Feb 27, 2006

Review: Money in Sixteenth Century Florence

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Carlo Cipolla. Berkeley: University of California Press, 1989.

Cipolla was an economic historian at the University of California – Berkeley whose writings transcended the somewhat narrow confines of economic history. Money in Sixteenth Century Florence is, on the surface, a numismatic and economic snapshot of the latter half on the Cinquecentro, but the author also delved into social and political history in this text. Cipolla argued that the combination of tight monetary policies by Florence’s grand dukes and the influx of New World silver bullion were the two most important factors in the commune’s banking crisis in the second half of the sixteenth century.

The author provided a currency primer to assist readers in understanding the intricacies of the Florentine monetary system. The commune had three types of coins: a) gold coinage, embodied in the gold fiorino (florin); b) silver coinage, which took the form of the grossi (groats); and c) biglione, poorly-refined metal coins such as the quattrino and denaro (also known as the picciolo). Cipolla demonstrated that the florin retained its original fineness and weight throughout the centuries, while the value of the silver grosso was steadily debased over several centuries; the Florentine mint, however, maintained silver fineness at the ratio of 958.33/1000, or the lega del popolino. The debasement occurred as heavier silver coins were minted, but given a proportionally smaller par value. The florin also competed with other gold coins of the period, especially the Venetian ducato, which had approximately 9% less gold per ounce. The net result of the debasement of silver coinage in Florence and the competition from less pure gold coins was the gradual disappearance of the gold florin from circulation.

The influx of silver from the Americas in the second half of the sixteenth century further exacerbated the currency crisis in Florence. The bimetallic monetary system that developed in Europe was built on the premise that a given value of silver could be exchanged for gold, and there was considerable administrative resistance to adjust the exchange rates, despite market pressures. Thus, overvalued silver coins tended to replace gold coins in circulation; Cipolla cited this as an example of Gresham’s law. Florentine officials created a new coin, the gold scudo, with a slightly lower gold content, to counteract the contraction of the florin supply.

The traditional money of account in Florence was the lira, and the florin remained stable at 7 lire until approximately 1530. However, the changes in exchange rates caused merchants to find creative ways to account for the inflationary pressures, since the official exchange rates were mandated by the government. The result of the stubborn refusal by Florentine officials to acknowledge the very real market changes in the value of gold and silver caused chaos in bookkeeping practices and, more importantly, an even greater scarcity of the florin and scudo.

Left: Florentine fiorino

The crisis began to accelerate with a 1564 audit of the Florentine mint, when it was discovered that the mint scales had been tampered with and that the mint had been underreporting its production by about 0.7%. Almost simultaneous with the escalation of the monetary crisis was the arrival of Francesco de’ Medici, who took administrative obstinacy to a new level. Cipolla recounted numerous examples of Francesco’s legislative attempts to outlaw the realities of the currency markets, much to the detriment of the Florentine economy. The problems extended beyond mere currency scarcity, as Florentine merchants found themselves unable to obtain credit on the international market since they could not procure the necessary gold coins to settle accounts; massive merchant bankruptcies inevitably followed in the economic meltdown of Florence.

Cipolla used a massive amount of tax records, merchant registers, and correspondence in his quest to illustrate this complex financial catastrophe. He provided extensive tables to summarize his findings, yet maintained a narrative that does not require a doctorate in economics to follow. Interspersed throughout the text are anecdotal accounts from Florentines that break up what could have been just another dry economic analysis. Finally, his portrayal of the misguided, late-medieval-man-in-an-early-modern-world Grand Duke Francesco is almost comical in its patheticity. Francesco’s blundering was best summed up in the following August 1577 decree: “It is not permissible to pay or receive any scudo at a higher value than 7 lire and 10 soldi,” as if ducal will, alone, could control the powerful forces of the currency market. Cipolla’s groundbreaking work manages to both inform and entertain the reader, not an effortless task in the arcane world of economic history.

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