Germany

Greed Is Good

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Greed is good, proclaimed Gordon Gecko in the movie Wall Street and Jacob Fugger would have agreed. Fugger was born into a merchant family in Augsburg, Germany in 1459. His father died when Jacob was 10 years old and his mother took over the family business.

When Fugger was in his late teens, his mother sent him to Venice to learn about banking. Venice was the Renaissance equivalent of the financial wizardry in today’s London or New York. Fugger used the skills he learned to become the biggest competitor of the Venetian bankers.

One of his earliest deals involved loaning money to Duke Sigmund, a free-spending aristocrat who declared war against Venice to boot them out of the southern Tyrol. (The southern Tyrol was permanently transferred to Italy only after the World War I defeat of Austria and Germany.)

No banker would lend money to Sigmund because he had a habit of defaulting. Fugger could have lost every cent he had and most of his family’s wealth if Sigmund defaulted. So Fugger demanded collateral, a silver mine at Schwaz, Austria. When Sigmund inevitably defaulted after botching the war, Fugger took over the silver mine.  Under Fugger’s management, the mine eventually produced 4 of every 5 tons of European silver and made him fabulously wealthy.

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Fugger became the lender of choice to the Spanish Habsburgs and to the Pope. He provided the loans that Charles V, King of Spain, used to buy the title of Holy Roman Emperor. Pope Leo X used Fugger loans to fund his massive construction projects in Rome.  

Of course, all those loans had to be repaid. Charles V made Fugger an Imperial Counselor, which elevated a peasant to the aristocracy and granted him business monopolies. Pope Leo X lifted the ban on usury or charging interest on loans which allowed Fugger to make more money. Every cardinal and bishop that had to buy their office usually financed with a Fugger loan. Most critically, Leo X sold indulgences which allowed the devout to buy an exemption from punishment in purgatory.

It all boiled over in 1517, when Martin Luther nailed his 95 Theses to the Worms church door, starting the Protestant Reformation. In 1525, the German Peasants’ War erupted against social and economic inequities. Fugger funded the counter-revolution which crushed the rebellion at a cost of about 100,000 lives, mostly peasants.

Like most wealthy people, Fugger became a philanthropist. He is best known for building the Fuggerei, a housing project for the working poor. The Fuggerei is now the top tourist draw in Augsburg, Germany, having been rebuilt after World War II with Fugger money.

Fugger was once asked how long he planned to work. He replied that no amount of money was enough for him and he would continue making a profit as long as possible. At his death in 1525, his wealth equaled almost 2% of European economic output. But money can’t buy you love. As he lay dying, his wife was with her lover and his nephews were scheming to cut her out of the inheritance. His nephews’ descendants continue to live off the proceeds of the wealth they inherited.

For more information about Jacob Fugger, see The Richest Man Who Ever Lived by Greg Steinmetz (2015). It’s a lively, quick read.

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