Fontaine L. (2008) When relief is worth more than a treasure

Fontaine, Laurence (2008) “Entre banque et assistance: la création des monts-de-piété”, chapter 6 in L’Economie morale. Pauvreté, crédit et confiance dans l’Europe préindustrielle. Paris : Gallimard, p.164-189.

Picture 2fontaine02FileMonte di pietà dei pilli, before 1880

The first Monti di Pietà (or mounts) were created in 15th-century Italy by Recollet monks to shield the less-fortunate from the scourge of usury. It was not so much intended to pool the poor out of misery as to provide the struggling middle dwellers with a last safety net before falling into poverty (p.164). In the peninsula, the capital hoarded in the safes of the mounts was often diverted from its original aim to be loaned to the rich. It prevented the Italian mounts from becoming really successful. However their model spread over Europe.

The spread of an institution

The main problem faced by these institutions was to find the initial capital to loan. In Venice, the mount served as a deposit bank that paid the depositors an interest. But the Church’s opposition (due to its assimilation of the system with usury) prevented the system from spreading (p.167). In Barcelona for instance, the mount at the end of the 18th century suffered greatly from the competition of new commercial banks that did offer rewards to depositors (p.169).

Further North, the spread of the mount was limited by the pre-existence of other welfare institutions (such as the Tables of the Poor in the Netherlands). Nonetheless Wenzel Cobergher was able to create 15 mounts in the Spanish Low Countries over the first three decades of the 17th century drawing most of his capital from loans. His model was later imitated in the Dutch Republic with the creation of the Banken van Lening. The institution was not adopted in England however before the 1800s (p.170).

Problems and limits

In France, the earliest mounts appeared next to the borders obviously inspired by foreign influences. In general however, these institutions were opposed by the elite which benefited from the money lending business (p.171). There were nonetheless several attempts in the more central regions to set up mounts, but those that were created often faced a swift bankruptcy (e.g. Paris 1637). Noticeably, many mounts also specialized in lending seeds to peasants (p.173). In general, the system was based on the assumption that cheap credit was more efficient than alms (p.175).

Most of the mounts were immediate hits both from the borrowers and the depositors sides (p.177). These institutions lasted often well into the 20thcentury. However their linkage with other charities to which they transferred all their surpluses and benefits meant that investments in the mounts themselves remained scarce and that interests on loans remained high (typically between 5 and 15%). This damaging link was not severed before the 20th century and the move of the mounts towards mutual banking (p.179).

Twisted usage

latourThe mounts were used regularly by the poor and in case of urgency by the rich. Among the labourers, the mounts were specially used during winter to obtain some funds out of the goods purchased during the summer when work was more plentiful. The services of the mount were widely used, in Marseille for instance, an estimated 5% of the inhabitants pawned a good there during the year 1734 (p.181). The use of the mounts’ services became so common that they were used as storage space for the winter wares during the summer for instance, or sometimes for as little as a day. They were also considered as a safe place to deposit one’s belongings and to invest some money (p.185). In Slaford, England in the early 1800s, 5% of the pawns were collected on the same day, 8% the following day and 20% within 72 hours.

The informal economy thus managed to integrate institutions partially designed to put an end to it (p.186). Ultimately a large numbers of objects were never claimed since the pawn tickets were monetized and exchanged as a paper money of sort. Symptomatically it often happens that the one withdrawing the pawn was not the one who had placed it (p.187). The private pawnborkers themselves regularly used the mounts to liquefy their assets. It may also explain the lower classes enthusiasm regarding conspicuous consumption (gold watches, etc.). It allows to immobilize and accumulate capital without loosing much liquidity (p.188).

Please see also the interview of the author by canal academie (in French).

Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).

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