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

by Greg Steinmetz

  In Saxony, there lived a thirty-three-year-old scholar from a mining family who had once studied to be a lawyer. Some later remarked on his debating skills and called him The Philosopher. Others remarked on the clarity of his speaking style and called him the Wittenberg Nightingale. In the nineteenth century, Carlyle put him alongside Napoleon and Shakespeare and declared him a “Great Man.” But for now he was just a humble academic known around Wittenberg as Martin Luther.

  Luther had heard about Tetzel from Saxons who had gone out of their way to buy indulgences. Barred from the duchy, Tetzel put them up for sale just over the border in Jüterborg in the state of Thuringia. Reports of the sale reached Luther. The campaign outraged Luther and the consequences of his outrage shook Europe to its foundation. Luther recognized indulgences for what they were—a scam Rome invented to cash in on popular fears of damnation. Luther found the St. Peter’s indulgence all the more offensive because it targeted Germans. The indulgence peddlers left France, Spain and other countries alone because these places had rulers strong enough to stand up to Rome. They refused to let people like Tetzel into their kingdoms, particularly if they were shipping indulgence proceeds out of the country. Germany was too fragmented to resist and let Rome have free rein. Germany had long been the venue for some of Rome’s worst abuses, and Luther could take it no longer. Enraged by what he heard about Tetzel, he composed ninety-five arguments against indulgences, his famous Ninety-five Theses. Item 67 told it straight: “The indulgences, which merchants extol as the greatest of favors, are in fact a favorite means for money-getting.”

  Luther timed publication to coincide with All Saints’ Day, the one day of the year when Frederick opened his relic collection to the public. Wittenberg would be full of pilgrims eager to see the holy teeth, bones and thorns. Wanting to make a splash, Luther nailed a copy of his list to the door of Wittenberg Cathedral on Halloween, the night before the holy day. All the pilgrims would see it. He also sent it to highly placed individuals, including none other than Archbishop Albrecht of Mainz. Luther was ignorant of Albrecht’s role in the scheme and hoped to persuade him to stop Tetzel. The letter speaks to Luther’s naiveté. His remarkably sycophantic language speaks to his low social standing and the prevailing etiquette.

  “Father in Christ and Most Illustrious Prince,” he began, “forgive me that I, scum of the earth, should dare to approach Your Sublimity. The Lord Jesus is my witness that I am aware of my insignificance and my unworthiness. May your highness look upon this speck of dust and hear my plea.” After referring to the “racket of indulgences,” he found his nerve. He told Albrecht, “It is high time you looked into this matter,” and asked him to “utterly suppress” the indulgence campaign. Albrecht never responded. But he did send a copy to the pope.

  8

  THE ELECTION

  When Fugger sat in his front row pew at St. Moritz, the church of Augsburg’s elite, he seethed. It offended him when the priests mumbled Scripture and delivered ill-prepared sermons. In letters to friends, he complained that the priests read too few masses and lit too few candles. He fumed that some saints’ days went unobserved.

  For Fugger, the job of priest was too important to leave to amateurs. He and his contemporaries considered priests to be agents of redemption, capable of converting life on earth into life after death. They believed that priests, by saying masses, taking confessions and reciting prayers, could deliver them to heaven. But priests were human and many fell down on the job. They ate and drank too much, kept mistresses, and, in what offended parishioners the most, neglected their duties as divine middlemen.

  It was one thing for a priest to disappoint a blacksmith or peasant. It was another to disappoint Fugger. He had the wherewithal to fight back. Aiming to upgrade the quality of local preaching, he launched a mini-Reformation at his church that put him at odds with his bishop, dragged in the pope and, if one believes the theory of one of his servants, nearly got him murdered.

  The battle for St. Moritz wasn’t just about a rich man stamping his feet until he got his way. More than anything, it was about someone trying to save his soul. Yes, Fugger is a recognizable figure to modern observers. He manufactured products, loaned money, signed contracts and fought competitors. Apart from the primitive technology, Fugger could have been a Russian oligarch, a Latin American telecoms boss or an American railroad baron from the nineteeth century. But this impression of Fugger overlooks the fact that he lived at a time when people built their lives around the church and man’s mission was to serve the Lord and strive for heaven. Fugger and his contemporaries not only believed that God created man, that Christ is the risen Lord and that sinners burned in hell. They also believed in a formulaic approach to salvation. If they said their prayers, confessed their sins and, yes, earned extra credit by paying indulgences, they would sidestep the flames. Hence, Fugger’s interest in St. Moritz. He wanted to save himself.

  Fugger first became involved in local church affairs under different circumstances. While his brothers still lived, the head priest of St. Anne, another Augsburg church, complained of cramped quarters. Wouldn’t it be great to add a chapel beautiful enough to credit the Savior and big enough to accommodate a crowd? The idea captivated the Fugger brothers, and Fugger made it happen after Ulrich and George died when he built a funeral chapel to honor their memory.

  The chapel gave him a chance to publicly declare his greatness in a socially acceptable manner. With thoughts of immortality, he hired a famous organ maker, a noted ironmonger and, for the most important feature—the design of the crypts—he turned to Maximilian’s favorite—Dürer. For the Fugger Chapel, Dürer contributed three designs: one of the resurrection of Christ and two of Samson. Fugger wanted to protect Dürer’s creations and insisted on an iron gate that opened during mass but otherwise stayed closed. Only he and the priests had keys.

  The St. Moritz dispute began in 1511 over a storage place for holy objects. Fugger and other community leaders built one behind the church. For whatever reason, the foundation that ran St. Moritz—a group comprised entirely of priests—objected. Fugger and the others felt insulted and diverted donations to other churches. Tensions escalated when the priest who ran the foundation retired and created a chance to upgrade the staff and the worship service. Fugger wanted a theologian instead of a hack and campaigned for Johannes Eck, his champion in the usury debate. The foundation hated the idea. Eck was a brilliant but arrogant hothead. They also bristled at Fugger telling them what to do. Not wanting the job that much anyway, Eck bowed out and Fugger asked another theologian, Johannes Speiser, to apply. Speiser refused at first and only agreed after Fugger said he would match Speiser’s church pay with his own money.

  Finding a candidate was the easy part. Now Fugger had to convince the foundation. This was a challenge because the foundation didn’t need his money and, unlike the emperor, could survive without him, thanks to large landholdings that gave it financial independence. Rather than let Fugger take over, it preferred to go without a new sacristy, a new chapel or whatever else he might offer. The foundation compromised by letting Speiser preach but only in the afternoon. This was an insult; few people, if any, went to church in the afternoon. Fugger was furious and he doubled his efforts to make Speiser the lead priest.

  In the middle of the controversy, Fugger took a seat in a coach and travelled thirty-two miles west to Dillingen on the north bank of the Danube. He was going to dinner with Christoph von Stadion, the bishop of Augsburg. Stadion lived in a ten-story castle with a round dome built in the eleventh century. After dinner, Fugger became violently ill—so ill that the aides traveling with him thought he would die. They got sick, too, but one was strong enough to pack Fugger into the coach and race him back to Augsburg. Doctors tended to Fugger through the night and he recovered the next day. Years later, one of the servants who had accompanied Fugger on the visit wrote down the story and attributed the illness to poison. Fugger should have had an ally in Stadion because Fugger had supported him
when he sought his seat. But Stadion sided with the priests, prompting Fugger to condemn his “ungratefulness and treachery.”

  Whether this was an assassination attempt or not matters less than what the episode symbolizes. Fugger had enemies and some of those enemies might have hated him enough to try to kill him. All we know for certain is that Fugger never again had a kind word for Stadion. He kept fighting for Speiser. He ordered Zink to take the matter to the pope.

  Leo was having a hectic year. He was campaigning for a crusade, selecting a record thirty-one new cardinals, and keeping an eye on the trial of some plotters who had tried to kill him. But like the politician doing a favor for a contributor, he wanted to keep Fugger happy. He ordered the foundation to let Fugger have his way. The foundation appealed to a clerical court, but here, too, Fugger prevailed. Speiser became the lead priest at St. Moritz. Back in his front-row pew, Fugger could now sit back and listen as a true theologian delivered erudite sermons and recited all the prayers. He may have smiled. By getting what he wanted, he could feel more confident about his own salvation and less concerned about purgatory’s fire.

  About this time, Fugger hired a nineteen-year-old Augsburger named Matthaus Schwarz as a bookkeeper. Schwarz stayed with Fugger and his successors his entire career. Although he became a critical part of the organization, he is less interesting for his own accomplishments than for the glimpses he left of Fugger. We know a lot about Schwarz because he commissioned a series of portraits that capture him through all the phases of his life. One shows him naked, another wearing armor and another with him in Fugger’s Golden Counting Room, quill in hand. He is sitting at his worktable as Fugger looms over him giving instructions. File drawers with the names of Fugger’s branch offices occupy the background. Schwarz, who loved fashion, wears a green doublet with slashes cut in the sleeves. He offers a lively contrast to Fugger in his black tunic and black hose. The only bit of color on Fugger is his gold beret. The picture is crudely done and has a cartoonish effect that would have horrified Dürer. But the Schwarz picture is important because it is the only one of Fugger practicing his craft.

  Schwarz’s literary efforts spanned two genres—fashion and management. In addition to his portrait book, he wrote a textbook on accounting that shows the emphasis Fugger put on accurate records. Schwarz, like Fugger, apprenticed in Venice. He studied bookkeeping there but wrote that he understood “little more than nothing” about accounts before joining the firm. After spending time with Fugger, he recognized the folly of Fugger’s competitors who believed they could live without detailed figures: “These little men write down their dealings in poorly kept scrapbooks or on slips of paper, stick them on a wall and make their reckonings on the window sill.” Fugger, in contrast, had clerks in each of his offices. They monitored every transaction and let nothing sneak through. The offices had to update the figures every week and close the books at year-end, no exceptions. Once they did, managers sent copies to Augsburg where Fugger’s staff translated the figures into Rhenish florins and, in another first, combined statements from all the branches into a single statement. The Italian banks had statements for each branch but never bothered with consolidation. Fugger could see the big picture like no one else. By knowing exactly where he stood at every moment, he always knew how much he had to lend or whether he needed to cut back. He knew if he was carrying too much inventory or too little cash. He knew how much he might be able to fetch for his jewels or factories. And he knew exactly, down to the last kreuzer, how much he was worth. Schwarz noted with disdain how others lost track of the numbers and how they expressed shock when they went bankrupt. They deserved their fate, Schwarz seemed to say. They were idiots.

  Schwarz described Fugger’s pioneering use of auditors—something the Italians later copied—and his insistence on involving three people in statement preparation as a tool to deter fraud. “Rarely will three people share the same views when it comes to bad intentions,” Schwarz wrote. “This way, the master will not be cheated and the servants will remain honest against their will.” Fugger was the chief auditor. While reviewing the ledgers for Neusohl, his big Slovakian mine, he fumed when he spotted that a general manager spent too much on food and lodging. “I don’t know what is going on here,” Fugger scribbled in the margin.

  Schwarz intended his work as a textbook for young Germans interested in business, and he gave his readers investment advice that probably came from Fugger himself. A business person, he said, should keep a third of his assets in cash, a third in investments and a third in merchandise, and brace himself for steep losses at any moment. It went without saying that he should personally own real estate. Investments fail and cash diminishes with inflation but land endures.

  In The Wealth of Nations, Adam Smith argued that capitalism provides for all or at least does as much as can be hoped. It succeeds because of what Smith called “the invisible hand.” An individual looking out for No. 1 is “led by an invisible hand to promote an end which was no part his intention,” he wrote. “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” In other words, individuals out for gain did more for the common good than deliberate state efforts to do the same. That’s the theory. The reality is that the pursuit of self-interest, if left unchecked, leads to crony capitalism, where those in power conspire with a handful of rich businessmen to look out for themselves and undermine others. Private individuals, not the state, still own the property. But wealth is concentrated in the hands of the few. And the lack of competition stills the invisible hand and its beneficial effects.

  Fugger didn’t see himself as an opponent of the common good. He pointed to the thousands of workers he employed in his mines, warehouses and factories. He could also point to his payments to suppliers that allowed them to employ thousands more. Without those jobs, many, if not most, of the workers would be landless peasants or even beggars. That’s why Fugger referred to business as a “wonderful jewel.” It took care of people. Besides, Fugger certainly had no objection to prosperity for all. He was simply doing what businessmen do. Like anyone else in his situation, he used every advantage he had to make money. Fugger would have been a fool not to exploit his special relationship with the emperor, particularly when there was no other path to extraordinary riches than through royal connections. He wasn’t being crooked as much as he was being practical.

  But the Tyrolean council, after the emperor’s latest costly adventure in Italy, saw it otherwise. It was convinced that Fugger’s cozy relationship with the emperor held back economic development and, more importantly, threatened the duchy with bankruptcy and made it vulnerable to a foreign takeover. Looking to calculate the damage, they totted up numbers on Fugger’s latest contract with the emperor and came to a damning conclusion: The deal was outrageously lopsided. Fugger had loaned the emperor 130,000 florins and, in return, would earn a profit of 466,000. As with previous deals, the emperor would repay by giving Fugger silver and copper from his mines. But the value of what Maximilian gave on this deal was far less than what he got. Once Fugger sold the metal in the open market, he would earn a profit several times what he loaned. A rubber stamp no more, it demanded a diet to investigate the findings and overturn the agreement.

  The council had inspected the books because the state’s finances were exhausted. The output of the Schwaz silver mine, the largest silver mine on earth, should have eased Tyrol’s financial burdens. But it instead allowed Maximilian to mortgage future income and run up massive obligations. Maximilian had taken office with a promise of fiscal discipline. Now it was clear that Maximilian was just as bad as Sigmund. The only difference was that Sigmund spent his money on love and Maximilian spent his on war. Sigmund had several mistresses and dozens of illegitimate children to support. Maximilian borrowed to pay troops and buy guns to fight Venice. The difference in how they spent it didn’t matter. The state was broke in any case and, like in the days of Sigmund, it had no money to d
rain swamps or build bridges, let alone provide for the courts of Maximilian’s daughter Mary, the future queen of Hungary, or of Anne of Hungary, the wife of his grandson Ferdinand.

  Fugger and Maximilian didn’t invent sovereign debt but they stretched it to a new extreme. Through their partnership, Tyrol had become an experiment in the limits of public borrowing. These days, governments routinely borrow for as many as 30 years. Investors assume taxpayers will be there to pay as the bills come due. But loans were almost always short term in Fugger’s time. Fugger went farther than his predecessors by making loans that went out as far as eight years. He trusted Schwaz and its silver would be there for him well into the future. His wager paid off but later investors, including Fugger’s heirs, got a tough lesson in royal finance at the end of the century when Maximilian’s great-great-grandson, Philip II of Spain, defaulted on the loans used to fund the Armada and his wars with England.

  In combating the council, Fugger could argue that he deserved a high return because the emperor was an unsafe credit. As a sovereign, Maximilian was above the law. Nothing other than the threat of revolution and the desire to preserve his good name compelled him to repay. A contemporary of Fugger’s nailed it when he said, “Leaders act as they please.” Another risk was the price of silver. A lot could happen in eight years. If silver prices crashed, Fugger could be stuck with losses instead of profits. But there are fair profits and ridiculous profits, and the council charged that Fugger’s profits were ridiculous. The auditors had made inquiries and found that other bankers would have loaned to the emperor at 10 percent interest. Fugger’s interest exceeded 50 percent. Maximilian may have had no head for figures, but the terrible terms suggested something other than faulty arithmetic. It suggested fraud. The council could not believe anyone, let alone the emperor and his experts, could have entered into such horrible agreements if they had known the details. Fugger must have lied to them.