The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger

by Greg Steinmetz

  A half century later, two guests of Fugger’s grandnephew Markus gave detailed accounts. “At the Fuggers, the meal took place in a hall in which one saw more gold than color,” wrote the butler of a visiting duke. “The marble floor was slippery like glass. A table filling the hall was laid with Venetian glass altogether worth more than a ton of gold. Mr. Fugger showed my master over the house which is so large that the Roman Emperor would have found room therein for his whole court.” The French humanist Michel de Montaigne was even more enthused. “We were permitted to see two rooms in their palace,” he wrote, “one of them large, high, and with marble floors, the other one filled with old and modern medallions, with a small cabinet in the back. These are the most magnificent rooms I have ever seen.”

  As Fugger stood inside and looked out the windows, he may have felt a twinge of satisfaction. He lived in the grandest house in a city that had become the financial capital of Europe thanks to him. He could see market stalls where the people of Augsburg, nestled far away from anything in the Swabian countryside, could find brocade from France, pepper from India and silks from China, all of which he had a hand in importing. He could peer down at those less fortunate; the drunken soldiers who taunted with swords; and the craftsmen, monks and beggars who shared the street with pigs, goats and chickens. Parades marched under him on festival days. To his right, Fugger could consider the spires of St. Ulrich and Afra, a Gothic masterpiece where three centuries later Mozart performed. To his left, he could see an even taller structure, the Perlach Tower, the clock tower whose height declared that businessmen, not the church, controlled the city.

  And the people on the streets could look back at him and question why Fugger had so much and they had so little.

  As the year 1512 drew to a close, Fugger gathered his family around him. Christmas was a happy time in Augsburg where people celebrated with feasts, music and mystery plays based on the lives of saints. But Fugger wasn’t interested in holiday cheer. He had business on his mind. His brother Ulrich had died three years earlier and his brother George had already been dead for six years. Fugger himself had no children, but his brothers had large families. As the relatives came together just after Christmas Day, Fugger informed them he wanted to bring his nephews into the family enterprise. The way he did it reveals Fugger as a bully. Like the many plutocrats who followed in his footsteps, he put aside considerations of fairness in pursuit of gain.

  He started down the road ten years earlier when he rewrote the original partnership agreement he had with his brothers. That agreement, from 1494, allowed heirs to take the place of any brother who died. The heirs would have the right to cash out or, if they stayed, have a role in decision making. Fugger forced a change in 1502. He prohibited the heirs from liquidating. He also stripped them of any say in the business. All the power stayed with whichever brother died last. Fugger was the youngest, so he was the one most likely to be the last one standing. Sure enough, he outlasted George and Ulrich. With Ulrich’s death, he took complete control. But by 1512, his brothers’ sons were growing up and Fugger saw a need to bring them in and plan for succession.

  Fugger informed the gathering that the firm would henceforth be called “Jacob Fugger & Nephews.” But they shouldn’t be fooled. Fugger would keep power solely in his own hands. He showed them the new partnership agreement. It was filled with references to “I” and “my trade.” The nephews were powerless. “They shall do nothing but what I command and give them permission to do,” the document said. “If I direct one of them to do something, and afterward recall it to myself, they shall not dispute it.” It ordered the nephews to always be honest with him, disclose to him every expense and conduct Fugger’s business “in complete secrecy and to tell no one.” It prohibited them from engaging in any business on their own and from signing anything without his consent. It gave Fugger the right to dismiss any of them, for any reason, at any time. The nephews and the others still had a claim on the money—Fugger didn’t steal it from them—but it had to stay invested.

  The most extraordinary part of the agreement allowed Fugger to arbitrarily change the terms without having to consult anyone: “In case I alter one or more of the above points or articles, and do it differently, or add anything which concerns this business . . . it shall be strictly adhered to by my nephews and their heirs.” Fugger closed the proceedings by presenting a Bible. He made everyone lay their hands on the Bible and swear to honor the new contract.

  6

  USURY

  Fugger spent the first half of his career making money. He spent the second fighting to keep it.

  In the first phase, he had his greatest commercial victories. He won the silver contracts for Tyrol, created a mining giant in Hungary and put together a distribution network to sell his output to a diverse group of customers across the continent. He invested the profits from Tyrol and Hungary in new opportunities. In doing so, he created a formidable cash-generation machine that, year in and year out, added to his net worth. This was all he ever wanted. He never aspired to stitch his fiefdoms together and become duke of Swabia. He didn’t even want to be the mayor of Augsburg. The Medici desire to turn wealth into political power was not in Fugger’s makeup. Nor did he want to slow down. By all indications, he was happiest when striking deals or scrutinizing his ledgers. Nothing gave him greater joy than the chores required to make him richer.

  Fugger would have liked the rest of his life to proceed in the same, linear way. In general terms, it did. He added to his fortune every year and he went from being merely rich to becoming the richest man on earth. But he also spent much of this period warding off attacks from a resentful general public and those who claimed to be its champions. He fought these opponents with the same vigor as he used against his commercial rivals. There was no hesitation and no ambivalence even when blood was spilled. He had a remarkable conviction in the justness of his actions. That’s just how it was with Fugger. The way he saw it, God put him on earth to make money. He let nothing block what he perceived as God’s will.

  Fugger was now a different person from the dare-devil entrepreneur in his thirties who risked everything on a loan to Duke Sigmund, became perilously ill-liquid to sew up a long-term mining contract and traveled on horseback to supervise operations and make sure his contrarian bet on Hungary paid off. Now in his fifties, he was locking in at least some gains by diversifying into low-yielding real estate investments. But that was only a change in style. There was nothing—getting older, being married for twenty-five years, the loss of his brothers—that bumped him off the course of making money. The biggest change was, whether he liked it or not, that he had become a statesman as much as a businessman. The scale of his business and sweep of his activities inevitably entangled him in the big events of the day and made him a player in political affairs. As much as he may have enjoyed playing the game at the highest level, and though he claimed to sleep well at night, the requirements of managing the largest commercial enterprise in Europe must have been a terrible strain. Creditors, customers and suppliers demanded his attention. Kings and bishops from all over Europe sought his money. Only the emperor had more interests to juggle. The Augsburg artist Jörg Breu the Elder painted Fugger about this time. He looked frail and his gaze points to the heavens. It’s easy to read this as Fugger feeling a sense of mortality, that this master of beating the odds knew he could not beat everything.

  It was during this second phase of his career that he made his mark on history. When Thomas Carlyle put forth his great man theory, he created categories for kings, prophets and poets but none for businessmen. Why should he? They are enablers. Businessmen find the money for others to pursue greatness. They don’t change the world. Fugger may not have passed Carlyle’s test, but he changed the world enough to become the most influential businessman in history. No Rockefeller or Rothschild had more influence on the political events of his time.

  His greatest contributions involved the Habsburgs. As we shall see, the first came i
n 1514, when he forced Maximilian to create the Austro-Hungarian Empire, a political entity that lasted four hundred years and played a prominent role in European history until its last breath in World War I. The second came in 1519 when Fugger bankrolled the teenage king Charles V and kept German-speaking Europe in the family’s hands, putting the Habsburg empire—an empire that strode across much of the globe—on firm footing.

  The frustrating thing about Fugger is that his achievements—both commercial and political—occurred so long ago that they seem to have little bearing on modern life. Fugger’s destruction of the copper cartel and the kick he gave the Hanseatic League only matter today because of the lessons they teach. The importance of understanding the vulnerabilities of competitors and the motivations of customers; the benefits of being indispensable; the need to stay firm in the face of attack: These are lessons that apply in any age. As for the political achievements, they still mattered at the time of Napoleon and even Bismarck and Woodrow Wilson, but less so today. The European Union links Spain and Germany, not a royal family. Spain has lost its hold on Latin America and Austria has lost its hold on Hungary. The Habsburg influence on these places remains, most significantly in the fact that nearly 400 million Latin Americans speak Spanish, but the lines on a map that Fugger helped draw have been erased.

  Another of Fugger’s feats changed the world in a highly relevant way. This was his role in overturning the church’s ban on usury—the charging of interest on loaned money. To the extent we can thank any single individual for our ability to borrow money to buy a house, lease a car or earn interest on our savings, we can thank Fugger.

  The anti-Fugger movement that began with the Hansa protests expanded in proportion to Fugger’s growing visibility. Fugger didn’t hide his wealth. Just as the coat of arms gave him credibility, the wagons of gold he displayed in Constance attracted customers in an age when word of mouth defined public relations. But fame also brought scrutiny and vilification. In 1513, Fugger’s success caught the attention of a group of Nuremberg intellectuals. Outraged by his wealth and methods, they seized on the church’s usury ban to attack him with the larger agenda of ending what we now call capitalism. A cleric named Bernard Adelmann, who hated Fugger for blocking his bid to become bishop of Augsburg, led the group. The humanist scholar Willibald Pirckheimer joined him. Pirckheimer was a friend of Dürer’s and a scholar of such distinction that Erasmus called him “the chief glory of Germany.” It now seems inevitable that as trade and technology developed, feudalism with its lords, serfs and self-sufficient manor farms would give way to a market-based model—that is, an economy that divided resources based on what a person could pay rather than what he needed. Fugger argued this was best for all concerned. Free markets created jobs and growth lifted all boats. But the intellectuals in Fugger’s time weren’t buying it. They only saw clever men like Fugger grabbing all they could.

  The only formal obstacle to Fugger was the church or, put more broadly, Christianity. Jesus had repeatedly condemned the rich. Fugger could dismiss a vague swipe like “You cannot serve both God and money.” He could not dismiss “Lend and expect nothing in return” (Luke 6:35) because Rome had enshrined the comment with a ban on usury. Dictionaries define usury as the charging of unconscionably high interest rates. The church took the words of Jesus literally. It considered any demand for interest, regardless of the rate, as usurious. It condemned anyone who charged interest as a usurer. It threatened usurers with everything in its arsenal short of execution: excommunication, the withholding of absolution and the denial of Christian burial. Any one of these made the offender a social untouchable. The harshness of the punishments reminded Christians that the Lord would take action even if the church did not. God was all-knowing. He would spot usurers and send them to burn.

  Fugger had no fear of excommunication. If the church excommunicated him, it would have to excommunicate all the other Christian moneylenders. This was inconceivable; there were too many of them. Nor did he fear damnation as a usurer. One of Fugger’s strengths was an absolute conviction in everything he did. And nothing seemed fairer to him than receiving compensation for the risks he took. To him, Jesus did not literally mean “lend and expect nothing in return.” The savior was simply issuing a blanket call for charity.

  But Fugger couldn’t ignore the usury ban. He had to take it seriously because his depositors took it seriously. Every time a depositor gave money to Fugger, they, like bankers, expected to earn interest. They took their 5 percent but felt dirty afterward. The Nurembergers circulated pamphlets about usury after the Diet of Cologne in hopes of putting a chill on bank deposits and destroying Fugger’s fund-gathering machine. The attack hit Fugger where he lived. Unless he could raise money, he could not satisfy client demand for loans. And unless he could make loans, his business would shrink and his influence would vanish. As the attacks grew, Fugger decided it was no longer enough for the church to look the other way. He wanted the church to expressly legalize interest. He wanted Rome to say, Forget about what Jesus said. He didn’t really mean it. He didn’t mean interest was criminal in every case. If done right, charging interest conformed with Christian values. Fugger may have been the only one strong enough to join the fight. The battle he was about to lead held the transition from the feudal to the modern economy in the balance.

  The usury debate went back centuries. Aristotle started it. He said it was fair to charge someone for a cow because a cow produced milk. But money was sterile. It produced nothing. Therefore it was unfair to charge someone for money. Aristotle’s argument sounds more like a rationalization for an emotional reaction than a reasoned argument. He hated debt and the power it had to destroy. He called money lending a “sordid profession” and likened lenders to pimps.

  No one cared about the usury debate in the Dark Ages when commercial activity was just a trickle in the stream. But as trade came to life in the eleventh century and lending began to power it, the victims of usurious practices multiplied. The church attacked the perpetrators for what it said was their own good. Their souls were on the line. The church had to save them. The Second Lateran Council, of 1139, condemned usury but stopped short of calling it a crime. Pope Urban III went further. He referenced Luke 6:35 and declared usury a mortal sin in 1187. Yet lending continued to grow, funding commerce while bankrupting more borrowers. In the Divine Comedy, an outraged Dante went further than Aristotle. Likening lenders to pimps wasn’t strong enough. Dante likened them to sodomites. Thomas Aquinas, the great theologian, overlooked the commercial benefits. It made perfect sense to him to trade money for wheat or a horse. The buyer got something of fair value in return. But why should a person pay back more money than he borrowed? That was an unbalanced and therefore unjust transaction. Aquinas called for stricter enforcement of church law and was so incensed with the whole thing that he went further than Aristotle and Dante. He likened usurers to murderers. The people, or at least some of them, saw it the same way. In 1310, a council in Mainz forced cemeteries to exhume recently interred usurers. The decomposing bodies came up smelling foul and covered with leeches, worms, spiders and other supposedly demonic helpers. Their condition “proved” the deceased had sinned. The next year, Pope Clement V, spurred by Aquinas, reiterated the usury ban and overturned secular laws that legalized it. The church’s enforcement arm got busy. Diocesan courts—there were hundreds of them—averaged about three prosecutions a year in the fourteenth century. Even more cases settled out of court.

  The prosecutions only succeeded in shuffling the participants. Christians were sidelined and Jews filled the void. The church had a complicated relationship with Jews that expressed itself commercially by forbidding them from agriculture and the trades while letting them loan money. On the one hand, the church kept Jews from competing with Christians for “good” jobs. On the other, it let them monopolize a profession that could be even more lucrative. As long as people other than Christians made loans, the church said nothing. Nor did it take action against
the flip side of the transaction; Christians were still free to borrow all they wanted. The approach was contradictory, but it let Rome fulfill its mandate of saving souls. Besides, who cared if a Jewish peddler came to a village and loaned a few pennies to a farmer? What was the harm in that?

  But by the fifteenth century, lending was no longer about pennies and farmers. The economy was booming and lending had become big business. Envious of the Jewish monopoly, Christians snuck back in and became the biggest lenders of all. Rich Venetians and Florentines paid lip service to the usury rules—and eased their guilt—by calling interest by other names: penalties, processing fees, gifts, loss charges. It didn’t matter what they called it as long as they didn’t call it interest. Another ruse was to disguise interest with complicated currency transactions. But the results were the same: They gave out money expecting to get more money back. They could call it what they liked, but the “more back” was interest. The most famous bankers were the Medici. Other Italians were just as active. The Italians loaned to each other, loaned to their sovereigns and crossed the channel to loan to the English kings. They loaned to popes, cardinals and bishops. They loaned as if the usury ban didn’t exist.

  Change came in Germany a century later. Anxious to catch the Italians and lured by interest rates as high as 43 percent, German cities cleared the field of incumbents. Augsburg expelled its Jews in 1438 and used the gravestones from the Jewish cemetery to build a new city hall. A textile trader named Hans Meuthing became the first Augsburger to try finance on a major scale. He made a large loan to Archduke Sigmund of Tyrol, which was backed, just like Fugger’s later loan to the duke, by the output of the Schwaz silver mine. Others jumped in, replacing Jewish lenders on transactions, large and small. The German satirist Sebastian Brant noted the development in his best-selling Ship of Fools (1494): “You borrow ten, eleven’s due. They’re more usurious than the Jew. Their business now the Jews may lose, for it is done by Christian Jews.” Fugger took lending further than anyone, but even he, like the Italians, used dodges to mask interest. He took silver instead of cash for the Tyrolean activities, making the loan repayments look more like purchases than loans.