugar, palm-juice, or dates. Sugar as a food was hardly known. Even in Roman days sugar was still regarded as a medicine, as we know from Pliny. Yet sugar-cane was being cultivated at that time in Arabia, although it did not reach the Mediterranean zone until the late Middle Ages. From India came spices, in particular cinnamon and pepper, which were then definite luxuries.

In Ptolemaic times trade between the West and India was in the hands of the Arabs who acted as intermediaries; they simply did not allow any rival into the Erythraean Sea, today's Indian Ocean. If the Greeks wanted to deal directly with India and to bypass the obtrusive and expensive Arabs, they had to choose the land route from Antioch via Babylon and Persia into the Indus valley.

It was by way of India that two important plants came to the West—rice and cotton. Very ancient Chinese documents report that rice was planted by the emperor in person, so great was its importance as a national food. The Greeks first came to know rice in Alexander's campaigns. Not long afterwards we hear that it was being cultivated also in Mesopotamia and, a little later, in Syria. The historian Strabo saw it in Syria in the days of Augustus, but he knew nothing of it being planted in Egypt; on the other hand he reports it as being grown in the land of the Garamantes—i.e., in Northern Africa, south of Carthage. Could the Phoenician merchants have brought it that far to the West?

The Greeks also made the acquaintance of cotton during the campaigns of Alexander the Great. According to our sources they met it in Bactria, or what to-day is Soviet Turkestan. Cotton used to be cultivated in the upper Indus valley at the time of the most ancient of Indian civilizations, around the third millennium B.C. To the inhabitants of Mesopotamia it remained unknown, although trade relations then existed between these areas. Admittedly, we find occasional mention in cuneiform inscriptions of "wool" growing on "trees," but this "cotton tree" was not related to our modern cotton plant; the fibre it yielded was very inferior. Nor was cotton known in ancient Egypt. At any rate, early Egyptian garments were made not of cotton but of linen.

The Greeks first planted cotton in the island of Tylos in the Persian Gulf, from there it spread rapidly through the greater part of the Hellenistic world. If we interpret Pliny correctly and if we are right in translating his word byssus by "cotton," the plant was cultivated even in Greece itself. However, it took several hundred years before the cultivation of cotton in Egypt reached a scale which made that country independent of imports from India.

Many kinds of fruit also came to us from the East in the train of Hellenistic commerce. The name Citrus medica shows that the Romans regarded the lemon as a fruit of the Medes—i.e., of Persia. The orange was not introduced into the Mediterranean area until the victorious advance of the Arabs. The cherry had been known in Italy for several centuries, but it was the general Lucullus, a well-known gourmet, who introduced a particularly delicious variety of sweet black-heart cherry from the Pontus, where it was cultivated in orchards (64 B.C.). Many types of fruit which had long been known in their common variety were introduced in cultivated strains from Syria and Persia—the plum, for instance. The Elder Pliny, who lost his life in the eruption of Mount Vesuvius in A.D. 79, reports that the apricot, which came from Armenia, was being introduced into Rome just as he was writing his book. The peach, the Malum persicum or "Persian apple," was gaining ground in the Roman Empire at much the same time. Theophrastus made its acquaintance during Alexander's campaigns, but it was only Augustus who brought it back from Persia. It probably came originally from China. Pliny also reports that the Greeks in Alexander's army ate bananas while in India.

The Persians had been visiting the Indus valley long before Alexander; the Arabs had been sailing to India for thousands of years, even to Southern India, although at first only by hugging the coast. Yet neither of them had succeeded in trading the merchandise of those remote countries to any considerable extent; they confined themselves to occasional transactions. The regular movement of merchandise only started with the Greeks.

This Greek trade was no longer confined to luxuries, such as incense for the gods, unguents, perfumes and cosmetics for both men and women, indigo, spices for gourmets, pearls and precious stones, choice fabrics of cotton and, increasingly, silk. It was the Greeks who moulded Alexander's huge empire into one vast economic unit, even while it was falling apart into several separate kingdoms.

Megasthenes, the Greek Ambassador to the Court of King Chandragupta (321-296 B.C.), reports that the Indian customs administration had its headquarters in a special customs house by the great gate of Pataliputra on the Ganges. On the approach of a caravan four or five customs officials would rush out, and then carefully they would write down the quantities and origin of all merchandise, making sure that all articles bore a seal of origin. If these seals were broken, or if a customs official became suspicious for any other reason, a thorough investigation followed, leading frequently to heavy fines. A favourite practice, even at that time, was the confiscation of the articles in favour of the State, followed by their sale by auction to the highest bidder. There were heavy penalties for false customs declarations.

Both exports and imports were subject to heavy duties, designed to protect the domestic producer. Native articles could not be sold by merchants in their place of manufacture, lest the king should lose the revenue from customs duties. This ban applied only to merchants, not to artisans. As a rule, the customs duty was one-fifth of the value of the goods; for fruit, vegetables, seeds, dried fish, and dried meat it was only one-sixth, and for clothes, animals, grain, fats, and salt it was only one-twentieth. Quite apart from customs, the merchant's life was made increasingly difficult by a growing body of bureaucrats who interfered in everything and issued ever-new regulations. Strangers were treated with particular suspicion. They needed not only passports but special permits for every time they entered or left the country.

Yet once these trade relations with India had been well established, they were not swept away even by political troubles. India's wealth continued to attract the Greek merchants; these merchants, however, began to abandon the dangerous overland route which led from Broach, then the chief transhipment centre for merchandise from central Asia, via Pattala in the Indus delta, across the Persian Gulf to the estuary of the Euphrates, and thence upstream to Babylon.

The sea route was gaining in importance; this led from the Malabar Coast in Southern India across the Indian Ocean to the island of Socotra on the African coast, off' the Gulf of Aden, and thence on to Aden (whose Greek name was Eudaimon) and Arabia, later to be called Arabia Felix by the Romans. Although there were numerous Indian merchants in the Ganges valley and the North-west, foreign trade in the Indian Ocean appears to have been chiefly in the hands of the Arabs until Roman times. Few Indian merchants seem to have joined the ranks of the bold mariners of those days, and much later still the Indians ventured out on to the sea only with great caution and deliberation. Even the Greek merchants who visited India in Hellenistic times and left us accounts of the land and its people remained exceptions until the Greeks discovered the secret of the monsoon. But this was only achieved by Hippalos about 100 B.C.

Egypt's chief export article in its trade with India continued to be linen, which was the only commodity accepted as payment for spices and cotton. The Arabs in Hadramut and on the northern coast of Arabia, who acted as middlemen in this entire trade, firmly refused to buy any other articles.

From far distant regions only luxury goods were imported, such as spices, precious stones, delicate cotton fabrics, gold, ivory, and perfume; from the Sudan came frankincense and myrrh. In the Mediterranean, on the other hand, heavy freighters were carrying bulk cargoes—grain from the Crimea and from Egypt, some also from Sicily, copper from Cyprus, the Sinai peninsula, and even Spain, iron from Northern Asia Minor, mercury from Cappadocia, tin from England and Spain, partly by way of Carthage and partly by the land route through France, oil and honey from Syria, figs from Asia Minor, timber and

pitch from the forests of Thrace, and wool from Lydia, Phrygia, and the western coast of Asia Minor.

We have a report of a merchant named Zenon importing vines from Chidus and Chios into Egypt—we have his receipt for 30,000 seedlings made out to another merchant. He cultivated oil-bearing plants, onions, leeks, lentils, sesame, the castor-oil plant, beans, peas, lupins, and even roses. Herodotus had reported that no vines were grown in Egypt and that all wine drunk on the Nile had to be imported. But now, thanks to this commerce, Egyptian agriculture had undergone considerable changes; the kingdom of the Pharaohs, formerly cut off on all sides, became part of that great economic system which comprised all the Hellenistic states, and indeed the entire Mediterranean and, beyond that, the whole world known to antiquity.

The North African trade was beginning to be transformed by the introduction of the camel, progressing gradually from Egypt towards the west of North Africa and rendering possible journeys by caravan across vast waterless deserts.

Everywhere we see traces of this flourishing trade: wine amphora' from Rhodes, Cnidus, and Thasos have been found in Southern Russia and on the Nile, among the western Greeks in Sicily, in the South of France, and in Iran. Greece continued to live on grain from the Black Sea area. Whenever there was a hold-up in traffic through the Bosporus, or when Byzantium increased the passage dues for ships, the effects were instantly felt throughout the Greek world.

Ships were increasing in size. On the Nile they soon reached a displacement of 500-boo tons. Ptolemy IV owned a yacht of over 4000 tons, which contained not only vast dining-halls and a library, but even a gymnasium. Journeys were taking less time. From Alexandria to Rhodes a merchant would need only four days now, from there to Southern Russia another ten days, or up the Nile to the Sudan also ten days.

Owing to abundant supplies from all parts of the world the prices of the principal foodstuff's began to drop. Besides, peace had at last been established and piracy suppressed, so that marine transport risks, and hence the excessive freight rates, were greatly reduced. Whereas at the end of the fourth century the carriage of an article from Athens to Delos cost two drachmas, a generation later the same freight cost only half a drachma.

Egypt was supplying grain so cheaply that the small farmer in Greece was ruined. Since on his meagre native soil he could not possibly compete, he emigrated to the countries of Asia and to the Nile valley. Besides, wages went much further there than in Greece, simply because everything was so cheap. A workman on the Nile earned more than a scribe in Delos, and an office employee more than an architect in Athens.

But while Hellenistic commerce was spreading farther and farther, while the wealth and hence also the importance of merchants was increasing in the island of Rhodes and in the great ports of Antioch and Alexandria, a counter-movement designed to throttle trade had come into being.

The Greek conquerors had made the acquaintance of the Oriental State with its all-powerful and arbitrary control of business and inter-traffic. The State, moreover, wanted the profits for itself. Even the kings who came from Greece, the successors of Alexander the Great, as well as their ministers and senior officials, presently began to participate in commerce; they drew it into their sphere of influence, and eventually got it entirely under their control. Apollonius, for instance, a minister in Alexandria, dealt in iron, wool, oil, horses, and-needless to say—slaves. We know about this ‘sideline' of the great gentleman because an employee of his-we might say his right-hand man—one Zenon, made use of his official journeys for engaging, alongside his official duties, in various private transactions, including quite a few on his own account—transactions of a similar variety to those of his ministerial master.

Free trade was a thorn in the side of officialdom. Everywhere State monopolies were being set up—for the cultivation of oil-bearing plants, for the extraction of oil, and for its sale. Private trade was stifled by high taxes. There were taxes on slaves, on buildings, on turnover, and on inheritance. Duty had to be paid on the keeping of cattle, poultry, and even bees. To meet the requirements of the army free deliveries had to be made of cattle for slaughter, skins, and honey. Even urban crafts were taxed. Special licences were necessary for weaving, fishing, selling groceries, and making pottery; naturally, all these cost money. Manufacture and sale of oil, salt, flax, the fulling and dyeing of cloth, the kilning of bricks, the manufacture of glass and papyrus were all State monopolies, as was also trade in jewels, wine, lentils, cheese, spices, and sodium.

Local potentates and high officials moreover issued additional arbitrary ordinances which assured them of unlimited power in the economic sphere. Soldiers and officials acted on innumerable instances as entrepreneurs and merchants. They confiscated land and property, expropriated the workshops of artisans, accumulated large sums of money on their military campaigns or by shady deals, and took bribes. True, they lacked specialized knowledge, but for that they had highly qualified slaves to whom the management of their businesses could be entrusted.

Their only danger was free competition—but then what were laws and prohibitions for? The State regulated everything—the areas to be planted under oil-bearing crops and the size of fields; the State issued the seed-stock, and in the textile industry fixed all prices from the raw material to the finished article, limiting the profit margin of the middleman. Without official permission the few free workers were not allowed to leave the place of work assigned to them. For an officially fixed wage they had to work in that place and nowhere else.

Foreign competition was kept out by high tariff walls. Even more effective were arbitrarily fixed prices for imported articles, which caused the merchants to lose all interest in such business.

Yet it was the Greek merchants who, in the first place, had welded the separate parts of the vast empire conquered by Alexander into one economic unit and who subsequently had held them together when Alexander's successors, the diadocbi, tore the separate provinces apart and transformed them into independent kingdoms.

It was due to the merchants that everywhere the most favourable conditions of soil and climate were being utilized for the growing of grain, flax, and oil crops. They brought these crops to where they were wanted and were able to offer them anywhere at a reasonable price. Throughout the entire Hellenistic sphere the peasants were moving their homesteads to wherever they found more favourable living conditions. The Greeks were leaving their hard and stony soil and emigrating to the fertile Nile valley, to Syria, and to Mesopotamia.

Mysians and Phrygians in Asia Minor, Jews and Arabs, Iranians and Libyans, were likewise seized by this urge to travel. Countless foreign colonies arose in the Egyptian cities; we have knowledge of Bithynian and Cilician groups. There is occasional reference to the great wealth of the Jewish colony in Alexandria; at the beginning of our era the Jews there spoke Greek among themselves. The Syrian colonies, presumably, were no less rich and respected. The great majority of them were merchants who preferred to stay in the background lest they should arouse the envy of officials.

By then the states of the Hellenistic world were ruled by the soldiers, by the successors of the generals who, together with Alexander the Great, had conquered these rich lands of the Persian Empire and were now demanding their share in the huge booty. What did they know of the peaceful, unobtrusive work of free merchants? Accustomed to command, they believed that they could prescribe to the subjected nations their way of life and work. Free trade seemed unnecessary to them; they tried to supplant it by their bureaucratic apparatus. They did not notice that life was slowly grinding to a standstill, and that all enterprise was disappearing, and that the people were doing but reluctantly what they were ordered to do.

The frontiers of the individual states were closing, traffic across them ceased, the exchange of merchandise came to an end. True, riches continued to accumulate at the courts of the kings who, though of Greek origin, had become Orientals in their mode of living, but the broad masses of the population stood apart and aloof from political life. Rome met very little resistance.

Chapter 4—The Fall of Rome

It was another red-letter day in the island of Delos. Ships were arriving in endless succession, heavily laden with an unhappy cargo: human beings, slaves. Crowded together in a narrow space were thousands and tens of thousands, and still the sailing-boats and galleys were bringing further masses of humanity. Rome had won another victory.

Even today, after the horrors of the Second World War, when millions of people spent years in captivity or forced labour, we find it difficult to picture just what a Roman victory meant. In the train of the victorious Roman legions a wave of misery and human grief swept the land.

Prisoners of war had always gone into slavery. Whoever surrendered in battle forfeited his life. And slavery, at any rate, seemed preferable to death. Hannibal sold the Romans he had captured at the battle of Canna in the slave markets of the East. After Rome had won the Second Punic War most of them were bought back by their relations.

Rome had sold entire cities and nations into slavery. The whole population of the Greek trading city of Tarentum, some 30,000 human beings, were sold in the slave market in 209 B.C. When the renowned and wealthy trading cities of Capua and Syracuse were captured all the inhabitants were made slaves.

During the Second Macedonian War any leading figures not readily submitting themselves to the service of Rome were dispatched into slavery by the caravan load. Not only the Greek intelligentsia but the entire Macedonian nobility were thus sold into slavery. Rome condemned the whole nation of the Molossians in Epirus to slavery because they had dared to offer resistance. The inhabitants of 70 cities had to take the sad road to the slave markets. Twenty-two years later, when the Romans conquered Corinth, they destroyed the city and deprived all its inhabitants, some 140,000 people, of their freedom. In the same year, 146 B.C., Carthage fell; once again the victors sold the surviving population.

In his Gallic War Caesar reports that one-third of the young men of military age in Gaul lost their lives to the Roman sword and that a further third were sold into slavery. A large proportion of these slaves were bought and sold in Delos. For some time this island was dependent on Rhodes. But as the inhabitants had supplied food to the Macedonians, the enemies of Rome, the victors simply decided that the entire population must quit the island. Under Roman protection Delos thus became a free port, eminently suitable for this most pitiful of all forms of commerce. Revolting as this trade may seem to us, we must nevertheless take a closer look at the organization which made it possible to sell and ship such vast numbers of slaves in so short a time.

Clearly such large numbers of people could not possibly be kept on the island for any length of time without grave risk of famine and epidemics, which would be most detrimental to business. The ships which brought the unfortunates from the theatre of war to Delos thus had to leave port again as soon as possible, taking their human cargo to its destination.

Every Roman army was accompanied by several wholesale merchants, the mangones, who would buy up the booty of the soldiers, sort it, and dispatch it to Delos. To make the enterprise worth while the average price realized by a slave had to be the equivalent of $56 to $84; particularly valuable slaves, however, had to be picked out first and advertised separately. The greatest demand was for good cooks and—significantly—experienced merchants, who realized correspondingly high figures. The price paid for a beautiful young female slave could be as much as $672. `Worthless' slaves had to be sold at a cut price of no more than $8.40.

From these figures it is easy to calculate that the capture of a city of 10,000—quite apart from the treasures seized during the looting and from the land and property distributed among the soldiers or sold by auction—would yield something like $280,000 from the sale of human beings alone. No wonder that the Roman wars began to assume the character of vast slave hunts. No general would set out without surrounding himself first with slave merchants who made him firm offers for the booty to be expected. Each victory meant great sums of money with which all the debts incurred earlier could easily be redeemed. Thus the impoverished Roman landed gentry, who until recently had tilled their own fields, became a wealthy class within a few decades.

The Romans did not suspect at that time that this disastrous slave policy would do them a great deal of harm in the future. Their entire politics came to be dependent, to a certain extent, on the slave traders. It was they who advanced money for expensive wars and who insisted on the wars being waged ruthlessly, in a way that would break the will of the enemy nation to resist. After all, they could make profits only if the generals mercilessly turned the vanquished into slaves. The great gentlemen, who did not look beyond their attractive profits, evidently did not realize this at first.

The slave trade was only able to achieve such huge profits because its `merchandise' was available at such incomparably low prices. So long as Rome waged its wars as definite wars of conquest and depredation, so long as it burst into wealthy and flourishing kingdoms and seized their treasures to finance its own war effort, the campaigns yielded a good profit. The prisoners taken in open battle were not nearly numerous enough to meet the costs of the extensive organization connected with the slave trade in Delos. Entire nations had to be enslaved to assure the soldiers of sufficient revenue.

At first glance the enslavement of a whole nation or even a major city might seem impossible. Of course, the vigorous young men, the women, and the girls were sold easily enough; but who wanted to acquire the aged and the infirm, the sick and the children? They represented a great financial burden which, in normal times, would be borne by the community. For the slave trader who acquired an entire population wholesale, there was only one possibility—ruthlessly to pick out from the multitude of human beings those who would achieve a price above average. The remaining population had to be discarded before new expenses were incurred.

After the destruction of Corinth in 146 B.C. its territory was given away as presents or declared alter publicus—i.e., property of the Roman State. How, then, were the unfortunate people who had been released again as unsuitable by the slave traders to make a living?

Even more frightful was the fate of the slaves. Manacled and branded, they were shipped from Delos to Italy, to the great estates with their appalling slave barracks, the ergastula.

Not all slaves had to do hard physical work; not all of them died miserably in the slave barracks. A proportion of them, no doubt numerically small but none the less of great importance, were made to take up responsible managerial posts on estates, in enterprises, and in offices—activities for which their masters lacked the time or perhaps even the ability.

Roman senators and generals acquired huge fortunes within a short span of time. Caesar became one of the richest men in Rome as a result of his victories in Gaul; his officers and officials acquired enormous fortunes, and even his soldiers returned with very considerable treasure. The looting of Celtic temples caused Rome to be so flooded with gold that a pound of it with a currency value of $504 was offered for sale for 3000 sestertii ($22.40). The rich booty made by the soldiers in Asia Minor brought them even greater profit. What could they do with all that money?

They looked for suitable bailiffs or men of business. That was why slave traders had a standing order to discover experienced and clever merchants who might be entrusted with the management of these enormous fortunes. Naturally, this wrought a complete change in the whole merchant class, not only in Italy but throughout the Mediterranean area. As all money, all power, and all trade was accumulating in the hands of a few Roman magnates, people as a rule with no commercial experience and but indifferent education, all business came to be in the hands of slaves.

The Roman master would give his slaves his instructions, threatening severe punishment for any mistake or failure. He himself had no understanding of business matters—but had he not purchased an expensive slave who had been recommended to him as an experienced merchant from Corinth, Athens, Rhodes, or Tyre? If anything went wrong it could only be because of the carelessness, laziness, negligence, or malice of his slave. A Roman citizen was free to have an insubordinate or incapable slave flogged or even killed. And under such constant threats the unfortunate slave was expected to conduct complicated business!

Many of them, a great many, failed. They had never been consulted; they had had no say when they had been sold at a high price as possessing heaven-knew-what qualifications. They were faced with insoluble problems. In the end they would be banished to some estate in the country to end their days pitifully in the ergastula. Others succeeded them, and others still, until at last a man would be found who measured up to his master's requirements. Frequently, no doubt, this was due not so much to his business ability as to his skill in making himself indispensable to his master.

Such a slave would then propose risky transactions, promising great profit—such as exports to some new province—which would depend entirely on his own specialized knowledge. Once the proprietor had committed himself to such business he was to a large extent dependent on his slave. Naturally, he could have him flogged or even killed, but that would not get him anywhere. On the other hand, if everything went well, the slave's master could earn a multiple of what the slave had originally cost him in Delos. Presently he would wish to engage in further, even more extensive transactions. He would offer the slave his freedom, or he would make over to him part of his own huge fortune on credit or for administration. Thus began the rise of the disenfranchised towards freedom, social standing, wealth, and, ultimately, unlimited power. And these were by no means isolated instances.

Anyone who knew his way about Rome tried first of all to gain the favour of the imperial chancellery—staffed entirely by slaves—by means of presents, flattery, or the right go-betweens. Whatever was suppressed in the chancellery would not come to the Emperor's ears. This was well known even to otherwise powerful and influential senators and officers. And what applied to the imperial chancellery applied in many another case. After all, what was a simple soldier, or even a cunning politician, to do with the fortune which fell to him unexpectedly when his army had won a victory, when his party had come to power, when a profitable governor's post was offered to him? He simply bought a slave who was used to handling large fortunes; to him he left the management of his affairs, possibly with the threat of having him crucified if there was the slightest embezzlement.

In the first century A.D., when Augustus came to the throne, Rome was practically ruled by slaves. Everywhere slaves sat in influential posts, naturally not in their own names but on behalf of their masters, who neither wished nor knew how to discharge these functions themselves. Maybe the ultimate decisions were still those of their masters who may have insisted on having the last word. But in fact business had become far too involved for any individual to gain an intelligent grasp of it at a single quick glance.

Why did not the Roman magnates choose their collaborators from among the free citizens of Rome? Until the end of the third century Rome was a purely agrarian country, with trade playing but a subordinate part. When wealth began to flow in it was far simpler to buy a good, experienced slave to manage the troublesome business of finance. Moreover, senators were precluded by law from engaging in any form of trade or commerce. Men who did not wish to stay on their country estates but wanted to make a career in the State would choose the way through the army, through politics, or through the senior civil service.

Small farmsteads began to be supplanted by enormous estates worked by slaves. These, very sensibly, made no attempt to compete with the great grain-producing areas of Sicily, Egypt, or the Black Sea zone. Instead they went in for oil and wine—export articles in great demand. Campania, in particular, soon became the main supplier of these goods, which were exported to the conquered provinces of Spain and Gaul. Slaves were also engaged in crafts on a considerable scale, mainly in building, pottery, tailoring, and various luxury trades.

The entrepreneurs, the employers of these artisans, bore Roman names; mostly they were senators of ancient line. But in their households they employed thousands of slaves. The pottery manufactories of Arretium, present-day Arezzo, employed sometimes as many as 40 slaves—craftsmen who had brought this art, native in Greece and Asia Minor, with them to the West. One of these artists was a slave from Asia Minor, Brygus, who had taken his name from his people, the Brygians. Nowadays a vase signed by Brygus fetches a very high price.

The ultimate aim in a slave's life, no doubt, was to be set free. The most capable and intelligent achieved this aim, and so, frequently, did the most ruthless and the most cunning. We have a stele, a gravestone, from Capua from the first century B.C. It shows a naked man standing on a stone base. From the left a man in Greek clothes approaches, clearly pointing to him. On the right, in dignified attitude, stands a Roman in his toga, calmly extending his right arm towards him. On this stele Publilius Satur had perpetuated the darkest hour of his life, when, stripped to the skin, he was sold as a slave. He was later set free, as emerges from the inscription, by his master, Publilius Stephanus; from modest beginnings in Capua the enfranchised slave had risen to wealth and great renown. Where had he come from originally? Clearly he owed his first name to his former master; his second name, Satur, might easily have been assumed later. How many such freedmen, enfranchised slaves, were living in rich Campania at the beginning of our era? How great was their influence? To what extent did they develop the new agriculture, the urban crafts, or the trade in choice export articles? An example of this type of man is Trimalchio, the character described by the wealthy and witty Petronius in his Satyricon. Petronius, the sybaritic friend of Nero, the "arbiter of elegance," or fashion-king of the capital, certainly knew more than just one man of this type. This is how Trimalchio boasts to his dinner guests about his experiences in the port of Puteoli, the import harbour of Rome:

“I was once just what you are, but by my own merits I have come to this. A bit of sound sense is what makes men; the rest is all rubbish. I buy well and sell well: some people will tell you differently. I am bursting with happiness.... As I was just saying, self-denial has brought me into this fortune. When I came from Asia I was about as tall as this candle-stick. In fact I used to measure myself by it every day. . . . Still, I was my master’s favourite for 14 years.... Then, as the gods willed, I became the real master of the house, and simply had his brains in my pocket. I need only add that I was joint residuary legatee with Caesar, and came into an estate fit for a senator. But no one is satisfied with nothing. I conceived a passion for business. I will not keep you a moment—I built five ships, got a cargo of wine—which was worth its weight in gold at the time—and sent them to Rome. You may think it was a put-up job; every one was wrecked, truth and no fairy-tales. Neptune gulped down thirty million in one day. Do you think I lost heart? Lord no, I no more tasted my loss than if nothing had happened. I built some more, bigger, better, and more expensive, so that no one could say I was not a brave man. You know, a huge ship has a certain security about her. I got another cargo of wine, bacon, beans, perfumes, and slaves. My wife did a noble thing at that time; she sold all her jewelry and all her clothes, and put a hundred gold pieces into my hand. They were the leaven of my fortune. What the gods wish soon happens. I made a clear ten million on one voyage. I at once bought up all the estates which had belonged to my patron. I built a house and bought slaves and cattle; whatever I touched grew like a honey-comb. When I came to have more than the whole revenues of my own country, I threw up the game: I retired from active work and began to finance freedmen.... Meanwhile I built this house.... As you know, it was a tiny place; now it is a palace. It has four dining-rooms, 20 bedrooms, two marble colonnades, an upstairs dining-room, a bedroom where I sleep myself, an excellent room for the porter; there is plenty of spare room for guests.... Take my word for it; if you have a penny, that is what you are worth; by what a man hath shall he be reckoned. So your friend who was once a worm is now a king.

Trimalchio was not an isolated case either in Rome or in the western Mediterranean area as a whole. Among the proud Romans who would not lower themselves to engage in trade, the smooth, quick-witted, experienced, and daring Orientals were bound to rise to the top. And were things different in the East?

Rome had granted full Roman citizens' rights to many Greek cities, even if their inhabitants were not Greeks but Orientals. The best known instance is that of the Apostle Paul, the son of a citizen of Tarsus, on the south-east coast of Asia Minor, who was a devout Jew and a Roman citizen.

There were large Jewish communities in nearly all the trading cities of the Mediterranean area, particularly in Alexandria and Antioch. These people were by no means all descended from the Jewish people, but included many who had adopted the Jewish faith.

Thus we see a strange stratum of people, former slaves and the subjugated inhabitants of Rome's Asian provinces, controlling the trade and presently the entire economic life of the Roman Empire. The Elder Pliny complains that the latifundia, the vast estates, had ruined Italy. But he overlooks the great social strains and stresses between the new class and the Roman State which had practically surrendered to it the nation's economic life.

The whole pattern of the Mediterranean area had been extensively changed by the new businessmen. The great estates switched over to the production of oil and wine, exported at first to the conquered provinces in the West. Presently, the olive and the vine were being planted also in Spain and Southern France—here and there even in Northern Gaul and Germany. The Elder Pliny reports that olive-oil had become the principal export of the Iberian peninsula. In his day the oil from Venafrum, in Italy, was still regarded as the best in the entire Mediterranean area, but soon it was excelled by that from Baetica—what is now Andalusia. On the fragments of clay vessels, which to this day form an entire mountain in Rome, the Monte Testaccio, we find innumerable Spanish seals. A considerable part of them come from the imperial vineyards of Tarraco, present-day Tarragona.

This trade with Spain, and later also with Southern Gaul, eventually ruined the Roman peasants just as it did the big Roman estates. People in the provinces just worked harder and for less money than those in the neighbourhood of the capital, where huge food subsidies encouraged idleness. Before long, however, a shortage of bread grain was beginning to make itself felt; Southern Russia, one of the principal granaries of the Old World, had been lost to it when hosts of Asian horsemen pushed the Scythians back from the eastern steppe.

In the first century A.D. grain exports from Sicily and Egypt declined considerably and eventually ceased altogether. Yet at the same time, the population of the Roman Empire had greatly increased, especially in the western provinces; that of Spain had doubled between So B.C. and A.D. 150, and much the same was true of Gaul. Italy, in the meantime, was being depopulated.

The Roman peasants had simply begun to emigrate to the conquered provinces where they could occupy a privileged position, acquire land cheaply, and get rich quickly, thanks to their experience in the cultivation of the vine and the olive—always on condition that their produce could be exported. And that depended on transport. In Spain Gades, present-day Cadiz, on the Atlantic coast, became the biggest, and no doubt also the richest, city.

Money now became the decisive key to a social career. Membership in the Senate, previously confined to the Roman aristocracy, became subject to a ‘census,' a kind of means test, in the amount of 250,000 denarii. If a person became poor he was eliminated. On the other hand, new men rose to membership; before long even the sons of freed slaves were permitted to become senators provided they owned the necessary fortune. Admittedly, this kind of rise was rare; it was still apt to arouse public disapproval, and, what was more important, membership in the Senate would cut off the upstart from the sources of his wealth since senators were precluded from engaging in trade. On the one hand, money was everything and its influence unlimited; on the other, the acquisition of money by way of commerce, indeed by any business activity, was forbidden to senators and generally looked down upon. Thus Roman society was divided into two sections—on the one side were the officials, senators, and soldiers, on the other stood the merchants, the bankers, and the industrialists. A dangerous split of society! Moreover, the days when only soldiers could rise to wealth were beginning to come to an end.

Since the period of great conquests had ended, soldiers were no longer able to acquire rich booty of gold, silver, and slaves; hence they could not easily accumulate a big fortune. Instead, trade began to develop. First it transformed Campania, and then Spain, Gaul, and Africa, into flourishing provinces. It brought wealth to Egypt. But soon the picture began to change.

The decline did not start in the East, nor at the threatened frontiers on Rhine and Danube, but in Spain, in the very province which had suffered least under big landowners or under incursions by barbarians. Yet from the middle of the second century onward complaints became more and more frequent about the decline first of the Spanish cities and later of the countryside. What was happening?

Unfortunately, the Roman historians have left us far more information about conditions in Egypt and in Asia than about those in Spain, Gaul, or even Britain, although surely the western provinces were among the most important at the time. Indeed, the Emperor Hadrian (II7-138), under whom the Roman Empire attained its greatest territorial extent, was a native of Spain.

In order to provide a reliable administration for this vast Empire Hadrian built up an apparatus of officials drawn, significantly enough, from the class of freedmen, or emancipated slaves. Not the representative of the Emperor or the Roman Governor, but officials employed by the State now tried lawsuits, managed the great estates, and controlled public life. In effect, this reorganization marked the final victory of the freedmen—i.e., the former slaves.

Without over-exaggeration this social transformation might be formulated as follows: anyone wishing to make a career for himself in the Roman Empire had to have a slave among his ancestors. This meant that he could scarcely have been a genuine Roman any longer. In our histories of the Roman Empire we read a lot about the infiltration of Rome by nations from the East, about the influence of Eastern religions even among the Roman legions on the Rhine and the Danube, and about the key role played in Rome's economic life by Syrians, Egyptians, and above all Jews; all this can be explained quite simply by the positions held in the administrative apparatus by emancipated former slaves.

Hadrian's reforms meant the victory of the merchants over the soldiers and landowners. Naturally, the Emperor and the public were unaware of this aspect; to them the reorganization was merely the codification of a state of affairs already existing. For a couple of centuries the great gentlemen in Rome had been content to have their business affairs run by their slaves or manumitted slaves. They themselves knew nothing of trade or commerce, or money matters generally; they had no wish to understand these matters nor were they allowed to. But of course they wanted to make money, to get rich, and to get rich quickly. That was what they had their slaves for-the slaves they had bought with their newly gained money.

The old word for merchant, ‘chapman,' is derived from Latin caupo—the proprietor of a wine tavern, who also traded in the local produce. In the eyes of Roman law this caupo was invariably a cheat, a man out to fleece his guests, especially when the tavern comprised an inn or a hostel. The caupo was liable for all losses; if anything disappeared it was assumed—in the eyes of Roman justice—that it must be the doing of the fraudulent caupo. Even if he was innocent it would not hurt him to have to pay up for the lost article. Let him be more watchful next time!

Ranking high above this despised merchant were the soldier, the landowner, the politician, the senior official. They ruled in Rome, they were responsible for the welfare of the Empire, yet they did not suspect that its prosperity depended on trade. On the contrary. They merely saw the free interchange of merchandise within the huge Empire as an economic threat to Italy herself. Italian agriculture and Italian artisans could not compete with the cheap products from the provinces. To eliminate this competition Rome made special laws.

As early as the first century, the Emperor Domitian (81-96) had tried to cut down on wine and oil production in Spain and Southern France. Trajan (98-117) decreed that all senators must invest money in Italian agriculture. This did not help much; even in Italy the cultivation of the vine and the olive had to be reduced. Growing of wheat was encouraged instead. Imports from the provinces were quite simply cut by law. Inevitably, prices rose as a result. And, as the cultivation of wheat required fewer people than the tending of vineyards and olive-groves, the unemployed countrymen began to flock to the big cities in the hope of finding work—unless, as in Rome, they could be fed generously by the emperors without doing any work at all. The free peasants were now in the majority, and even the great estates could no longer manage without free agricultural workers.

The emperors viewed this drift from the country with displeasure and anxiety. They saw the rural areas getting depopulated and the cities getting crowded; they saw the lengthening queues in front of the annona, the State food-issuing office for the unemployed. Who was responsible for this unfortunate state of affairs? The merchants, of course! They imported cheap goods from the provinces in order to make profits. They were underbidding the hard-working peasants, merely because somewhere else the sun shone longer, the fields yielded more generously, or the people lived more modestly.

Agriculture was declining from bad to worse while the merchants were getting richer. The reforms of the Emperor Hadrian, the last great "augmentor of the empire," marked the beginning of the disastrous trend which led eventually to the total suppression of the independent merchant. Hadrian wanted to eliminate the middleman wherever possible and to bring together the consumer with the producer. The imperial officials were to see to it that property was distributed `justly' within the Empire.

At first these imperial decrees were not too stringent. The Empire was still prosperous; everywhere the exchange of goods between the provinces had created new wealth. The State was still in a position to pay out the sums it was exacting from the merchants, but nevertheless the road to disaster had been embarked upon. Once the barbarians' assaults on the frontiers of the Empire became more violent, once incapable emperors such as Commodus and Caracalla started to wreck the internal structure of the State by their extravagance and their ruthless persecution of political opponents, the merchants had to bear the entire burden of the wars.

The Emperor ordered them to be organized in compulsory guilds; precise lists of obligatory deliveries, to be made without payment, were drawn up and imposed on them. Let those hard-boiled rogues—Syrians, Aramaeans, and Jews—see how they got their money; let them squeeze it out of their customers just as the Emperor was squeezing it out of them!

When the Romans were engaged in war on the lower Danube the local prefect simply summoned the merchants of the neighbouring province and issued the following order: "By a certain date so many thousand bushels of wheat, so many thousand horses, and so many carts must be available in Thrace." Complaints and lamentations were of no avail. Soldiers do not recognize the word "impossible." Unless the merchants made their deliveries punctually, not only would their entire fortunes be forfeit to the State, but the indignant Emperor would have them all crucified! And the miracle happened. On the appointed date the supplies necessary for the campaign were duly delivered.

Once or twice the merchants stood for this, biting back their anger. Then they concluded that they were in the wrong business. They urgently advised their sons to choose a different livelihood. They would try to buy them a nice estate, as far away from their old place of residence as possible, far from the extortions of imperial officials. The merchant class began to melt away.

The emperors tried to check this trend by holding the merchant guilds responsible. The merchant's occupation, as all other professions, was declared hereditary. A son was compelled to succeed to his father's business, whether he wished to or not. But this did not stop the rot. Nobody wanted to take on any office; the rich people fled; the merchant class broke up. Its place was being taken by State officials or unscrupulous speculators.

Yet the trade between the provinces of the Empire depended on the merchants. Italy had risen to prosperity by exporting wine and oil—primarily olive-oil—to Spain and Gaul, and even to the Eastern Mediterranean. But this required a merchant to plan the business, build up the organization, and carry the risk.

So long as the State received compulsory deliveries from the provinces it was able to distribute free food in Rome; for doing that it needed no merchants. But the agricultural producing units which lived by their overseas trade, by exporting to other provinces, declined in the absence of the merchant class. Their output was not even enough to feed the great cities in their immediate vicinity. As a result, these cities began to be depopulated about the end of the second century, even in such provinces as Spain and Southern Gaul, which did not suffer from barbarian invasions. The State began to notice a drop in tax revenue.

Taxes in the Roman Empire were collected not from the taxpayers—for that the State lacked the necessary machinery—but by tax farmers who, in return, enjoyed certain privileges. In the case of conquered and subjected provinces this system might have been justifiable; but once all provinces had been given Roman citizenship rights the method of tax collection had to be reorganized. The emperors therefore decreed that henceforth the municipalities were to be responsible for the payment of taxes—in other words, the rich people, who had accepted honorary office, were made liable, with their own fortune and even their lives, for the payment of all taxes.

After all, it was argued, the merchants were merely advancing the money which they could always recover subsequently from the peasants in their capacity of tax farmers. Besides they were making such vast profits from deliveries and commerce! Let them collect the taxes throughout the land! When in fact their servants appeared on the farmsteads to drive off the livestock or impound the crops needed for the imperial armies or for supplying the cities, the oppressed began to resist. There were peasant revolts, such as the one in Egypt in A.D. 172, when Alexandria was very nearly looted, or one in Gaul, when the city of Alesia was burnt to the ground. The rich people—i.e., mainly the merchants in the cities—were finding it more and more difficult to pass on to the countryside the tax expenditure incurred by them. In the end they had to dip into their own pockets.

Soon there were scarcely any merchants left. True, small merchants, the caupones, would still travel from place to place, or even settle down to open an inn. But they lacked the decisive prerequisites of the wholesale merchants: knowledge of a wide range of merchandise, a grasp of the market situation, extensive organization, and, above all, capital.

More and more frequently do we encounter complaints that there are no public-spirited people left. Nobody was prepared to take on honorary posts in municipal administration. Compulsion had to be used to find men for civil office.

The change was clearly felt in the cities. The urban artisans lacked a sufficient market because exports to distant provinces were declining, and simultaneously imports from farther afield were arriving less frequently. Admittedly, supplies were still coming in from the surrounding countryside, but no foodstuff's or raw materials from more distant sources. Goods were becoming shorter and prices were rising. By the end of the second century famine was threatening even those provinces which only a few centuries before had been so rich—Egypt, Sicily, and North Africa. To some extent the higher prices were due to a devaluation of the currency. While Marcus Aurelius had adulterated his silver coinage by a 30 per cent addition of base metal, under Septimius Severus 193-211 this admixture rose to 50 per cent. The nations north of the limes no longer accepted silver coins, but demanded gold. The one class which could have reunited the severed ties between the separate provinces, and between town and countryside, no longer existed.

"Nobody shall have any money except myself and my soldiers," the Emperor Caracalla 211-217 is reported to have said. While an enormous fortune accumulated on his hands Rome’s currency collapsed.

No man was permitted to choose his career freely; a son had to succeed his father. Above all, the sons of the curiales, the city fathers, were not allowed to seek safety elsewhere. They had to be responsible, as their fathers had been before them, for the extortionate taxes. And still the taxes rose.

Without commerce the entire Empire crumbled. It was easy enough for the soldiers to confiscate the property of political opponents or to gain exemption from taxes in recognition of their military exploits. But who was to buy the surpluses? Who was to supply the goods the public wanted? Who was to organize the exchange of commodities between different provinces?

Since the Greek helmsman Hippalos had discovered the monsoon, the regular wind which reliably drove the ships before it, the Greeks had been sailing from Africa to India year after year between the months of June and September, and returning from India to Africa between December and March. The main entrepot in the northern part of the west coast of India was Baryzaga, which we met in Hellenistic days under the name of Broach (south of present-day Baroda); farther south on the Malabar coast was Muziris, the pepper port, which had a numerous Roman colony—presumably mainly Greeks, Arabs, and Egyptians. They made their livelihood from commerce which was gaining in importance all the time. The newly rich Romans would insist on having Indian merchandise, while the moralists of Rome angrily condemned such luxuries. These complaints have given rise to the theory, supported by many historians, that the Roman Empire collapsed because of its trade with the East—i.e., because of its trade deficit. But this view is no more tenable than the theory that Rome declined because of its great estates.

There is, of course, no doubt that to begin with the exchange of goods between the Mediterranean area and India led to a trade gap. For the luxury articles they imported, the Romans had to pay with precious metals-gold and silver, coined and in bullion—since they hardly had any merchandise to offer of interest to the East. According to Pliny, some 25,000,000 denarii flowed from the Roman Empire to India every year. This is confirmed by the numerous Roman gold and silver coins that have been found in India. Soon, however, the balance shifted, first because the emphasis of Roman imports from India switched from luxury articles and spices to bulk commodities such as cotton, and secondly because the Mediterranean area was presently in a position to supply goods which were in demand even in India: linen from Egypt, fabrics and fine glass from Syria, bronze from Italy, tin from Spain, and oil and wine from Asia Minor.

The cotton imports caused a boom in the textile industry of Egypt and Syria, and Roman arts and crafts were making considerable profits from exports to India. The Indians even bought Syrian horses. After the beginning of the second century the quantities of Roman gold and silver coins found in India showed a marked decline. Trade was balanced by them.

The Indian trade cannot therefore be blamed for the economic difficulties of the Roman Empire. What Rome lacked was the pulse-beat of economic life. River ports like Xanten on the Rhine, and seaports like Aquileia on the Adriatic were silting up. Since merchandise was no longer delivered voluntarily, the state itself had to turn manufacturer. In Gaul, Britain, and Italy State-owned arms factories, State-owned weaving-mills, dyeing plants, and tanneries were set up. All in the hope that the State might take the place of the now defunct trade.

Exchange of commodities and specialization of labour were supplanted by the self-sufficiency of the big estates. Every one produced only what he consumed himself. The coinage was losing its importance as nobody any longer had any wares to sell. The only trade that still flourished was that in luxuries, because the imperial court itself acted as the buyer. But payment had to be made in gold.

The end was at hand. In vain did the Emperor Diocletian issue price regulations, market ordinances, and currency reforms. They were of no avail. Without the merchant class the Empire, internally weakened and undermined financially, collapsed under the assault of the barbarians.

Chapter 5—The Man from the East

Ibrahim Ibn Yaacub, a much-traveled Arab Merchant, was greatly astonished at what he found between the Rhine and the Elbe. The people were uncouth and lived, like a big family, on extensive estates. Everything they needed they produced themselves; they grew their grain and sheared their own sheep; their women and girls spun, wove, and sewed throughout the long winter. The cattle supplied not only meat but also hides, which were tanned and made into shoes, breeches, and jerkins. There was little there for a merchant. Even the King had no permanent place of residence, but would set up his palatum first in one place and then in another, staying until the food supplies of the immediate vicinity were exhausted. Princes and peasants were satisfied if, beyond meeting their own requirements, they were able to support the King's armed retainers.

That at least was the impression of the Arab traveler who had journeyed from the Volga across Poland into the land of "King Huto"—the Emperor Otto the Great (936-973). To his surprise, however, the picture suddenly changed when, having crossed the Rhine from the east, he entered the city of Magandscha, the city we know now as Mayence or Mainz. There he found coins from Samarkand! Spices were on sale in amazing quantities—pepper, ginger, cloves, and galingale—a root related to the ginger-plant. Undoubtedly these goods had been brought by merchants along the land route via Central Asia and Eastern Europe.

It seems, therefore, that, alongside a subsistence economy, an extensive trade network had survived, with Mainz as its final outpost. The Arabs had preserved something of the trade which the Roman emperors had throttled within their Empire, by their compulsory measures. So long as the Romans wanted merchandise from countries beyond their frontiers, from the remote and unknown East, they had to protect the merchants. Otherwise they simply would not come. That was why the merchants survived in the east of the Empire even after the west had sunk back into a primitive subsistence economy. They continued to exchange the goods of the Mediterranean area against those of India; indeed, they further extended their relations when the Chinese, advancing across Central Asia to the Pamirs, penetrated into Turkestan. Under the protection of Chinese troops the China trade now began to develop, over a well-nigh endless road stretching across the whole of Central Asia. Only valuable merchandise was carried along this lengthy and hazardous route, for only it could bear the exceedingly high transport costs. Among these goods, silk was the most important. At the time of the Roman emperors we know that it was literally worth its weight in gold.

Between the empires of Rome and China there lived the Parthians, who were not slow to exploit the advantages of their geographical situation. Greeks and Romans were dependent upon the costly mediation of Parthian agents. For that reason they tried to bypass the Parthians by finding a sea route to India and thence to China.

We possess two Greek records describing this trade: a periplous of the Erythraean Sea, the Indian Ocean—i.e., one of the many sailing directions which used to be drawn up by the masters of Greek vessels on the strength of their own observations to make the journey to unknown seas easier for their colleagues—and an account of the journey made by the merchant Alexander to the trading centre of Kattigara in Eastern Asia, presumably in the neighbourhood of what to-day is Saigon.

Arabia Felix, "happy Arabia," was the Roman name for the province on the south-eastern coast of the Arabian peninsula. From here Egyptian linen, Syrian glass, and various arts and. crafts were exchanged against Indian cotton, Chinese silk, and, above all, Indonesian spices. A large proportion of these goods were taken by the land route from the south coast of Arabia, in earlier days even from Hadramut, via Petra (south of the Dead Sea) to the Sinai peninsula and to the Mediterranean. From Petra the trade routes ran to Damascus in the north, to Basra in the northeast, to Gaza in the west, to Elath on the Red Sea, and across the Arabian desert to the Persian Gulf. The real peak of Petra's commercial importance was at the beginning of the third century; after that its wealth slowly declined, presumably because of heavy attacks by Arab desert tribes. In those days a rectangular black stone was revered in Petra as a divine symbol—a model for the Caaba in Mecca. Numerous Greeks participated in this extensive trade, but its hub was undoubtedly with the Arabs. Even Jews, Syrians, and Egyptians had to bow to their superior commercial ability. Politically, however, the Arabs seem to have been incapable of forming a powerful community—until the son of a merchant, Mohammed the Prophet, brought about a change. As a young man he had traveled on his father's business to Mecca and the great markets of Syria, where the Arabs had been selling their wares for centuries. There he made the acquaintance of Christianity and Judaism. Driven by inner voices, the Prophet preached to his heathen fellow tribesmen the faith in one god—Allah.

After the death of Mohammed in 632 his successors, the caliphs, within a few decades had conquered nearly the whole Middle East. Boundless wealth fell into their hands, wealth largely produced by trade. When the Muslim General Amru captured Alexandria eight years after the death of the Prophet, he reported to the Caliph Omar:

“The great city of the west has fallen. Its riches and beauty cannot be put into words; it comprises 4000 palaces, as many bath-houses, four theatres and places of entertainment, and 12,000 provision stores. Forty thousand Jews are paying taxes; 200,000 Copts and Greeks will likewise be taxed in future.”

In 642 the Arabs conquered Persia; in 698 they conquered Carthage and the whole of western North Africa; between Rio and 714 the Iberian peninsula fell to them, and in 719 they even penetrated into Southern France. Would this enormous powerful empire last? Their military successes the sons of the desert owed mainly to their boldness and their unshakeable faith. After the capture of Alexandria, when General Amru wanted to save the world-famous library, the Caliph Omar said contemptuously: "If the writings agree with the Koran they are superfluous. If they disagree they must not be tolerated." Thus, during the next six months, the priceless papyri were used to heat the many bath-houses of Alexandria.

Soon the merchants came to the fore again. For centuries Arab merchants had been maintaining business relations with the countries of the Middle East and India. In countless caravans they had crossed the desert from oasis to oasis; they had sailed the seas; they had organized the exchange of merchandise between Greeks, Romans, and Indians. It was in this spirit that the new Arab Empire was built up.

Along its frontiers the fanatic horsemen galloped across the countryside, breaking enemy resistance, burning, killing, and destroying. But inside the Empire there arose the magnificent residences of the caliphs; trading centres began to flourish. The arts and sciences had found a home.

Probably one of the main reasons why the Arab world developed so successfully was the fact that the State did not concern itself with economic affairs. The new rulers had no intention of regulating everything or of collecting all the profits themselves; they left to the private entrepreneur, to the merchant and the farmer, both risk and gain. At the court of the caliph it was the merchants, not the officials, who were in the majority. Once more, as many centuries earlier, they crossed the desert with their caravans of camels or sailed away in their ships to return with choice fabrics, precious weapons, spices, and jewelry for their ruler. Admittedly, the merchant had to pay high taxes to the caliph, but these he simply added to the price. Naturally, this kind of trade was not suitable for bulk commodities. Foodstuffs, grain, oil, and wine, and industrial raw materials such as copper and tin, played a subordinate part. Goods which did not yield a high profit were of no interest to the Arab merchant. What he liked best were out-of-the-way and rare articles. Arab merchants now sailed to East Asia, to the Spice Islands, and even to China—well beyond the limits reached by the Greeks. They probed down the east coast of Africa and got as far as the island of Madagascar, which had remained unknown to classical antiquity.

Merchandise from China, from India, from the countries south of the Sahara, or from the distant land of the Franks could bear surcharges of 100, 200, or more per cent. The dangers alone which threatened the merchant while he was away—terrible sandstorms, thirst, Bedouin bandits, and greedy customs officials on the frontiers—made all business a venture and an adventure.

From the seventh to the ninth century the Arabs controlled the great islands of the Mediterranean, from the Balearics across Sardinia and Corsica to Sicily, Malta, Crete, and Cyprus. There was no naval power that could oppose them. The turning-point came only when the Normans snatched Sicily from the grasp of the Saracens, as the Arabs were called at that time.

However, the focus of the Islamic world and of Arab trade was not in the Mediterranean but in the Indian Ocean. True, even in Roman days commerce had been extended as far as the Erythraean Sea, from the estuary of Tigris and Euphrates to Northern and Southern India, as far as the island of Taprobane, present-day Ceylon, and even to Kattigara in East India, but it had always been conducted through intermediaries.

It was left to the Arab merchants to develop a prosperous flow of trade reaching from Mesopotamia, from the new capital of Baghdad and the port of Basra, to India, Madagascar, Indonesia, and even China.

From the Pillars of Hercules, now called Gibraltar in honour of the Arab general Al-Tarik, right into the heart of China and India, Muslim rulers were in power, accepting for many centuries to come the centralized leadership of the caliph. Under Arab rule the ancient Bactria, now also known as Balkh, and Chowaresmia (also known as Chorasmia or Khwarizm), with the oasis cities of Bukhara and Samarkand, the area south of the Sea of Aral, flourished. From here caravans set forth along the silk route to China.

In earliest times, those referred to by Herodotus, the trade route did not follow the silk route, but led from the northern coast of the Black Sea, bypassing the Caspian Sea in the north, across Kazakhstan, where to-day unending wheatfields have forced back the steppe, to the Altai mountains, which were rich in gold. There the road ended; not even the most adventurous of the men who had set out from the north coast of the Black Sea to reach the heart of Asia would venture across the towering mountains and the endless Gobi desert. That, at least, is what Herodotus says.

Or is it possible that the distrustful merchants withheld their real knowledge from the stranger who questioned them so closely about all matters pertaining to trade and foreign countries? The fact remains that not until two centuries later, when Alexander advanced as far as the Oxus and the Pamirs, do we have news of a road that reached as far as Cathay, the land of silk. Later, when the Chinese had extended their power across Central Asia to the edge of the great Takla Makan desert, to the slopes of the Pamirs, commerce between the Middle Kingdom and Europe began to flourish under the protection of Chinese garrisons and guard-towers. The chief beneficiaries were the Parthians, who made the most of their geographical position. They barred the Romans and Greeks—and this, to them, included the Aramaeans of Syria—from crossing their kingdom. The Western merchants took their merchandise only as far as the frontier of the Empire, the Euphrates. From there, Parthian caravans undertook the further transportation.

Slowly the camels would move over the Zagros mountains and across the deserts of Iran, across the Elburz mountains, and the Kara Kum desert in Southern Turkestan, to the city of Balkh. This part of the journey took several months, even though the ancient Persians had built fairly good roads in these areas.

The real hardships did not begin until the caravans had climbed the slopes of the Pamirs and reached the "Stone Tower," the fortified outpost of the Chinese frontier guards, which for many centuries remained a landmark for the China traders.

Between one caravanserai and the next the travelers had to cover hundreds of miles; there were only few water-holes in between. Tents were pitched night after night and guards mounted, and the travelers, exhausted from the day's exertions, the heat, the searing sun, and the fierce sandstorms, sank into deep sleep. Now was the chance for the thieves to pounce on the rich caravan and plunder it. Even powerful emperors, even the energetic Mongol rulers, frequently preferred to conclude treaties with the tribes of horsemen along the edge of the desert and to make them generous presents so that they should leave the passing merchants in peace. It was cheaper to pay a kind of road toll in advance than time and again to send armies into the desert. In good days, when the power of the Chinese emperors was great and much feared, merchants could travel confidently and safely from one stop to another, from one caravanserai to the next, always certain of a friendly welcome. But woe betide them when internal disputes were tearing the Empire asunder, when the steppe people were in revolt, or when daring gangs of robbers threatened the land! How could forces of any size be supplied for any length of time, on the edge of the desert, among the few oases? The fast-moving thieves would vanish into the infinity of the sea of sand and emerge once more the moment another caravan approached.

To reach the next oasis with its caravanserai was a happy occasion for the merchants. The solid wall offered adequate protection against both sandstorms and raids. Here the bales of merchandise could be resorted, the camels fed and attended to, and invalids cared for. In the wide open courtyards the travelers pitched their tents just as they would in the desert. There was an abundant supply of foodstuffs for sale. But no sooner had the travelers recovered a little from the exertions of the preceding days than they would be urged on by the leader of the caravan. On no account must any time be lost. Even under the most favourable conditions the journey from the Stone Tower to the Great Wall of China, the proper frontier of the Chinese Empire, took three whole months of hardships, privations, perils, and adventure.

"The peril of the west," a traveler of that date complains about a journey through the basin of the Tarik,

“is the flowing sand, the thousand-mile-sand. Like a whirlwind it rushes into the thundering gorge, sweeping you along, crushing and shattering-there is no foothold for you. And if you succeed in escaping there is nothing beyond but infinite emptiness.... The land scorches its people; if you look for water you will not find it anywhere. Forsaken and hopeless you stand, and nowhere is there any help. Far and wide, nowhere is an end to be discerned. And so the caravan merchants wend their way through the night, like mariners upon the seas, steering by the stars.”

Foreign merchants were not allowed to enter the Chinese Empire itself—at least not when the emperor of China was powerful enough for his command to be obeyed. In times of political unrest, no doubt, the Chinese officials and frontier guards would accept bribes to improve their meagre pay. There were hardly any free merchants leaving China during the first few centuries—only caravans headed by imperial officials, taking the silk route to the West. In addition to their merchandise they took with them weapons and supplies for the frontier garrisons.

Before the impenetrable sandy desert of Takla Makan the silk route divided into two roads, both of them clinging nervously to the slopes of the mountains surrounding the Tarik basin, since it was down these mountain slopes that the little water came which fed not only the oases but also the wells and water-holes where stops had to be made en route. Admittedly, the area must have been more humid then than it is now: trees must have grown there then, though they have long since been covered by sand. Nevertheless it must often have been a case of pressing on, thirsty and exhausted, until the next oasis was reached.

Upon their backs the camels had to carry water, tents, weapons, and even a large part of the food. Hence it was not possible to carry large quantities of merchandise. And yet, while trade flourished along the silk route, every one grew rich—the merchants, the oases and cities in the Tarik basin, Hotan, Tashkent, Kashgar. Great prosperity also came to Bukhara and Samarkand. Kashmir, the gateway to India, and the countries of Bactria and Chorasmia lived by this trade. Even when silk began to be cultivated in the West, silk from China continued to be an article in enormous demand, an article for which fabulous prices were paid.

The Arab merchants were attracted by the valuable wares of East Asia and India. Leave the cheap rubbish for the common hawkers, the little men who had never tasted the gale on the high seas or the storm in the desert, who had never known the bliss of roaming the infinite world!

Before long East Asian and Indian crops were cultivated in the West: sugar-cane was grown not only in Egypt and Cyprus, but also in North Africa and Spain; cotton, India's principal export during the era of the Roman emperors, was cultivated in what today is Algeria; indigo in North Africa; mulberry-trees for the cultivation of silkworms at Gabes, south of Tunis.

The Indian trade did not develop without some temporary setbacks. In 740 the Arab merchants had to leave the trading city of Broach because the local traders' opposition to Islam had turned into a hatred of all foreigners. Before long, however, the Arabs returned because they had found a powerful supporter in the ruler of Hyderabad.

This mighty Indian ruler, who was so favourably disposed to the Arabs, earned the special praises of the Arab merchant Suleiman, who visited his country about the middle of the ninth century. They brought with them a multitude of magnificent merchandise: pearls and precious stones, steel blades from Damascus, fiery Arab stallions, fine muslin, pepper, cinnamon and cloves, silk from China. In the evenings, moreover, they would recount wonderful tales from all parts of the world. They would speak of their caravan journeys across deserts and steppes, of hunger and thirst, of hardships and sufferings, but also of the far island of Madagascar and of slit-eyed Chinese. They would describe their voyages in small ships tossed by storms and gales, they would tell of shipwreck on unfamiliar coasts, of touching hospitality, and of the merciless avarice of foreign princes. And into their accounts they would weave many strange tales, of the giant bird, the roc, which could pick up an entire ship in its talons to let it drop back into the sea, of desert spirits who lured the traveler from his route, and of powerful sorcerers who put charms on entire cities, turned human beings into animals, and dissolved palaces into thin air.

These were the colourful stories told and retold in the bazaars, interwoven with new accounts and real-life experiences of merchants and mariners, and linked to historical personages and events. Thus the Caliph Harun al-Rashid would walk night after night through the streets of his sleeping city to see that justice was done and injustice punished; a beautiful princess would sigh in her sleep; a daring young man would slip into the palace; a bold prince and a fearless navigator would survive hare-brained adventures. These were the fairy-tales the merchants told one another as they journeyed from the Atlantic coast of Morocco to China, from Madagascar to Samarkand, along the endless routes of slow-moving caravans and in sleepless nights at caravanserais while the jackals howled outside and the guards nearly dropped with fatigue.

And what a multitude of things these merchants had to talk about and to marvel at! To the east of India lay the empire of Ruhni, present-day Bengal, where rhinoceroses lived and where a woollen fabric was manufactured so delicate and gossamer-like that an entire garment could be pulled through a ring. There were miraculous dreaming gardens and white palaces in Chorasmia (Khwarizm), south of the Sea of Aral. In Zanzibar there were offered for sale the ivory tusks of elephants; from Arabia came splendid horses, of a beauty and fire unmatched anywhere in the world. Long stories could be told of the jewels of powerful princes—their origin, how they had come down to them, and what curses and what blessings they carried. This was no world for cool, sober calculation. Calculation and accountancy had no place in Arabic civilization: there a strange magic surrounded all everyday occurrences, and even trade was steeped in its aura.

The merchant took his valuable wares to the powerful princes, the caliphs, the emperors and kings; he entered the royal residence as a great gentleman in his own right. There he would present his most beautiful and most valuable article to his host—not from fear, but because he knew the noble mind of the ruler. And, sure enough, he was not disappointed. The prince's gift to the strange visitor, who had entered his residence with such a generous gesture, was worth a multiple of what he had received. Only after such an exchange of presents, which was determined by the person and position of prince and merchant, would the remaining goods go to the bazaars. Here again there were no fixed prices. When a caravan had only just arrived even the most beautiful articles were sold cheaply; but if a caravan had not come in for months, or if rumour reported it to have been looted by thieves, or when news had arrived of severe gales in the Indian Ocean, prices would rise to vertiginous heights.

In a bazaar wares were not ‘retailed' or ‘distributed.' What took place here was business—and that, to the Eastern mind, meant haggling. Wrestling for a price, getting the feel of the market, fencing with one's business opponent—all these were not tedious labours but sheer delight, an exercise of the intellect and of psychology, a duel in which the customer had to be vanquished and yet won over.

The indispensable features of the bazaar were the semi-darkness of vaulted arches in narrow streets, the zealous traders standing in their doorways, the market crier inviting passers-by to enter, the dignified ceremonial which preceded business transactions: a non-committal conversation over a cup of coffee, enquiries about the health and prosperity of one's partner, and accounts of one's latest journey. The bazaar, above all, meant the display of an exceptional range of merchandise.

No ordinary commodities, however, were bought and sold in the bazaar—no commodities, that is, for which a market price could be calculated and fixed-but only precious things, jewels, choice fabrics, silks and the finest cotton goods, colourful carpets, rare weapons and tools. But there were also various odds and ends—second-hand articles such as might have been made by a craftsman for a wealthy customer at one time, junk bought by the poorest of the poor, spices and medicinal herbs, and mysterious articles such as tiger hairs or huge human teeth credited with magic powers—with powers to cure diseases and make wishes come true.

The bazaar was a place of unending surprises: insignificant things would reveal themselves as unique objects of wonder. A young man would buy an oil lamp, a worthless lamp, scarcely fit for further use; yet anyone rubbing it would suddenly have a powerful genie obeying his commands. Who would have said, just looking at the carpet, that it could carry its purchaser through the air? Even the powerful caliph himself would be well advised now and then to stroll through the bazaars, looking at things, examining, and seizing his opportunity.

Arab trade was predominantly conducted in these bazaars. In Anhilvada, the capital of Gujarat in India, there were eighty-four bazaars alone, organized according to different trades and crafts. Who knows how many there were in Baghdad? Or in Basra, on the Persian Gulf?

We are familiar with this world from The Arabian Nights. In the semi-darkness of the bazaar the sharp dividing-line between truth and fiction, between reality and fairy-tale, was blurred. The Arab merchant was no hero or pirate, as were the earlier Greeks. Nor was he a big businessman who let his money and his slaves work for him, as did the Roman senators or their freedmen. The Arab was an adventurer, gambling rather than calculating. Placing his firm trust in Allah, and in Kismet, he sailed forth into the unknown; if it was written that he should drown in the waves of the sea or fall into the hands of pirates, he could not escape his fate anyway. But his sleek dhow, the Arab sailing-ship, would surely take him to some shore where he would find brethren in the faith. Thus, trusting in Oriental hospitality, he traveled on the back of his camel from Morocco to the Chinese frontier. Months, perhaps years, would pass before he returned. Whether rich or poor—it was all in Allah's hand. Terrifying were the storms, terrifying the depths of the sea and the reefs of unknown coasts. If a caravan lost its way, if an exceptional heat-wave dried up the wells, the animals would be the first to die of thirst and then the men. Bleached bones along the trade routes testify to countless tragedies.

As late as 1674, when the routes were very much safer, robbers ambushed and looted a caravan consisting of 2000 merchants and 500 armed men between Persia and India, and made off with jewelry and fabrics worth at least $4,900,000.

Clearly this kind of trade was possible only if profits were correspondingly great. For the merchandise they had brought from Turkestan, merchants in Kabul used to achieve a price which was roughly five times what they themselves had paid; thus, even after deducting their high transport costs, they were left with a net profit of 300 to 400 per cent. It seems probable that during the first few centuries of the Caliphate profits were, if anything, even higher.

The arrival of a caravan was always a great event; emerging from the desert and slowly advancing towards the city, the camels with their dignified gait, each of them carrying the 45o-pound loads customary for long distances, the bearded men's faces burned black by the sun of the desert against which even the white burnous provided but insufficient protection—all of them exhausted and emaciated, half-parched with thirst, frequently sick or wounded by robbers.

The same was true for ships returning to their home ports after an eventful voyage. As the broad hulls were more suitable for shallow water, the ships preferred to hug the coasts; but suppose they were to run aground on a sandbank or to strike a reef? The planks, lashed to the keel with ropes of palm bark and pinned with tree-nails, were but inadequately covered with the grease of a sea fish or with a very thin layer of pitch. And yet these pitiful vessels ventured out over tremendous distances—to Zalla or to Mombasa and Malindi on the east coast of Africa. Perhaps the busiest port at the time was Sofala, in the much-renowned gold country of Monomatapata. Africa supplied ivory, tortoiseshell, and ambergris, an excretion of the sperm whale used for perfume.

Arab merchants were established everywhere. Their ships sailed from Siraf and Ormuz on the Persian Gulf, and from Katif and Muscat to the Indian ports of Sendapur, Mangalore, Fandarina, and Cranganore, to buy there the "Indian cane" (i.e., sugar cane), cinnamon, pearls, perfumes, and pepper—the last mainly in Kaukamali on the Malabar coast. Kaukamali was, at the same time, the principal port of call for all ships bound for Ceylon, East India, and China.

From the Maldive Islands, west of Ceylon, came the gossamer-thin clothes woven from tree-bark; from there also came ambergris, and, for the sailors, fresh milk, oil, honey, and salted fish. In Aghena, the capital of Ceylon, the Indians, Muslims, Jews, and Christians had their own representatives at the law courts. Pilgrims from all over the world traveled there to venerate the imprint of Adam's foot; no one hoping to impress his listeners in the bazaars back home could afford to miss the famous footprint.

Ceylon was the terminal point of the great overland trade route which led from Samarkand via Balkh, Kabul, Multan, and the Indian peninsula down to its southern tip. Merchants were prepared to endure the appalling hardships and the high costs of the overland route in order to avoid the dangers of the sea voyage. But it was beyond Ceylon that the real adventure began: the crossing of the stormy eastern sea to the "land of the Rami," where camphor, coconuts, and muslin were traded. From there the pilgrims arriving in Ceylon brought gold, furs, and aloe wood. We cannot be sure what the Arabs meant by this mysterious land of al Rami; maybe the Coromandel coast on the eastern side of Southern India. Or possibly Sumatra. From Ceylon the ships went to the Nicobar islands, to Sumatra, Java, and Borneo, and beyond. Of Siam and Cochin-China the Arabs knew only the coastal settlements.

Some time around A.D. 787 the first Arab ship called at the Chinese port of"Kanfu"—probably not Canton but Hangchow, the capital of Chekiang, south of the Yangtze river. An Arab merchant reports from that period:

“When merchants arrive in China by sea, the Chinese first take over all their merchandise and store it in warehouses. Throughout six months it is kept there, until the very last merchant ship has arrived. Then they take ;o per cent. of everything and return the rest to the merchants.”

Even with this exorbitant tax the merchants still made fabulous profits. Simultaneously they stocked up cheaply with silk, since here "even the lowest man goes about dressed in silken clothes both summer and winter." Moreover, they bought the delicate porcelain which was in such demand in the West but was unsuitable for overland transport on the backs of camels.

Thanks to the Arab merchants political relations between the Middle Kingdom and the Caliphate in Turkestan were close and amicable, especially as both empires saw a common enemy in the fierce desert tribes of Central Asia who, time and again, would take a fancy to the rich cities of China or to the flourishing trade centres along the northeastern frontier of the Islamic empire.

In the tenth century the town of Mazadachan, in Chorasmia, south of the Sea of Aral, was ringed by 12,000 forts. There was an abundance of foodstuff's and fruit in the town; the only thing the Arab visitor missed was nuts. Woollen and cotton fabrics were woven in the city, for export to Eastern Turkestan and China. The Chorasmians must have enjoyed traveling; they were found in large numbers in all the major cities of Western Asia. Their wealth was founded entirely on trade. The Arab Al-Maqdici lists a large range of goods which were traded in Chorasmia—pelts of marten, grey squirrel, sable, desert fox, beaver, and hare, as well as wax, arrows, swords, cork, ambergris, a type of leather called kimucht, honey, rams, cattle, and, somewhat surprisingly, Slav slaves. All these goods came from the Volga. The Chorasmians themselves cultivated grapes, which they dried and sold as raisins; they baked cakes, extracted oil of sesame, made clothes, carpets, rugs, precious brocades, veils, locks, bows which only the strongest men could draw, and a particularly tasty cheese called ruchdin. On the Sea of Aral they built ships.

Another Arab reports:

“Kyat is the principal city of Chorasmia, the gateway of Turkestan, the principal market for the wares of Turkomans and Chasars; it is the place where all wares flow together. The city possesses great wealth.”

The starting-point for the caravans to Persia and India was Urgench. There the trade routes from the south intersected with those leading from the Volga to Central Asia.

The great market of Itil, on the Volga estuary, presented a strange picture. Sitting on wooden forms specially knocked together for the purpose, surrounded by the pretty Slav girls they were offering for sale, were the Russian merchants. On the river-bank they had put up a circle of lesser idols surrounding a large idol to which they would pray: "Oh, lord, I have come a long way with my sable skins and my pretty wenches. Graciously accept these my offerings, the foodstuffs, and the alcoholic beverages, and send me a merchant whose purse is filled with dinars and dirhemes [Arabic gold and silver coins] and who will buy from me all that I wish to sell, without arguing and haggling!" Not always were these Germanic Russians patient enough to wait for a merchant; besides, they were probably less good at haggling than at swordplay. When opportunity offered they would loot the rich ports in the area of present-day Baku. Later these savage raids ceased, and Russian merchants brought their beaver pelts and black-fox skins, and, above all, their slaves, to Baghdad.

This trade in Russian girl-slaves flourished for many centuries. The road which these unfortunate victims took was either through Thuringia and Mainz, across France, down the Saône and the Rhône to the Mediterranean and to Moorish Spain, or via the Black Sea to the Middle East.

As the intermediaries between the Greek, Indian, and Chinese civilizations, the Arabs transmitted much valuable knowledge both to Western Europe and to China. To this day we use Arabic numerals, which represented a tremendous advance on those used by the Romans. Indeed, it was only the symbol for zero which made possible our modern way of decimal arithmetic. It might almost be said that all modern bookkeeping and business accountancy would be impossible without it.

At the beginning of the ninth century a man from Chorasmia, named Mohammed, son of Moses, but called by the Arabs quite simply al-Khowarizmi—i.e., the man from Khwarizm—published the mathematical textbook which became known by the name of "Algebra."

In China the Arab merchants made the acquaintance of gunpowder, of saltpetre, the "Chinese snow." At the end of the eleventh century we find the first reference to the compass needle which was to become so exceedingly important for all high-sea navigation. Paper, invented in China about A.D. 105, was brought to Samarkand by Chinese prisoners of war in 751, and was from then onward manufactured there and exported to the entire world as a highly prized merchandise.

The population of China is reported nearly to have doubled between A.D. 652 and A.D. 73 3. During the following twenty years it continued to rise from 45 to 52 million. China's own agriculture was in no position to meet the growing demand for rice and grain. In seasons when the monsoons and rains failed, disastrous famines swept the country. Whereas in A.D. 630 one bushel of grain cost only io copper pennies, by A.D. 765 the price had risen to 1400 copper pennies; during the political unrest of the succeeding years the price in besieged cities rose as high as 70,000 copper pennies. Who was to blame? Naturally the foreign merchants!

Significantly enough, it was a Chinese merchant who led the revolt of 878. The Arabs called him Bantchoa, the Chinese Hwang Tchao. Countless foreigners were killed. But the popular indignation also turned against those Chinese who had embraced Buddhism, Islam, or Christianity. Chinese sources put the dead at 26,000, some as high as 200,000. From then onward the Arabs sailed only as far as India, to Calicut, the Malabar coast, or, at the most, to Ceylon. There they met the Chinese merchants.

Only few Eastern merchants traveled to Christian Western Europe north of the Alps. These merchants came from the vast, colourful, exciting world of the East, like the Ibrahim Ibn Yaacub who visited Mainz. They found unassuming people living in poor villages. Whatever they needed they themselves produced. If a merchant bought up merchandise anywhere this immediately resulted in shortage and hardship for the regular consumers; apart from modest reserves for emergencies there simply was no merchandise. But on the great Christian holidays, when the peasants from the surrounding countryside streamed into the cities, when the nobility assembled in order to engage in knightly sports, the foreign merchant, the "man from the East," was there with a staggering display of goods.

In the square outside the church, by the gateway to the episcopal palace, or under the protection of a powerful castle he put up his stall, simply and crudely knocked together, but piled high with dazzling things such as the people of those days could scarcely even dream about: valuable fabrics, magnificent weapons, and rare spices. Here we have the tentative beginnings of a market—at first only at "fairs," a word derived from Latin feria, meaning a Church feast, and reflecting the close connection between religious observances and worldly trade. In order to be prepared for these great occasions, some of the merchants began to place orders. Thus they provided a livelihood for the local artisans.

This was by no means an easy task: opposition to the merchants appeared at times to be insuperable. The artisans wanted to deal direct with the consumers; they wanted, as in the past, to produce their goods to the order of the lord of the manor, the clergy, or the peasants of the neighbourhood.

Amid these inhospitable surroundings the unarmed strangers enjoyed the protection of the great lords, for they knew how to gain their favour. From far afield they would bring them choice fabrics, precious weapons, hunting falcons, or thoroughbred horses. Animals were always in great demand. The Caliph Harun al-Rashid sent Charlemagne silken garments, perfumes, tents, a live elephant, and an intricate water-clock wrought from brass. An Indian Embassy presented the Emperor Augustus with a tiger and a python. A live rhinoceros was brought by merchants to China from the land of Huantchi, presumably Sumatra. It caused a tremendous sensation.

Chapter 6—The Italian Cities: Trade Become Business

“The grape and olive harvest in Istria has been plentiful: a command has been received for the surplus to be shipped to Ravenna. You have numerous vessels: see to it that this transport is carried out. You will not find it difficult, experienced as you are in long-distance freightage. The sea is your home: you are familiar with its perils. If the winds prevent you from gaining the high seas, your ships are yet able to defy the gales by sailing along the coast or making for the estuaries. When the wind drops your sailors disembark so that from the shore they might haul their ships along. I myself have seen this and I gladly confess that I was much struck by the appearance of your dwellings.... Like waterfowl you live in dwellings scattered over the surface of the sea. You have united severed tracts of land; against the fury of the waves have you built your dykes. The fish you catch are sufficient to nourish your entire population. Among you there are no distinctions, hence there is no envy among the citizens. This equality guards you against vice. Your salt-pans have taken the place of fields. They are the foundation of your wealth and the guarantee of your livelihood. Men can live without gold, but not without salt. Hold therefore your ships in readiness to bring wine and oil from Istria as soon as word is sent to you.”

The author of this letter, written at the beginning of the sixth century, was Cassiodorus, the Roman Minister of Theodoric the Great, King of the Ostrogoths. It is addressed to the inhabitants of that coastal area which nowadays includes the city of Venice.

The storm of the great migration of peoples had swept over Italy; the Roman Empire had been smashed. Even in Rome itself the barbarians were established; but their seat of residence was Ravenna. They had conquered the Empire as warriors, but their King, determined to administer it in the manner of a Roman Emperor, surrounded himself with Roman officials. His orders to them, particularly on the perennial problem of the food supply, met with success. Wine and oil from Istria had to be delivered: it was to be shipped to Ravenna. The man responsible for the implementation of these orders—a Roman in Theodoric's service—knew only too well that there were ways and means far more effective and much cheaper than imperious commands. He paid money to gain the co-operation of the most capable and energetic. Not for nothing was Cassiodorus descended from a Syrian family which had lived for some time in Southern Italy. He also knew why he addressed himself to the Venetians.

About the middle of the fifth century a few families had fled to the islands from the ancient cities of the Venetian plain, Aquileia and Patavium (present-day Padua), to escape the headlong advance of the Huns. But it was not until half a century after Cassiodorus's letter had been written to the Venetians, when the Lombards had burst into Italy and were roaming the mainland, killing and sacking, that Venice began to rise to importance. Again the inhabitants of Aquileia and the rich families from Friuli and Verona sought safety on the islands lying in the lagoons off the Adriatic coast.

From the beginning the Venetians took upon themselves most of the goods traffic between Byzantium, the capital of the East Roman Empire, and Ravenna, where the highest Greek official in Italy, the Exarch, had his residence. Venetian sailors thus brought to Italy the goods traded at the Golden Horn—silk from China, blades from Damascus, fabrics from Mossul (the famous muslin), and spices from India: But for these close relations with Byzantium, Venice would certainly not have grown so rapidly. By then, the Byzantines had learned to grow mulberry-trees and to breed silkworms, so that silk fabric for the precious garments of the clergy, the princes, and the nobles was now also beginning to come from Byzantium.

From Egypt the merchants brought back flax and fine linen; there, too, it was possible to buy those Indian spices which the medieval cooks considered indispensable. There was a great demand for cloves from the Moluccas. Compared with these articles, precious stones and pearls now played a subordinate part. On the other hand, a new foodstuff was beginning to gain ground—sugar. Nearly everything that was sold from the eastern Mediterranean to the Western world passed through Venice.) With great skill the clever Venetians not only gained political independence as a Republic, but also obtained from Charlemagne a trade privilege which was endorsed by the Greek Emperor in Byzantium. East and West alike used Venetian merchants whenever they wanted to exchange their wares. Along the boundary between the East Roman Empire and the West Roman Empire now resurrected under the Franks, the Venetians established their commercial power. They possessed no political hinterland, nor, to begin with, any industry. All they had was their ships. What protected them against attack was, on the one hand, the jealousy of the great Powers and, on the other, their unique situation in the sea. "The Venetians are born of the sea," a Greek author of the day wrote. "They are rogues like the Phoenicians, but of great cunning." Above all, they were real merchants. In Byzantium, by way of contrast, all-powerful officials still believed that they could guide and control the economic life of their people by means of decrees, monopolies, privileges, licences, and maximum prices.

When the East Roman Empire, threatened by the Muslims, was no longer able to defend its possessions on the Adriatic, the Duke Pietro Orseolo subjected the coastal cities of Istria and Dalmatia, mainly because they supplied the timber needed by the Venetians for building their ships.

In the Christian West a trade centre owed its reputation to the great Church feasts, whose splendour was heightened by the relics of saints which would be exhibited on these occasions. Princes, nobles, and above all the high clergy, would come from all over the world—in short, customers would congregate. Such commercial considerations played a considerable part when, in the ninth century, the relics of St Mark were transferred to Venice from Egypt.

The mere fact that the Venetians succeeded in acquiring these greatly revered relics in a country ruled by Islam reflects their considerable diplomatic skill. But for their close trade relations with the Arab peoples this success would not have been possible. At the time of the negotiations ten Venetian galleons lay at anchor in Alexandria.

In the course of their trading with the East the Venetians came to know many a process upon which they themselves founded important industries. The secret of weaving and finishing silk fabrics came from Byzantium; from Egypt they learned the skill of glass manufacture, which was soon to spread the fame of Murano throughout Western Europe. In Venice textiles were dyed and oil pressed. But the main industry remained shipbuilding—the basis of the city's dominion of the sea.

There was one dangerous rival on the west coast of Italy—Amalfi. Favourably situated on a spit of land in the Gulf of Salerno, Amalfi grew into an important trade city which successfully defended its independence both against Byzantium and against the Lombards. Its position, like that of Venice, was based exclusively on trade and shipping. Ships from Amalfi called at Alexandria and Beirut, partly to take pilgrims to the Holy Land, partly to purchase merchandise which was readily saleable in Italy. Before long the merchants of Amalfi had founded trading-posts in Palermo, Syracuse, and Messina—i.e., in cities held by the Muslims. The Muslims welcomed this trade which brought them considerable gain. They generously granted the strangers their own settlements, the so-called fonduks, where the foreign merchants could live among themselves; similar fondaci existed for foreigners in Venice.

History appeared to be repeating itself. The Assyrian merchants in the Hittite Empire lived in similar quarters; the Greeks had their own self-contained settlements in Egypt; and before long the German Hanseatic cities would repeat the pattern by setting up their agencies at the Steelyard in London, the ‘counter' in Novgorod, and at the Rialto in Venice. In the Islamic view the law of the Koran applied only to believers; hence the Christians were allowed their own jurisdiction, an early example of that consular jurisdiction which many countries enjoyed in Asia down to our century.

Amalfi made the most of its advantages. At the peak of its prosperity the small town had a population of 50,000—a quite astonishing figure for those days. It is probable that it was then by far the most populous city of the entire Christian West. Its currency enjoyed high regard throughout Italy and even in the Levant. Its laws were respected everywhere and frequently taken over by other cities. The institution of a special court of law to deal with cases of maritime trade, the Consolato del mare, became a model for the entire law of the sea of the West.

A citizen of Amalfi, Flavio Gioja, has been credited with inventing the compass. This is not strictly correct, as the compass-needle had been known to the Chinese, though in the shape of a fish. Certainly Amalfi may claim to have been the first to use the invention for navigation on the seas by combining the magnetic needle with the compass chart.

Amalfi's rôle came to an end when the Normans seized Sicily and, in 1131, captured the city itself. No sooner had Amalfi recovered from this blow when the Pisans conquered and sacked the city, destroying it for good. Today only ruins survive to mark its ancient position and size.

Genoa's rise to power began with the Crusades. Situated between France and Italy, Genoa was easy to reach also for the Germans. It was there that the Crusaders took ship for the Holy Land, and the major part of their supplies passed through Genoa. As early as 1097 the city, at the suggestion of Pope Urban II, dispatched a fleet to Syria; two years later a far greater Genoese fleet secured the supply of food and weapons to Antioch, where the Crusaders were being hard pressed by the armies of the Emir of Mossul. This well-organized flow of supplies was an important factor in the successful resistance of the beleaguered garrison and the ultimate repulse of the besieging army.

During the following years Genoese naval transports helped in the capture of Caesarea and other Syrian trading cities, where Genoa succeeded in ensuring for herself a predominant position with numerous privileges. Genoese consuls represented their merchants in Tyre and Sidon.

In accordance with its geographical position the City-state preferred to concentrate on the western Mediterranean, leaving the eastern part to its great rival, Venice. In 1138 a Genoese fleet conquered the island of Minorca, in the Balearics, and freed the Christians held prisoner there by the Moors. Eight years later the Genoese, in close alliance with Count Raymond Berenguer IV of Barcelona, captured the cities of Almeria and Tortosa on the east coast of Spain. This did not, however, cause them to rupture their commercial relations with Moorish Spain; on the contrary, they concluded a treaty of trade and friendship with the Muslim King Abdullah Mohammed of Valencia, who gave them permission to found their own factories in Valencia and Denia.

Genoa was altogether anxious to buttress her commercial position in the western Mediterranean by diplomatic agreements. She concluded trade treaties with the rulers of Majorca, North-western Africa, and Egypt. The most favourable, no doubt, was the agreement of 1156 with Sicily, under which the King of Sicily was expressly bound to protect Genoese trade and to push out the French and Provençal merchants. Genoa was also linked by close friendship with the Popes, who were looking for a counterpoise against Venice. Pope Alexander IV exempted them from all trade taxes in his temporal domains. In Southern France, too, there were countless Genoese merchants, especially in Narbonne and Arles, where they likewise enjoyed considerable privileges.

Venice meanwhile was further developing her position in the eastern Mediterranean and in the Black Sea. Fortunately, the Crusades did not interfere with the entire Eastern trade, but only with that to Syria. Relations with Central Asia remained unaffected. In spite of their consideration for their Muslim trade partners, the Venetians permitted their fleets to intervene in the military decisions of the Crusades. They tipped the scales in the naval battle of Joppa and made possible the capture of Tyre in 1124. In return Venice was granted, in all cities that were captured, the privilege of her own jurisdiction, her own churches, and her own weights and measures.

The growing power of the city in the lagoon was viewed with serious misgivings by Byzantium. Venice had long ceased to be a mere trading city; she now had extensive territories in Istria and Dalmatia, she possessed Croatia, and was trying to block the land route—or more properly, the river route—down the Danube. In the war between Byzantium and Sicily Venice sided with the latter. The East Roman Emperor thereupon forbade entry to his country to all Venetians. When the Emperor Manuel lifted the ban, some 20,000 Venetians once more set out for the East Roman Empire with large sums of money; however, in 1171 they were arrested without warning and all their merchandise confiscated. Neither protests nor threats were of any avail. Byzantium, however, had under-estimated the proud merchants of Venice; they now blockaded the Byzantine Empire, cutting off all trade. Within a few years the Emperor had to yield and even promise compensation for the losses suffered by Venice. Once more Italian merchants, including many from the city in the lagoon, settled in Byzantium. To all appearances peace and friendship had been restored. But the Venetians were merely awaiting their chance of revenge. That chance was to come soon.

The meeting-place of the knights gathering for the Third Crusade—which was aimed not at Syria but Egypt—was Venice. But where were the knights to find the large sums which Venice demanded for ferrying them across? The aged Duke Dandolo made them a curious proposition: they could work their passage by temporarily entering the services of the city of Venice.

Thus the Crusaders, working their passage, first conquered Dalmatia and then Constantinople. Mercilessly the Lombards and the French, who had set forth to perform a pious deed, sacked the Christian city. Venice had her revenge.

She now occupied the most important islands and capitals in the eastern Mediterranean—Corfu, Crete, Euboea, Adrianople, and the countries of Epirus and Aetolia. She founded several colonies on the Black Sea coast: from Sudak, on the southern coast of the Crimea, merchants traveled to Moscow and even as far as Novgorod, where they encountered traders from the Baltic.

Even more important was the fact that, from the Black Sea, the Venetians were able to deal directly with the countries of Central and East Asia; this trade yielded good profits. That was why great importance was attached to the friendship of the emperor in Trebizond and the kings of Armenia, through whose territories the trade route to Turkestan lay. No longer were the Venetians to be dependent on those overbearing Crusaders in Palestine or on the Muslim Sultan in Syria.

Nevertheless, to ensure good relations even with him, the Venetians paid the Sultan a voluntary 10 per cent tax on all their turnover in return for permission to buy and sell goods without let or hindrance throughout his empire. The treaty concluded with the Sultan of Aleppo was even more favourable: he demanded a tax of only 6 per cent., and, in return, permitted the Venetian merchants to equip their own quarter in Aleppo, where they could enjoy their own jurisdiction, not only in civil cases but also for criminal law. Similar favourable trade agreements were concluded with Egypt in 1238 and with Tunis in 1251.

Unparalleled wealth accumulated in Venice. Merchandise arrived from Northern and from Eastern Europe, from the Mediterranean area, from the Middle East, and even from Africa and the Far East; and on every consignment the Venetians made a profit. They enjoyed a monopoly, based partly on their business relations, partly on their wealth, which enabled them to grant credits and undertake great risks, and finally also on their military and political superiority. A shrewd commercial policy was combined with an ever-watchful determination to tolerate no rivals. Military power went hand in hand with political friendship; this, in turn, was frequently buttressed by financial assistance and strengthened by occasional presents.

Secure on her islands, Venice could afford to wait calmly. Her adversaries she played off one against another, using every opportunity of acquiring privileges cheaply. Lombards, East Rome, the Saracens, Normans, Crusaders, and the Sultans of Egypt, Iconium, Syria, and Tunis—all these were mere pawns on the chessboard of Venice's politics. By making use of the one, who often did not even know what the game was, the others could be made pliable and ready to negotiate; frequently one opponent was won over in order to subject another. Eventually the Venetians were firmly established along all the important trade routes of the eastern Mediterranean. Along her canals Venice shipped a truly inexhaustible stream of merchandise from Asia to Central Europe.

About the year 1260 the brothers Niccolo and Maffeo Polo visited their trading-station in Constantinople to look around for more beautiful and cheaper precious stones. On the Bosporus the Venetians enjoyed such a degree of protection that it was safe for Niccolo to take his young wife with him. Later, however, the two merchants conceived the idea of visiting their business connections in Sudak, in the Crimea, who bought for them the precious stones from the caravans arriving from the Far East. To see for themselves what this trade was like, to talk to the people who brought the valuable wares from far-off countries, to see if it was possible to buy even more favourably—these were the considerations which induced them to leave the young wife behind in Constantinople and to cross the Black Sea to the Crimea.

What they heard in Sudak gave them no comfort. In Southern Russia a new, huge empire had arisen whose ruler controlled all trade. The caravans from the interior of Asia now traveled only as far as his residence on the Volga; there they turned back. Ought they not to pay a visit to this powerful prince?

The merchants in Sudak urgently advised them against such a dangerous enterprise. They were afraid of the Mongols, those wild horsemen who had swept through the whole of Asia as far as Central Europe, carrying with them murder, arson, and pillage, sparing no one, neither man nor woman, neither the aged nor the children. Hair-raising stories were being told about those ruthless campaigns halfway across the world. Only five years previously the Mongols had once again fallen upon Poland, laid waste the land, and destroyed Cracow. How could one do business with them? But the Polos were prepared to risk it. Surely there were some monks who had already visited the Mongols? And what a missionary could do surely an experienced merchant, used to negotiation, should be able to do as well.

At the court of the Mongol ruler they subjected themselves to the ancient Oriental customs: they surrendered all their precious jewels to the ruler as a gift. They were not deceived in their expectations; the Mongol prince received them hospitably and returned their presents generously. They were free to move through his territory, and to buy and sell whatever they wished. As they had no serious competitor business was most profitable. Their daring had paid dividends. But how were they to return to their country?

In the meantime the victorious Greeks had driven the Venetians from Constantinople. This way home, therefore, was barred. In Armenia war was raging between the Mongols and the Muslims. On the advice of their host, the Venetians decided to travel in a wide arc around the Caspian Sea, through the West Siberian steppe and the western provinces of the gigantic Mongol empire, into Persia. But in Samarkand they were halted again.

Luck, however, was with them. They met an imperial envoy returning from Persia to the court of Kublai Khan, the great Khan of Mongolia. The envoy took a liking to the clever men from the West. Would they like to accompany him to the great Khan? The temptation was irresistible. What had begun as a brief visit to business connections in the Crimea became a journey whose end was nowhere in sight. Back home a young wife and a newly born son were waiting. Nevertheless, this unique opportunity of seeing the land from where all the rare merchandise came could not be allowed to pass unused. They accepted the invitation.

The journey took many months: from Samarkand over the icy heights of the Pamirs, along the silk route through the Tarik basin in Central Asia, across the deserts of Mongolia to Karakorum, the seat of the Mongol emperor. Slowly, very slowly, the caravan crept forward. True, the imperial envoy received every help from the Mongol authorities: horses and foodstuffs were provided free of charge, the roads were protected by garrisons and guard-posts, but the rigours of the unending journey were appalling—scorching heat by day, icy cold at night, and also the high passes, and the long distances which demanded forced marches so that the next water-hole was reached in time, the howling storm which cut through even the thickest sheepskins, the rarefied air up in the mountain passes, which were blocked by ice and snow, so that the caravan was forced to wait for several weeks. The hardships were too much for the Mongol envoy; he died on the journey. But the Venetians reached their destination and were most amicably received by the great Khan.

Kublai liked them for their intelligence and for their integrity; soon he treated them as friends. Eagerly he listened to their accounts of conditions in the West. At last he dispatched them to Europe with an important message: he offered to fight side by side with the Christians against the Muslims in Asia Minor, Syria, and Egypt. Indeed, he was prepared to become a Christian himself and to have his subjects converted provided learned monks could convince him of the truth of their religion.

With this truly revolutionary offer the Polo brothers set forth on their homeward journey. The great Khan had given them golden tablets on which he had engraved his name with his own hand; these were to ensure that all along their route the merchants would enjoy the Emperor's protection. They were to receive free of charge whatever they desired, and they were entitled to issue orders to the troops in the garrisons. Thanks to these powers the long journey was accomplished without incident. But when the Polos returned home in 1269 everything had changed. The Pope was dead, and no successor had yet been elected. Nor was there an Emperor left. There was nobody to whom the Venetians could have delivered the magnanimous offer of the powerful ruler of the East. For two years the Polos stayed in Venice, in vain. Then, as they did not wish to keep their exalted friend and patron waiting any longer, they decided to return to East Asia empty-handed. On this journey they took with them Niccolo's son, young Marco Polo. At the last minute the new Pope sent a few monks to accompany them, but when the party had reached the mountains of Armenia and learned the alarming news of a new war in the East the Papal emissaries lost heart. The Polos continued on their journey alone, trusting in the protection of the imperial seal. The hardships of the journey proved too much for young Marco. For several months the caravan had to halt in the foothills of the Pamirs until he recovered from his sickness. After what must have seemed an eternity the Venetians arrived at the great Khan's court in Peking.

Kublai no longer had his residence in the inhospitable steppe but in the middle of prosperous China with its flourishing trading cities, thronged with hundreds of thousands of inhabitants. From the Spice islands, from Indonesia, from India, from the interior of Asia, and from far-off Siberia—from all corners of the earth came merchandise and tribute, sent to the great Khan by the nations he had subjected: magnificent horses, tigers, and rhinoceroses for the imperial big-game pits, rare weapons, and precious jewelry. With amazement the Venetians watched countless ships arriving in the great ports day after day, laden with pepper and cloves, with Indian fabrics, with gold and silver. Vast wealth flowed into the court from customs revenue and from the tax on salt sold by the Chinese to foreigners, from silk and from Chinese ceramics. Kublai Khan appointed young Marco Polo, to whom he had taken a particular liking, to be overseer of State revenues. Marco did not deceive his master's trust; he served him loyally. From his journeys across the length and breadth of the Empire he sent the Khan rare hunting animals, panthers, and falcons, knowing how these gifts would delight the mighty ruler. There was only one drawback: the Emperor would not let him return home. He had got too used to the company of the lively young man.

Not until many years later did an unusual opportunity enable the Polos to return home: they were permitted to accompany a Mongol princess who was to be married to the ruler of Persia. In order to spare the noble lady the rigours of the overland route it was decided to go by sea, via Indonesia to the Persian Gulf. The voyage took eighteen months; it was so strenuous that most of the party died on the way. The princess and her entourage of women, however, thanks to the Polos' solicitude, survived all hardships and privations. Marco Polo reports that when the moment of parting came the princess wept bitterly.

The Venetians were astonished by three ragged figures turning up one day at the Polos' house in Venice, demanding admittance and claiming to be the rightful owners who had left for the Far East twenty-six years before. They had long been declared dead. In the evening a banquet was given for all relations and for the leading citizens of Venice. The travelers made their first appearance in clothes of precious crimson brocade; before the guests sat down to dinner the hosts withdrew and presently returned in clothes of crimson damask; the brocade clothes were instantly cut up, in accordance with Mongol custom, and distributed among the servants. Halfway through the meal the three men changed into crimson velvet, and the damask clothes were now cut up and given away. After the meal the clothes were changed once more.

But the real surprise came at a late hour when the servants had been dismissed. Young Marco cut open the seams of the shabby garments in which the three travelers had arrived; and from the seams of the ragged clothes tumbled out quantities of pearls, diamonds, rubies, emeralds, and sapphires. No one could doubt any longer that these men were indeed the Polos who had returned at long last. But the strange stories the travelers told of the land of the great Khan were nevertheless disbelieved by their fellow countrymen. They sounded so implausible, so boundlessly exaggerated, that young Marco was nicknamed in Venice "Messer Miglione"—"Master Million." This was also the name given to the book which he wrote about his experiences in Asia—that is, as soon as he found leisure to write it: in Genoese captivity.

During the time that Polo was in Asia Genoa had become the leading naval power in the Mediterranean, despite the fact that it lay wedged between the mountains and the sea, without hinterland. "A sea without fish, mountains without forests, men without faith, women without modesty—that's Genoa for you!" the Venetians used to scoff But they underrated the sheer determination of their rivals. Genoese merchants also wanted to enter Constantinople and sail through the Bosporus. So long as the proteges of Venice, the `Latin' emperors, were established at the Golden Horn, the overwhelming part of the Asian trade belonged to Venice. And this the proud lords of Genoa would not accept.

They helped the Greek Emperor Michael Palaeologus of Nicaea to reconquer Byzantium in 1261. As a token of gratitude the Emperor ceded to Genoa the suburbs of Pera and Galata on the Bosporus, both of which have remained Christian quarters to this day. In the Black Sea, apart from the Genoese only the Pisans were allowed to trade; to everybody else, but in particular the Venetians, the harbours were now closed.

Supported by this alliance, Genoa became the predominant commercial power not only in the Black Sea but in the entire Eastern trade. For two centuries Genoa retained possession of Kaffa, the most important transhipment centre in the Crimea, today's Feodosia. Genoa had settlements in Soldaia (present-day Sudak), Cembalo, Tamono, and Cerco. Genoa concluded trade treaties with the Sultans of Armenia, Egypt, and Syria, with the Berber princes of Africa, and with the Moorish kingdoms. Even when the Christian possessions in Syria were lost again, the Genoese maintained their privileged trade position. A Genoese, Benedetto Zaccaria, married the sister of the Emperor; he commanded the Genoese fleet in the battle of Curzola in which Marco Polo was taken prisoner. In the end this dominant position was undermined by internal quarrels, which led to protracted civil wars and to Genoa's political and economic decline. Even so, the city was to remain for a long time to come the richest trading-port in the western Mediterranean.

Crafts and manufactures at first played only a subordinate part in -Venice and Genoa. The merchants of these cities were great gentlemen, city nobility grown rich over the centuries, at least as familiar with military matters as with profitable business. Thanks to their close relations with the East, however, the arts and crafts began to flourish. Frequently foreign artisans were invited from abroad, so that their manufactures could be acquired and sold more cheaply. Thus the famous glass factories were set up on the island of Murano, which supplied glass buttons even to the mandarins of China. In Venice itself lace-making and silk-weaving developed. Before long the Italians were able to supply to the East their own manufactures—woollen and cotton fabrics, weapons and ornaments, skillfully fashioned vessels, and leather goods. They found a ready market on the Red Sea, in Abyssinia, in Tartary, in the islands of the Indian Ocean, and on the coasts of India and Africa.

The principal profit from this development, however, was derived not by the great merchant cities of Venice and Genoa, but by Florence. Situated on the Arno, away from the sea, Florence could not hope to play an important part in commerce. Its inhabitants therefore concentrated on arts and crafts. The rise of Florence began when the monks of the Order of Humble Brethren, previously established in Tyre, transferred to Florence in the face of the advancing Muslims and were received therewith open arms. They had learned the art of weaving from the Orientals, and had further developed it; in particular they had evolved a method of dyeing wool, called calimala, the secret of which was closely guarded. The Florentines presently succeeded in further improving the finishing of these textiles by imparting to them a beautiful sheen, so that their products soon gained a high reputation in the European markets.

As there was not sufficient wool in Tuscany, this had to be imported from France and Flanders, and even from England. Huge covered wagons traveled from Ghent via Brussels, Paris, Avignon, to Marseille or Aigues-Mortes—then still on the Mediterranean—and across the Apennines to Florence. Aigues-Mortes was also the destination of the consignments of wool shipped from London via Bordeaux, to be transported thence through Gascony and Languedoc. All freightage in the western Mediterranean, however, was controlled by Genoa. This trading city, still powerful, undertook the protection of these transports. The result was a lower rate of maritime insurance than before. The rate rarely exceeded 15 per cent. and frequently stood at 12 per cent. These are not high figures considering the dangers from wind and waves to which those early awkward vessels were exposed.

Frequently the Florentine merchants had their wool woven for them in Flanders or France; the dyeing, however, was invariably done in Florence itself, chiefly with indigo imported from the East. About 1338 Florence had more than 200 workshops which processed between 70,000 and 80,000 pieces annually. Customers far and wide demanded Florentine cloth; no other material in Europe could match it for perfection.

For a while Florentine exports passed through neighbouring Pisa, which did exceedingly well out of this brokerage. The Pisans, however, were not satisfied, and in 1356, in order to extort from the Florentines a greater share in their profits, they revoked the freedom of trade which Florence had enjoyed. No doubt the powerful sea lords thought that the poor artisans on the Arno ought to be grateful to them for allowing them to find a customer for their wares at all. But they were mistaken. In spite of increased overheads, the Florentines now channeled their merchandise through the port of Talamone, which, though inadequate, belonged to Siena. Pisa had to yield; it could not afford to lose its trade with its rich hinterland. In 1370 it once more exempted all Florentine merchandise from customs duties.

Fifty years later, in order to become independent of Pisa, Florence acquired the harbour of Leghorn for 100,000 gold ducats. It set up its own fleet of warships and a special office for maritime affairs. In the very next year the Florentines obtained permission from the Sultan of Egypt to import and export their merchandise on entirely equal terms with the Venetians. Agencies were set up in the Egyptian cities, and consuls appointed. Soon the first galleon flying the Florentine flag arrived in Egypt; it was followed by ships sailing to Kaffa and Trebizond, Tripolis and Tunis, the Balearic Islands and Catalonia, and even Flanders and England.

On their eastward voyages the ships carried industrial manufactures, which were traded for valuable Oriental goods. When the galleons sailed to the West they did so to purchase raw materials—fine wool from Spain or coarse wool from England. Since the Portuguese had seized Tangier from the Muslims the sea route had become cheaper than the overland route from Bordeaux to Aigues-Mortes. However, it still remained the more dangerous of the two, if only because of the pirates off the North African coast.

In order to purchase wool at such great distances and to bring it to Florence, considerable capital had to be tied up for a long time, and, what was more, not in an occasional transaction of great risk and correspondingly great profit, but currently at low rates of interest, so that the domestic textile industry should remain competitive. To this end Florence developed an elaborate banking system.

The Venetian and Genoese merchants were themselves rich enough to equip their ships. If a ship returned it brought great gain; if it was lost the loss was so great that no insurer or banker would be prepared to underwrite it at a low premium. Only a regular, steady business made it possible to spread the risks evenly and to make capital a calculable factor in the total production costs of an industry. At the peak of its prosperity Florence had eighty banking-houses, with branches throughout Italy—the Bardi, Pazzi, Villani, Capponi, Buondelmonti, Corsini, Falconieri, Portonari, and, more powerful than all others, the Medici. About the middle of the fourteenth century the Pazzi alone had sixteen branch offices—in Avignon, Paris, Bruges, London, Majorca, Morea, Rhodes, Cyprus, and Tunis.

The vast capital of the Florentine banking-houses came from their highly profitable money transactions. Emperors, kings and princes, and above all the Church, had the taxes paid by their subjects and believers, as well as the sums sent by them to their allies, remitted through the banks. This was done for two reasons. First, there was but little precious metal about in the Middle Ages; if all payments from one country to another had been made in cash all economic life would soon have come to a halt. Charlemagne was unable to levy a monetary tax because there were not enough coins in his realm. His empire was still too deeply rooted in an economy based on payment in kind. Such a market economy as was able to develop slowly in a few cities depended entirely on the small quantities of coin current in the Christian West.

Year after year large sums of money flowed into Rome from all parts of Christian Europe: indulgence money, Peter's Pence, the taxes levied from believers for the maintenance of the Papal See and for its great ecclesiastical and political purposes, contributions to the Crusades—in all, very considerable sums collected as money or precious metal and now to be transported to Italy over great distances and along hazardous routes.

The Florentine banks simplified the procedure. They accepted the monies in the countries of payment, used them to pay for the wool bought locally, and then paid the Vatican out of the proceeds of the cloth sales. Moreover, they collected from the Popes a considerable transfer charge. The firms authorized by the Pope to collect money for him in foreign countries all made excellent profits. It was to this close connection of banking and the Holy See that the Medici owed their rise to the position of the richest family in Florence.

In this way the Florentines paid for their wool without any great capital of their own. The Florentine banking-houses, moreover, used the Church monies for granting credits, often to very considerable amounts. The Bardi, for instance, made enormous loans to the King of England, at times a multiple of their own capital. When Edward III stopped all payments in 1339 his bankers, the Bardi and the Pazzi, went bankrupt. King Philip VI of France decreed autocratically that the Florentine merchants and bankers must pay large fines for their 'usury'—fines which, needless to say, went into the King's pocket. Without powerful political backing the Florentines were practically helpless against such arbitrariness.

Around the middle of the fourteenth century the city on the Arno had about 100,000 inhabitants, 110 churches, and 39 monasteries and convents; it was the biggest city of the Christian West. Arts and crafts were flourishing; within a single year the textile industry produced cloth valued at 1,200,000 gold ducats. Science and the arts rose to new heights.

Florence had gained this position not with the aid of powerful armies or mighty fleets of warships, but solely through the hard work of its artisans and the shrewdness of its merchants.

What the Florentines looked for was a regular, sound business. The city's entire way of living bore a middle-class stamp. Even the richest families fell in with the simple usages of their fellow citizens. The tone was set by the artisans, by the guilds—in particular by the fourteen so-called lower guilds, whose number was subsequently enlarged by those of the workers in the cloth-mills and by the tailors and barbers.. Among the seven upper guilds the cloth-makers ranked first, followed immediately by the money-changers, or, as we would say, the bankers.

To the Florentines the customer was a ‘business friend,' who was offered, in free competition, the best merchandise at the lowest possible price. The customer should feel satisfied with his purchase. Only on that basis could a durable business be built up. That was why Florence was most careful to see that all obligations were met, that the terms agreed were observed, that the quality of the merchandise was up to the vendor's promises, that delivery dates were punctually kept, and that the coinage remained genuine and unadulterated.

Every country, indeed most cities, struck their own coins, whose gold or silver content fluctuated, and which might be accepted in one country and refused in another. A money-changer had to know countless different coins and examine every one for its real value. Against this background the Florentine florin—the name itself is derived from the city—remained stable. When Abu Abdullah, the Sultan of Tunis, saw his first gold florin in 1252 he was amazed by the superb finish and the purity of its gold. He asked the Pisan merchants what the inscription "Florence" meant.

"Oh, that's nothing special," the Pisans replied. "It is a region where our hill tribes come from—like your Arabs."

"This coin is not the work of any hill tribes," the Sultan replied.

The Florentines were solid, reputable merchants. "You must deal with your business friend fairly and squarely. You yourself must remain absolutely reliable: the kind of emotion which a nobleman or a farmer, a peasant or a landowner, a warrior or even a beggar can afford, has no place in commerce. The merchant must never forget that he is merely the trustee of the possessions of others and that he lives by the trust of others.” These remarks by a Florentine schoolmaster are vastly different from the principles which governed trade in Venice or Genoa.

For the merchandise traded by the Venetians the ‘prime cost'—i.e., their price at their place of origin on the Black Sea, the Syrian coast, or in far-off Asia—played but an insignificant part. After all, high or low purchase prices depended on so many things: in times of war, or of fierce storms, or when princes arbitrarily blocked the roads, prices would soar. But if several caravans arrived at the same time they had to sell their wares cheaply because they were neither willing nor able to wait long. But even these ‘low' prices still ensured a considerable gain for the caravan traders.

Commercial calculation, on the other hand, presupposes that purchasing prices remain more or less stable so that a definite figure can be computed for them. Next, the costs and risks of transportation have to be not only assessed but also covered by insurance or by the setting aside of reserves. This, in turn, presupposes a continuous, steady exchange of goods, such as would enable the merchant to spread an occasional loss over several successful transactions. He must know what percentage of his ships will be sunk on an average; the limits between which his costs will fluctuate; and at what times, and where, goods will be offered in quantities sufficient to enable him to stock up again. Above all, he must be able to count on a reasonably steady market for his merchandise.

A merchant dealing in such articles as wool and woollen fabrics—goods constantly in demand—would soon be able to estimate fairly accurately the average magnitude of his risk, and what would be a reasonable price. In short, he would know what figures to put down in his balance sheet. That was something entirely unknown in the Eastern trade as practiced by Venetians and Genoese. The great merchant princes of those cities never calculated; calculation to them seemed pointless from the start. If in a foreign port they found ample supplies and low prices they stocked up on favourable terms. After all, things might be quite different on their next visit. In those circumstances, how could they calculate ‘prime costs'? If their ship and merchandise were swallowed up by the sea or seized by pirates they would lose their money at a single stroke—a fate which very nearly befell Shakespeare's Merchant of Venice.

The Florentine merchant, by way of contrast, demanded security. He wanted to be in a position to see at any moment exactly how much he was worth: not in nebulous outline, as the Venetians might have been content with—"two or three ships fully laden with precious merchandise from the East"—but in precise figures: so and so many thousand florins.

For this purpose he had to write everything down; he had to keep accounts, to enter in his balance sheet the size of his stock, the goods he had dispatched, the monies due to him from his customers, and the sums owed by himself. He then had to assess conscientiously the risks of his transactions and set aside appropriate sums. If he had been excessively cautious, if he had overrated the perils of a journey, then his profit at the end of the year would be greater than expected. If, on the other hand, more ships had been lost, or if his customers would not pay as promptly as he had assumed, or if his goods did not achieve the prices envisaged, then his balance sheet would show a smaller profit, or possibly even a loss. The mere idea that a fortune could be computed, that a variety of factors could be expressed in figures, had seemed unthinkable to the Venetian or Genoese merchant adventurers of the early Middle Ages. What was the use of figures? Did they provide any security? Why write things down laboriously, day after day, when a single gale at sea could make nonsense of all calculations, and when a single successful transaction could make up for all losses?

A man who can obtain credit at any time at the mere mention of his name naturally needs no balance sheet.

But the small artisan in Florence, the merchant who dispatched his woollen fabrics, had to prove his financial position to the banks. And they would investigate him very thoroughly. The first question, invariably, was about his `capital: That was the reliable basis of all credit. Whether a man had a lucky touch in business, whether he came from a famous family which, in case of need, could be relied upon to help—all that was not so important as the reserves behind a man: his merchandise, his workshops, his buildings. Credit depended no longer on the person, but on a man's financial standing expressed in precise figures.

In the ledgers of the merchants the vast quantities of merchandise were reduced to a few dry figures. Commerce lost its colourful variety, the charm of adventure, and became a sober, one might almost say a petty, act of calculation. Human beings with all their hopes, their courage, their anxieties and their weaknesses were now supplanted by accurately computed `fortunes.' The merchant now was "worth so and so much." We have become familiar with this way of thinking since the days of the Florentine merchants, but we should not forget how utterly new and revolutionary this idea was in the thirteenth century. The transition from merchant adventure to sober calculation became possible only because Florentine trade was based on the sale of its arts and crafts in accordance with solid middle-class principles.

At the time when Venice built up her industries no accurate calculation was needed. Manufacturing secrets were carefully guarded, and the Venetian warships saw to it that no rival infringed the monopoly of the city's artisans or merchants. The Florentines, on the other hand, were engaged in fierce competition with the artisans of other cities. Price and commercial efficiency alone were decisive. The Florentines were forced to calculate accurately and shrewdly.

But was it possible to make a fortune with prices calculated to such a nicety? Indeed, was it worth while to have to borrow money from the banks in order to bring wool home from far afield and then sell the dyed fabrics to foreign customers on credit? With amazement the great merchant princes of Venice and Genoa watched the Florentine merchants, those petty penny-pinchers, grow rich. Accustomed to profits of 100 per cent. and more, they could not imagine that it was possible to build up fortunes by operating with a very modest profit margin. Naturally, a big turnover was necessary, and this could be achieved only by selling cheaply. The Venetians and Genoese did not notice that part of their high profits were swallowed up by their heavy losses, whereas the Florentines had reduced risk to a minimum and would sooner decline an uncertain business deal than get involved in a doubtful adventure.

Carefully they would examine the ‘credit standing' of their customer; neither personal connections, nor respect for a great noble name, nor yet the non-committal recommendation of some exalted person, would induce them to give money or merchandise on credit to an adventurer. Bitter experience had taught them not to trust the dazzling glitter of high office; the memory of the English and French kings who had defaulted on their payments was an ever-present warning to the once-bitten Florentines.

The people who got rich in Florence were not so much the artisans as the bankers, but in their business it was almost impossible to separate commercial from purely banking transactions. The banking-houses granted credits to the artisans to enable them to order English wool from the merchants without having to pay for it until delivery had been made in Florence and found to be in good order. The merchants who purchased the wool could draw the money they needed from the banks in London, Bruges, or Barcelona.

Thanks to this enormous financial power the Florentines could always purchase their raw materials where they were cheapest. If a transport was sunk or robbed, the banks would come to the help of the merchants. They would spread the cost as evenly as possible among all their customers. At first they merely `assessed' the risk. Presently, however, their accountants worked out, on a mathematical basis, precise rates of probability for their insurance business. Even accidents were calculable.

To ensure a smooth and safe way of remitting money the Florentines invented the `bill of exchange: Unlike the payment order instructing a business partner to pay the bearer the sum specified, the bill of exchange represented the drawer's obligation to meet the sum himself at any time in the event of the bearer not having been paid by the recipient. The bill thus became a regular debt of the drawer. As a result, a bill of exchange, when transferred, became ready money: the Florentine banking-house stood surety for it. It was upon this voluntary liability that its superiority was based.

By way of contrast, the Venetian banks, which were mostly in Jewish hands, were not permitted to conduct any commerce in goods but only financial business, while the Christians were altogether forbidden to charge interest. Venice lived by its commerce and shipping. Three thousand merchant ships and 45 war galleons with a crew of 25,000 soldiers and 11,000 sailors were at her service. Sixteen thousand people were employed in her arsenal. Florence had no military strength, yet the payments entrusted to her banks passed safely through the length and breadth of Europe.

Florentine merchants carried with them, wherever they went, their sober business sense, precise commercial calculation, and reliability. Above all, they planted these ideas in the countries from which they bought their wool—Flanders and England.

Chapter 7—Strength Through Unity: the Hanseatic League

What shrewd merchants had for long been fearing at last happened: King Valdemar IV of Denmark, called Atterdag, struck. Without any declaration of war his navy captured the Baltic island of Gothland. Visby, the powerful trading centre on the Baltic, then perhaps the biggest and richest city in all Northern Europe, now belonged to Denmark.

For a long time past not only Danes but the entire greater and lesser nobility of the Baltic had been looking in envy at the powerful cities which so prided themselves on their freedom, and at the "pepper-bags," as they called the merchants who sat securely behind their high walls, getting richer all the time. After all, who were these peddlers in the eyes of the kings of Denmark, Sweden, and Norway, the Dukes of Holstein, Mecklenburg, and Brandenburg, or the Grand Master of the German Order in Prussia? Not one of the merchants could compare in splendour or importance, in power or fame, with the great lords who sat in their vast estates, deriving enormous incomes from levies and rents. But the citizens just sat in their towns and, banded together in their "Hanseatic League," defied kings and princes.

The war had been triggered off by the rights and privileges enjoyed by the German Baltic towns at the great fair which was held every year at Falsterbo and Skanör in south-western Sweden between St. Bartholomew's Day (August 24) and St Denis' Day (October 9). Merchants came from all countries to buy fish, principally herring, which was caught in large quantities along the near-by coast of Schonen. Fish was a favourite food, especially during the long winter and for Lent, which was strictly observed. Falsterbo and Skanör may not have smelt very pleasant during those weeks, but a great deal of money changed hands.

From this trade the kings of Denmark derived handsome profits, since they charged the merchants high fees for admission to the market. Whenever a king found himself short of money he would assign these privileges for a long time ahead. Or he might grant to a few cities the exclusive right of fishing for herring or selling the catch—in return, needless to say, for an appropriate fee.

With their money the clever merchants of the Hanseatic cities on the Baltic, the so-called Wendish towns, had acquired a trade monopoly for herring in the province of Schonen, in Southern Sweden. And that was worth a good deal. The herring fleet comprised 40,000 boats and employed 300,000 fishermen. The salt for pickling the herring came from Northern Germany, chiefly from Luneburg. The profits from this trade went not only to the Luneburg merchants but also to the great nobles from whose land the salt was obtained. They were among the richest men in Northern Germany.

It was to break this trade monopoly and to strip these rich pepperbags of their privileges that King Valdemar seized Visby in 1361. True, this capture did not mean the end of the war, but the Danish King already regarded himself as the victor; after all, he was in alliance with the most powerful rulers of Northern Germany. The Margrave Ludwig of Brandenburg was his brother-in-law; the entire levy paid by the free city of Lübeck, a sum of 16,000 silver marks, had been mortgaged to Ludwig by the Emperor Charles IV. Would they not all stand together to put those impertinent hucksters in their place?

The Hanseatic cities replied by a trade embargo. However, in this predominantly agricultural area this had little effect. The first attempts by the Hansa towns to resort to arms were dismal failures. The unfortunate leader of the Hanseatic war fleet, Johann Wittenburg, burgomaster of Lubeck, was executed by his fellow-countrymen after suffering a crushing defeat in the Sound. But the war went on. The Wendish towns concluded an alliance with those in the West, as well as with Sweden and Mecklenburg, with Holstein, and with many Jutland nobles, so that the Danish King's war effort soon collapsed. Valdemar Red his country. In the Peace of Stralsund (1370) his subjects confirmed the ancient privileges of the Hanseatic towns: freedom in trade in the kingdom of Denmark, Hanseatic jurisdiction in Schonen, and the monopoly of fish exports from Falsterbo and Skanör, as well as from Bergen in Norway. Hanseatic ships were again allowed to sail through the Sound unmolested. The Hansa merchants had won their victory and had gained self-confidence and world-wide respect. It had been a long and difficult road.

Under the assault of the wild hosts from the East—Germans, Huns, Avars, and finally Magyars—even the modest village-to-village trade which had developed in Roman times came to an end. First to recover was the long-distance trade. On the feast-days of the Church, which provided the only diversion in a dreary day-to-day existence, the great nobles as well as the general population of the countryside made their way to the fairs and to the markets. And indeed these occasions were a popular fete. All around the church and along the roads leading to it, the itinerant merchants would erect their tents or market-stalls. Time and again we find references to Jews, Arabs, and Wends visiting these fairs.

Only slowly and tentatively did people begin to settle in these cathedral cities or in the neighbourhood of powerful and influential monasteries, in order to manufacture merchandise predominantly for these markets—tailors making clothes, wheelwrights repairing wagons, armourers forging weapons. The artisans in the city processed the raw materials which they obtained from outside, from the surrounding countryside—wool and flax for clothes, hides for leather and shoes, timber for furniture and vehicles, iron for weapons and implements. From the earliest times, however, we find a curious inconsistency in the attitude of these artisans. For their own purchases they usually needed the merchants who supplied their raw materials; but when it came to selling their own products they wanted to deal with the consumer direct.

The countless guild regulations and market ordinances of medieval cities which have come down to us reflect all the producer's hostility to the middleman. Merchants were forbidden to offer in the market wares manufactured locally; these could be sold only by the artisans, by the members of the guild. Trade by middlemen within the city walls was a criminal offence. These rules thus barred both the small local merchant and the itinerant merchant from farther afield. The latter was only allowed to supply merchandise from far-off countries.

It is impossible to over-emphasize the distinction which the ancient city laws made between external trade and local trade, by opposing the local dealer—i.e., the small shopkeeper—to the merchant proper. Not until the artisans in a town produced more than they could sell in the local market did they begin to show interest in the merchant. It was then that they needed an intermediary who would gain for them a wider market.

It is, of course, an open question whether, in the restricted conditions of the early Middle Ages, the artisans would have even thought of manufacturing more than was required by their local customers, if it had not been for an external stimulus. The foreign merchant who attended the great Church feasts and fairs naturally looked around in the city for any merchandise he might take home with him or sell elsewhere en route. If he saw a well-made piece of work he would buy it; he might even order more articles for the next fair. He merely had to be careful not to offer his newly acquired goods in a town where the same articles were manufactured. Otherwise the local artisans, fearful of their livelihood, would have demanded a sales ban to be imposed on his goods; these might even be confiscated or, at least, declared subject to high customs duty.

The merchant clearly had to show a great measure of consideration for the manufacturer. He was welcome only when he brought the artisan orders from far afield. As early as the tenth century the weavers of Ghent, Ypres, and Bruges organized annual fairs to sell their cloth to long-distance merchants who would carry it away "over sea and sand." Before long, Flanders cloth enjoyed an outstanding reputation throughout Northern Europe, in England—which at the time had practically no textiles industry of her own—in France, Holland, and Germany. Since local sources of raw materials were nowhere near sufficient, Bruges bought up almost the entire English wool clip.

Bruges was originally the terminal-point of a long trade route leading from the Mediterranean through the Rhone and Saône valleys via Dijon and the plateau of Langres into Champagne. Presently a new market developed—the lower Rhine valley, with the ancient trading city of Cologne, the starting-point of the route to the Baltic region ever since Roman days. Urban crafts were beginning to flourish also in Westphalia, but unlike the Low Countries, where wool-processing was the main trade, the Westphalians developed linen-weaving, which is centered on Bielefeld to this day. These textiles were taken by merchants to the Baltic.

There had been extensive trade in the Baltic basin even before the Germans. The Normans had for long sailed down the Russian rivers and, after a not inconsiderable "towing stretch," when their ships were hauled overland, down to the Black Sea and even to Byzantium. The great geographical extent of this trade, however, should not deceive us about the fact that Scandinavia at that time had scarcely any merchandise to offer. The Normans mainly took along with them loot extorted from the inhabitants of Russia—honey and wax, and above all the slaves with whom they flooded the markets of the eastern Mediterranean. In exchange they bought jewelry and silk. Naturally, this was no basis for any regular or reliable trade. Not until the Germans introduced their merchandise from Western Europe did intensive commerce begin to develop on the Baltic.

Two economic zones were now in contact, zones fundamentally different but almost ideally complementary—the industrial West with its centre in Flanders and the undeveloped wide-open spaces of Eastern Europe, an ideal source of raw materials. The Baltic trade zone consisted of three areas: North-western Russia, with Novgorod as its capital, Lithuania between Memel and Dvina, and Poland on both sides of the Vistula. The most important of these was Novgorod, on Lake Ilmen.

Before the foundation of Lübeck the occasional merchants from the West had traveled across the ancient Haithabu and later through Schleswig along the Schlei to the Baltic. These men from the lower Rhine, from Franconia, Frisia, Saxony, and Westphalia were united in a ‘brotherhood'; our records also speak of a similar "Schleswig brotherhood" in the Westphalian city of Soest in the twelfth century. In Birka, on Lake Mälar, not far from where today is Stockholm, the Frisians were established.

After the adoption of Christianity the hub of the Swedish trade shifted to Sigtuna, near Uppsala, then both the centre of Christianization and trade, while Visby on the island of Gothland became the new centre of the Russian trade. From the very beginnings we find references to German merchants there. Indeed, they were so numerous that in 1190 a German Church was built there—St. Maria Teutonicorum. By 1280 there were more Germans than Gothlanders in Visby, so that the town became a mixed community run according to German law. Visby was in complete control of the Russian trade. This superiority the German merchants owed to their bigger and stronger ships, the Kogge and later the Holk; they were the first ships suitable for the carriage of bulk cargoes—wax for the churches, honey, tar and pitch from the boundless forests, charcoal and potash. But the real profits came from the trade in furs, which were brought all the way from the White Sea and Siberia. The decisive point was that Western Europe was able to offer in exchange goods which were almost indispensable to the Russians—salt from Lüneburg, and cloth from Flanders, and later from England. Herring, now that the process of pickling was known, could be sent over great distances.

From Poland came the grain for the large population of Flanders, from Mecklenburg and Brandenburg the timber for shipbuilding, and from Prussia the yew wood for the much-feared weapons of the English bowmen who had tipped the scales in the battles of Crecy and Agincourt. Brewers' malt, on which the brewing industry of the Wendish towns depended, was produced in Holstein, Altmark, Brandenburg, Mecklenburg, and Pomerania. Thanks to this brewing barley Hamburg became the leading brewing city throughout Northern Europe, and was to supply the areas along the North Sea coast with beer for the next few centuries. Several hundred brewers made beer for Amsterdam alone. Wismar was second to Hamburg only in the quantity but not the quality of the beer it brewed; it supplied mainly the Scandinavian market. The home of hop beer was the small town of Einbeck, west of the Harz. mountains; there was an Einbeck beer-tavern in Hamburg as early as the middle of the thirteenth century. The Bock beer, popular to this day, owes its name to Einbeck.

Wherever Hanseatic merchants were established there was a smell of brine, of herring in little wooden barrels, of resin, of beer, and of dried skins. There was continuous coming and going in the ports: day after day ships were unloaded and reloaded, barrels rolled into cellars and warehouses, and huge wagons with woollen cloths and linen fabrics manhandled into position. No sooner had a ship arrived than it was hurriedly re-equipped for the next journey. Every shipload meant a profit. Perhaps some customer was already waiting somewhere for cloth or herrings. Ships were always scarce; no one knew when one of them might not be uselessly detained for weeks or months by gales at sea or political unrest. The head of a Lübeck merchant-house did not speculate: his transactions were sound and judicious, his prices fluctuated but little. It was inconceivable that the demand for herring should suddenly stop, or that timber should no longer be needed, or that the thirsty sailors would not demand beer.

Besides, what were the producer countries to do with their surpluses? The taxpaying peasants and backwoodsmen, the fur-traders and the great estates supplied grain, honey, cattle, timber, and valuable furs for which there was no market in the immediate neighbourhood and which, in fact, acquired their value only if traded far afield in exchange for other merchandise.

The Hanseatic merchant knew that he was indispensable: from this knowledge he derived his dignity, his pride, his security. The aristocratic gentlemen of the German Order might grumble at times about the stuck-up pepper-bags and secretly despise them as peddlers and "herring-tamers." But they knew very well that without the Hansa merchants their ambitious colonization and settlement drive could not survive. From Lübeck ships carrying wine, beer, cloth, salt, and fish sailed through the whole of the Baltic. Everywhere the merchants found business partners—Germans who had settled permanently, or at least for a number of years, and were familiar with local conditions, who would buy up the harvest at the right time of the year, who would have the timber cut down and would collect the furs from the trappers. Even in distant Novgorod the Germans had a colony, a trading-post known as the Court of St Peter, a large `counter' where the merchandise was stored and the merchants accommodated, both those locally resident and the voyagers from back home.

Such a ‘counter,' or trading factory, existed also in Bergen on the Norwegian coast. Discipline there was almost as strict as in a monastery, especially for the younger merchants. They were instructed to lead a God-fearing, well-conducted life, always to be conscious of the value of their good name, and of their duty to do honour to their mercantile calling. The experienced merchants knew only too well that a great deal of annoyance could be caused by some young buck kicking over the traces. The merchants were tolerated in the foreign country only because they were needed. They were there only on sufferance. It was only natural for the inhabitants to envy the successful foreigners who kept a firm hold on all commerce, autocratically fixed all prices, and were getting richer all the time. Sometimes an unimportant, trifling incident would be enough to spark off a wave of xenophobia which could lead to persecution, expulsion, heavy losses, and possibly serious clashes. All that was bad for commerce. It might cause a protracted trade war, as in Novgorod in 1388, when three years passed before the Russians yielded.

The big Hanseatic ships also sailed to England to buy wool. For some considerable time past Flanders had been unable to manage without English supplies. The English monasteries with their vast estates intensified their sheep-breeding when they discovered how profitable an occupation it was. After the bankruptcy of the English crown the Florentines angrily withdrew from all trade with England, so that the Germans soon had the field to themselves. Their counter in London was the famous Steelyard; it was from there that English commerce was controlled until the sixteenth century. Whenever the Germans bought wool English agriculture profited; when they did not buy heavy losses were suffered.

This unparalleled commercial power of the German merchants was viewed with jealousy by the English. Admittedly, they could no longer do without these important purchases, but at least they were hoping to gain for themselves greater advantages, higher duties, and above all credits. But their representations were turned down by the Germans. Whenever the Hansa merchants lent money to the King they insisted on securities, to make sure they would remain unaffected even by national bankruptcy. Advances were granted only in respect of future wool clips. Even this respectable steady trade in mass consumption goods still carried a considerable degree of risk. During the war with France, English ships fell upon the Germans lying off Sluys, the port of Bruges. The King flatly refused to return the looted ships or to pay compensation. The Hanseatic merchants thereupon imposed a complete trade embargo on England. Three years passed before the proud King yielded and made full restitution.

Yet the German merchants attached great importance to being able to sail through the Channel and along the west coast of France, peacefully and unthreatened, down to the Bay of Biscay. Once or twice a year the merchants would make the voyage in close convoy, escorted by well-equipped warships, to bring back French and Spanish red wine—in great demand by the Church, which needed it for sacramental purposes, and by wealthy customers in the bleak North and East. Red wine was the favourite beverage along the western and northern coasts of Europe. The "Biscay sailors" considered themselves a cut or two above the merchants trading with Russia and, even more so, above the herring-traders. They did not have the support of an English counter, but they knew that they would be welcome anywhere if they purchased wine and in exchange offered furs from Russia. Moreover, trading in open port the Germans were not subjected to those pinpricks which made life so difficult at times at the Novgorod counter whenever the Russian nobles thought those foreigners should be taught another lesson.

Without the furs from Eastern Europe the Hanseatic merchants would have been in a difficult position in many markets, especially in France and Spain, as the bulk cargoes like timber, wax, and grain were, as a rule, shipped only as far as Bruges. In the far North the Germans needed to have no fear of rivals; in Western Europe, on the other hand, several nations were only too anxious to break into the envied trade of the Hanseatics.

On the whole the Hanseatic towns succeeded in holding their own without resorting to arms. Only as a last resort would they declare war, and they had every reason to avoid this ultimate step-trade would be at a standstill, the merchants would be losing money, and no victory, however impressive, could make up for the losses suffered during the war years. As a rule the Hanseatic towns confined themselves to breaking off commercial relations and imposing a boycott; in this way they demonstrated to the enemy that he was also a customer at the same time and was only damaging himself by expelling the merchants. But woe to a rival who would use dissension or war in order to break into the profitable business laboriously built up by the Hansa. At once the gates of the principal German cities would be closed against him; he would lose his old customers as well as the new business. Unity, a common front-this was the whole meaning and purpose of the Hanseatic League.

It is impossible to state definitely whether the Hanseatic League was a confederation of cities or an association of merchants. Certainly it never was a clearly defined unified organization with a federal head or a precisely laid down number of members, with a clearly formulated statute and well-defined obligations. At first the merchants of a town would group themselves together-as in Soest or Cologne. The next stage, presumably, was a guild of merchants who would visit certain markets and support each other as fellow countrymen, such as the United Gothland Traders of the Roman Empire, who were established in Visby. King Henry II of England granted permission to the traders from the Rhineland and Westphalia to form an association. The merchants from Lübeck, then still a young town, strove hard to obtain equal status with those of Cologne; eventually Hamburg, too, received royal permission to set up its Hansa in London, an association with special privileges. In 1281 these German associations coalesced—not without some lively opposition from Cologne—into the London Hansa of Germans.

This association was confined exclusively to merchants; the towns themselves were not involved. The patrician merchants felt powerful enough to stand on their own feet in a foreign country provided they fell in with the foreign laws and provided also they offered sufficiently large advantages to their customers. But as their business became more extensive and their profits bigger, so also grew the number of their opponents and rivals. True, the merchants had insured themselves by promises and letters patent against all misuse of power—but what use were parchment and seals against arbitrariness and caprice, and, above all, against the avarice of princes?

When France was at war with England the Count of Flanders swept away all privileges with a stroke of the pen and flatly prohibited the importation of English wool. Thereupon the Germans cut off all supplies from the East, mainly of grain. Also, they no longer bought any Flanders cloth. That was a heavy blow to the thickly populated area which was unable to feed itself, and for the weavers who were now cut off from their market.

There were, of course, many merchants who participated but unwillingly in these embargoes because they themselves were not interested in the English wool trade. But the point was to stand together so as to show the powerful Count that a privilege guaranteed by letters patent could not be infringed at will. Only if all German trading-houses refused to supply merchandise to Flanders and to buy goods in Flanders could the Hanseatic League prevail. And they succeeded: for eighteen months Flanders was as though dead, then the Count yielded. It was then that the German towns were first given the name by which they were to become famous: Die Stede van der dadischen Hanse—the towns of the German Hansa.

Who belonged to that League? Even this question cannot always be answered for certain. The most important towns, of course, were regular members. They sent their delegates to the "Diet meetings," where they would vote in the consultations and, in times of military conflict, undertake the obligation to supply so and so many warships and meet a definite part of the war expenditure. But many a smaller town would hang back in times of emergency without necessarily leaving the League; it would not, however, go as far as to act in defiance of a decision taken by the important members of the Hansa, such as having commercial relations with a town on which a trade embargo had been imposed. At the peak of its power the Hanseatic League had seventy-two members.

The German towns, however, were so variously organized and governed by such a variety of laws that it was not easy to lay down uniform principles. Some towns belonged to a bishop, others to a territorial ruler, or perhaps to the German Order in Prussia, while others yet might have to consider a powerful neighbour when formulating their policy. There were also towns which had been mortgaged by the emperor to some powerful prince. But the patrician merchants of even these towns would regard themselves as belonging to the Hansa. They would act as though they were free members of the great League. And the territorial rulers, who depended on their merchants, respected this wish. The Prussian towns were regarded by law as ‘corporations' in their own right, entitled to deal independently with the German Order even though they recognized the Order's sovereignty over them. Berlin was not a free imperial city but a Hansa town with definite rights and duties.

There were no regular financial contributions to the Hanseatic League. As the need arose, especially in times of war, contributions were exacted and voluntarily paid by the merchants-such as poundage dues on all Hansa merchandise. For that reason the League was unable to maintain a fleet of warships; it remained dependent on those ships, the so-called "peace ships," which the individual towns made available. Not even the cost of important embassies and congresses could be passed on to the members in accordance with any regular system. In fact, the League was no more than an association of merchants.

In the West German cities the artisans predominated; in the harbour towns on the North Sea and the Baltic, on the other hand, it was the merchants and sailors, frequently also the shipbuilders, and occasionally the brewers. As a rule the brewers themselves undertook the transportation of their beer, mostly in large barrels loaded on wagons and ships, not only within the immediate neighbourhood but also to distant destinations. In fact, the brewers practiced the business of the import-export merchant more than any other manufacturers. It was this import and export business that determined the policy of a Hansa town. It was concentrated in the hands of a few merchant families, the wealthiest and most highly respected of whom would sit on the City Council. The law of Lubeck stipulated as late as the end of the thirteenth century: "Only a man whose livelihood does not spring. from a craft may be a member of the Council." The Council members decided on whom to admit whenever a vacancy arose through sickness or death.

In the inland towns, on the other hand, the more numerous artisans gained greater influence on the management of local affairs. But frequently the patrician merchants, backed by the harbour towns, retaliated brutally. Squeamishness was unknown. In 1301 ten master craftsmen who had started a rebellion in Magdeburg were publicly burned in the market-place. The weavers of Cologne fared no better. "And wherever the weavers were caught, they killed them in the street. They searched them out in the houses, in the churches and in the monasteries, and none of them was spared, neither old nor young. Their womenfolk were expelled and their fortunes seized."

The merchants learned their business during long, hard, and frequently troublesome years of apprenticeship. The young men would sail away in the big ships, and stay for a year or two-and sometimes quite a number of years—in a foreign counter to gain experience of the country and its people, and of the merchandise handled. For months on end they would accompany the heavy covered wagons on their overland journeys. They knew most of the Hanseatic towns; everywhere they had friends who would give them advice and information, and who would probably help them out of difficulties, even without any binding legal obligation. A far-flung fraternity of German merchants, ruled not by statutes but based on mutual respect and joint work—that was the essence of the Hanseatic League. The merchants were able to trust one another, for they had all been through the same school. Few stood out above the average, but that average was fairly high. Reckless or dishonest traders, with too much of an eye to the main chance, speculators who would corner all goods in order to force up prices, or fraudulent dealers who thought little of the good name of their vocation, had no place in a Hansa town. To be respectable, to subordinate one's own ambition to the common weal, to be as mindful of the interest of one's town as of one's personal advantage, to help a fellow citizen whenever he was in difficulties and not exalt oneself above him—these were the qualities esteemed in Hanseatic society.

The Hanseatic merchants dealt in bulk commodities for the general public—fish, grain, and beer, salt, timber, and cloth. These goods could not be sold with the high profit margins possible with spices or silk. The moment prices began to rise the consumers would start complaining, artisans would grumble, and the poorest in the town would become rebellious. The words `usurers' and ‘cheats' would be on everybody's lips. People would gather in the streets and angrily urge the town council to take steps against this unheard-of price increase. There would be indignation also among foreign customers. Time and again there was trouble with the Russians in Novgorod, with the Swedes in Stockholm, with the Norwegians in Bergen, and with the English in London—whenever the customers thought the Hansa merchants were all too ruthlessly exploiting their privileged position. At once the cry went up that the Germans should be stripped of their privileges, and that local traders should sail out to market the domestic manufactures and purchase the necessary foreign commodities. Why should the Hanseatic League make such enormous profits? The League would be on the watch against strangers breaking into its jealously guarded markets-but at the same time it had to remember the reactions of its customers and their powerful princes.

The Frisians, who did not belong to the Hanseatic League, were quick to use a famine in Flanders for collecting grain from the Baltic coast in their own ships. Once in Danzig, they decided they might as well continue to participate in this profitable commerce. But Lubeck was not prepared to permit this at any price: the merchants from Kampen and Zwolle, on the Zuider Zee, were allowed to sail only as far as the Sound or, at the most, to buy fish at Schonen. Not a mile farther. In retaliation the Frisians tried, though in vain, to stop the Wendish Hansa merchants from sailing down towards the Channel.

This did not worry the Hanseatic towns unduly, since fish, beer, and above all Russian furs, were in any case transported along the safe land route from Lübeck over the Trave to the Elbe and thence by wagon to the West. Only such bulk cargoes as timber and grain were shipped by sea around the Jutland peninsula towards Norway and Flanders. The difficulty was finding homeward freight for these ships. Flanders cloth or Indian spices bought in Bruges were too valuable commodities to be exposed to the stormy sea. On their return voyage, therefore, the ships chiefly carried wine from France and salt from Portugal or even Spain. Luneburg had long been unable to supply the large quantities of salt now demanded at Schonen.

The voyage to the Bay of Biscay, to the isle of Oleron off the Loire estuary, was a joint enterprise of Germans and Dutch; this unity was promoted by the large numbers of pirates and sea-rovers lurking off the Channel coast, eager to seize valuable ships. Nevertheless, relations between the Hanseatic and the Dutch towns, which felt excluded from the Baltic trade, remained tense. Holland's subsequent secession from the German Empire was, to some extent at least, due to these commercial antagonisms.

The merchants of Lübeck viewed the Portuguese salt with misgivings; they feared its competition with Luneburg salt. Altogether, the interests of the individual Hanseatic towns clashed often enough. When Eric of Pomerania imposed a universal Sound toll, Lübeck declared war. The Wendish and Pomeranian towns sided with Lübeck, but not so the Prussian ones, whose military zeal was dampened by the German Order. Under the terms of the peace treaty the victorious towns were subsequently exempted from the Sound toll, whereas the Prussian towns had to continue paying. In 1471 King Christian I of Denmark barred the Sound to Dutch ships trading from the Bay of Biscay, but when Lübeck failed to make adequate payments to him he lifted the prohibition again.

Lemberg (nowadays Lvov) was the meeting-place for Russians from Kiev and Moscow, for merchants from Hungary and Prague, for Italians from the Black Sea and Constantinople, and for the Central German traders from Nürnberg and Ulm. There was much dealing in Hungarian copper, in Oriental merchandise like silk and spices, in woollen cloth from Flanders, Westphalian linen, and iron articles from Nurnberg. The Poles, in order to oust the Hanseatic towns of Thorn and Danzig, endeavoured to channel the Lemberg trade to Cracow. Casimir the Great granted staple rights to this town: all merchandise had first to be exhibited for sale there. Only then could it be transported farther, along the Warthe river, avoiding the territory of the hated German Order. But the Order hit back: it granted to the town of Thorn staple rights for all Polish goods passing through its territory.

Such squabbles were a considerable hindrance to commerce. The towns had to try to appease the quarrelsome princes, promise them advantages, lend them money, and, if all else failed, resort to arms. Their principal aim was peaceful commerce. They did not want to see the vast area from Novgorod to Bruges and down to the French Atlantic coast, and from Bergen to Lemberg, split up by customs barriers. They wanted it as a vast, unified market for the German merchant.

Throughout nearly three centuries the Hanseatic towns were able to accomplish just that—a remarkable achievement. Especially if one considers the small size of the German towns. Of the twelve million inhabitants of the Holy Roman Empire of the German Nation barely more than 300,000 were living in towns during the first half of the fourteenth century. The biggest city was Cologne, the only one numbering more than 20,000 inhabitants. Lubeck had rather less at that time; Hamburg in 1275 had only about 5000, and a whole century later the figure still did not exceed 8000. Bruges, meanwhile, had a population of 50,000 and Prague of 40,000. Then came the Black Death with its fearful ravages among the narrow streets.

With these small numbers the merchants nevertheless compelled the powerful territorial rulers to keep the peace, punished them for illegal seizure and looting, and made them honour their promises and treaties. They were able to do this only because time and again they found new allies and because their customers realized the advantages offered them by commerce. Force would have got them nowhere.

When a wedding took place at the court of the wealthy Duke of Burgundy the nobles required so many furs that prices soared steeply. Stocks had to be hurriedly replenished by fresh supplies from Russia. The princes of the Church depended on wax, incense, and wine. The population of Flanders suffered famine when the harvest failed and the German merchants were unable to supply enough grain.

The North European trade was exceptionally extensive for those days. On the other hand, over the St. Gotthard Pass, the most important Alpine road in the late Middle Ages, no more than 1200 tons of freight would be carried, even in a good year. To transport this quantity of merchandise 600 freight wagons were needed on the level stretches of road and 2000 to 3000 carts in the mountains. As the pass was open only during the summer months this meant that about twenty carts would laboriously make their way up the mountain every day. These are very small quantities indeed compared with the 1000 Hanseatic ships which plied between the Gulf of Finland and the Schelde. Each ship carried between 30,000 and 40,000 'loads'—i.e., 60 to 80 tons. Apart from the voyage to the Bay of Biscay, which took a whole year, the ships did their round trips several times. The annual turnover of the Hanseatic merchants was something like 200,000 tons, and rather more in good years. To this must be added the considerable overland trade.

Dependence on the two counters in Bruges and Novgorod, however, eventually led the Hanseatic towns to lose all spirit of enterprise and to confine themselves to brokerage between these two markets—in other words, to content themselves, without any risk, with a safe though limited profit. "Safety first" was the slogan governing the activities of the German merchants in the fifteenth century. And that in spite of the fact that the Hanseatic League owed its spectacular rise to the daring of the merchant adventurer. This was an alarming trend, the more so as conditions in Northern Europe had meantime greatly changed. The most important of these changes was the collapse of the Russian Empire in Novgorod.

The eclipse of the Hanseatic League during the subsequent centuries was due to the fact that the two cornerstones of its commerce, Flanders and Russia, had lost their importance because of political influences in the face of which the merchants were powerless. The Germans had based their wealth on the exchange between two areas far removed from each other. Now they lost their unique position as intermediaries.

In 1487 the Tsar Ivan III captured the town of Novgorod. A large part of the population, including the German merchants, were forcibly transferred to Moscow. Many of them died during this compulsory resettlement. In 1494 this displacement was repeated. Twenty years later, when the Tsar returned to the Germans their old counter in the Court of St Peter, the Baltic trade had come to an end. As many centuries earlier, the valuable furs once more traveled to the South. They were lost to the Flanders trade.

Although cloth manufacture continued to flourish in Flanders it was no longer the controlling factor in the North European market as it had been during the thirteenth and fourteenth centuries. Gone were the days when the town of Ypres could afford to build a cloth-hall 433 feet in length, or when the weavers, fullers, and shearers, the dyers and the soap-boilers, and all the other ancillary trades of cloth manufacture accounted for 60 per cent. of Bruges's population of 50,000, then the biggest town in Europe. During the Hundred Years War with France (1337-1453) the English had marketed their wool in Holland. As a result, cloth manufacture in the towns of Middleburg, Zieriksee, and Dordrecht grew in volume. From 1384 to 1388 the staple—i.e., the compulsory market—for English wool was in Middelburg; after that it was shifted to Calais. After 1400 Leyden moved into first place. But the Dutch cloth continued to be sold via Bruges because the Hansa merchants refused to buy cloth anywhere except in Flanders; they stuck firmly to their old business partners. Needless to say, this was not greatly to the liking of the Dutch, especially as east of the Zuider Zee their own towns belonged to the Hanseatic League and wanted to break into the Eastern market on their own account. They were, moreover, enjoying a greater share of the herring fisheries, as the herring had by then disappeared from the Swedish coast and were found in the North Sea instead. The Dutch were now in a position to make good use of the Biscay salt which the Hanseatic ships were bringing from Portugal. Amsterdam, it has been said, was founded upon herring-heads. Why, one feels tempted to ask, did the Hanseatic towns not break with Bruges and deal directly with the Dutch producers? After all, there was frequent opportunity for such a rupture.

Piracy off the Flanders coast increased considerably after the Hundred Years War. In 1447 five Prussian ships had to fight three engagements with powerful pirate vessels before gaining entry to the harbour of Bruges. As Burgundy, which owned not only ancient Flanders but also the county of Holland, did nothing to protect the merchants against the pirates, the Hansa Diet decided on a compulsory staple for Bruges: all merchandise taken to Bruges or acquired there became subject to duty. From the proceeds of this the merchants robbed at sea were to be compensated. In other words, the merchants passed on their losses to the Flemish producers.

The Hanseatic League would probably have got away with this project if it had had to deal merely with the three towns of Bruges, Ghent, and Ypres, and the rural district of Bruges. But the proud Duke of Burgundy prohibited the levying of the duty. His noble counselors had long been nursing a silent dislike of the overbearing and bumptious pepper-bags—and now was their opportunity. When the negotiations with the Burgundians dragged on indefinitely with no prospect of agreement, the Hanseatic League in 1450 moved the staple from Bruges to Deventer.

Now it was the Prussians who protested—not only the Grand Master of the German Order but also the towns—because Deventer also belonged to Burgundy. The East German merchants moved to Amsterdam and Middelburg, and the West German ones to Mechelen (Malines) and Antwerp. In order to unite the two groups the Hanseatic League decided in 145 3 to move the staple to Utrecht.

In vain did the Italians from Florence, Lucca, and Genoa, the Spaniards from Catalonia and the Basque towns, the Portuguese and the Bretons implore their Hanseatic business friends to return to Bruges. The Duke of Burgundy remained indifferent to the fact that the cloth-makers of Flanders could now find no market, that neither English nor Spanish wool was being imported, and that the towns were slowly starving. He remained hard, invoking his prerogatives as the territorial ruler, prerogatives which some unknown upstart merchants had dared infringe. When the unemployed weavers of Ghent revolted in despair, the ducal troops crushed the rebellion.

Eventually the League made a concession on the issue of jurisdiction: it acknowledged the sovereignty of the Duke, who in turn recognized all their Hanseatic rights and privileges. Bruges undertook to compensate any German merchant who might suffer loss by piracy, ducal officials, or any other cause.

Thenceforward the Hanseatic League unshakeably maintained the staple in Bruges, even after England had long ceased to send its wool there because of its own textile industry. The British had long been envious of the huge profits made by the Germans in their commerce. As early as the fourteenth century a saying was current in England: "The Hanseatic merchant buys a fox-skin from an Englishman for a penny in order to sell back to him the tail for a florin." At first the English merchants, whose appearances in the Baltic became increasingly frequent, applied for admission to the Hanseatic League, but their application was turned down in 1379. They thereupon formed their own association which received a royal charter in 1491 under the name of Merchant Adventurers. They followed in the footsteps of the Hanseatic merchants and visited Antwerp, Norway, Sweden, and Denmark, and also Bordeaux. Every one was delighted that the Hanseatic towns at last had a rival who offered better prices and sold more cheaply in order to break into the business.

The English demanded the same rights as they had granted the Germans in London—i.e., free access to the Hanseatic towns. The League, however, was not at any price prepared to admit its English rivals. In 1446 the English Parliament therefore decided to withdraw the Hanseatic privileges. Again a trade war broke out. The English fleet raided a group of merchant ships sailing to the Bay of Biscay; the Dutch ships, about fifty in number, were released again, but the Hanseatic ships, of about the same number, were simply incorporated in the English fleet. For the sake of the Steelyard in London, upon which the laboriously built-up wool trade depended, the Hanseatic League did not want an open rupture. Negotiations were started.

The merchants, however, decided to take their revenge. Lubeck merchants, sailing to Bergen, captured an English ship off Skagen. In 1458 the English once more attacked a Biscay convoy. Lübeck thereupon sent its trading ships to the West, but England was not prepared to give in. In 1468 the Steelyard was closed, the merchants resident in England were arrested and their merchandise confiscated. Open warfare had begun.

The Hanseatic League's next step was to put an embargo upon the trade in English cloth throughout its entire sphere of influence. It barred the Elbe-Trave route and induced Denmark to close the Sound. Only small quantities of English cloth reached Breslau and Cracow by the tedious overland route via Cologne. England had to give in. In 1473 the Hanseatic League not only had all its privileges restored but moreover received a payment in compensation. The buildings in London and Boston, hitherto leased to the Steelyard, became Hansa property.

The area around the Baltic had become a pacified safe-trading zone. Between the Sound and the Gulf of Finland, where merchants "carrying salt, hops, cloth, and other needful things were formerly robbed of ship and merchandise, and the sailors thrown overboard and drowned like dogs," now reigned law and order, as King Gustavus Vasa of Sweden acknowledged. It was this peaceful commerce which enabled Sweden to rise to prosperity. Germans had long been in charge of the copper- and iron-ore mines in Norberg; in the fifteenth century these ores were the principal export of the country, ranking even above timber.

The Hanseatic League could exist only as long as the separate towns were able to pursue a policy of their own, dispose freely over their finances, wage war even against an ally of their own territorial overlord, or else stand aloof from wars involving their country. No sharp dividing-line existed between domestic and foreign policy. Thus the counts of Holstein were able, throughout several centuries, to be liegemen of the King of Denmark and, at the same time, allies of the city of Lubeck against Denmark. More than once a ‘governor' of Sweden rose against the King in Denmark; to do so he needed the support of the German towns.

In strongly centralized states the territorial rulers concentrated in their own hands all rights and duties, and compelled their `subjects' to serve their political aims. This was as true of Burgundy as it was of Tudor England, of Scandinavia, and of the new Muscovite Empire. In the end it came to apply to Germany too. In its endeavours to maintain its privileges the Hansa was not supported by any German state. In a strong state, on the other hand, neither the Hanseatic League nor a German Baltic trade could have developed. Power politics would only have impeded peaceful commerce.

Free from political alliances and antagonisms, the Hanseatic League was able to pursue economic aims, conclude treaties, enter into obligations, or remain neutral. Hansa merchants were established in specially privileged counters—in London, Bruges, Bergen, and Novgorod, ill Copenhagen and in Stockholm, in Cracow and in Lemberg. No outside support could have given the Hansa merchant the same degree of protection as the medieval system which raised him out of the national sphere and recognized him as an ‘estate.' We have heard of the impassioned protests made by the English merchants against such privileges. But the King of England listened to those protests only when the concept of the national state had prevailed. In 1471 the Stockholm city by-law, under which half the City Councillors were to be Germans, was rescinded. The Council of the Realm decreed that "every town shall be governed exclusively by Swedish men born in the country." No foreigner was permitted to hold office as mayor or alderman.

‘National rights' were triumphant. Yet fundamentally it was no more than mere envy: the local merchants saw only the monopoly of the Hanseatic merchants and the numerous privileges which they themselves had been refused in the Hanseatic towns.

The Hansa merchants were said to have earned fabulous wealth thanks to their monopoly. But was this really the case? As a rule they contented themselves with a small profit margin. They could remain competitive only if their charges were moderate. No doubt a large fortune was occasionally accumulated, but this was the exception rather than the rule. Only rarely would a fortune exceed 10,000 florins. Heinrich Castorp, Mayor of Lübeck during the second half of the fifteenth century, certainly owned more, but we do not know any details.

The commerce of the Hanseatic League was based on a limited but sound gain. Security, especially during the later centuries, was more important than uncertain profit. The Baltic commerce lacked the dazzle of the trade with the Orient, the glitter of gold, the rustle of silk, the sparkle of precious stones. Certainly the German merchants of Bruges dealt in these articles also, receiving them across the Mediterranean area, but their main business was in unassuming everyday commodities—in barrels of herring, cargoes of grain, tuns of beer. In the early sixteenth century there was not a single merchant house in any of the Hanseatic towns that could have compared with the Fuggers and Welsers of Augsburg; indeed, even the lesser firms in Southern Germany surpassed the Hansa merchants in wealth.

Great fortunes are not so easily acquired from herrings and timber, Flanders cloth, or even Russian furs. There were no serious risks and no great fluctuations of prices-and only these could yield great profits. Any usury, any sharp dealing would at once jeopardize the good name of the reputable' merchant and possibly mean the loss of irreplaceable business partners. The reliability, not the size of a business house was the decisive factor in the North.

We are familiar with the faces of many important merchants. Hans Holbein drew or painted the portrait of many a Steelyard merchant—Hillebrant Wedigh of Cologne, Georg Giese of Danzig, Dirk Tybis of Duisburg, or Cyriakus Kahle of Brunswick. Calmly, with clear-eyed confidence they regard us, secure in their sense of independence. These men were neither speculators nor reckless gamblers. They conducted their business in accordance with sound principles; they turned their money over and made good sound profits. Their real capital was trust—the trust of business partners in even the remotest countries, trust not so much in their financial power and commercial ability as in their business probity. They did not wish to outsmart anybody or court risky enterprises. The favour of princes neither dazzled nor tempted them. They were, in short, respectable merchants.

Chapter 8—The Fuggers, Kings and Slaves of Credit

In response to the Emperor's urgent call for help, Anton Fugger, the great merchant from Augsburg, was hurrying to Innsbruck. He was traveling in spite of the bitter cold, stopping neither by day nor by night; yet he was a reluctant and dispirited traveler, for he guessed what lay ahead of him. Once again—as so often before—he would be required to come to the rescue. But this time he would remain firm. He would have to refuse. His partners had exacted his solemn promise that he would not lend the Emperor any more money. There had to be a limit; the credit of even this greatest of merchant houses was extended to the utmost.

So then, on April 3, 1552, the great merchant sat face to face with his Emperor. Though no more than fifty-two, the monarch was an old, tired, spent man. He was tortured by gout. Upon his shoulders rested a responsibility he was no longer able to bear. His features reflected boundless disillusionment; his eyes were desperately imploring.

"I need money," he said. "You must help me, Anton Fugger."

"Impossible," the merchant replied. "I have no ready money left; everything is tied up. In these difficult times not even I can lay hands on any more. My credit, too, is exhausted."

The Emperor Charles V was silent for a while. Then he said in his soft, almost toneless voice, "You've got to find a way. I must have the money." This then was the man reputed to be the most powerful Emperor that ever ruled Europe, who owned half the globe, whose possessions extended to the newly discovered Americas and to vast territories in the Far East, who was at the same time Roman Emperor, King of Spain, Duke of Burgundy, Archduke of Austria, King of Naples and Sicily, the renowned victor over Moors and Turks. And this man had no money; he was reduced to begging and pleading.

In his quiet, dignified way he explained to his friend the desperate, almost hopeless position: his former ally, Maurice of Saxony, who owed to the Emperor his Elector's Hat, had gone over to the enemy, to the Protestants. His army, the only one north of the Alps, was moving in forced marches towards Southern Germany. Soon he would reach the Alps, perhaps even Innsbruck. Unless a force were raised in a hurry Habsburg would collapse. But troops cost money, a lot of money, and the imperial coffers were empty. All attempts to raise funds elsewhere—in Augsburg, in Ulm, in Nurnberg, in Strasbourg, in Venice, or in Genoa—had failed. All purses had been firmly closed or else had been empty. The head of the house of Fugger was the only one who could help.

The Emperor recalled the many decades throughout which the two houses of Habsburg and Fugger had cooperated. Together they had risen to power in the preceding century. Must they not stand shoulder to shoulder in this last, supreme effort?

Anton Fugger was deeply moved; but he could not help. Clearly and in detail he explained to his sovereign what his accountant had set out for him in plain figures in his famous "Golden Countinghouse."

Six years before the Emperor had owed the house of Fugger about 2,000,000 florins; from his brother, King Ferdinand, a debt of 443,000 florins was still outstanding. A further i,5oo,ooo florins were invested in Spain, in its landed estates and mercury-mines—in other words, the money had been advanced to the Spanish State; 1,250,000 florins were invested in Hungary's commerce, and a further 250,000 florins in Naples. To that had to be added warehouse stocks in Antwerp, Augsburg, and other German cities.

Nevertheless, Fugger had then decided to make available once more a very large sum of money in order to finance the war against the Protestant League of Schmalkalden—even though this action had done him a lot of harm with his Augsburg fellow citizens, the town government, and with business connections in Southern Germany, most of whom sided with the Protestants. Only with Fugger's help, they were saying, could the Emperor defeat the Protestants.

In 1547 the Emperor had called Fugger to his headquarters camp near Wittenberg, in order to demand from him more money. Anton Fugger regretted; he wished to withdraw from all business, to give up everything, to get out of all obligations. The Emperor, intoxicated by victory, was threatening terrible punishment to the Protestant towns. To avert the worst, Fugger went down on his knees to pacify the Emperor. Again he had to pay. More and more the firm of Fugger came to depend on the House of Habsburg.

Every one had been stripped and squeezed dry by the Emperor, friends and foes alike—the latter by high levies and the former by excessive credits. Now the Emperor was poor and forsaken, and Southern Germany was in the hands of the enemy. This meant that the former sources of money had dried up, since anyone trying to transfer funds to the Emperor was risking vicious reprisals on the part of the incensed Protestants. To make matters worse, France was openly siding with the enemy. She threatened to confiscate the capital or merchandise of any merchant lending money to the Emperor. She also guarded the sea route from Spain to the Netherlands. What was Fugger to do? The Emperor kept pressing him. Just once more, just this once; this was the last time he would ever want money! If he refused not only would Southern Germany be lost, but also upper Italy, Hungary, and the Netherlands—and that would strike the Fuggers in their vital spot. It was even doubtful whether the Emperor would be able to hold out in Spain.

While the two men—the Emperor and the merchant, the inflexible statesman and the coolly calculating businessman—were in interminable negotiation without coming to any conclusions, news arrived that enemy troops were approaching Innsbruck. To avoid surprise and capture by a fast raiding party the Emperor had to flee to the mountains during that same night. Everything seemed lost.

What would his great uncle, Jakob Fugger, have done? Would he have yielded? Anton well remembered the incisive firmness with which that great merchant had answered the same Charles V when, under all kinds of pretexts, he had not punctually redeemed his debts. No insolent imperial counselors would get out of their obligations towards Jakob Fugger with impunity. After all, to whom did Charles V owe his imperial crown? Yet even Jakob "the Rich" had always emphasized that it was in the interest of his house to cooperate closely with the Habsburgs, never to abandon them, and to face, side by side with them, all troubles and difficulties. Anton Fugger yielded. He could not and would not betray the tradition which had marked the rise of his house. And a spectacular rise it had been; a rise watched by contemporaries with amazement and admiration, but also with indignation and envy. Even the Emperor depended on the Fuggers; it was their money that decided his war.

The merchandise sold in Southern Germany was imported from Italy. Laboriously it had to be brought across the Alps on large covered wagons. In consequence, only valuable, expensive articles could be marketed in Southern Germany, which in turn meant that the customers were the great nobles who alone could find the money for such costly goods. The knights wanted magnificent swords with damascene blades, counts and dukes sought precious clothes of velvet and silk, the churches needed frankincense—all of them articles from the East.

These goods reached Southern Germany by three routes: the Rhone valley and Alsace; over the Alpine passes; and across the Black Sea and up the Danube. Along these routes prosperous towns sprang up, only to decline at once when war or unrest interrupted commerce. From the products of the artisans alone the merchants could not have lived, since every town was anxious to keep out foreign competition. Everywhere the masters of the guilds were on the Council; jealously they guarded the livelihood of the honest artisan. As for Oriental merchandise, the merchants were welcome to make on it what profits they wished! And the princes of the Church and the knights seemed prepared to pay the most fantastic prices for such fripperies!

The longest, but for some time the most favourable, route was up the Danube; it was more convenient than the difficult Alpine passes. From Constantinople the route went via Belgrade, Budapest, and Vienna to Passau, Regensburg, and Nürnberg, or via Prague to Leipzig. These German cities were also the starting-points for the trade routes to Eastern Europe—Cracow and Lemberg, and thence into the boundless steppe of Southern Russia, the countries whence came the wax for innumerable candles and the honey then so important for sweetening food and drink. Sugar still hardly existed at that time.

When the Mongols captured Southern Russia and the Turks settled in the Balkan peninsula this trade came to an end. Instead, in the fifteenth century, a trade developed from Southwest Germany to the Rhône valley; cities such as Basle, Strasbourg, and Constance grew rich. Now the Swabian merchants themselves ventured abroad. Across France they extended their trade relations to Spain.

What attracted them there more than anything was the saffron cultivated in the fields of Catalonia. Saffron was indispensable for apothecaries, for culinary purposes, and even for the dyeing of textiles. The Ravensburg trading company enjoyed what was almost a monopoly in Spain in the fourteenth century. It bought up the entire saffron harvest. It maintained trading-posts in the French towns along the route—in Avignon and Marseille, in Barcelona, Saragossa, and in Genoa. The sons of the great merchants of Ravensburg—the Muntprat family, for instance—used to be sent abroad to acquire a thorough grasp of this trade; on one occasion they were captured by Corsican pirates. From the rich French provinces, from Burgundy and Champagne, the Swabian merchants exported such luxury articles as fabrics and lace into far parts of the East.

In the south the Alps barred the road. True, a great many armies marched through Augsburg into Italy, but the merchants were discouraged by the high costs of transport. Trade across the Alps only got going properly when the Swiss started to build bridges over their turbulent mountain torrents and made the St. Gotthard Pass negotiable, and when the Tyrolese improved the road over the Brenner Pass. Venice, naturally enough, endeavoured to channel all commerce over the near-by Brenner, while Genoa championed the route via Milan and the St Gotthard, or occasionally that up the Rhone valley.

Passau, Regensburg, and Nurnberg, Basle, Strasbourg, and Ravensburg were well-known trading cities at a time when Augsburg was known merely as a bishopric. To begin with, Augsburg owed its prosperity not to its trade but to its artisans. All around the town, mile after mile, the fields were blue with the blossoms of flax as far as the eye could see. All the villages in the vicinity were working for the merchants in the town, who were prepared to accept any quantity of linen. At last they were able to sell to the Venetians something that could bear the costs of transport over the Alps. What else was there to offer the Italians in exchange for their valuable Oriental merchandise?

In one of these villages outside the gates of Augsburg, in a place called Graben, lived the Fuggers, a peasant family weaving linen on a fairly considerable scale. By their hard work they soon rose to a position when they took the linen woven by other families to town to sell it there. In 1367 Hans Fugger decided to give up weaving and to become a merchant. With the then considerable capital of $61.60 he began to market his father's linen. He married twice, first the daughter of the Master of the Weavers' Guild, and after her death another weaver's daughter, Elisabeth Gefattermann.

It was a turbulent epoch. The guilds were forcing the old-established noble families to accept them into the town councils as equal members. Moreover, an important change took place in the weaving trade itself. Pure linen fabric, such as was manufactured also in Northern Germany, particularly in Bielefeld, was being supplanted by fustian, a roughened material whose warp consisted of linen but its weft of cotton. Hans Fugger's fustian soon earned an outstanding reputation in the great Southern German markets of Ulm, Nürnberg, and Frankfurt. His business progressed so well that in 1397 he bought a house in the best business quarter and opened a large vaulted hall for his wholesale business. When he died in 14o8 he left a fortune of 3000 florins—in terms of purchasing power about the equivalent of $56,000 today.

The demand for fustian grew yearly. But where was all the cotton to come from that was needed for its manufacture? Linen production had posed no raw material problems since the immediate vicinity supplied the necessary flax. Cotton, however, which mostly came from Egypt, had to be imported via Venice. The few cotton-fields of Spain only met domestic requirements. The Venetians were making sure that cotton was not traded anywhere else. They defended their monopoly with an iron hand. Florence and Genoa might control the North European wool trade, but the cotton belonged to Venice.

The German merchants who maintained their own house on the Rialto were strictly forbidden to travel beyond Venice lest they should deal directly with the merchants from the East. Anyone trying to evade the law risked severe penalties. But the very connection with the city in the lagoon yielded a handsome profit to any enterprising merchant.

During the first half of the fifteenth century the artisans of Augsburg rapidly rose to prosperity. The new fustian was highly esteemed everywhere because of its durability and low price—in France, England, and even in Spain. In exchange, silks, spices, and Mediterranean fruit entered the country. Southern Germany became an industrial area not yielding in importance even to the much older Flanders. Among the heavy covered wagons which made their way from Augsburg to all corners of the globe were also those of Fugger's widow and her two sons, Andreas and Jakob. From Venice they imported more and more cotton for their own weaving shops. Needless to say, they had their share of trouble with the greedy territorial rulers who, in order to muscle in on this new wealth, exacted high customs duties. In 1442 Duke Otto of Bavaria complained that the Fuggers—like other merchants and long-distance hauliers—were bypassing the road over the Hüchelberg in order to save on customs duties.

In 1452 the two brothers, who had gradually come to direct the business, separated. Four years later Andreas, whom the people of Augsburg even then called "rich Andreas," died. His son, Lukas, who sat on the Grand Council of Augsburg as representative of the weavers, held a number of honorary offices: Inspector of Wool, Inspector of Herrings, and Taxmaster. He was, above all, the trusted representative of the guilds; at the same time he was a merchant. On behalf of his native town he went to Frankfurt to negotiate guarantees for traveling merchants. His goods went to Milan, Venice, Nürnberg, Frankfurt, Antwerp, and London. We can follow his traces everywhere. To the later Emperor Maximilian, who was for ever in financial straits, Fugger conveyed a commercial bill from Innsbruck to Antwerp. This money was to pacify his restive soldiery.

This was the beginning of the great credit business of the house of Fugger. Lukas developed a liking for easily earned interest and charges; he permitted himself to be tempted into lending out his money to the great lords who were for ever spending more than was in their coffers. Frequently there were disputes when their debts were due for repayment. The town of Louvain, for instance, could not be made to redeem its huge debt of 10,000 florins either by court judgment or by proscription. To make matters worse, some of Lukas's customers, whom he had trusted too far, went bankrupt, so that even the rich Fugger eventually had to suspend payments. The house of the Fuggers "of the doe," as this branch of the family was known after its coat of arms, declined into poverty.

Jakob Fugger, on the other hand, remained on the solid ground of the weaving trade and of commerce. He sold the cloth from his own and other Augsburg workshops, himself purchased the cotton and dyestuff's, and began dealing in silks and woollens, in clothes, spices, and perfumes. When he died in 1469 he was reputed to be one of the richest citizens of Augsburg, even though the tax books list him only in the seventh place. Lukas Welser, who had made a rich marriage, is shown as owning twice as much as he—14,000 florins.

But it was under the sons of Jakob that the house of the Fuggers "of the lily" reached the peak of its power and prosperity. It enjoyed such a reputation that the Emperor Frederick III bought from it large quantities of gold and silver brocade, silk, and woollen materials for the marriage of his son Maximilian to Margaret of Burgundy. The Fuggers sold the output of 3500 looms; in their warehouses were bales of red and black material for dress trains, and fabrics in parrot green, sulphur yellow, golden yellow, and rose pink. Textiles from all over the world were kept in stock: arras from the Netherlands and Frankfurt, white cloth from Friedberg, red cloth from Kromburg, grey cloth from England, black cloth from Lemberg, coarse woollen cloth from Nördlingen, velvet from Venice, Carcassonne, and Lyons, satin, damask, and taffeta, bombazine, silks, and cottons. In order to cultivate their business connections, only Ulrich, the eldest of the Fuggers, remained at home; his brothers, Andreas and Hans, went to Venice, while Georg went to Nürnberg to conduct the trade with the East. Markus, Jakob's third son, was a priest in Rome, and the youngest son, also called Jakob, was likewise intended for the priesthood. However, when Andreas and Hans died unexpectedly at an early age, the family asked him to give up his idea of becoming a priest and to become a merchant instead. At the age of eight the highly gifted Jakob was sent to Venice in order to learn the business during a three years' stay at the Fondaco dei Tedeschi, the traditional trading and living quarters of the Germans. Nowhere else could a merchant gain such an insight into world trade as in Venice, where Oriental spices, Greek wines, Venetian lace, glass, and silks were traded in exchange for metal, timber, grain, leather, woollens, and linens, and furs from the North. There, moreover, young Jakob learned double-entry accountancy, then called la Veneziana, and learned to understand the interplay of business and politics. He made the acquaintance of the Florentine banking-houses, like that of the Medici; he saw what money and credit could achieve; but he also realized the dangers accompanying such business, dangers to which his rich cousin Lukas had fallen victim. To begin with, the elder Ulrich ruled in the Golden Counting-house in Augsburg while Jakob was employed in the ‘foreign service.'

During the war of 1487-88 the Archduke Sigismund of the Tyrol had seized the mines owned by Venice; the Venetians, however, defeated the reckless Archduke and forced him to pay some 85,ooo florins in compensation. As he could supply no more than 60,000 florins' worth of copper he obtained a credit from Jakob Fugger; as security for his loan Fugger demanded and received the assignment of the rich Schwaz mining company which had begun to work the recently opened silver-mines, the most productive in the Tyrol.

The agreement was a masterly stroke by young Fugger. The mines in Schwaz were to supply the silver to Fugger at the same price at which they used to deliver it to the Archduke—five florins for each mark (equal to 280 grammes or about ten ounces). On each mark of silver Fugger had to pay the Archduke three florins in taxes, so that the silver cost him eight florins per mark in all. His problem, therefore, was to take the silver, received at a fixed price, to wherever it would fetch a good price in the market—and as a rule, this would be in Venice. It is probable that the Fuggers made a profit of at least four florins on each mark of silver.

The Tyrolean business had thus proved profitable, and before long Fugger was able to extend it considerably. The spendthrift Archduke had been reckless enough to get involved in financial complications with his neighbour, the ruler of Bavaria, and had glibly assigned to him Freundsberg and the Schwaz mines to a total amount of 100,000 florins. But the Habsburgs in Vienna were hostile to Bavaria; they therefore induced their cousin to break with the Bavarian merchant, Baumgartner, and to hand over the entire silver business to the Fuggers.

In 1488 alone the Fuggers advanced to the Tyrolean Archduke the unprecedented sum of 150,000 florins—30,000 florins payable immediately in cash, and the rest in monthly instalments of 10,000 florins. From the business records of the Augsburg firm we know the profit which this transaction yielded. On the 40,000 marks of silver (about 24.500 lb.) which they received in respect of their loan, the Fuggers, after deduction of their overheads, made a profit of about 55,000 florins, or something like 40 per cent of the sum advanced.

The Tyroleans, horrified by their ruler's disastrous financial transactions, heaved a sigh of relief when his nephew Maximilian took over the county of Tyrol and the Vorarlberg territories against payment of an annuity of 52,000 florins as well as the residual debt with the house of Fugger, in an amount of 46,000 florins, which he redeemed with 5750 marks of silver paid in 42 weekly instalments. Thus began the close cooperation of the Fuggers with the Vienna Habsburgs in the person of Maximilian, who was shortly afterwards elected Emperor of the Holy Roman Empire. Known as "the last knight," Maximilian had far-reaching, indeed boundless plans. He wanted to secure for his house the neighbouring kingdoms of Bohemia and Hungary and to drive the Turks out of Europe. He dreamed of adventures and great chivalrous tasks without giving a thought to the vast sums of money which would be necessary for his projects. This money was to be found for him by the Fuggers.

Jakob Fugger first of all developed the silver-mines of the Tyrol until they were working to capacity. In 1491 he once more made a loan to his sovereign—120,000 florins, advanced on the security of increased silver deliveries. This advance was nowhere near being repaid when Fugger had to grant further credit to the Emperor—this time to the tune of 10,000 florins a month.

In 1494 Maximilian suddenly tried to sever his relations with the Fuggers and to mortgage the silver-mines to a Nurnberg syndicate in order, by this questionable procedure, to obtain further sums of money. The Augsburg merchant, however, intervened energetically. He insisted on his mortgage, and compelled the Emperor to break off negotiations with the Nürnberg group. In 1494 the trading company of the Fuggers was transformed into an open company, probably the first in Germany, under the name of "Ulrich Fugger and Brothers, of Augsburg. " A 'firm'—the term came from Italy—is more than a loose association of partners; it is a corporation in law, with its own capital. The three brothers, Ulrich, Georg, and Jakob, undertook, for a period of six years, to leave their `capital plus gain' in the business on a basis of an equal share in the profits. The company's sign was a trident, based on a misinterpretation of the name of Fugger; in fact, it comes from the old German word for dyeing.

Having derived such benefit from the silver trade, the enterprising Fugger now turned his attention to copper, a metal in great demand not only in Europe but even more so in the East and in India, where mineral raw materials were scarce. Eastern merchants were increasingly asking for copper in exchange for their spices and jewels. With the copper trade Jakob Fugger assumed the management of his company. The decisive point was cooperation with the Hungarian copper-mine owners, the Thurzos, who lacked the capital to get the neglected copper-mines of Hungary into profitable working condition again. Hans and Georg Fugger concluded leases with the Augsburg Thurzos; the Fuggers undertook to market the copper and in exchange advance the sums necessary for improving the technical equipment of the mines, in particular the liquation plant where the silver was separated from the copper ores. This process required large quantities of timber and a considerable amount of water-power.

The next problem was to overcome the difficulty of transport. First of all, the Hungarian King's permission to export the copper was needed, and then permission from the neighbouring territorial rulers to allow its transit. Everywhere the powerful nobles and influential towns wanted to profit from customs duties or at least from their right of staple. The Hungarian copper used to travel from the mines at Neusohl (now Baòska Bystrica, in Eastern Czechoslovakia) via Teschen (now Tìšín or Cieszyn on the Czechoslovak—Polish frontier) to Breslau (now Wroclaw) and thence to Danzig. In difficult—and costly—negotiations with Maximilian, Jakob Fugger bought exemption for himself from the Vienna staple and the Danube tolls, so that his copper could be shipped up the Danube through Vienna to Regensburg. Being no longer dependent on Antwerp, he marketed the copper where the merchants most urgently needed this commodity for export to the East—in Venice.

This kind of business policy was possible only by firmly relying on the Habsburgs; they were the masters of the Danube traffic on which, in the last resort, everything depended. The most powerful competitor of Hungarian copper, however, was the Tyrol. If the Fuggers wanted to control Europe's entire copper trade they had to get a footing in Tyrolean copper as well. Already the Tyrol's silver was very largely under their control. As the Medici had done on wool, so the Fuggers based their banking business on silver and copper.

In 1498 Ulrich Fugger had tried, in conjunction with other merchants, to form a syndicate—probably the first in Germany—to regulate the copper market and fix the price of copper. At that time, this meant saving the copper price from collapse. Copper sales had come to a standstill because the war with the Turks had barred the way into Asia. In a letter to the Emperor Maximilian the Augsburg merchant explained that hardly any copper had been sold in Venice during the preceding nine months because the Venetians, from fear of the Turks, were refusing to ship valuable cargoes by sea. The routes to Milan and to France, as well as that to the Low Countries, were blocked. If he, Fugger, had not then bought copper no one else on earth would have undertaken such a risky business. The mines would have stopped producing and would have failed miserably.

As so often happens with this kind of agreement, the partners quarreled because the allegedly ‘independent' Thurzo trading company had thrown large quantities of Hungarian copper on the market. The cartel broke up.

Jakob Fugger now offered four florins per quintal of Tyrolean copper, arguing that he paid no more for it in Hungary. He got his way, and in 1506 Maximilian prohibited the export of Tyrolean copper by anybody else. In return for a new loan of 60,000 florins the Fuggers were also assigned the copper and silver output of the mines and smelting works of Rattenberg. Before long they were reaching out for the former Bavarian mines of Hausham. They even wanted to lease some Swedish mines and the Bohemian mine of Joachimsthal.

When in 1496 the Emperor mounted a campaign into Italy, his treasury was once more at a low ebb. The imperial cities refused to advance any money on account of the ‘common penny,' which had been floated, since nobody trusted the Habsburg Emperor. It was then that Jakob Fugger generously offered him the sum of I2I,6oo florins against the mortgage of the Tyrolean copper-mines. This agreement successfully concluded, the Augsburg merchant first of all kept back the still outstanding balance of the earlier silver loans; he next paid out in cash to the Tyrolean Government the full sum owed to it by its Habsburg sovereign. After deduction of all these items there was a mere 13,000 florins left for Maximilian. With a great deal of difficulty he persuaded Jakob Fugger to grant him further advances to a total of 27,000 florins, in respect of future silver deliveries, so that a sum of 40,000 florins eventually flowed into the imperial coffers.

Over the next few years the Fuggers invested the enormous sum of 1,064,499 florins into the Hungarian copper-mining business, by way of modernizing the mines, building roads, setting up smelting works, and redeeming privileges. Admittedly they did not find these sums single-handed. The balance sheet for the year 1511—i.e., fully 15 years later—still shows a business capital of only 245,463 florins, of which no more than 81,000 florins belonged to Jakob Fugger and 87,853 florins to the heirs of his brother Ulrich; the rest belonged to the heirs of his brother Georg.

Even at the time of his first great loan to the Archduke Sigismund of the Tyrol, Jakob Fugger had been able to find the money only with the help of Antonio de Cavallis of Genoa. The wealthy Prince-Bishop of Brixen, Melchior von Meckau, had so much money invested with the Fuggers that they found themselves seriously embarrassed when, after the Prince-Bishop's death, his heirs immediately demanded the withdrawal of their share. Undoubtedly, it was dangerous to get involved in such risky financial transactions with the Crown. But what was the alternative for the Fuggers? Maximilian's financial position was getting steadily worse. Even the imperial taxes did not help—for if they were paid at all they arrived only after a long delay. The nobles of the Empire, in the face of this situation, proposed that compulsory loans should be imposed upon the great merchant-houses in Augsburg, Ravensburg, and the Hanseatic towns. But the merchants remained inflexible. Once again the Fuggers had to come to the rescue. As security for a sum of 50,000 florins they had extensive domains assigned to them—the lands of the county of Kirchberg and the manor of Weissenhorn. Since the loan was never repaid these lands became Fugger property; they belong to the family to this day. But even this 50,000 florins was not nearly enough.

At last, in 1509, the League of Cambrai promised the Emperor substantial sums of money, to be paid out in instalments in Rome, Florence, and Antwerp. Jakob Fugger undertook the transmission of this money. After having the accounts assigned to him he paid out part of the sum within a fortnight and the balance within six weeks in bills of exchange drawn on Augsburg. That was a remarkable banking transaction for those days. The costs and dangers of transport, whether of precious metals or merchandise, justified what was then called an ‘arbitrage' or cambio arbitrio, a differential computation of the amount paid in at one place and paid out at another. With such large sums this produced a considerable profit.

To transmit money from Rome to Augsburg was comparatively easy, because it had only to be offset against the payments which were made regularly in Germany to the Holy See. This alone represented a very considerable financial deal for those days. Conditions were then particularly favourable because since 1494 Florence had been a democracy under French protection. The Medici had been expelled and the other banking-houses, like the Strozzi and Salviati, were relying largely upon France. Germany had a free hand.

There was no end in sight to the Emperor's financial difficulties, nor to his fantastic plans. In order to become Pope he wanted to bribe the Roman cardinals. Once again the Fuggers were to have advanced enormous sums on the security of future Papal revenues. Already they owned the entire silver output of the Tyrol for eight years ahead, and the copper output for the next four. Pressed by the Emperor, Fugger replied cautiously that he did not know how many more years he could expect to live or how the fortunes of war would go in the near future. Moreover, he explained, he had "much other great business, and more coming in every day"; business was "coming into his house such as, a few years before, he would gladly have ridden a long way to pursue." Nevertheless, he was turning it all down because he had reached a ripe old age and had no children; he would content himself with his existing business and not seek any new.

What sort of business was it that came "into the house" of the Augsburg merchants? Since the Portuguese had discovered the sea route to India the spices no longer came to Europe by the laborious route via Egypt or Syria, but along the Atlantic coast of Africa to Lisbon. Venice lost its predominant importance. The marketing of the spices which now came in via Western Europe had to be organized anew; moreover, a way of equalizing the payment balance with Portugal had to be found.

After all, the spices were not captured booty but had been purchased for a considerable price. Indeed, a good deal of haggling was usually necessary with the local rulers, the proud maharajahs, the powerful Moguls. For payment they demanded precious metal and then still more precious metal, as well as copper in unlimited quantities, and finally linen and linen clothes. All these commodities were traded in Antwerp. Until then the English had been the only ones to sell their cloth there in competition with that from Flanders; the Italians and the Hanseatic merchants had remained faithful to Bruges even though the Swin had become so silted up that sea-going ships were no longer able to enter.

The South German merchants realized the importance of Antwerp when the King of Portugal established his ‘factor' or business agent there in order to market the Indian spices, mostly by the entire shipload. In 1484 the Bruges counter of the Hanseatic League complained that the staple was being held in Antwerp all the time, and not merely for the great fairs at Whitsuntide and in the autumn, on the Feast of St. Bavo. Unlike Bruges, which was hamstrung by guild regulations, Antwerp granted the merchants full "fair privileges," above all exemption from customs duty and protection by law during the whole year.

Antwerp opened for the Fuggers the door to the Asian business. In 1505, in conjunction with other German and Italian merchants, they equipped a fleet to bring merchandise back from the East Indies. They were not allowed to make this voyage a second time: the Portuguese wanted to pocket the profits themselves. From then onward an Augsburg factor was established in Lisbon who would regularly send large quantities of pepper to Antwerp, where the Fuggers maintained a house of their own and further consolidated their leading position in the pepper market. At the same time they increasingly channeled their silver and copper to Antwerp. Before long they also transacted major financial business from Antwerp.

When the Emperor Maximilian relinquished his guardianship in Burgundy of his grandson Charles, later to become the Emperor Charles V, upon his coming of age, he received a sum of 100,000 florins as compensation. And who but the Fuggers accepted this money for transmission to Vienna? The Augsburg firm was even doing business with England. At first it had confined itself to transmitting England's financial contributions to the Emperor, since the real bankers of England were still the Italian firm of Frescobaldi. This banking-house, however, was not in a position to hold such a large sum in ready money; very soon they had to borrow 60,000 florins from the Fuggers in order to be able to pay out the sum in Germany at all. Without the help of the Augsburg merchant-house Maximilian would probably not have been able to pay his German mercenaries. Before long a request came in also from the Netherlands Court, from the young Duke Charles. Bernhard Stecher, the Fuggers' factor in Antwerp, had to advance him 27,000 pounds at 40 pfennigs of Flemish money at a rate of interest of 11 per cent., on the surety of the town of Antwerp. A year later, with this loan still not repaid, new requests for money were already coming in, as Charles had to travel to Spain to assume the crown. Yet the coffers of rich Burgundy were still hopelessly empty.

The principal business of the Fuggers consisted not in granting credit and profiting from interest, but in the transmission charges, the `arbitrage. They undertook to transmit monies not only for the German clergy, but also for that of Poland, Scandinavia, and Hungary—in particular the service fees which became due when a bishop succeeded another. The Pope deposited all incoming monies, especially those of the jubilee Year of 15 o9, with the Fugger bank, which already handled a large part of the transmissions from Germany. New business came along. When the 24-year-old Albrecht of Brandenburg, of the house of Hohenzollern, though already Archbishop of Magdeburg and Administrator of the Bishopric of Halberstadt, wished in addition to become Archbishop of Mainz, he required a Papal dispensation—and this cost a good deal of money. Moreover, he had to pay 42,000 Rhenish florins to the Cathedral Chapter of Mainz in order to redeem Gernsheim, which had been pawned to Hesse.

Behind these financial transactions were aligned big political moves. The Hohenzollerns, supported by the March of Brandenburg, by the German Order in Prussia, and by the biggest and most influential Archbishopric, wanted to become the leading power in the Holy Roman Empire. They undertook to pay the sum of 21,000 ducats in Rome against Albrecht's promissory note. The Fuggers' factor in Rome, Johannes Zink, succeeded in getting the Pope to grant to Albrecht, in exchange for a further Mom ducats, an indulgence for the Cathedral of Mainz. At first the Hohenzollern emissary had a bad fright; where on earth were they to find the new sum, considering that their credit was exhausted with 20,000 ducats? The Elector Joachim of Brandenburg advised his brother Albrecht to make arrangements with the Fuggers. The 10,000 ducats which Albrecht was to pay to the Pope were intended for the construction of St Peter's; for this purpose the Pope had indulgences issued throughout Germany.

To each indulgence box the representative of the house of Fugger held a key. The boxes could be opened only in the presence of witnesses and of a notary; half the sum in the box was transferred to the Pope—through the Fugger bank—the other half went to the Fuggers in part redemption of their advances to the Archbishop. The coins, we read in the records, "rang merrily in the boxes." In 1517 the Archbishop Albrecht owed the Fuggers only a little over 6000 Rhenish florins, or one-sixth of his original credit; the balance sheet of 1527 no longer lists him as a debtor at all. The business had been smoothly completed, but the unity of the Church was finally broken. The indulgence, however, proved a bitter disappointment to the Pope; according to the Vatican accounts it yielded only 5149 florins. From this total had to be deducted the commission for the Fuggers, so that the Holy See, which in any case was entitled only to half of the balance, received a mere 2466 florins. The Archbishop collected altogether 8436 florins, of which he had to surrender 3000 to the Emperor, so that he was left with only 5436 florins. The violent recriminations which followed were addressed chiefly against the "indulgence traders," in particular the Dominican Tetzel, who had shown himself a little too smart at business.

The reverse came from an unexpected quarter. After the death of King Ladislaus of Hungary in 1516, the young King Louis allowed himself to be persuaded into a dangerous adventure. His baptized Court Jew Szerenzich convinced him that the one way of getting rich quickly and easily would be to admixture to the silver coinage not a quarter but half its weight in copper. The Diet agreed, and the country was flooded with money. Soon, however, it was discovered that this bad money would not buy any merchandise abroad. Even the workmen of the Thurzo copper-mines resolutely demanded to be paid in old coinage or else to be given double wages, considering that everything had become more expensive. The factor had to give in. The general indignation turned against the foreign merchants, chiefly against the Fuggers, whom Szerenzich, now deposed and under arrest, blamed for the national misfortune. With a great deal of difficulty the Fuggers' representative at Neusohl moved all valuables to Cracow for safety. Angrily the King of Hungary demanded from the Fuggers a sum of 604,105 florins for the mint’s “lost profit” and for other losses allegedly caused by them. He declared magnanimously that he would settle for 200,000 florins and, moreover, would regard the 125,000 florins already confiscated by him as part payment towards that sum. He would then "forgive them" the remainder of the fine. Jakob Fugger now mobilized his influential connections. He addressed himself to the imperial chancellory, to the King of Poland, the Emperor himself, the Archduke Ferdinand, and the Dukes Wilhelm and Ludwig of Bavaria. In support of Jakob Fugger's complaint, the Emperor was to "set the whole empire in motion against Hungary." An even weightier step was the threat by the Augsburg merchant that he would make sure that "in no place in Germany would Hungarian copper be accepted for buying or selling unless King Louis relented, compensated the Fuggers, and immediately reinstated them in their commerce."

These were weighty words. Fugger's nephew, Georg Thurzo, advised him to give up the Hungarian business altogether, but the proud merchant replied that he would not be driven out of his realm by anybody and that he "would make profit while he could." Jakob Fugger was sixty-six at the time. Only on his deathbed, in 1525, did he have the satisfaction of hearing that the King of Hungary was again offering him the lease of the copper-mines.

Between 1526 and 1539 the Fuggers sold 267,000 quintals of copper from Hungary, most of it via the Baltic to Antwerp, as well as 112,000 marks of silver, most of which they supplied to the Hungarian mint. However, when the Turks occupied Buda in 1541 Anton Fugger thought it wiser to withdraw from the now hazardous Hungarian business.

In view of the success of his close cooperation with Maximilian, Jakob Fugger was vitally interested in the election of his successor. He had to prevent Francis I of France from becoming German Emperor. The scales would be tipped by money. The Electors insisted on cash payment or promissory notes from the great South German merchant-houses, chiefly the Fuggers. But were the merchants to have more confidence in imperial promises than in those of the princes?

Francis I was steadily driving up the demands of the Electors. Whereas at the beginning of March the imperial crown could have been had for 500,000 florins, a few weeks later the price had gone up by another 200,000 florins. At last, when the time for the election came, the Elector of Brandenburg unexpectedly went over to the French side. Charles V had to spend 850,000 florins to make sure of the votes he needed. Of that total the Fuggers alone advanced 543,000 florins; the Welsers, the second richest firm in Augsburg, contributed 143,000 florins, and the Genoese and Florentines between them raised approximately 165,000 florins. Not all this money went into the Electors' pockets; the Spanish agents had to be paid, and the Swabian League and the imperial knights under Franz von Sickingen received 171,000 florins. A further 29,000 florins had to be paid to the Swiss mercenaries—and thus the list continued interminably.

Jakob Fugger, the great "Governor," never accounted for his decisions to his partners, the sons of his brothers. His hand alone was firmly on the helm of his business. According to the property registers for 1511 and 1527 the business assets of the Fuggers (not counting their private property) increased from 245,463 florins to 2,021,202 florins, although a sum of 48,672 florins was withdrawn from the business in 1511 for payments to various members of the family. Altogether a profit of 1,824,411 florins was made over a period of 17 years, or on average 54 ½ per cent per annum. Never before had a private person accumulated such a fortune. The Fuggers then owned five times as much as the Medici had done in their heyday. In terms of present-day money their fortune would have to be estimated at about $28,000,000 with a real purchasing power about five times that figure.

Jakob's successor, his nephew Anton, was careful during the first few years of his management not to get involved in any more credits to the Habsburgs. He gladly left this business to the Genoese, who rose to the leading place in European finance during the next few decades. Later records enable us to trace clearly the gradual shift of the Fugger trade away from ore-mining and the metal business towards the Indian commerce handled at Antwerp.

In 1546 the mines and the entire Hungarian trade accounted for no more than 368,000 florins on the profit side of the Fuggers' business, whereas a sum of 1,066,000 florins was outstanding from Spain where their investments in 1527 (after deduction of liabilities) had been no more than 170,000 florins.

The Spanish business had been started by Jakob Fugger. When the Emperor Charles V had proved tardy in repaying the debts he had incurred in connection with his election, the far-sighted Augsburg merchant had made sure of a valuable collateral: he had ‘leased' the revenue of the great religious Orders of chivalry in Spain, whose enormous landed property came under the sovereign's ownership upon their sequestration. The estates of the Orders, the so-called maestrazgos, supplied agricultural produce—mainly grain. This was sold in Lisbon, and exchanged there at favourable prices for East Indian spices which were then shipped to Antwerp. The Fuggers were thus able to do magnificent business in Spain with their money without any serious transmission problems.

Between 1538 and 1542 the Fuggers, at an increased lease fee of 152,000 ducats, had an annual revenue of 224,000 ducats, which means a profit of 50 percent. During 1551 and 1554 they even operated with a profit of 85 per cent. on the invested capital. To this must be added the mercury-mines of Almaden, which had first been worked in Roman times. Until the days of the Fuggers, however, the mercury in Spain had been used almost exclusively for the manufacture of cinnabar pigment; the Fuggers, experienced mine-owners that they were, knew of course how important mercury was in silver production whenever the necessary wood was not available for ordinary smelting. The mercury evaporates, and this vapour combines with silver to form silver amalgam from which the mercury can be recovered. The mines of Almaden acquired tremendous importance for the Peruvian silver production, since the extraction of silver at Potosi at an altitude of over 12,000 feet was possible only with the help of mercury. As no timber was available at that altitude the ores could not be smelted in the ordinary way. Year after year the Spanish mercury went to America, and year after year the Fuggers made their profit.

The American trade! The Fuggers and their business partners, the Welsers, knew only too well what was at stake. Would Southern Germany succeed in maintaining its predominant position or would it decline into a remote corner bypassed by the great stream of world commerce? Venice was an example of a leading trading city utterly declining within a few decades.

Spices no longer came to Europe via the Red Sea and the Mediterranean, but by the sea route around Africa to Lisbon. The Turks, moreover, blocked the export of cotton from Egypt. Augsburg thus lost its most important source of raw materials. Moreover, its staple article, fustian, was not selling any longer. It was being supplanted by pure cotton materials from India. Was the fate of Southern Germany inextricably tied up with that of Venice?

With its 15,000,000 inhabitants Germany represented a large and receptive market during the first half of the sixteenth century. Economically it controlled the entire Scandinavian and East European areas, as well as the Danube basin. The position of the Hanseatic traders and of the great Southern German merchants was still unshaken in Poland and Hungary. Besides, there was a justifiable hope that it would be possible to extend the commercial network over England and the Low Countries. The confident Hanseatic merchants were still established at the Steelyard in London. The English, as yet, did not enjoy among the Iberian nations, who had a firm hold on the Eastern as well as the American trade, the same degree of confidence and friendship as the great German merchant houses. It should, therefore, be possible to build up anew an overseas business from Antwerp. This great plan had first been conceived by Jakob Fugger "the Rich." The great advantage which the Fuggers had over all their competitors was that they controlled the merchandise which alone was in demand in the East—silver and copper. Moreover, they had the necessary capital at their disposal for buying entire shiploads from the King of Portugal and paying for them in cash. Who could compete with them in this respect?

Antwerp accepted any quantity of silver and copper. There was no need for worry on that score, as there had been some years earlier in Venice when Hungarian copper had to be marketed at bargain prices because the Turks had cut the sea routes. Cotton would sell readily in any quantity; perhaps linen fabrics might be exported to the East Indies in exchange? In Antwerp, moreover, there was no need to consider the local artisans and merchants, as the Hanseatic League was obliged to do in Bruges. Already the Fuggers were establishing trading-posts in the principal Hanseatic towns; already they were taking a share in the Baltic trade; already their messengers were being dispatched to Scandinavia and Poland. They even wanted to break into the Italian business by supplying Venice and Milan from the North. Only France had to be excluded so long as the quarrel between Francis I and the Emperor continued. But perhaps that would be settled one day.

The Fuggers sought and found support from other Southern German merchants. This is clearly revealed by the balance sheet for 1539; as partners in the firm we find Hans Welser and his brothers with a share of 29,000,000 maravedi, equal to 80,000 ducats, and Sebastian Neidhard with the huge sum of 39,400,000 maravedi.

What, then, caused these schemes to fail? They were wrecked not by any natural or inevitable difficulties, but by the friend of the Fuggers, the Emperor Charles V.

We are familiar with the personality of the man on whose realm the sun never set, the last sovereign to embody the entire majesty and dignity of imperial power as understood by the Middle Ages, the victor of the battles of Pavia and Mühlberg, the conqueror of Tunis. The painters have given us his portrait—dignified, August, truly imperial. The historians commend his clear reason, his balanced judgment, his grasp of the great questions of politics. But we also know him as the leading merchants of his day saw him—Jakob Fugger the Rich and his nephew Anton. They saw a very different person.

The Emperor suffered from one positively fatal weakness: he was no good at arithmetic. The costs of waging a war had increased out of recognition since the armies of knights and their retainers had been supplanted by mercenaries who had to be paid by the sovereign. A Milan condottiere once told King Louis XII of France that wars needed money, more money, and still more money. A normal levy of mercenaries would cost, according to a calculation made in 1532, roughly 560,000 florins for six months' pay and equipment, but not taking into account supplies of food, baggage train, and various sundries. A Spanish corps kept in Southern Italy for about six months cost 1,250,000 ducats.

Against all warnings by his Ministers the Emperor time and again got involved in major campaigns. He enlisted large numbers of mercenaries, made far-reaching promises which could never be kept—and was invariably surprised to find his coffers empty. Disaster was only just averted in 1525, during the war against Francis I of France, when the two armies were menacingly facing each other at Pavia and no money available. How were the muttering mercenaries to be paid? Fortunately the Emperor was victorious. For the moment his financial worries were at an end since the French had to pay an enormous ransom (1,250,000 ducats) for their King, who had been taken prisoner. Within two years, however, the same situation arose again. Again there was no money to pay the discontented troops. Thereupon the imperial army, incensed, marched upon Rome and mercilessly sacked it. It was a long time before the Eternal City recovered from this sacco di Roma. Its riches had been plundered and its artistic life ruined. Half a century later a similar catastrophe took place in Antwerp under Philip II. Again there was no money to pay the troops; again the troops mutinied. For three days the mutinous troops looted the city, killing 8000 burghers and accumulating a booty of 15,000,000 florins. More than 500 of the finest buildings went up in flames. Antwerp was reduced to poverty.

Whenever he was in bad financial straits the Emperor expected the great merchant-houses to come to the rescue. Without giving it a second thought he would mortgage the future and make countless promises. If the merchants held back he simply extorted the money from them by threats. This is what Lucas Rem of Augsburg wrote about the Emperor Maximilian, the grandfather of Charles V:

“He was pious, not of high intelligence, and always poor. He pawned so many towns and castles, revenues, and estates in his country that little was left to him. He always wanted to wage war and yet lacked the money for it. At times when he wanted to make war his servants were so poor that (like the Emperor himself) they could not pay the hostelry bill for the night.”

To get funds for his war against the League of Schmalkalden the Emperor Charles V ruthlessly put the screw on his friends, the Fuggers in Augsburg (now a Protestant town), on the Genoese, and on the merchants of Antwerp. No sooner had he won a victory than he summoned the Fuggers to his headquarters near Wittenberg in order to borrow more money. It was then that Anton Fugger, weary of Habsburg cunning and brutality, wished to withdraw from business altogether. But that was no longer possible. He who sups with the Devil needs a long spoon. The millions invested in the Spanish business held Fugger firmly chained to the services of the house of Habsburg. The entire business capital of the Fuggers, some 5,000,000 florins, the largest sum ever owned by them and probably by any single firm at any time, was fully tied up in extensive dealings with the Habsburgs. And even this enormous fortune had not been enough; Anton Fugger had had to obtain credit. Could he afford to let the Emperor fall? In an anxious letter to his faithful factor, Oertel, in Antwerp, a man only too ready to grant credit, Fugger said, "It is indeed His Imperial Majesty's great weakness that he wants to wage war and borrow the money for financing it; I wish these great gentlemen ceased delighting so in wars."

Nevertheless he gave in. At Villach, to where the Emperor had fled from Innsbruck, he granted him the enormous credit of 100,000 ducats cash and 300,000 scudi in bills of exchange on Venice—an unparalleled sum for those days. But he did not have the courage to chalk up his loan to his firm: he made it on his own private account. No doubt he knew why.

Chapter 9—The Elusive Treasure of El Dorado

Queen Isabella of Castille wanted to meet the man who had for several years been pestering her Government for support for his revolutionary plans. Christopher Columbus proposed to sail across the ocean to the West—instead of circumnavigating Africa to the East—in order to get to India. According to his calculations, this route would be very much shorter; moreover, it would lead straight to the heartland of the rich Asian trade. A mere 6o degrees of longitude west of the Canary islands, which belonged to Spain—i.e., after no more than one-sixth of the circumference of the earth—his ships must invariably encounter the first islands off the Asian mainland. The Crown of Spain would gain the commerce with India and win dominion over the richest lands on earth.

But the verdict of the experts who had carefully examined the proposals of the Genoese had been unfavourable and often positively damning. To begin with, all his calculations were wrong or at least totally unsupported by fact. It was indeed possible that the Asian continent extended very much farther to the East than had hitherto been assumed. But as far as the Eastern trade was concerned, what mattered was neither the east coast of Asia nor any islands off it, but only India itself, above all its western coast and Ceylon. On this point all the old authors were agreed, as were also the Arabs through whose hands the spice and jewel trade had been going for centuries.

India, however, was situated only 35 degrees longitude East of the entrance to the Red Sea, and only 45 degrees East of Egypt. Even if the route round the tip of Africa was very much longer than was in fact assumed in Portugal, was a crossing of the boundless ocean to India not a piece of utter folly? And even if this westward route did lead to India, would Spain be in a position to maintain commerce with those distant lands?

But the strongest argument against Columbus's plans was the man himself. True, he called himself a merchant, but did he possess any of the qualities which marked a good merchant? In earlier years he had worked for the Genoese merchant house of the Centurione, who had sent him first to Chios and later to London. While sailing to England an attack by French pirates drove the young merchant to Lisbon. Subsequently he represented the house of Centurione in Madeira, then an important producer of sugar-cane, a valuable and, at that time, rare sweetening agent. This then was the sum total of his commercial experience. He had married the daughter of a senior Portuguese official.

What turned the learned Spanish counselors more than anything against the adventurer was the frivolous manner in which he seemed to be planning his voyage and his boundless, positively fantastic demands. The first voyage, he explained, was to cost practically nothing; he would take with him no military force of any size nor any merchandise for barter. Instead the Genoese stubbornly demanded the title of Admiral and the rank of supreme official in the territories to be discovered, as well as a major share in all treasures. What for? Merely as a reward for the discovery? And who was to conquer the country subsequently, who was to colonize it, who was to build up its commerce? To none of these plain questions did Columbus have an answer.

Strangely enough, the very thing that set officials and scholars against Columbus attracted the Queen. To sail to the West across the sea! To preach the word of God to the heathens! To break the power of the infidels who had been barring the West's trade with the wonderland of India and profiting hugely from 'their part of intermediary! Perhaps even to break the power of Islam altogether by attacking it from the rear! All these were ideas which the stranger developed with great passion and almost religious fervour, imbued with the faith that God had chosen him as His instrument.

At the time, in Cordoba in 1486, the Queen did not see her way to approving the funds for the bold enterprise: her hands were as yet tied by the war against the Moors in Granada. But six years later, in 1492, a small fleet of three caravels set out towards the West—five years before Vasco da Gama discovered for the Portuguese the route to India around Africa.

How different were the preparations for these two voyages! Columbus was content with a few glass beads and other trash, such as in his youth he had fobbed off on the inhabitants of the west coast of Africa. The Portuguese, on the other hand, carefully furnished their fleet with gold and silver, presents of goodwill, and bales of woollen fabrics. But when the ships reached their respective destinations the Spaniards encountered naked savages who eagerly accepted anything the Europeans offered to them, whereas the Portuguese found the pampered Arab merchants of the Indian coast unimpressed by their offerings. Even merchandise in demand in the Mediterranean was in their eyes worthless. They advised the Portuguese on future occasions to bring only precious metals, possibly some copper, and above all hempen ropes. Anything else that the Europeans had to offer they turned down with disdain.

The Portuguese returned—not to trade merchandise, however, but with their powerful warships in order to snatch from the Arabs their dominant position in the Pacific Ocean. Within a few decades the picture had changed completely. The Spaniards allowed the great merchants of Western Europe to take part in their voyages to the Americas. In Portugal, on the other hand, the Crown alone controlled all commerce; the independent merchant was excluded.

Yet the wealthy merchant-houses of Southern Germany were trying hard to gain a foothold in the Indian trade. The fleet which in 1504 again set out from Lisbon to make for India round Africa included some ships equipped by the Welsers of Augsburg and laden with valuable German merchandise. In subsequent years the foreign merchants were reduced to purchasing their Indian merchandise in Lisbon and reselling it in Central Europe. The Portuguese, who at first organized their voyages of discovery as commercial enterprises, intent on peaceful trade rather than military conquest, were now flaunting their military power.

The Spaniards, on the other hand, gratefully accepted the help of foreign merchants, even on a considerable scale. When it was found that the newly discovered islands were not part of Asia, the merchant Amerigo Vespucci, the Sevillan representative of the Medici, attempted to penetrate even farther to the West, right round the American continent, if possible as far as the Spice Islands. However, south of the Equator the coast of the new continent was found to project so far to the east as to reach into the half of the world assigned to Portugal. Vespucci thereupon gave up his project: all he did, in fact, was visit Brazil. The Portuguese Cristobal de Haro, the proprietor of one of the most important merchant-houses in Lisbon, who was in conflict with his King, financed Magellan's voyage under the Spanish flag—the first circumnavigation of the globe.

Even though only one ship returned to Spain and even though Magellan himself had been killed in South-east Asia, the voyage yielded financial profit. The great merchant-houses of Western Europe were encouraged, as a result, to repeat the attempt on their own account. Sebastian Cabot, the son of an Italian and the chief pilot of Spain, who had reconnoitred the Atlantic coast of North America on behalf of the English, was commissioned to equip a new fleet in order to repeat Magellan's voyage and find a route to the Spice Islands, or even to the legendary lands of Ophir and Tharsis.

In this expedition the Germans again participated—the Fuggers and, even more so, the Welsers, probably because on the only voyage to the East Indies in which they had previously taken part, in 1504, they had made a net profit of 175 per cent. on their invested capital of 20,000 florins. The Fuggers at that time had contributed only 4000 florins, whereas the Italians (the Genoese and the Medici of Florence) had raised between them 29,400 florins.

Meanwhile, Jakob Fugger, thanks to his influence with Charles V, achieved the repeal of the prohibition which until then had barred all non-Spaniards from the spice trade with the Moluccas. He had an ambitious plan for shifting the spice trade from Lisbon to Seville, from under the wing of a State monopoly to a free trading city. In exchange for 10,000 ducats Fugger was granted the right of having his own plenipotentiary or agent to accompany the fleet.

The vast machinery built up by the Augsburg merchant was now set in motion. The ships were built in Danzig, where there were enough experienced workmen and where timber, tar, and pitch were very much cheaper. Laden with cheap grain, building timber, and copper (from the Fugger mines in Hungary) the new ships sailed to Lisbon and Seville to be used on the India route.

For the fleet which once more sailed forth along Magellan's route in March 1523, under the command of Garcia de Loaysa, Jakob Fugger, in conjunction with his business friend Cristobal de Haro, supplied, at the Emperor's expense, eight entire shiploads of copper, mast timber, tar, pitch, oakum, and other materials from the Hanseatic towns to Corunna, the base of the new trade. A factor of the Fuggers, Georg Wandler, was on board. The fleet sank miserably in the Pacific Ocean. Nothing was ever heard of it again.

Another factor of the Fuggers, Hans Prunbacher, accompanied the next fleet which sailed three years later under Cabot's command. This fleet, too, never reached the East Indies—but this time the reason was that in South America the Admiral was too dazzled by the rumours he heard of the legendary silver mountains. He searched for them in vain, quite forgetting the original purpose of his voyage. Even though only a single ship returned to Seville four years later, it yielded such a large profit that the Fuggers suffered a loss of only thirty-eight ducats. For many years the Fuggers sued in the Spanish courts for reimbursement of their investments lost in the two Molucca fleets.

For a while the Fuggers toyed with the thought of participating in the colonization of America. But their plans for acquiring land in what to-day is Chile came to nothing. The Welsers participated—temporarily—in Venezuela in the conquest and opening up of South America, but without success. Alongside the conquistadores, those men of the sword, the merchants were powerless. Besides, they did not find any merchants in the New World with whom they could have collaborated.

The Portuguese, by way of contrast, encountered in Asia a highly developed Arab merchant class whose commercial sphere extended beyond India, to the Moluccas, and even to China. The Portuguese now likewise extended their huge commercial empire to these remote points. Yet there was a very striking difference between the Arab and the Portuguese methods of trading. The Arabs were pure merchants. They offered their wares to the local princes, and would not dream of promoting commerce by brute force. They were gladly and amicably received wherever they went. In addition, the Arab merchants were far too weak to stand up to the local rulers and, instead of waiting for help from their caliph or sultan, they preferred to act abroad as independent free men. Even where energetic entrepreneurs or a family like the Enosaid on the east coast of Africa founded their own sultanates, they managed without support from their native country.

The Portuguese, on the other hand, would never have gained control of the Indian trade by peaceful means. They simply lacked the merchandise to oust their Arab competitors. Admittedly, the precious metal from Central Europe and (since the middle of the sixteenth century) from the legendary silver mountain of Potosi in Peru and the Mexican silver-mines of Guanajuato somewhat restored the balance of payments between Europe and Asia, so that the exchange of goods was once more on a commercial basis, but this was not enough in the long run. An attempt had to be made to bring European merchandise to India. The country best suited to do this was probably Germany, with its flourishing manufactures and mines. Yet the German merchants had been trying in vain to get a foothold in the Indian trade. They were not admitted. Why should those foreign pepper-bags make money from the international trade which the Portuguese had so laboriously built up? As it was, Portuguese officials and courtiers were annoyed at the tremendous difference between the purchasing price in Southern Asia and the resale price in the Antwerp market. They saw neither the costs nor the risks of the traders, nor did they understand the difficult task of equalizing the balance of payments and of supplying other merchandise in exchange for that received.

Things were different in Spain. Year after year the silver fleet arrived from the West Indies, laden with fabulous, untold treasures of silver. Was the King of Spain, on whose realm the sun never set, really the richest monarch on earth? We have the admiring reports of diplomats, including such experienced merchants as the Venetians. They saw with their own eyes the heavy silver ingots which were carried into the royal treasury. The monarch surely must have fabulous revenues. But was it so in fact?

Was it really such a profitable business to transport the silver from an altitude of over 12,000 feet first down to the Pacific coast, then by sea to the isthmus of Panama, then across the narrow neck of land to the Caribbean coast and thence—by no means the easiest of tasks—past the notorious pirates to Spain? No Spaniard ever performed this calculation, nor, for that matter, any of the impressed diplomats. And yet it would have been easy enough to show that the King was losing quite appreciably on every pound of silver that reached his treasury.

Prospecting for the fabulous silver-mines and their working was done by private entrepreneurs. Only one-fifth of the silver went to the King, the remaining four-fifths had to be paid for in the ordinary way. The new town of Potosi had to be built; there were no roads, there was no livestock, the mercury had to be brought all the way from Almaden in Spain, there was no grain and not even fuel. Up there in the mountains there was nothing but bare bleak rock.

Everybody was getting rich: the mine-owners, the farmers, even the workers—all except the King of Spain. Out of his taxes, consisting principally of the 'royal fifth,' he had to maintain his officials, proud and grand gentlemen like the viceroys in Lima and Mexico; he had to support the Church and the sciences, and above all he had to foot the bill for the military protection of his silver shipments. And that was very expensive, for in the Caribbean Sea and on the Atlantic, and indeed in Spanish waters, there was a permanent state of war. Everybody was out to capture those rich silver ships.

The shippers of Rouen, Dieppe, and St Malo turned the hostilities between France and Spain to their own account by sending out their ships on raiding sorties. Similar operations were later also launched from Le Havre. Thus, in 1523 the sea captains of the shipper Jean Ango, captured two of the three ships carrying tremendously valuable Mexican treasure off the Azores. Convoys alone were no protection. Along the coast of the Caribbean numerous fortresses had to be built, and entire fleets of warships had the single task of keeping off the bold corsairs and later also the English.

If we add up all this expenditure we find that it is considerably greater than the revenue from the silver business. The senior officials and the foreign diplomats did not see this; but the merchants were aware of it, and the ordinary people, caught between the millstones of taxes and devaluation, felt it only too clearly.

The Emperor Charles V spent these huge `revenues' on paying for his election or for his everlasting wars. He did not see that by far the greatest part of his money had already been spent in advance. Generously he gave the Fuggers vouchers for Spanish money or silver, on which they could not in fact lay their hands. The Spanish population desperately tried to keep the silver in Spain. Throughout the Emperor's reign, and also during that of his son Philip II, we frequently find merchants complaining that it was impossible to get any money out of Spain. The merchants of Antwerp even equipped some ships to collect the silver, but at the last moment some authority or other would invariably intervene and prohibit the export of silver in the face of express imperial orders. It was a hopeless situation.

America's silver undermined and ruined first the Spanish colonial empire, then the finances of the Spanish state, and eventually the entire economy of Spain. To have realized this, a man had to have some arithmetic at his command—and neither the bold adventurers nor the Emperor possessed that skill. All the captured treasure was spent on equipping new expeditions and new campaigns. Almagro, Pizarro's partner in the conquest of Mexico, lost the greater part of his enormous fortune on his unsuccessful expedition to Chile. The fortune of Jimenez de Quesada, the conqueror of Bogota, was frittered away in his search for the land of El Dorado, that phantom which receded more and more the longer the Spaniards pursued it. The boundless revenue derived from the conquest of Mexico was wasted by the conquerors on their fruitless journeys of exploration through North America.

The profits of the rich silver-mines were eaten up by inflation. True, much more silver was mined during the second half of the sixteenth century than before, but the devaluation of the currency had so increased the production costs that the real gain melted away. Even the discovery of mercury-mines in South America (at Huancavelica) meant only a slight saving. At the end of the century the same quantity of silver bought only half the goods it had bought fifty years before. Prices, in terms of silver, had doubled.

The Spanish treasury saw only the absolute increase in State revenue. Between 1523 and 1525—i.e., during the last years of Jakob Fugger's life—it amounted to approximately 400,000 ducats annually. By the middle of the century, between 1554 and 1560, the revenue had risen to 3,500,000 ducats—largely owing to the silver-mines of Potosi. During the reign of King Philip III (1598-1621 it was estimated at 24,000,000 ducats a year. But what about expenditure? Invariably it exceeded the revenue.

In 1543 alone Spain had to contribute 1,000,000 ducats towards the war against France. The result was a national deficit of 700,000 ducats. The Spanish parliament, the Cortes, resolutely demanded in 1548 that all exports of precious metal and money should be prohibited; this was in fact done in 1552. At the same time the Emperor Charles V mortgaged 600,000 ducats of Spanish silver to the Netherlands Government as an advance towards the costs of the new war against France.

The Netherlanders sent one Balthasar Schetz to Spain, but, typically, he received less than 59,000 ducats in cash and a voucher for 400,000 ducats in respect of the next silver shipment from America, a further voucher for 122,000 ducats to be met by the lease fees of the maestrazgos for six years ahead, plus 200,000 ducats on account of the papal indulgence for the next three to five years. Against these enormous sums credits were then taken up with the Fuggers and the Genoese—Agostini Gentili and Silvestro Cattaneo. Of the huge quantities of silver which arrived in Seville during the next few years no more than 40,ooo ducats went to the Netherlands in part payment of official liabilities. And what about the remaining silver? It vanished mysteriously; it just ran through the Spaniards' fingers and prices continued to rise.

Philip II suspended all payments. He simply scrapped the vouchers given to creditors in respect of Crown revenue and instead gave them five per cent. State bonds. Nowadays we might have called them compulsory war loans. These loans, however, had no negotiable value outside Spain. Even the silver which the Fuggers had confiscated was rerouted to Antwerp aboard Spanish ships. It was the beginning of the end.

Two years before his death the elderly King Philip II speaks in a letter of his fear that he might go hungry in his old age. This, then, was the richest monarch on earth, whose revenue at the time of his death was roughly thirty times as much as that of his father at the time of his birth.

Yet the men in power failed to diagnose the cause. They simply blamed the speculators, the usurers, the foreigners, the Germans and Italians—in short, the merchants. The merchants as a class were the villains of the piece. If only the State were to control all commerce, limit and regulate it, eliminate the merchants, and expel the foreigners all troubles would soon be over.

At the beginning of his reign the Emperor Charles V still spared the merchants. But as his debts increased beyond all bounds he yielded to his advisers. His evil genius was his secretary, Francisco Erasso, who was firmly convinced that the German traders were at the root of the fiscal disaster. At the same time he was himself surrounded by unscrupulous speculators and usurers who were profiting from the general difficulties. In the end this honourable official was deposed by King Philip II and sentenced for gross malversation. To Erasso and the likes of him the moratorium was a welcome opportunity for squaring accounts with the hated merchants and creditors.

At the beginning of the reign of Charles V there had been practically no taxes on commerce with America. Soon, however, an import duty of 7 ½ per cent. was levied in Spain, known as almojarifazgo; to this was added an export duty of 5 per cent. and a turnover tax (alcabala) of 1o per cent. When the merchandise arrived in America another 6 per cent. had to be paid on it. But all this was not enough. New taxes were imposed, forcing up prices: the averia, a levy in respect of the escorting warships; the almirantazgo, an impost to remunerate the admiral in America and his war fleet; and the tonelada, which was to benefit the shippers of Seville. During their first year of office officials had to surrender half their income, the media anata. To this were added frequent 'non-recurring' levies such as the cruzada (for a crusade) or the armada de barlovento for fighting piracy in the Caribbean.

In 1563 the Cortes complained that, weighed down by taxes, many people were going out of business in order to live on their capital. The Spanish fairs and markets declined. From a letter of the Fuggers we learn that in 1571 the merchants left the fair of Medina del Campo before its conclusion, because of excessive duties, even though the settling of fair accounts had not yet been completed. Everything depended on the silver from America. When greater quantities of silver began to arrive from the newly opened mines of Mexico Seville experienced a veritable intoxication. And yet the 600,000 ducats were but a drop in the ocean of the standing debt of several millions, repayment of which was due but had to be postponed again. Nevertheless the King's Secretary of the Treasury, Juan de Curiel, was already arranging for new credits to a total of 500,000 ducats; but these did not materialize because, as the Fuggers' factor reported back home, "he sought all too cunning advantages: the Treasury Councillors found greater readiness and advantage on the part of the Genoese who have a reputation for squeezing blood out of stones."

The May fair in Medina del Campo, where the banking-houses used to settle their transactions by accountancy, without any cash payments, was prorogued until 1575. By that time only few merchants turned up—mainly those connected with the Court, but none from Burgos and other towns, "and business was slow and reluctant."

The Secretary of the Treasury wanted to close the poorly attended fair after less than a month, but the bankers were unable to settle; no precious metal had arrived for a long time and no cash was therefore available. At last the impatiently expected silver fleet arrived with 3,500,000 ducats on board. Of this total, 2,500,000 belonged to private individuals and 1,000,000 to the King—so that even with this shipment he was not able to redeem all the payment promises made by him on account of it.

Before long the total debt had reached a fantastic figure. The list of creditors was headed by Nicolo de Grimaldi of Genoa with 5,000,000 ducats; then followed the two Genoese, Lomellino and Agostino Spinola, with 1,500,000 ducats each. Lorenzo Spinola and the Fuggers were owed between 3,000,000 and 4,000,000 by the Spanish Crown. Then there were Spanish creditors such as the Secretary of the Treasury, Espinosa, with 2,000,000 ducats, and Juan de Curiel de la Torre with 1,500,000.

The result was national bankruptcy. The decree announcing suspension of payments blames, on the one hand, the usury which runs counter to divine and temporal law, and, on the other, the ceaseless drain of money across the frontier, a drain infringing Spain's vital interests. How, one wonders, did the Spanish officials imagine that the war in the Netherlands and in France would be paid for except by the export of money? The decree also laments, in moving language, the decline of the Castilian fairs. Small wonder in view of the Crown's economic policy.

Earnestly the merchants reminded the King that only credit based on trust could save Spain. If the merchants were ruined the King would have no one to help him. Not until the following year was the principal creditor received by the King—Nicolo de Grimaldi of Genoa, Prince of Salerno. He was owed the round sum of 5,000,000 ducats by the Crown of Spain. The merchant implored his royal debtor at least to take over the obligations which he, Grimaldi, had taken upon himself. He would content himself with a shirt to his back provided his good name was saved. His pleading was in vain.

After some sort of agreement with his creditors, based on more promises for the future, which again led to bankruptcy, the borrowing of money cheerfully continued. The Genoese were still not scared off; once more they advanced to the King 5,000,000 ducats. The Fuggers' factor in Spain merely shook his head; it seems, he writes, that "the Genoese have more paper than cash." To begin with, it really seemed as though Genoa was making a profit from these dubious transactions. Agostino Spinola again lent the Spanish Government 1,000,000 scudi; later we hear that the Genoese were paying out 2,000,000 scudi in monthly instalments of 150,000 crowns in the Netherlands. In the following year another Spinola, Ambrosio, undertook to pay out 2,500,000 crowns, and eventually we even have a contract with Ottavio Centurioni for a sum of 10,000,000 scudi. When Spain, exhausted by the naval war against England, proclaimed its third national bankruptcy half of Genoa went bankrupt as well.

But surely Spain was a rich country even without American silver? Why did her commerce decline? Why did prices keep rising? The man in the street blamed the merchants; he did not see how grain production was shrinking. In December 1566 the Cortes complained that cultivation of wheat had diminished to such an extent that Spain, at one time the producer of an exportable surplus, was no longer able to meet its own requirements. Since the wool prices had risen out of all proportion, because of `speculation,' the landowners preferred to go over to sheep-breeding. It was the sheep that transformed Castile, formerly covered with forests, into the treeless sun-baked plateau it is today.

During the second half of the sixteenth century cloth-weaving was still flourishing everywhere. Before long, however, we find complaints about excessive prices and the destitution of the population. As Spanish wool could no longer be processed at home it had to be marketed at the international fairs, mainly in Antwerp. But it was too expensive. Yet it was these Spanish supplies, more than anything else, that so overloaded the market that the international wool price collapsed. The sheep-breeders lost their money. Sheep-breeding in Castile, the so-called Mesta, which totaled some 14,000,000 sheep about the turn of the century, declined to half that number within a few decades.

Were the prices alone to blame? The prices reached their peak around the year 16oi; subsequently they declined, but Spain continued to get poorer all the time. The reason why prices were dropping was not an increased supply of merchandise but the progressive impoverishment of the people who were consuming less and less. Was it surprising that the Spaniards should place all the blame for their decline on the usurers and "blood-suckers," on the merchants who were skimming off the profits of the extensive Indian trade, who were sending all ready money out of the country, who were acquiring tax farming rights at low rates, and squeezing the country dry?

About the middle of the sixteenth century the State intervened. Officials were to straighten things out again. What a misjudgment of the functions and possibilities of the bureaucratic apparatus! The first thing was the fixing of maximum prices. The result was that even less grain was being grown and the peasants drifted into the towns. The same applied to wool. But what suffered most was the foreign trade because this could not be hamstrung by maximum prices. At the time of the national bankruptcy of 1576 even the two biggest banks in Seville, those of the Espinosa and the Morgas, had to suspend payments. Liabilities reached the staggering figure of 2,500,000 ducats. Thomas Muller, the factor of the Fuggers, realized what this meant. "As a result, the commerce with the [West] Indies, which had hitherto supported all other, has been totally ruined." The general lack of confidence was spreading. The fleet which was due to sail to New Spain in May could not be loaded because "the Cargadores have neither money nor credit; the merchandise supplied them on credit they can no longer assign to the banks." Instead of the privately owned banking-houses a public or State Bank was now to be set up. After all, the King should have sufficient cash at his disposal, since he confiscated the entire silver fleet and refused to pay his debts. But how was he to transmit money to Antwerp? In Spain no one was prepared to undertake any payment obligations. Only the daring Jewish bankers in Lisbon, who urgently needed silver themselves for the Portuguese East Indies shippers, would issue bills of exchange on Antwerp. Against ready payment in silver and an official export permit to Lisbon the factor of the Fuggers eventually risked issuing a bill of exchange for 230,000 escudos. The delay in the transmission of money, however, had disastrous consequences: the Spanish soldiery mutinied and sacked the flourishing city of Antwerp.

Neither Spain nor the merchants trading with her ever recovered from this blow. With Antwerp there collapsed the trade which until then had distributed Indian merchandise throughout Central and Eastern Europe. Likewise no more goods—such as copper, high-quality textiles, blades, weapons, or armour were sent to Antwerp for marketing in America or India, or even in Spain.

As they could no longer sell any merchandise to Central Europe, the Spaniards had to pay in precious metals for all imports. To their horror they saw their silver running through their fingers. Desperately they tried to keep it in their country. Even America felt the consequences. In 1577, when at long last another silver shipment of 5,000,000 ducats arrived in Spain, the King immediately issued a ban on the exportation of any money. Yet only 1,750,000 ducats actually belonged to the King; the remainder belonged to the conquistadores and the great gentlemen in America who wanted merchandise in exchange for their good money. What was more, they wanted merchandise not available in Spain but only in the Netherlands and in Germany. However, all payments to these countries had been prohibited.

It was decreed instead that Spain should re-establish the great fairs, and that this should be done by the State. In this project it was to be assisted by the great Spanish merchant houses, Juan Ortega de la Torre and the brothers Vittoria, who were represented on a semiofficial organization, the casa de contratacion, in Seville. This casa de contratacion was granted a monopoly; private commerce with America ceased entirely. The ‘fabulous' profits were to be cut down to a ‘fair scale.' This, at any rate, was the idea of the all-powerful bureaucrats to whom a merchant meant a man with a thorough legal and possibly also theological training, with some understanding of the canonic prohibition of receiving interest, and with the ideal of the ascetic life, but who had never spent a sleepless night tormented by anxiety over a ship long overdue. Such were the men to be charged with the development of commerce with America!

Until then the Spanish administration in America had been trying to encourage agricultural production and urban crafts. Rice, silk, hemp, flax, wine, sugar, and cotton were being produced in increasing quantities. Mexican shipyards were building the great galleons which sailed as far as Manila. How, then, was Spain to sell any merchandise in America when the inhabitants there were producing everything themselves? Gradually, therefore, the Government curbed the enterprise of the American settlers: in 1595 they were even forbidden to cultivate the vine. In future, every drop of wine was to be imported from Spain, and on every drop the State would make its profit. Commerce was being strangled increasingly. Ships were allowed to sail only to America from Seville. Sailings could no longer be made according to requirements but only at fixed dates and in large convoys—at first twice a year, later less frequently. Whereas originally sailing in convoy had been for the sake of protection, between 1575 and 1582 it became the normal mode of shipping to the Americas. Two fleets, one from Santo Domingo and the other from Cartagena, carried the whole yield of precious metal and all other merchandise to Europe in order to return with goods in demand in the New World: velvet, silk, lace—in fact, everything which the high officials and conquistadores required, including weapons, ammunition, and tools.

Commerce with the Plate estuary came to a complete standstill; the customs barrier at Cordoba cut the American continent in two. The great development plans for the eastern half of South America were thus doomed to failure. Were the Spanish people to be blamed for this? The English used to despise the Spaniards for their lack of enterprise, for allowing themselves to be tied to the apron-strings of bureaucracy. But was this contempt justified? What could the individual achieve against a State which crushed everything? When the plague of piracy became increasingly serious, the merchants of the Northern Spanish provinces, Basques and Galicians, approached King Philip II with a tempting offer: they were prepared, at their own expense, to equip a powerful fleet in order to drive the French and English from the high seas, on condition of trade being freed.

King Philip II declined the offer. He feared that a free, untrammeled merchant class would soon shake off all State control and even avoid paying taxes. And who then would raise the large sums which the Crown owed all the world over? Would the Spanish economy survive in free competition, when merchants were at liberty to deal in Spanish, Netherlands, English, and French merchandise? Instead the King equipped the "Invincible Armada" at State expense; it failed dismally. What was left of commerce about the end of the seventeenth century scarcely deserved the name.

Conditions were not much better in Portugal. The Portuguese colonial empire had likewise become the domain of bureaucrats, courtiers, and favourites, of the higher and middle nobility, of profiteers, and of men looking for easy money.

In all the important Asian ports, which alone were permitted by the Portuguese to engage in commerce, official representatives purchased the merchandise at fixed prices. Fraud and malversation were a daily occurrence. Ships belonging to the Crown carried the goods to Europe where the royal factor tried to market them among the merchants. Although the volume of trade increased considerably profits shrank in the most startling manner. The terms of trade had changed completely; that was the whole secret. As the demand for spices continued to increase, it naturally caused the price to rise; at the same time the supply of precious metal which Europe used for payment of its purchases became more plentiful. In other words, the purchasing power of silver steadily declined. The Portuguese officials had to pay ever higher prices, in terms of silver, while at the same time encountering ever greater difficulties in finding solvent customers in Europe, now that the great merchant-houses were bankrupt and Antwerp no longer the important entrepot that it used to be. The distributive apparatus in Europe became more and more expensive.

The bureaucrats in Lisbon were unable to explain this economic process; they put all the blame at the door of their competitors, who were piercing their monopoly and paying higher prices in Asia in order to break into Portugal's sacred purchasing areas. The French were blamed, and the English, and most of all, the Dutch. The spice trade, moreover, had long ceased to be a purely commercial affair; it had become a predominantly financial transaction, since a complete shipload was only allotted to a merchant who paid in advance. And these advances became bigger and bigger. Even after the Spanish bankruptcy the merchants paid advances totaling 900,000 crowns in respect of promised deliveries of spices. A year later, in is6o, the Portuguese Crown suspended payments. The business accounts of the Fuggers and the Maug family alone showed demands totaling 15,000,000 reis. These debts were never paid.

Only the city of Genoa appeared to be an exception to this rule. How could that have been? Davanzati, a citizen of Florence, wrote in 1581 with a mixture of mockery, admiration, and envy:

“The Genoese have invented a new kind of paper business which they call ‘Besançon fairs’ because that was their place of origin. But today they are held in Savoy, in Piedmont, in Lombardy, and in the province of Trento, outside the gates of Genoa, or indeed in any other place, so that a better name would be 'Utopia,' that is to say, fairs without locality. In contrast to the Lyons fair no merchandise is bought or sold; all that happens is that 50 or 60 bankers meet together, each with a little paper book, in order to regulate the banking business of nearly the whole of Europe and to renew it by reexchange at a rate of interest agreed among them, their main purpose apparently being to protract this game indefinitely. In this way they gain 250,000 scudi a year in commission alone.

In view of the then usual commission rate of one-third per cent. from both parties, this suggests an annual turnover of 37,500,000 scudi.

Another observer writes a little later:

“The fairs are the crossroads where the highways of the diverse and separate nations meet. They are the ocean whence all waters of commercial life originate and whither they all return. At these fairs nearly all the merchants of Europe meet together, either in person or through their representatives.”

It was at these Genoese fairs that the European merchants, threatened and oppressed by the State and fleeced by countless national bankruptcies, attempted to keep world trade going.

To this end they created a currency that would be independent of governments—the stub di marchi, a unit not represented by any coin but by a definite quantity of gold. The bankers also tried to define the scudo di marchi in terms of silver and, in this way, to introduce a double currency. But this part of the project failed. As the large quantities of silver arriving from Peru and Mexico were ruining the silver price, the merchants decided to keep to gold. One hundred of these scudi di marchi were worth as much as ninety-nine real gold pieces of best mint quality from Spain, Naples, Venice, Genoa, or Florence. It was now possible to make payments even without gold and yet at the full rate—in any event, gold was in short supply and insufficient for the volume of trade transacted. Payments were made by means of a clearing account, without any money changing hands. But if a merchant insisted on paying cash he was able to do so against a discount of one per cent.

The scudo di marchi was thus a hard currency. An Italian contemporary observes: "The clever bankers have achieved what no prince ever succeeded in achieving: they have made possible what had always seemed impossible." Cash was now flowing like water to the most favourable spots, even if the transport of money was still tremendously difficult. The Genoese bankers accepted the silver in Spain and paid out the equivalent, sometimes even in advance, at whichever fair their customer chose. Thus, they might set off a consignment of spices to Antwerp, or later Amsterdam, against a payment of ecclesiastical dues or indulgences from Germany to Rome, or a consignment from Italy to France against an order for luxury goods from Northern France placed in Seville—all by means of their little paper books.

The Genoese fairs survived even the profound crises of the sixteenth century, when, following the Spanish national bankruptcy, most of the banking-houses of Genoa went out of business. Only in the seventeenth century did they too begin to decline, probably because world trade had shifted to Holland and England, where they had little influence.

After the first Spanish national bankruptcy of 1557 the Southern German merchant-houses also went into eclipse—not only the Fuggers and Welsers, but also the smaller ones, like the Kraffts, the Manlichs, the Schorers, and the Maugs of Augsburg, the Ingolds of Strasbourg, all of them respected and prosperous firms trading with the Levant and with England. The decline was universal. "The way our business is nowadays," one of the Fuggers wrote at that time, "100,000 crowns means as much to us as 1,000,000 did some years ago"—even though the value of money had greatly shrunk since. During the last two decades of the sixteenth century and the first two of the seventeenth, bankruptcies among Southern German merchant houses increased at such a rate that only a very few firms were left. For a while Frankfurt on Main, always a focus of commerce, experienced a certain prosperity when the merchants from Antwerp settled there. Johann von Bodeck, the grandson of a nobleman from Thorn, in Prussia, built up a considerable business in the old imperial city: During the last decades of the sixteenth century he imported silk, rice, and drugs from Venice, spices from Amsterdam, mercury from Nürnberg, indigo and wool from Spain. These he then resold—the mercury to Amsterdam, Antwerp, and Hamburg, the indigo, rice, cinnamon, and ginger to Hamburg, and the wool to Amsterdam. He also had a share in the great shipments of rye to Genoa from Amsterdam and Emden. On his instructions Hamburg sent iron and wax to Bilbao. He had money invested in the Dutch East India Company.

In the end he, too, was ruined by credits to princes and cities. He resisted as best he could—but it was of no avail. The Imperial Counselor Dr. Gumpeltzhamer, as the emissary of the Emperor Ferdinand, called on him with strict instructions to obtain a loan of 50,000 taler. Von Bodeck, "more than a little alarmed," tried to point to the poor state of business, but the imperial official threatened that he would block all monies due to von Bedeck from princes and cities of the Empire. He also warned him that criminal proceedings might be taken against him for charging throughout many years six or even seven per cent. interest and lending money to merchants from one fair to another. Under compulsion he eventually invested money in the Mansfeld copper-mines. The city of Leipzig, which already owed him money, was in such straits that it could not install even the most indispensable equipment. The Thirty Years War and the turmoils which followed it finally ruined the old man, who must have possessed a fortune of 500,000 taler about the year 1630.

Small traders continued to exist as before—the huckstress who carried her wares from town to town, the itinerant vendor who turned up at village fairs with his cart. But the international merchant, who had brought prosperity to the Hanseatic towns and to Northern Germany, to Nürnberg and Augsburg and Constance, remained ruined for a long time to come. Emperors, kings, and princes had killed the goose that laid the golden egg.

Chapter 10—War, Commerce and Piracy

The arrival of English ships in the port of Vera Cruz on the Mexican coast was an occasion for universal rejoicing. They brought a cargo of Negro slaves, tall, powerful creatures, but also good, durable English woollen cloth, keen blades, knives, axes, and shears. And everything was so cheap! The British, moreover, paid excellent prices for the foodstuffs they loaded, and for the Spanish planters' sugar and tobacco for which a ready market had developed in England. Last but not least, the sailors spent their money freely ashore.

Only the Spanish Viceroy of Mexico, in his mountain home, was worried. For several weeks two strongly worded letters had been lying on his desk. The India Council in Seville had sharply complained to him about his subordinates. Why were they tolerating the illicit trade with the English, a trade which was bound eventually to undermine the carefully built-up economy of Spanish America? To break into some one else's business with low prices was not difficult if one had no customs duties or taxes to pay. But where was the money to come from for the salaries of the officials? Between the lines the Viceroy could all too clearly read the charge that, in order to please the settlers, his officials had turned a blind eye—or indeed a pair of blind eyes—on the existing state of affairs, unless in fact they had been accepting bribes from the unscrupulous smugglers. Severe penalties were to be imposed in future on any official who did not take the strongest possible measures against all forms of illicit trade.

The second letter contained a curt order from the King to attack any English ship which entered an American port without special permission with a view to engaging in trade. The crews of such ships were to be prosecuted for smuggling.

John Hawkins, the commander of a small English fleet, suspected nothing of the disaster that was about to befall him. In the past, whenever he had brought slaves from Africa, he had been received amicably, and indeed cordially, by both settlers and officials. Time and again the Spaniards had assured him how delighted they were to have at last some one to supply those indispensable black slaves. Their own officials and the monopolists back home in Seville seemed unable to supply sufficient Negroes—and only they could do the work in the hot plantations of the tropics. How was the young colony to survive if a convoy arrived only once or twice a year? That was not nearly often enough. No wonder prices were rising steeply.

Here, then, was an opening for the English sailors and shipowners. With a cargo of cheap glass beads, a few knives and axes, or a few coloured textiles, they would sail to the Guinea coast to trade this trash with the African chiefs for slaves. This `merchandise' was always available. Adequate supplies could always be obtained from the hinterland. A single raid on some neighbouring villages was enough to meet all the requirements of the strangers and to purchase, in exchange, those delightful trinkets. True, the Portuguese had complained bitterly about the English engaging in commerce on the African coast which belonged to their King, but the English merchants had pointed out that along the entire length of the African coast the Portuguese had but a handful of bases. There could be no question, therefore, of Africa being a Portuguese possession; anyone was entitled to treat freely with the true rulers of the country, the Negro chieftains.

The Spaniards, of course, were not concerned with Africa at all, that part of the world having been allotted to Portugal. But they did care about America. Hawkins was flabbergasted when the Spanish Governor of Vera Cruz informed him that much to his regret he would have to arrest him and confiscate all his ships. But an English sea-captain was not to be trifled with in this manner. His ships were well armed and his sailors feared neither the Devil nor the French pirates. Were they to haul down their flag before those Spanish dons?

Before the Governor could take any action the English had occupied the commanding harbour-mouth of Fort San Juan de Ulua. The Spaniards counter-attacked vigorously; they stormed the fortifications and barred the exit to the English ships. Only two escaped—Hawkins's ship and a small one under the command of Francis Drake, a young man who had risen from ordinary seaman to sea-captain in the Guinea trade. The infuriated Spaniards sentenced the crews of the other ships to severe penalties for illicit trade, and eventually handed them over to the Inquisition as heretics.

On the high seas, meanwhile, the two escaped captains swore vengeance. They were hard men. They had gained their experience not as peaceful merchants anxious to remain on good terms with their customers, prepared to accept humiliations for the sake of a good profit, but as tough seamen.

It is astonishing to reflect how late the English found their way back to seafaring. After all, did not their ancestors include the Anglo-Saxons and the wild Vikings, who, throughout many centuries, had sailed and plundered the coasts of Western and Southern Europe, who had penetrated to Iceland and Greenland, and even to the American continent? Later, however, England's trade and shipping had got into the hands of foreigners—first the Italians and then the Hanseatic merchants. Even the English war fleet had declined to a pitiful condition towards the beginning of the sixteenth century. But now the trend was being reversed.

When the first reports about the discovery of America arrived in England from Spain, King Henry VII equipped a small fleet which was to seek a northern passage to the real India, the route which Columbus had failed to discover. But since the English lacked extensive knowledge and experience of navigation they invited as their captain an Italian who had traded in spices in Mecca in earlier years, and who had been established in London as a merchant since 1484—John Cabot. Although his first voyage in 1496 did not open up the route to the "Great Khan," as Cabot had thought in his first flush of enthusiasm when he made a landfall west of the Atlantic, he discovered something else—the most prolific fishing-grounds in the world. The coast was bleak and deserted, covered with ice and snow for months on end. But the sea was alive! Millions and millions of fish crowded the water—and not the little herrings of the eastern Atlantic, but large cod.

To the kings of England, Portugal, and Spain, and also to the wealthy merchants of London, Lisbon, Seville, and Antwerp this meant nothing; their dreams were of gold and silver, of spices and silks. But the lesser people, the fishermen along the European coasts, at once realized what to do when the news reached them. In their solid, seaworthy fishing-boats they set sail for the north-eastern coast of America to catch the cod in their trawl nets by the ton. Before long, fish from the Newfoundland bank swamped the European markets. Even though the Reformation had relaxed the strict fasting rules of the Church of Rome, the European consumers readily accepted the cheap, nutritious fish.

Most of the fishermen did not even go ashore—there was very little to tempt them. Only the English landed to dry their catch during the summer months, because they had to be economical with the precious salt which still came largely from Portugal and Northern Germany. This dried fish they supplied even to the plantations in the West Indies. It was up to the slaves to manage as best they could with the rock-hard dried cod in the heat and humidity of the tropics. At least it remained edible.

It may well be that the fishermen of the sixteenth century made more money out of their Newfoundland fish than the Spanish did with all their magnificent discoveries including the fabulous silver-mines. The demand for fish was tremendous everywhere—in Europe, in Africa, and in the West Indies. Fishery meant a livelihood. Fish could be traded for the spices of India, for the sugar from the West Indian plantations, or for silver from Peru and Mexico.

These fishermen knew nothing of the difficulties of the royal officials or of the anxieties of the independent merchants. Indeed, they did not understand why they were being continually harassed by customs duties, taxes, prohibitions, price regulations, and compulsory monopolies. They hardly believed their ears when they discovered how vastly prices differed on the two sides of the Atlantic. When they sold their fish in Africa Negro slaves were offered to them quite cheaply; upon arrival in the West Indies these Negroes were very nearly worth their weight in gold. What could be simpler than, on their next voyage, to take a few slaves along with them and sell them in America at a tremendous profit?

The men who had served their apprenticeship in the Newfoundland fisheries were accustomed to roughing it at sea. Sometimes they would be fog-bound for weeks, hearing nothing but the faint creaking of the rigging and the lapping of the waves against the hull; all else was swallowed up by the impenetrable fog-bank. On their homeward voyage past Iceland they might be caught in a gale and many a small sailing-boat lost. These conditions produced a hardy breed of sailors who subsequently, during the long wars between France and Spain, would sail forth under some intrepid captain and seize a richly laden merchant ship. The right to engage in armed piracy had been granted them by royal charter. This document could turn a peaceful trading ship into a dangerous sea-raider—provided she carried enough cannon behind the portholes and an audacious band of men. And there was no shortage of sailors, French or British, in the fishing-ports in Dieppe, St Malo, and Dunkirk, or in Bristol, Falmouth, or Plymouth. Whenever news reached the Newfoundland fishermen of some particularly successful capture—such as the feat of Jean Ango of Dieppe who, in 1523 when every one was at peace, captured the Mexican treasures which Cortez had taken from the Emperor Montezuma—the young men could barely be restrained in their eagerness to sail forth and raid merchant ships.

To begin with, the fishermen of St Malo had placed cannon on their ships so that no Spaniard should intercept them. Needless to say, if they should have encountered a ship inferior to them in armament they would not have missed such a favourable opportunity of earning a little "on the side" without asking too many questions about international law. They knew that their King would back them up, even though the countries might be at peace. "There is no law beyond the line," was an old saying. No one could say for certain where that legendary "line" ran beyond which it was permissible to attack, loot, and kill. For the pirates, at any rate, it ran fairly close to the European coast. In their ports, however, the sailors were secure; the well-fortified harbours of Dieppe, St Malo, La Rochelle, and Dunkirk need have no fear of anyone, not even of their own King.

Enviously the English watched the naval exploits of their French fellow-fishermen of the Newfoundland grounds. They themselves were obliged to hold back while their King Henry VIII was allied with Spain. Besides, his daughter, Queen Mary 1, known as Bloody Mary, was married to King Philip II. But her sister and successor, Elizabeth, had a soft spot for the British sailors.

There was a fresh wind blowing through the whole of England—a wind both blowing off the sea and blowing towards the sea. Just before Queen Elizabeth's succession in 1557 the privileges of the Hanseatic merchants had been scrapped and the Steelyard had finally, closed its doors. The religious Orders, which until then had sold their wool to the foreigners without worrying overmuch about its further processing, were dissolved after the Reformation. Ever since, English wool was processed by English artisans. We hear of one William Stumpe, who acquired the abbeys of Osney and Malmesbury and filled every corner of them with looms. Artisans from Flanders, who had emigrated to England during the religious disturbances, soon helped the local textile industry to reach a high level. But who was to buy the fabrics? English merchants equipped large ships, amply armed them with cannon so they should not be seized en route, and loaded them with their cloth.

The natural market was Central Europe, because only there was the winter cold enough for warm woollen materials. But perhaps it might even prove possible to break into the Baltic and the Russian markets?

England's foreign trade was built up by two guilds of merchants—the Merchant Adventurers and the Staplers (or Merchants of the Staple). Both originated in the Middle Ages. In 1379 the Hanseatic League refused to accept the English merchants as members; twelve years later they formed their own guild, which received formal recognition by royal charter. To the great indignation of the Hanseatic League they concluded treaties with the German Order and the Prussian towns; but since at first the English had only cheap cloth to offer, which could not compete with that from Flanders, the German merchants contented themselves with a protest. For the sake of this insignificant cloth trade they certainly did not wish to quarrel with England, which was the supplier of their wool. After all, they enjoyed the backing of the abbeys and big landowners against all attempts by the English merchants to break the irksome monopoly of the foreigners. The English merchant guilds conducted their modest business as best they could: they exported the still rather mediocre English cloth to the Continent where, as a rule, it was bought and resold by their great Hanseatic competitors.

But some audacious men wanted to do more. There were two Englishmen in Seville, Roger Barlow and Robert Thorne, importing spices from India. In 1526 Barlow accompanied Sebastian Cabot on the voyage which was to have gone to China, Ophir, and Tharsis but which unfortunately ended in South America because the master captain decided to go against his instructions and seek the land of silver. Cabot fell into disgrace with the Spaniards.

Barlow at once seized on this opportunity; he prevailed upon his fellow countrymen to invite the famous man to England and to put him in charge of an English fleet with the grand title of Governor of Mariner Adventurers for the Discovery of Unknown Regions, Dominions, Islands, and Places. What his father John had attempted in vain, Sebastian was to achieve—to make England into a colonial power.

In 1553 the small fleet of three ships set sail: not, however, towards the West but to the East, past Norway, to sail around Asia to China. The English did not get far: two ships were wrecked off the Lapland coast, and the third reached the area where today stands Archangel. From the coast of the Arctic Sea the master-mariner Chancellor traveled 1500 miles overland to Moscow, where he was cordially received by the Tsar Ivan the Terrible. That alone made the voyage worth while. His visit suddenly made the Russians realize that they might enter into commercial relations with Western Europe without being dependent on the Baltic countries, on Lithuania, Poland, or Sweden, with whom they were at war. The English, for their part, were hoping to obtain more directly—and more cheaply—the valuable furs which they had been buying from the Hanseatic merchants at high prices. At the same time, Russia with its cold climate would make the ideal market for their warm woollens.

Encouraged by these prospects the English merchants founded the Muscovy Company, the first great shareholders' company, which received a royal charter in 1555. Until the eighteenth century it played an important part in the Russian trade, at times controlling it exclusively. But so long as it depended on the White Sea route it had to face the almost insuperable difficulties resulting from vast distances.

But the English had found in themselves a new courage and a new confidence. They now set themselves up on the continent. They established their staple in Emden, which had not been accepted into the Hanseatic League: all English textiles and wool had to be offered in Emden first. Emden quickly rose to prosperity. "Wealth! Why, the signiory of Emden shall be mine!" Christopher Marlowe's Faustus exclaims as he sells his soul to the Devil. Flanders was ravaged by religious wars; the artisans were escaping to England and the merchants to Emden. England benefitted from both moves.

Hamburg was delighted when the Merchant Adventurers founded a trading-post within its walls, mainly because this strengthened its hand against Lubeck. Why should the Hamburg merchants worry about the closing down of the Steelyard? With the Hanseatic League in general decline each town had to look after itself. It was due to the English that during the next few centuries Hamburg rose to be the biggest trading city on the German coast; it was in Hamburg that the English purchased the merchandise of the Baltic basin—salt, pitch, wax, and honey—and it was to Hamburg that they shipped their wool cloth.

Much bigger, if perhaps less certain, profits came from the slave trade. The Merchant Adventurers bought Negroes in Africa in exchange for glass beads and knives, and sold them in America for sugar, rum, and silver. Admittedly the legitimate West Indies trade came to a sudden end after the clash at Vera Cruz, but the illicit trade only flourished the more.

To smuggling was added piracy. Francis Drake, thirsting for revenge, looted Panama; he then sailed through the Strait of Magellan into the Pacific, that well-guarded Spanish sea. Although he returned home with only one of his three ships, the loot he made on his voyage was colossal. But this also meant the end of England's trade in Spain.

King Philip II ordered all the properties of English merchants within his kingdom to be confiscated until such time as compensation had been paid and the insolent pirate punished. Queen Elizabeth wavered. Then she decided for the pirate. This meant war against the great sea power of Spain, but it also meant that at last there was a chance of participating in world commerce, above all in the spice trade with Asia.

The Merchant Adventurers viewed the impending war with mixed feelings. True, their sympathies were all with the bold sailors thirsting to be revenged on the haughty Spaniards—and impatient to raid their merchant ships. Was there really no alternative to open warfare? And would England be strong enough on the seas to stand up to Spain?

The less excitable merchants were still seeking some alternative: they wanted to engage in commerce, not in piracy. There were still so many unused opportunities. About the year 1546 Anthony Jenkinson went to the Mediterranean area and for seven years traveled through the East, visiting Algeria, Tunisia, Syria, and Turkey. In Aleppo he met the Turkish Sultan, Suleiman the Magnificent, who was just preparing his campaign against Persia. Jenkinson must have impressed him favourably, because the Grand Turk generously granted the English merchants permission to trade freely throughout his empire. Doubtless he was hoping to revive the old land route with English assistance, and to make the Black Sea once more the great hub of world commerce. Jenkinson returned to London just as the Muscovy Company was equipping four ships with woollen fabrics and pewter vessels for Moscow via the northern route and the White Sea. Here was his chance to join the expedition. The Tsar graciously permitted him to travel through Russia and even gave him letters of recommendation to the Shah of Persia.

Together with two other Englishmen Jenkinson traveled down the Volga to the Caspian Sea, and thence with a large caravan of 1000 camels through the Turkmenian Steppe to Bukhara, on the ancient silk route. As in Marco Polo's day, the Chinese were still bringing nutmeg, rhubarb (then a highly prized medicine), corals, and, needless to say, silken fabrics, in order to trade them for cotton from India, and for sheepskins and furs from Russia. To the great disappointment of the English merchants, however, the Indians in Bukhara had no spices to offer, and showed little interest in the English woollen cloth. They were still receiving sufficient quantities of cloth of superior quality via Syria from Italy and Flanders.

Bukhara, therefore, was not the place for making contact with the Indian trade. The centre of the Eastern trade was in Persia; that was where one would have to station one's agents. Jenkinson convinced the London merchants of this, and, more important still, Queen Elizabeth. The return trip from the Caspian Sea to Moscow alone took him six months. On his next voyage Jenkinson visited Shah Tahmasp at his residence of Khasvin, but the Shah received him rather ungraciously and instantly ordered him to be imprisoned. He feared that the Englishman might be a Portuguese spy. With some difficulty this mistake was finally cleared up. But now the Turks demanded Jenkinson's extradition: they were not going to watch the Eastern trade being rerouted through Persia to Russia, at the expense of their own province of Syria. But his friends foiled the plot against Jenkinson. The Indian merchants in Khasvin welcomed the idea of selling spices to the North; they declared themselves ready to supply any desired quantity provided they received a firm assurance of sale.

Even more favourable was the offer of the King of Georgia: he would supply to the English any quantity of silk they wished. The Tsar of Russia was satisfied; he could see the beginnings of a most promising commerce with Asia. The Muscovy Company did in fact attract a considerable volume of commerce to Russia, which flourished particularly when Persia was at war with Turkey and traffic through the Mediterranean was barred. However, when the Turks captured the province of Shirvan, on the western shore of the Caspian, they cut off the trade route so painstakingly established.

That was the end of a, promising business. In 1581 the Company distributed a dividend of 106 per cent. At the same time, the losses in that strange, wild land were not inconsiderable. Looting had to be expected constantly; on one occasion Cossack pirates in the Caspian Sea captured ships carrying merchandise worth between £30,000 and £40,000. Whenever a foreign traveler died the local ruler at once confiscated his property. What purpose was served by endless lawsuits? Even with the Tsar himself there was serious trouble. On one occasion, indignant at the bad treatment meted out to his Ambassador in London, he simply confiscated all English property in his empire.

Perhaps it might be possible to reach Asia by a northwest passage. At first fortune appeared—quite unexpectedly—to favour the voyagers to North America: the third expedition undertaken by Frobisher on behalf of the Muscovy Company returned in 1578 with large quantities of glittering ore which the optimistic finders believed was pure gold. Unfortunately it was only cat-gold, a variety of mica. Nor did the English find the northwest passage. This was situated much farther to the North among the eternal ice. Another failure. There was no way through to Asia on that side either.

The sailors were right: only by force could the Spanish blockade be broken. That was also Francis Drake's opinion. His programme was clear-cut and plausible: first smash the Spanish war fleet, then sail to India to buy cheaply—spices, silk, cotton, and—in Africa—ivory. There would be no difficulties; on the African coast the ships would load slaves, take them to America, and trade them for gold and silver. That alone would yield fabulous profits. And he ought to know.

Aboard his Golden Hind he had seen the greater part of the Pacific coast of America, looted whole towns and richly laden galleons, and crossed the Pacific Ocean to the Spice islands, where he was offered such quantities of cloves, pepper, musk, and cinnamon that he could not carry it all in a single ship. It was this overwhelming success that decided the issue; Queen Elizabeth knighted Francis Drake on the deck of his famous ship, and openly supported the man whom the King of Spain wanted extradited as a pirate. War was unavoidable. England was risking a high stake—her Indian trade through Seville and Lisbon, her trade through Antwerp, and her trade with the Mediterranean.

It was in the Mediterranean that the English had great expectations. A few years previously the Levant Company had received a royal charter for trading with Turkey; this gave it a monopoly for seven years for an annual duty of at least £500. Clearly, to make this payment an economical proposition there had to be an enormous turnover of merchandise. Valuable presents had helped to buttress this privilege: a great number of silver vessels, thirteen English dogs, and a silver clock, a veritable masterpiece with delicately wrought hunting scenes, mounted huntsmen and running dogs in a forest. In vain did the French Ambassador in Constantinople try to eliminate English influence; he was unable to prevent the establishment of English consulates in Egypt and Syria, and of trading-posts in Constantinople, Aleppo, Scanderoon, Tripoli, Cairo, and Alexandria.

The English supplied woollen cloth, rabbit-skins, tin, mercury, and amber, and in exchange bought spices, pepper, indigo, silk, cotton, and linen in vast quantities. A single ship, the Hercules, carried a cargo worth £70,000 in 1587.

Yet there was also a good deal of annoyance with the Eastern potentates. The Turkish Pasha in Cairo exacted his customs duties not in cash but in merchandise, which he himself offered at inflated prices in the local market. Naturally, nobody would buy it. He thereupon simply prohibited the sale of all Oriental merchandise until his own warehouses were empty. On another occasion the Pasha demanded a io per cent. duty on silk fabrics; hitherto the tariff had been one-third of that sum. He reduced this duty again only when a propitiatory present had been given him. It would have been pointless for the merchants to complain to the Sultan in far-off Constantinople. They would have had to wait for months for a reply, and during that time their business would have been at a standstill.

All this chicanery might be tolerated and good profits made nevertheless. Was it likely that war would bring the same gains? It was the bold seafarers who tipped the scales: they had served their apprenticeship in the fishing fleets and were now engaged in piracy. They were returning from their voyages with fabulous, dazzling treasure.

To everybody's surprise the powerful Spanish fleet, the Invincible Armada, was defeated by the English, who at once counter-attacked, penetrating into the Spanish ports, capturing the unsuspecting ships and seizing tremendous riches. Soon no Spanish ship on the high seas was safe from them—but lawful commerce with Spain, Portugal, America, and Africa came to an end. The audacious sailors, the sea-dogs, as they proudly called themselves, could not understand why. Surely they controlled the seas.

In London the experienced merchants put their heads together. To rule the seas by armed force was not enough; it was necessary to revive commerce, and this commerce must be in their hands. Admittedly, the Iberian and American coasts were barred to them; they could do nothing about that. Voyages to Africa were useless if the Negro slaves could not be resold. The Mediterranean, too, had to be written off since no English ship could slip through the Spanish-controlled Strait of Gibraltar. There was only one thing left: to open up the sea route to India round Africa and the Cape, past a hostile Spain, straight towards the centre of world trade.

The two leading lights of the Levant Company, Osborn and Staper, were listening attentively to the project of a young man, a project which at last held out promise of breaking into the legendary Indian trade of the Portuguese.

As a young merchant, John Newbury had repeatedly sailed the Mediterranean. Disguised as a Muslim merchant he had traveled to Baghdad and Basra in order to reach India via the Persian Gulf. There he had fallen into the hands of robbers. His entire party was about to be sold into slavery, but when Newbury revealed himself as a Christian the corsairs took fright. They feared the vengeance of the all-powerful Portuguese. To escape reprisals they simply put him ashore at Ormuz, the trading centre on the Persian Gulf.

The Portuguese Governor had an unpleasant shock when he discovered an Englishman in the well-guarded port; the Venetian Consul also was highly suspicious. The last thing they wanted was a commercial rival. Unconcerned by the upheaval he had caused, Newbury purchased spices, silk fabrics, and indigo. Via Persia he returned to Constantinople safe and sound. Because the Mediterranean was barred he had to take the long, tedious route up the Danube, through Poland, to Lemberg and Danzig. Once home, he sold his merchandise easily and with profit. He was now urging the Levant Company to send him out once more, so he could open up the Eastern trade for England.

The Company readily agreed to his tempting proposition. The voyage was carefully planned. John Dee, the geographer, was consulted, and so was the scholar Hakluyt, who produced a letter written by an English Jesuit in Goa. Queen Elizabeth gave Newbury a letter of recommendation to the Mogul Emperor Akbar the Great and to the "King of China." Hopes, clearly, had been pinned high.

Newbury set out with five companions. Two of them were to stay behind in Baghdad and set up an English trading-post there, two more were to stay in Basra or, if the Portuguese permitted, in Ormuz. He himself would penetrate to India, to Goa.

But his rivals were not caught napping. By the time the English left the port of Tripoli a secret report was already on its way from the Venetians resident in Syria to their representative in Ormuz, who delivered the news post-haste to the Portuguese Governor. Thus, when Newbury arrived there, all unsuspecting, he found himself arrested as a spy. Small wonder. Drake had loaded a cargo of spices in the Moluccas in spite of the Portuguese prohibition, and had moreover ransacked the Spanish possessions. And since is8o Portugal belonged to King Philip II.

The four prisoners were taken to Goa for their faith to be put to the test. That was fortunate for them. One of them happened to be a painter: he decorated the Jesuit Church there so splendidly that the others were set free. Friends secretly warned them to make their departure as quickly as possible to escape further charges. Only the painter stayed with his Jesuits. This time he was unlucky. King Philip sent urgent orders to have the impudent intruders sent to Lisbon at once for punishment. The ship sank with all hands.

But the remaining three were able to take a good look at the wonderland of India. They visited the rich diamond city of Golconda in the south and the capital of Agra in the north. Solemnly they presented to the Great Mogul the letter from their Queen. The Emperor at once took one of them into his service—the jeweler Leeds. Newbury's other companion, Fitch, was to travel down the Ganges to Bengal and there to wait for Newbury, who would pick him up with an English ship in two years' time. Newbury himself returned to Constantinople by the caravan route through Persia.

But Fitch waited in vain. Eventually he departed, traveling farther to the east, to Burma and Malacca. There he spoke to Chinese merchants who had come over the mountains from the North. All of them were prepared to sell merchandise to the English. After eight years Fitch decided he had had enough; he returned to Basra—luckily unrecognized—via Ceylon, Goa, and Ormuz. On the Syrian coast he embarked on an English ship.

Why had his fellow countrymen let him down? The gentlemen of the Levant Company had studied Newbury's reports very carefully. There was no market for woollen cloth. Neither pepper nor cinnamon could be purchased freely because the Portuguese had the monopoly and were defending it stubbornly. To market cotton goods in Europe seemed difficult; after all, raw cotton was cheaper on the Syrian coast than in India, and to establish costly plantations seemed inadvisable so long as political tension continued. The Indian trade did not seem profitable. The Levant Company gave up.

That was the state of affairs until the Dutch began to make their fat profits. Since Charles V the Low Countries were part of the Spanish Crown, but not of the kingdom of Spain. The Castilians did not even admit the inhabitants of Aragon to the American trade, let alone their King's subjects in the Netherlands. Let them do their buying in Seville. They allowed them to sell the fish which they caught off the American coast, also their luxury goods, such as Brabant lace and Flanders cloth—but even there the local producers grumbled about competition. Neither Charles V nor Philip II could overcome the opposition of their Castilian subjects. The great merchants of Andalusia wanted to enjoy for themselves the fruits of the voyages of discovery, which had, after all, been financed by Castile alone. Nothing annoyed the Netherlanders more than this discrimination. For centuries they had been experienced sailors; about the end of the sixteenth century between 25,000 and 30,000 Dutch sailors were making a living from the sea traffic with Spain and Portugal. Why then should the oceans be denied them? King Philip II believed that he could force all his rebellious subjects to their knees by ordering the seizure of any Dutch ships found in Spanish or Portuguese waters. In 11594 the Dutch merchants were even forbidden to visit Lisbon, no matter whether they belonged to the rebels or not. He was going to show those `water beggars,' those Geuses, what it meant to cross swords with the great naval power that was Spain. But he made a bad mistake. Although the English had tried in vain to capture the Indian commerce for themselves, the Dutch succeeded in doing just that within a few years.

At the time when the Dutch trade with Spain was still flourishing young Jan Huyghen van Linschoten settled in Seville as a merchant. He later accompanied the Bishop on a journey to Goa and stayed there for five years. On his return voyage he stopped for two years in the Azores, arriving back in his native country at the very moment (in 1592) when the trade war between Spain and the Low Countries broke out in earnest. His travel account, printed in 1595, was based on his own observations and on unimpeachable eye-witnesses. It encouraged the Dutch to risk the voyage to the East Indies. No Dutch ship sailing to Asia was without Linschoten's book; every sea-captain studied it thoroughly during the long voyage.

The basic idea which the Dutch took over from Linschoten was well conceived, sound, and reasonable, in line with the Dutch temperament. There was nothing in it about piracy, force, or war. The coasts of India, he argued, were firmly held by the Portuguese; it would have been lunacy to attack them, especially as the Dutch possessed not a single base between home and the far-off unknown waters, while Portugal had established a succession of safe ports all along the African and Asian coasts. The island of Java, however, and the Malayan archipelago were almost undefended, although Malacca, in Linschoten's words, represented "the staple for the whole of India, China, the Molucca Islands, and all the other isles; there is much selling there, and all the ships call there when sailing to and from China, the Molucca Islands, and Banda, from Java, Sumatra, and the other neighbouring islands."

That was where Cornelius Houtman made for with his four ships in 1595. Houtman was an experienced merchant, acquainted with Portugal and knowledgeable about the East India trade. "Excessive curiosity" had landed him in prison in Portugal, but his fellow countrymen had bailed him out and placed him at the head of their little fleet. When he arrived at Bantam after many months the local inhabitants arrested him. The Portuguese had gone to work surely and swiftly in order to rid themselves of this irksome intruder. However, Houtman was released for a considerable ransom, and sailed on to the Moluccas. Tropical diseases took a fearful toll of his crew, especially as the Dutch did not dare enter ports where the Portuguese were established. When Houtman returned home after 28 months only 89 of his original crew of 249 were alive. But he had succeeded in breaking through the Spanish-Portuguese blockade. Even though the commercial results of the first voyage were not great, they were sufficient to cover the costs, and moreover yielded valuable experience.

Holland now went in a headlong rush into the East India business. Companies sprang up like mushrooms after the rain—in Amsterdam, Rotterdam, and Zeeland. If the Spaniards thought they could close the Asian and American markets to outsiders they made a big mistake. Before the end of the century sixty-five ships were leaving Dutch ports every year for Asia, Africa, and America. That was a bold venture. Frequently only half the ships of a small fleet would return; some would have been swallowed up by the enraged sea with all their crew and cargo, others might have been captured by the Spaniards, or wrecked upon some unknown reef.

It was obviously necessary to choose routes which were unguarded, and to look for new routes away from the old well-known ports and bases. Thus a fleet of four ships under Olivier van Noort sailed through the notorious Strait of Magellan, while another circumnavigated the Cape which they named Horn after their home port. Returning from Indonesia, the Dutch dared not follow the much-frequented route via Ceylon; instead, they described a wide arc to the South, towards the Cape of Good Hope—and en route discovered Australia! For months on end the ships, which were still rather small vessels, would sail without sighting land, in an ocean which, in the imagination of the sailors of the day, was inhabited by fearful monsters, by huge sea-serpents and giant swordfish which, according to current legends, would furiously pierce the hull of any ship. Every voyage was a heroic achievement of seamanship.

Indignantly Philip II, King of Spain and Portugal, watched the impertinent intruders, those rebels from his own Low Countries, break into the carefully guarded Asian sphere which by time-hallowed right was the preserve of the Crown and a few monopoly companies. At first he thought he could scare those daredevil seamen out of the Asian trade by making it difficult for them to sell their unlawfully acquired merchandise in Europe. He strictly forbade his Spanish and Portuguese subjects to conclude any treaties with the Dutch; he even forbade them to settle debts they had made with them. Surely, with the few ships which managed to slip through, the Dutch would not be able to build up a permanent business. Sooner or later the consumers in Central Europe would have to return to the true masters of America and Asia. Ports like Antwerp or Amsterdam could not last, the King of Spain thought, if their merchants were barred from Lisbon and Seville. All he was doing, in effect, however, was to seal off his own kingdom from trade with Central and Northern Europe.

Amsterdam gained a firm hold on commerce; every year 640 ships left the port for the Baltic, laden with Flanders and English cloth, iron goods, fish, lace, and linen, as well as with overseas merchandise—spices, indigo, cotton, and sugar. Another eighty large ships set sail for the high seas.

This dramatic upsurge of commerce is easily explained. The States General of the Netherlands exempted the seafarers from all duties; indeed, they made a certain payment to sea-captains sailing to Asia. In order to reduce the rivalry between the five existing companies, they were amalgamated in the United East India Company, which, in 16o2, was granted by charter the express right of entering into treaties with Indian princes, building fortifications, appointing governors and judges, and levying troops.

This was rather more than a commercial company; it was a semiofficial organization, a political power headed by regular merchants. The young States General contributed a mere 25,000 florins to the share capital, but in time of war they granted the company military protection. When it came to the test the State would also undertake to stand surety for major loans. During the first few decades this support was of only limited value; sailors and merchants in Asian and African waters still had to be self-reliant. They had to use care in sounding the local inhabitants—whether they were overstocked with supplies they would part with eagerly, or whether their excessive prices would leave no margin for profit. The merchants had to know what goods were needed in a specific place, so that their purchases there could, if necessary, be paid for in merchandise if sufficient precious metal was not available. Here was no government claiming for itself the profit of audacious voyages in order to maintain fortresses, organize patrols by warships, or pay the salaries of viceroys. The dangers were enormous, but then the gain that beckoned was commensurate. The merchants bore all the risk, but they also pocketed all of the profits.

No sooner had the Dutch East India Company been founded than its directors, the bewindhebbers, dispatched a large fleet of fourteen sailing-ships to Asia under Wybrand van Waerwyck. From the local ruler the Admiral received permission to build a stone trading-post in Bantam. From this firmly established base his ships sailed out in all directions—to Banda, Achin, and Borneo, to Siam, and eventually even to China. Admittedly, the Dutch were not permitted to enter the Chinese harbours, but since many Chinese merchants called at neighbouring places profitable business connections with them were easily entered into.

Meanwhile another Dutch fleet of thirteen ships under van der Hagen had set out to strike at the Portuguese wherever they could. Thanks to the ships' numerous and powerful guns the Dutch succeeded in concluding treaties of friendship with the Indian rulers of the Malabar coast, of Calicut and Cochin. In Amboyna, one of the Spice islands, van der Hagen occupied the Portuguese fort and established a firm Dutch trading-post. At the same time his vice-admiral, Cornelis Bastianenzoon, stormed the Portuguese fort in Tidore, but omitted to set up a trading-station. On his return voyage in 1606 van der Hagen encountered the third fleet dispatched by the Dutch East India Company off the island of Mauritius—eleven ships under Cornelius Matelief. There they established a firm base for the East India merchant mariners. Although this island had been discovered a long time before by the Portuguese it had since been disregarded. A short while later a fourth Dutch fleet followed, consisting of eight ships and carrying troops to man the newly established bases. It was certainly high time to think of military protection, for the Spanish and Portuguese had united in order to drive the intruders out of their hitherto unquestioned sphere of interest. Regular warfare broke out in Asia. At first everything went wrong for the Dutch. Their attack on the fortress of Malacca was a failure; the Spaniards expelled the Dutch merchants from the Philippines. Soon however, the picture changed. Matelief, who was continually receiving supplies and reinforcements from home, first defeated the Portuguese fleet off Malacca and then completely blockaded Goa, the principal Portuguese port. In the Bay of Gibraltar a Spanish fleet was defeated by the Dutch, whose superiority at sea was no longer in question. At last the King of Spain yielded; in 1609 he concluded a twelve years' armistice which provided for full freedom of trade in Asia. In Europe, however, commerce was still subject to permission from the King of Spain. It was a remarkable success.

Two totally different economic systems were opposing each other. The Portuguese—officials, not merchants—stubbornly defended their monopoly; they prescribed to their customers in Europe prices and terms of payment. The Dutch, experienced merchants that they were, knew that gain depended primarily on favourable purchase. While the officials in the Portuguese settlements, acting as their King's representatives, were calmly and patiently waiting for any foreign merchants to offer them merchandise, the Dutch sought out the source of their commodities, trying to get into direct contact with the producers and collectors of the spices. They bought from the planters in the Moluccas, not from Arab intermediaries. This may have involved more effort, but it was worth while. By 1610, one year after the conclusion of the armistice, the Dutch had forts in Amboyna, Ternate, Matchian, and Batchian, right in the heart of the Spice Islands. They had their own trading-posts in Bantam and Jakarta (later Batavia). The Spanish and Portuguese officials believed that any merchandise exported from Asia to Europe permitted of a net profit. But that was an illusion; even if it had been looted by force of arms in the first place its price was inflated by the considerable expenditure for the maintenance of the colony and the war fleet.

What was needed was sound business. Pillage and loot in the long run did not ensure profits. The idea of loot, therefore, had to be given up. Nor did little Holland even try to manufacture the merchandise needed in Asia. It confined itself to acting as carrier and middleman. Not even in ship-building was it able to compete with those who possessed much more timber—such as Danzig on the Baltic. The Dutch had for a long time been renowned as carriers, as shipping agents, perhaps even as far back as Roman times; since the heyday of the Hanseatic League they had been unrivaled in this field. Vast sums were earned by the Netherlands through their shipping business alone. Even the Portuguese merchants on the Malabar coast were compelled to import merchandise from the far-off Spice Islands and Java on board Dutch ships. And since the Dutch were shipping the East Indian spices to all parts of the world, aboard their own vessels, the marketing of it almost automatically became concentrated in their hands. Even Spanish and Portuguese merchandise went through Dutch hands in the Channel, the North Sea, and the Baltic.

The Dutch were the first to realize that world commerce was a unity. Only he who led in all fields could stand up to foreign competition. Because the Dutch controlled the world freight market they were also in a position to supply Negro slaves to America more cheaply; because they marketed the Negroes in America they received enough precious metal to engage in their Eastern trade. Because they were able to offer merchandise in East Asia, and because they also had enough silver for their purchases, they succeeded in attracting the customers of the Portuguese over to themselves. And because, finally, they offered the Asian merchandise on more favourable terms they displaced the Iberian nations from the European markets. One wheel engaged in another, one link of the chain interlocked with the next.

In the opinion of the Portuguese and Spanish officials there was therefore only one way left to fend off the superior competition of the Dutch—force, war. Spain did not renew the armistice. That was a bad mistake. If the commercial superiority of the Dutch had already been demonstrated beyond any doubt, their sea power exceeded that of Spain and Portugal even more—not least because of the economic power behind the East India Company. True enough, the Netherlands possessed no land forces of any size either in Europe or in Asia. Even in the eighteenth century, when the Dutch East India Company was firmly established in the Insulinde Islands—in the Malay archipelago—their soldiers never numbered more than 10,000 men, most of whom were local inhabitants of little fighting value. But their naval power was outstanding.

Once more Portugal and Spain closed their harbours to the Dutch merchants. At once the Dutch blockaded the Portuguese ports of Goa and Malacca. They destroyed the enemy fleet and any merchant ship which showed itself. Hopefully, Lisbon sent out a new fleet and a new Viceroy. But the Dutch destroyed three of his ships even before they got to the East. Their naval superiority so depressed the Viceroy that he urgently advised his King to make peace instantly and at any price with the superior enemy, even if it meant granting the Dutch full freedom of trade.

In vain. Lisbon could not and would not give in. The Dutch thereupon attacked the Portuguese fortress of Ormuz in the Persian Gulf, and a year later Bombay. On the mainland the Portuguese held out. Dutch attempts at overpowering the lightly held bases along the African coast were likewise unsuccessful. But what use were these fortresses if they were cut off from their home country and from all commerce? And the Dutch did not let a single ship through.

After ten years of blockade the Dutch stormed Malacca in 1641. Tropical diseases and famine had reduced the white garrison to 100 men. Yet the military effort of the Dutch was quite modest; they had only 1500 men under arms, and the same number was provided by their ally, the King of Johore. The blockade of Goa continued. When peace was at last concluded in 1645, Lisbon's commerce, together with that of Goa, was ruined. Amsterdam and London had meanwhile risen to power.

The English had been rather hesitant about venturing to the East Indies around the Cape of Good Hope. They had had too much bad luck along that route. In their first attempt, undertaken by Captain Lancaster in 1592 with a small fleet, all ships were lost. Lancaster himself returned to England on board a French ship, destitute. Surely piracy in Atlantic waters was a more profitable business!

In 1592 British sea raiders captured a large Portuguese East Indiaman, the Madre de Dios, off the Azores. Aboard this ship alone they seized £140,000, corresponding to roughly $8,400,000 in present-day prices. On board the Portuguese ship the English found a Latin account of the "Kingdom of China," carefully wrapped in calico and locked in a sandalwood box, as though it were the greatest possible treasure. The English also admired the construction of the East Indiaman, a type of ship developed from the galleon and called a carrack, and possessing the remarkable cargo capacity of 1600 tons. Perhaps it would be worth while after all to sail to the East Indies? Queen Elizabeth entrusted a personal letter for the Great Emperor of China to the ships equipped for the next voyage under Sir Robert Dudley. The letter never reached its destination. All ships were wrecked in a storm.

But the tough British did not give up. The Lord Mayor of London, Sir Stephen Soame, and a number of Aldermen together subscribed over £30,000 for a commercial venture to the East Indies. One out of every three of the subscribers already was a shareholder in the Levant Company; Soame himself and fifteen directors likewise belonged to it. Without their experience of trade in the Mediterranean the British could not have embarked on the East India venture.

Eventually, on December 31, Moo, they received their charter: the Levant merchant Thomas Smythe was appointed Governor of the "Company of London Merchants Trading into the East Indies." This was not a business firm with a fixed capital, but an association of several merchants who had been granted a monopoly of the East India trade. Each member was free to decide what shares he wished to subscribe to in any particular voyage. Each voyage was accounted separately. There was, however, an obligation to take part in the expedition together with other partners.

The need for this arrangement is clear from the balance sheet for the very first voyage. The capital raised was approximately £68,000, of which nearly £40,000 went on equipping the ships. They took with them £21,000 in cash and £6860 worth of merchandise. But they had no profit to show for all this. On the contrary. The deficit of £4000 to £5000 had subsequently to be met by the subscribers to the voyage. They even had difficulties in paying off their crews. Yet all four ships returned home, though badly battered—even the impressive 900-ton Red Dragon, which her sailors at one stage had been ready to abandon. The fact was that London was no European entrepot for spices. The home market alone was unable to absorb them in large quantities, so that they could be sold only at reduced prices. Whereas a few years earlier the Dutch had been selling pepper at eight shillings a pound, the price now dropped to two shillings. But even at this price there were not enough buyers. We do not know what total quantities these ships brought back home; the Ascension alone carried 210,000 pounds of pepper, 1100 pounds of cloves, and 6030 pounds of cinnamon.

Far more disappointing was another fact which had emerged on this voyage. The East declined British manufactures. In the hot countries there was hardly any market for the woollen materials which still represented the principal English staple commodity.

The main reason why the London merchants nevertheless decided to equip a second fleet was that they wanted to save the supplies which were still warehoused in Bantam in Java. Again, over £60,000 was subscribed. The equipment of the ships consumed £48,000; £10,000 in cash and £1000 worth of merchandise were taken on board. As the commander of the fleet, Middleton, had been instructed to look around not so much for pepper as for the rarer spices—cloves, cinnamon, and musk—he went on from Bantam to Amboyna in the Moluccas. At first business with the Portuguese seemed to go smoothly; suddenly, however, a Dutch fleet appeared on the scene, forcing the surrender of the Portuguese Governor and emphatically forbidding the English to engage in any commerce.

In Tidore and Ternate the British were likewise able to do business only until a Dutch fleet arrived and compelled them to move. Moreover the Dutch so intimidated the islanders that they hardly dared to supply the English with spices in spite of the handsome prices paid by them. Nevertheless, the three ships returned with so much merchandise from their two years' voyage that taking the two expeditions together the shareholders made a profit of 95 per cent. on their invested capital. And that in spite of the fact that the fourth ship had been lost. Clearly the risk had paid off after all.

London was now trying hard to become the European entrepot for tropical spices. Their export was permitted without the restrictive conditions of payment in silver which had until then paralyzed business. Even so the shareholders of the East India Company were not yet satisfied. Although the two voyages undertaken since the grant of the charter had yielded an appreciable financial gain, English trade with the East was still utterly inadequate. Surely India would offer far greater possibilities?

The Levant merchant Midnall was just then giving a thrilling account of his adventurous journey which had taken him to Agra via Kandahar and Lahore. In Agra he had made a present of a quantity of jewels and twenty-nine thoroughbred horses—which he had specially brought with him from Persia for that purpose—to the Mogul Emperor Akbar the Great. As the emissary of the Queen of England, he demanded for his fellow countrymen freedom of commerce. Moreover, he expressly asked for the right to attack Portuguese ships and harbours whenever they wished to do so, without intervention by the Indians. It was this dangerous demand which threatened to lead to the breakdown of negotiations, since the officials of the Great Mogul were reluctant to annoy the all-powerful Portuguese who ruled the seas.

Midnall, however, persisted. In a personal interview with the Great Mogul—the Englishman spoke Persian fluently—he was in fact granted a treaty which met his requests. No amount of intriguing by the Portuguese at Akbar's Court could prevent this success. The gentlemen of the East India Company carefully examined Midnall's reports and his bold idea of organizing an extensive trade with India herself—not confining themselves to offering English woollen cloth for sale, but buying and selling Indian merchandise or exchanging it for spices in Java. The prospect was certainly tempting, but since Midnall made excessive demands for himself, the Company did not employ him.

Another English fleet set out for Asia to follow up and develop the commercial contacts made on the earlier voyages. It carried a considerable supply of merchandise, worth £7280, as well as £17,600 in cash. After a twelve months' voyage the two biggest ships reached first the island of Sokotra, just outside the Red Sea; thence one of them, the Red Dragon mentioned earlier, set a course for Bantam in Java, while the Hector, under Hawkins, made for Surat, north of Bombay, then the principal port of the Mogul Empire.

It was difficult enough to navigate across the shallow sandbar—but these technical difficulties were as nothing compared with the political obstacles which the Portuguese tried to erect against them with the Indian authorities. There could be no question, they argued, of a British settlement at the very centre of Portuguese commerce, between their two bases of Diu and Goa. Reluctantly the Indian Governor allowed the English to sell their merchandise, but he strictly forbade them to set up a permanent trading-post; his rather lame excuse was that only the Mogul Emperor himself could give permission for that.

Hawkins promptly set out for Agra himself. He left William Finch in Surat as his representative, and ordered his ship, the Hector, to sail to Bantam in the meantime. In Agra Hawkins was first regarded as the ambassador whose arrival had been promised by Midnall. Hawkins spoke Turkish fluently; his confident manner soon overcame the resistance of the Court, and he succeeded in establishing friendly terms with the Emperor Jahangir, the son of Akbar, who had died in the meantime. The Emperor solemnly granted the British all the rights they could have wished.

Less pleased by all this were the Indian officials along the coast who had been partly bribed and partly intimidated by the still powerful Portuguese, and were desperately anxious not to provoke them. When one day the commander of the English fleet was flatly told that he would have to leave port without doing any business, he lost his temper; off Aden he captured every Indian ship he could intercept. This in turn annoyed the Turks, who were established in Egypt and Syria and derived considerable customs revenue from this position of middlemen in the Mediterranean. The East India Company was just then negotiating with them about a favourable trade treaty which was to open to them the ports on the Red Sea, especially the harbour of Mokha.

In Indonesia the former comradeship-in-arms between Dutch and British was breaking up. The Dutch were beginning to realize what dangerous rivals the British were; besides, since the armistice they no longer needed them as allies against the Portuguese. On pain of severe penalties the Indonesians were forbidden to engage in any trade with other European nations. All protests by the British Ambassador to the Dutch Government in The Hague were fruitless; besides, the Dutch East India Company would not even allow its own Government to interfere in its business. But the determined English would not give up and kept on trying.

In Ayuthia, the capital of Siam, the English were allocated a house of their own, immediately next door to that of the rather distrustful Dutch. Siam's trade in China and Japan was suffering considerably from the hostilities between those two countries. But somehow or other considerable quantities of raw silk, silk fabrics, and porcelain still managed to reach Siam; moreover, Siam itself supplied dye woods (such as Brazil wood), aloes wood, benzoin, tin, hides, and furs.

When two Dutch merchants working for the English East India Company began to build up British commerce on the East coast of India, the Coromandel coast, the Dutch barred them from all Indian coastal towns where they had settlements. The local officials of the hinterland, on the other hand, seemed only too pleased to deal with other Europeans than the Dutch, who were apt to insist too rigidly on their privileges. They willingly granted permission to the English to set up a trading-post in Petapoli, to sell British woollen cloth and purchase major quantities of the cotton fabric, calico, which found a ready market in Bantam in Java, in Patani in the Malay Peninsula, and even in the Red Sea area and in England itself.

In Japan all commerce was firmly in Portuguese and Dutch hands. However, an Englishman by name of William Adams, traveling aboard a Dutch ship, had been stranded on the Japanese coast and decided to stay there. The ruling Shogun bestowed his favour upon him and instructed him to build a European ship—probably the first keeled ship built in Japan. Adams had sent repeated reports to the East India Company in England describing his good relations with the ruler. King James I thereupon sent a personal letter to the "Great King of Japan" asking for trade facilities for his subjects. When the Clove entered the harbour of Hirado in 1613, with a representative of the Company on board, a man named Saris, the Japanese immediately put a house at his disposal. However, the English woollen cloth was not easily sold, as the country was flooded with cloth by the Dutch and Portuguese. Besides, Saris and the old sea-dog Adams did not get on too well with one another: Saris regarded Adams, who was married to a Japanese woman, as a naturalized Japanese, while Adams thought the new arrival ignorant and conceited like all Europeans. There were, moreover, factual differences of opinion between them. Adams had always maintained friendly relations with the Dutch, whereas the inexperienced Saris simply regarded them as malicious rivals. At any rate, English commerce with Japan was of short duration. During the war between Holland and England the East India Company in 1623 withdrew its trading-post. It had spent £40,000 in Japan and had received hardly any revenue in return.

Chinese merchants had been sailing to Japan, Siam, and even Java since ancient times, but in their own empire the Chinese did not permit any foreign trading-posts. Admittedly, the Portuguese were allowed to buy and sell in Macao, but only under exceedingly strict supervision. In vain had the Dutch sent their ships to Canton in 1604 and 1607. When an English ship, the Unicorn, was wrecked off the Chinese coast while sailing from Bantam to Japan, the Chinese authorities behaved most reasonably: the shipwrecked crew were allowed to purchase two small ships and continue their journey unmolested, but all trade was forbidden them.

The Dutch were viewing the successes of the British with growing misgivings. What right had the English to break into world trade? Until well into the sixteenth century they had left their foreign trade to Germans; after that they had bought their spices in the Low Countries, first in Antwerp and then in Amsterdam. What gave them the right, all of a sudden, to compete with the Dutch? During the difficult days of their joint war against the Spaniards the English had attracted the Dutch artisans to their country and had moved their staple from the threatened Dutch ports to Emden. So long as the assistance of British warships was needed on the high seas it had been necessary to turn a blind eye to all these infringements—but surely an end must now be put to them. Holland ruled the seas; the time had come to settle accounts with her dangerous rival.

One night, in 1623, the Dutch pounced on the small English settlement outside Amboyna. The official pretext was that the English had incited the inhabitants of the island of Ceram to rise against the Dutch at any rate, merchants and settlers were executed out of hand for high treason.

There was consternation in England. King James dared not take action against Holland in view of her supremacy at sea; he silently stomached the defeat. The English merchants evacuated Indonesia, which thus became an unchallenged Dutch possession, undisturbed by any rivals, the foundation of Dutch commerce in Asia, and the principal gold-mine of the Dutch East India Company. In Batavia there reigned a Dutch Governor General; and in that miserable swamp, beneath the scorching tropical sun, in that humid and oppressive climate, the Dutch made themselves at home. They built as they did in Holland: solid, clean, well-made houses with highly picturesque gables and brown tiled roofs, with sparkling window-panes, and with shutters. Everything looked delightful. The town, intersected by canals, became known as the Venice of Indonesia.

The revenues of the Portuguese Crown diminished rapidly when Indonesian spices began to reach India in small quantities only and at excessive prices. After all, the wealth of Calicut and Ceylon depended on their position of entrepots rather than on their own modest pepper crop. Even after the English had switched over to cotton and sugar they did not become rich, because competition—from Brazil, for instance—was too strong. The truth of the matter was simply that for ordinary every-day commodities the Cape route from Asia, all the way round Africa, had become too long once tropical plantations had been set up on the other side of the Atlantic. Let other nations get involved as much as they liked in the East Indies: the proud mijnheers of Amsterdam did not care. They had a firm hold on the two key areas of world commerce: Indonesia, the source of the really valuable spices, and the Rhine estuary, the distributive centre for Asian merchandise in Central Europe. They forged the bridge between East and West: three out of every four ships sailing the high seas about the middle of the seventeenth century flew the Dutch Rag.

In order to shake their predominant position, Cromwell issued the Navigation Acts, which made it illegal to import merchandise aboard ships other than English. In bitter naval warfare the English managed, more or less, to stand up to the Dutch; they did not, however, succeed in breaking their complete supremacy in commerce.

Louis XIV's wars of aggression altered the political situation in Europe; after the fall of the Stuarts England became the ally of the Dutch, their common enemies now being France and Spain. Again piracy flared up. Freebooters, filibusters, and buccaneers furiously swooped down on the Spanish possessions in the West Indies, capturing one ship after another, looting rich ports such as Panama and Santiago, and gaining a foothold for themselves on the islands. Jamaica became British. Why should anyone engage in laborious commerce and supply merchandise when it was so much easier and quicker to get rich by force? Smuggling was rampant.

Everywhere the pirates had their agents who reported every ship promising rich booty. Unscrupulous receivers accepted and marketed the stolen goods in America—and that, at the time, almost invariably meant Spanish possessions. Above all, the pirates had to sell in the New World the Negro slaves whom their boarding parties had seized aboard captured ships. This was easy enough, as the English were just then beginning to lay out their tobacco plantations in the southern parts of North America.

When peace was concluded, however, the English fleet at once restored order in West Indian waters, supported now by its former enemies, the Spaniards and the French.

It was no easy task to make the adventurous men who commanded the raiding ships understand that the royal charters had lost their validity, that the world no longer belonged to audacious daredevils but to peaceful merchants, and that force must at last yield to law. The pirates' lairs had to be smoked out one by one, and many an unrepentant law-breaker ended on a warship's yardarm.

Chapter 11—Paper Money, Illusions and Speculations

In wide-eyed amazement the French fishermen gazed at the magnificent beaver furs before them; for a few knives or axes the American Indians would willingly part with hundreds of these valuable skins which were fetching such high prices in Europe. Everybody of any importance wanted a beaver hat. From La Rochelle these hats went not only to the cold areas of Eastern and Northern Europe, but also to Spain, to Brazil, and even to Africa. Indeed, the American Indians could scarcely supply enough furs, and near the coast the beaver soon became extinct. To get beaver furs in large quantities it was necessary to penetrate deeper into the country where the animals were still living undisturbed.

The French fur-traders roamed the entire North American continent. Their search for the highly prized skins took them deeper and deeper into the hinterland, and led them to enter into a new, closer relationship with the Indians. The French did not come as settlers, like the English on the New England coast, nor as proud warriors and conquerors, like the Spanish, but as friends who had definite advantages to offer to the Indians.

When the Spanish armies under Narvaez, and later under de Soto, advanced into the Mississippi basin from the south, the terrified Indians fled before them. They would rather set fire to their huts than submit to the invaders. In the end, after suffering frightful losses, the conquistadores were again compelled to withdraw. They carried away with them the conviction of the pointlessness of spending vast sums on conquering and opening up those territories, since they contained neither gold nor silver.

On the coast, the English settlers had robbed the Indians of their land. They were squeezing them out of their traditional hunting-grounds in order to settle there themselves. The bitter fighting along the new frontier had made the "backwoodsmen" hard and cruel. Agreement with the American Indians appeared out of the question.

But the French fur-traders, the coureurs de bois, had different ideas. They could not possibly trap the beavers themselves; they themselves could not collect all the skins they wanted. They depended on getting their merchandise from the Indians. What was the difficulty? Surely the Europeans possessed sufficient goods for successful barter with the American Indians?

It was no longer a case of cheating simple people, of fobbing them off with a handful of worthless glass beads, with things that were useless to them, and then expecting them to change their entire mode of living, to go out hunting and trapping in order to meet the wishes of the foreigners. If the fur-traders wanted a regular supply of skins they would have to give the Indians steel articles, knives and axes, shears and hammers. Anyway, the Indians were only too anxious to get weapons from the white men—not only swords but also firearms, especially rifles.

With these weapons they would be able to hunt the fur-bearing animals much more easily, and hence produce very much bigger quantities of furs. The Indians were ready to promise anything. But was it not too great a risk to let the Redskins have firearms? What guarantee was there that they would only be used for peaceful hunting purposes and not for war—first against rival tribes and later perhaps against the white man himself?

On behalf of the Sieur de Monts, who held the monopoly for the fur trade in the French territories of North America, the geographer Champlain sailed up the St Lawrence river and in 1602 founded the city of Quebec. Farther upstream, however, he found himself in the middle of a war between the Hurons and the Iroquois on both banks of the river. Could he remain neutral? His friends, the Hurons, who had been supplying furs to the French for many years, urged him to help them. They stood in danger of being exterminated by their cruel enemies.

Champlain let himself be swayed to intervene. He advanced as far as the lake which today bears his name, and, thanks to his superior firearms, defeated the Iroquois. He could not know that his intervention had triggered off a relentless feud which was to bring about the collapse of the French colonial empire in Canada.

The trade in furs had its difficulties. Time and again the Indians tried to stop the Europeans from penetrating deeper into the country lest they should seize for themselves all the advantages of the middleman. The Indians were ready enough to guide the French all the way up the rivers, as far as the lakes, but they would not allow them to establish settlements or trading-posts behind their backs—settlements which would have enabled the Europeans to deal directly with the local people. They were afraid—and quite rightly so—that they would lose the fat profits they were making from reselling the European steel tools.

The tribes of the hinterland, for their part, wanted to do business with the white men. Their hatred, therefore, was directed not against the European traders but against those Indians who interposed themselves between them and the coveted European goods and who blocked all direct trade. The European traders now had to decide: either for their old friends who had collaborated with them for many years, or for the inhabitants of the hinterland who were only too anxious to trade with them direct.

At first the French tried to shirk this decision. In vain. The Indian wars broke out all around them. The Iroquois penetrated farther and farther to the North. They drove the Algonquin from the Trent river, north of Lake Ontario, and attacked even along the Ottawa river. And, most dangerous of all, they were getting their firearms from the Dutch on the Hudson river.

The news of the rich fur trade in America had, of course, spread throughout Europe. Why should the French be the only ones to profit from it? From New Amsterdam—as New York was still then called—the Dutch fur-traders began to move into the interior of the country. They had no compunctions about supplying the friendly Indians with steel weapons, and even firearms, provided they brought them enough beaver skins. Since the French had come down on the side of the Hurons, what else could the Dutch do but support their enemies, the Iroquois? Facing each other in North America now were no longer Redskins and Whites, but two European countries, two big trading powers, determined to achieve their ends, if need be by force.

Soon the British appeared in the arena as well. They had long been casting covetous eyes on the French fur-trading posts in the North, but they had been unable to understand the secret of the Frenchmen's success—peaceful trade with the Indians. By force of arms the British conquered the territories on the Atlantic—which were subsequently to become Nova Scotia—and parts of the Canadian mainland (1628). Four years later, however, Britain resold these seemingly valueless lands to the French. Only when the English fur-traders had begun to penetrate up the Delaware and Connecticut rivers did the official attitude change. There the traders encountered the Iroquois, the mortal enemies of the Hurons and hence now also of their French friends. In return for British help, the Iroquois undertook to divert the fur trade to the south—i.e., to the British.

No doubt the settlers in the forest clearings on the Atlantic coast, toiling relentlessly to cultivate the soil and raise crops, continued to regard the Indians as their natural enemies. But the fur-traders depended on them. They supplied them with the weapons they needed to fight their Indian and French enemies. The issue at stake was whether the fur trade would in future follow the St Lawrence to the north, or the Hudson to the south. It was an issue that would ultimately decide whether the interior of North America would one day be British or French.

Advancing down from the north, the French fur-traders increasingly pushed past the British possessions on the Atlantic seaboard. No sooner had the French received back their former possessions than Champlain dispatched a scout, Jean Nicolet, across Lake Huron farther to the west. This intrepid man traveled more than 6oo miles across unknown territory never before trodden by a white man, past the Sault Ste Marie, through the narrow Mackinac Strait into Lake Michigan, then along its northern and western shores as far as Green Bay, and up the Fox river to the watershed which was only three days' journey away from Wisconsin and the vast Mississippi basin.

An enormous territory lay open before the French. It was only a question of time when they would push through to the south to reach the Gulf of Mexico. The fur-traders had opened up a route which no army could have traveled. Nicolet was traveling as the official emissary of the great fur trading company which enjoyed the patronage of Cardinal Richelieu. He regarded himself as his country's ambassador to the American Indians, with whom he entered into regular peaceful relations. It looked as though a new era in the relationship between Whites and Redskins in America was about to begin—an era of amicable cooperation. But presently the Indian wars broke out again between Iroquois and Hurons, fanned this time by the fur-traders on the Atlantic coast.

By 1650 the Hurons, the allies of the French, were all but exterminated. The victorious Iroquois, the allies of the Dutch and the British, swept on towards the north, not only to Lake Ontario but up the river courses as far as the watershed behind Hudson Bay. For twenty years they thus blocked any French advance beyond the estuary of the St Lawrence river. By the time the French troops eventually defeated the Iroquois and forced them to make peace, the British had long crossed the mountains and penetrated to the west.

With three companions and three servants, an adventurous English fur-trader, Abraham Wood, rode out from Fort Henry on the Appomattox to the Roanoke river, in order to acquire skins in the interior. A later expedition, sent out by Wood in 1673, succeeded in crossing the mountains and reaching the Tennessee, where they made friends with the Cherokee. This move aroused much indignation among the Indians on the eastern flanks of the mountains, who began to fear for their attractive profits as middlemen. The British therefore decided to deal with the Cherokee through these intermediaries; though somewhat less profitable, this was still vastly preferable to watching the skins go north, to the French. Since the end of the Indian wars the French had again been able to move more freely.

The French fur-trader Jolliet, together with Father Marquette, a Jesuit priest, had meanwhile crossed the Wisconsin river, penetrated to the Mississippi, and rowed down that river as far as where the Ohio joins it. There the local Indians warned them about the Spanish who were established farther to the south, whereupon the French travelers decided to return. But they brought back with them the news of a waterway leading right down to the Gulf of Mexico. Nevertheless, the French decided to exploit first of all the boundlessly rich fur paradise in the north.

Some time before, two coureurs de bois—Pierre Radisson and Grosseilliers—had made contact, setting out from Lake Huron, with the Indians of the north. Their efforts to hire ships in New England to reach these territories from the north failed in the face of what they called the cowardice of the New England captains who were unfamiliar with the more northerly latitudes. They succeeded, however, in getting two ships from England—the Eaglet and the Nonsuch—and these they took into Hudson Bay.

Here they were then, face to face with the huge, as yet untouched rivers with their innumerable beaver dams—a goldmine which almost defied the imagination. The Indians could scarcely snatch up the steel knives and axes fast enough—let alone the rifles—and in exchange they delivered any desired quantities of skins. The French on the St Lawrence very soon noticed that their supply of skins from the north was drying up. In vain they tried to push through to Hudson Bay by the overland route. Even though the sea route was blocked by ice in winter, it was still more practicable than the laborious overland approach to the St Lawrence.

In 1670 King Charles II granted a charter to Prince Rupert and seventeen nobles for a "Company of Adventurers of England, trading into Hudson's Bay." This gave them the right to "the whole and entire trade and traffic to and from all havens, bays, creeks, rivers, lakes, and seas into which they shall find entrance or passage by water or land out of the territories, limits, or places aforesaid." That was a pretty comprehensive monopoly. Its full effect, however, was not to become apparent until very much later.

Seventy years later the Hudson Bay Company, as it was more conveniently known, maintained only four or five forts with barely 120 employees on the coast. They were content to receive the furs from the Indians and to barter them for European manufactures—knives and axes to begin with, but presently for ever-larger quantities of brandy. Back in London, the Company's critics demanded that the charter should be repealed as it was not being adequately utilized.

So long as the French in the south were trying to get the American Indians to deliver their precious furs to them, it would indeed have been difficult for the English to penetrate deeper into the continent. But when Canada fell to Britain in 1763 the number of fur-traders anxious to get their share of the wealth of the north increased considerably. Coming from the south, they moved into the territory claimed by the Hudson Bay Company for itself. As they began to clash with the Hudson Bay Company, the traders united to form a new company, the Northwest Fur Company of Montreal.

Now that the national rivalry between British and French had disappeared, the rival business interests of the traders from the north and the south clashed all the more violently. There were incidents involving bloodshed between representatives of the two trading companies; there were complaints that even gravid animals were being killed, and that far too much brandy was being foisted upon the Indians in an attempt to buy their friendship. In 1821, however, the two rival companies amalgamated.

It is scarcely possible to assess their full importance in the opening up of the American continent. In their search for new sources of furs, the companies' emissaries penetrated deep into inhospitable territories. Towards the end of the seventeenth century, Henry Kelsey traveled from Fort Nelson to Lake Winnipeg, and up the Saskatchewan river to Cedar Lake. He established peace everywhere among the Indian tribes of the plain by persuading them of the advantages of trade.

In 1789 the fur-trader Alexander Mackenzie set out from Fort Chipewyan on Lake Athabasca, across the Slave river towards the northwest, in order to open up new fur-supplying territories. By way of the river that now bears his name he reached the Arctic Ocean. Even that was not enough for the intrepid explorer, for the Hudson Bay Company—then still independent—was already trying to move its outposts up to the Great Slave Lake. Three years later we find him traveling up the Peace river and, after tremendous difficulties, cutting across country to the Pacific Ocean. He discovered the northern route across the continent, the famous Northwest Passage of which explorers before him had dreamed for centuries. The fur trade alone had made his achievement possible, because it alone convinced the suspicious and hostile people that peaceful trade with the strangers could pay of The Indians, whose economy had consisted of hunting and collecting, were now able to exchange their furs for highly prized steel tools—and, unfortunately, also for the dangerous firewater. This trade alone made it possible to overcome the mortal enmity between two races on such different levels of cultural and economic development. Thus, while the Indians of North America have largely disappeared wherever they clashed with settlers, they have most gratifyingly survived in the north, where their contacts were primarily with the fur-traders.

The government of the Sun King showed little understanding for the importance of the fur trade. It was far more anxious to establish colonies of settlers; it set up missionary stations; it appointed administrative officials. And when these efforts failed it lost all interest in Canada.

However, when the English and Dutch began to grow rich from their Asian commerce, the French Government too woke up. Why should not France be able to organize a profitable world trade? She held a number of trump cards not possessed by her rivals: a considerable industry manufacturing mainly luxury goods—fine linen, lace, tapestries, magnificent furniture, and finely wrought glass—on the basis of a domestic market of about 15,000,000 inhabitants. All these were goods for which there was keen interest throughout the Mediterranean area. From Syria, France imported Oriental fabrics and quantities of spices, from Cyprus she received sugar, from Egypt cotton and ivory, and from Russia furs; French silk fabrics from Lyons and the linen and woollen cloth made in Northern France were finding a ready market in the East. Admittedly this trade was chiefly in the hands of the Genoese and Venetians, who greatly outnumbered the French merchants. The haughty courtiers had nothing but contempt for commerce, and their intrigues and envy could easily ruin a merchant, as they did the great Jacques Coeur, who lost his vast fortune and freedom. Coeur had been the founder of France's trade with the East. He had sailed out to Damascus and introduced there French manufactures—textiles, lace, weapons, and wrought gold and silver work—articles which until then had been offered exclusively by the Italian merchants. In Syria he had purchased those Eastern goods on which the Italians had been making such high profits. Within a few years he had become so rich and respected that he was able to grant credits to the Order of the Knights of St John in Rhodes and even to the powerful city of Venice.

In 1436, during the war with England, he was appointed Director of the French Mint. When King Charles VII rode into liberated Rouen Jacques Coeur rode immediately behind him; his financial policy and his credits had ensured the King's victory. Hundreds of Coeur's ships were plying about the Mediterranean; he had trading-posts in nearly all the major towns of France, and he had 3oo employees in his service. No private person in France had ever before owned such a fortune. That was what excited the envy of the courtiers. They started a rumour to the effect that Jacques Coeur had poisoned the King's mistress, the beautiful Agnes Sorel; because of this vile defamation the ungrateful King had him thrown into prison and his property confiscated. Only after several years did Jacques Coeur succeed in escaping. He died on the island of Chios as the captain of the sixteen galleys which the Pope had sent to relieve Rhodes. France was