------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (January 2009)

Laurence Fontaine, _L’économie morale, pauvreté, crédit et confiance
dans l’Europe préindustrielle_. Paris: Gallimard, 2008. 439 pp, €20
(paperback), ISBN: 978-2-0707-8577-3.

Reviewed for EH.NET by Pierre-Cyrille Hautcoeur, Ecole des Hautes Etudes
en Sciences Sociales and Paris School of Economics.


Economic history frequently suffers a tension between a purely economic
approach that considers homo economicus as invariable through time and
space, and a relativist approach that refuses any broad comparison
because of the supposed incommensurability of human activities
experienced in different settings. The influence of anthropologists,
especially in the tradition of Karl Polanyi, has contributed in
particular to the idea held by many historians that Ancien Régime
societies were qualitatively different from modern ones, and that their
economies cannot be studied in the same terms because economic activity
was embedded in social life. Furthermore, this statement is sometimes
reintroduced in today’s policy debates in a more normative way, when it
is argued that the markets should be submitted to social institutions
and needs as was the case up to the Industrial Revolution.

Laurence Fontaine -- an economic historian at Centre national de la
recherche scientifique in Paris -- helps us to clarify these questions
in a particularly interesting way since, as a social historian, she
insists on the importance of social relationships in the provision of
credit in early modern Europe, but she also, and indistinguishably,
emphasizes the role of the market as allowing the poor, and especially
women, to escape the constraints and limitations that result from their
social position. To that extent, her book is not only a good one for
those wanting to better understand the economies -- and particularly the
credit markets -- of early modern Europe, but it also provides a way out
of that enduring epistemological debate.

Although I have chosen to open this review by insisting on that
epistemological contribution, the book is not centered on these issues,
which appear mostly in the conclusion. Most of the book actually
discusses the provision of credit in the Ancien Régime economy. It
chooses to study it “from below,” that is from the point of view of
economic agents and not from that of institutions, governments or
economic theorists (even if all of these appear sparsely). The focus is
on the ordinary agents: the poor and lower middle class, in contrast to
the most-studied bourgeoisie. Because of these choices, the book is
based mostly on qualitative sources, such as diaries, letters, death
inventories, small firms’ accounting books, and prison records, with
some attempts at quantifying the questions under study, but only at an
individual or local level and for relatively short periods. A few
chapters build on an insightful use of contemporary novels and theater.
If unsystematic, the documentation is abundant: examples are taken from
all over Europe from the fifteenth to the eighteenth centuries.
The book is organized in a thematic order (with chapters on the poor,
the peasantry, the elite, urban micro-credit, women, pawnshops, usury,
mentalities, exchange practices and the construction of trust). This
organization brings a strong sense of the fact that most economies
inearly modern Europe faced similar problems, even if the variety of
traditions or the different choices that were taken by governments when
creating or regulating institutions are frequently mentioned. It
downplays long-term change, even if some particular transformations are
mentioned.

As is typical of any book dealing with such a large period and space, it
is mostly based on a large -- indeed impressive -- bibliographical base
(30 pages of references, mostly in English, French and Italian, with
occasional Dutch, German and Spanish). It is, perhaps more importantly,
based on Fontaine’s experience studying the poor and migrants
(especially peddlers) of early modern Dauphiné and Savoie.

The first important result of the book is to show that credit was not
only developed among the well-to-do in early modern Europe (as shown for
example by Hoffman, Postel-Vinay and Rosenthal in _Priceless Markets_).
It was a daily part of the “survival strategy” of the poor, more
important, indeed, than the help provided by charitable institutions.
Most of the working poor needed credit in order to start or to keep
their small businesses running in the face of accidents, delays,
illness, and life-cycle events -- and this was true as much in the
countryside as in the cities. Fontaine shows that the few remaining
traces suggest that oral credit was ubiquitous, that written credit was
much more frequent than what is observed in notaries’ archives (because
of the cost and delay of their certification), and that a majority in
the population died with negative assets -- that is, unpaid debts
superior to their belongings.

Credit was organized in various circles, starting from the closest
relatives (the family and neighbors), social authorities (the lord,
notables), institutions (guilds, pawnshops) and, lastly, foreigners --
as most moneylenders were considered (either Lombard, Savoyard or Jew).
Except for very small amounts, credit among equals (or relatives) – was
rarely much of a resource for the truly poor ... because their relatives
were poor too, and also because even “family solidarity is everything
but natural” (p. 36). Actually, such solidarity could only result from a
well-organized community, which was able to constrain the borrower.
Therefore most of the credit to the poor came from notables,
institutions and moneylenders.

Among these, the lords were probably those with the most specific
behavior in the Ancien régime. They frequently lent substantial amounts
to their vassals, especially to their farmers. These debts were seldom
reimbursed, and mostly implied yearly payments (which could be in kind).
They could be restructured when either the lender or the borrower left
or died, and parts of them could even be abandoned gracefully in periods
of hardship. Fontaine argues that these debts were part of a broader
social relationship, which explain both that the lords had to lend in
order to maintain status and reputation even when reimbursement was
anticipated as almost impossible, and how they were able to force
payments for long periods, thanks to their local power.

Aristocrats actually reciprocated downward the relationships based on
political dependence they suffered towards the princes to whom they
forcefully lent and asked for privileges or rents as payments. When in
debt (and they were frequently so), they dismissed and ill-treated their
moneylenders (who always suffered bad treatment if they tried to obtain
payment through legal means), except those who had been able to access
some personal secrets, as was frequently the case when wives pawned
their jewelry to old women lenders (the marchandes à la toilette made
famous by novelists down to Balzac). On the other hand, aristocrats
considered their gambling debts as the only serious ones because they
were purely personal, among equals, and a symbol of their lives’
dedication to risk and gratuitousness.

At the opposite end of the social spectrum, poor women had no power and
a precarious status. Fontaine shows that the legal position of women
mostly deteriorated in much of Europe in the early modern period,
obliging them to participate in the most informal and unsecured credit
markets. However, her conclusion is not that the market was dangerous to
women, but quite the opposite, since where women started participating
in markets, they ended up not only surviving, but even obtaining some
recognition, as merchants if not as wives: “Everywhere and since the
Middle Ages, the development of markets boosted the legal autonomy of
women” (p.144).

Credit was then not limited to the world of the merchants, as often
described, but penetrated, although unevenly, all classes of society. As
early as the first half of the sixteenth century, Rabelais could write
that “nature created man only to lend and borrow.” Usury laws were
unable to restrict the ubiquity of credit, as the Church actually
abandoned applying them as early as the sixteenth century. At that time,
the states took over the issue and maintained or reinforced usury laws,
but let develop a jurisprudence which allowed for many exceptions and
by-paths.

Credit was ubiquitous and diverse, but Fontaine argues that its
diversity can be better understood using a bipolar lens. Step by step,
her book builds a representation of the credit market that distinguishes
two ideal-types of credit relationships. These two ideal-types are
clearly delineated in chapter 8 thanks to the use of Shakespeare (_Timon
of Athens_ and _The Merchant of Venice_), Molière and the _Tableau de
Paris_ by Louis-Sébastien Mercier. The first one is “aristocratic” the
second one “merchant.”

In the aristocratic world, credit relationships are embedded in social
relationships and religious imperatives: interest is frequently hidden
or in kind, or even disguised in voluntary gifts, debts have no definite
term or can be prolonged indefinitely, the relationship between debtor
and creditor is statutory or personal. In the merchant world on the
other hand, the contract is precisely defined and respected thanks to
strong guarantees, and the relationship is impersonal or among equals
thanks to a strong role of the law. If this distinction is similar to
the one usual among anthropologists, Fontaine’s claim is actually very
different: first because she argues both types of relationships
co-existed permanently (even if their relative importance varied) and
most people could enter both types of relationships, choosing with whom
to contract. Second because the market was not intrinsically less humane
than the personal relationship: if less open to credit restructuring for
personal reasons, it was more rule-based and thus more protected against
the creditor’s power. So individuals chose both what type of
relationship they wanted to enter and with whom to enter it. They,
usually, had some choice, and the social environment, although
constraining, was also a space of opportunities.

Even more important, Fontaine shows that the aristocratic and the
merchant economies not only conflicted but also penetrated each other.
Chapter 6 is very illuminating in that respect, showing that pawnshops
(monte di pieta) were invented in the early fifteenth century by
Franciscans wanting credit to become a complement to charity, one
through which the poor could get more autonomy and capacity to exert
their talents, although escaping the dangers of usury and over-indebtedness.

The last chapter on the social construction of credit provides the
reverse example: while Franciscans accepted the role of credit markets
in helping the poor, merchants never entirely rejected some
“aristocratic” dimension of credit. Analyzing bankruptcies and the
relationships among merchants in hard times, Fontaine shows that they
appealed to the community to which they belonged, and obtained help as
long as they were truly integrated into it, much like in the
aristocratic economy.

The book then concludes that both market and personal relationships were
always present in early-modern credit, but focuses mostly on the role of
the market in allowing the emancipation of the poor and the development
of their capabilities, in an explicit reference to Amartya Sen.
Although I had great pleasure in reading this convincing and powerful
book, a few critical remarks must be added. First, although the book’s
approach encompasses many topics, some important ones are missing. The
practices and culture of credit among merchants is given little place.
This is certainly intended as a necessary correction in view of its
excessive place in the previous literature, but the correction is
probably also excessive. Public credit is also absent, to some extent in
contradiction with the author’s very views on the relationships between
princes and some of their aristocratic creditors. Maybe most
importantly, this is a history with little historical change. As
mentioned earlier, some changes are mentioned in various chapters, but
no answer is given to the most important question: if there was a
substantial change in the way credit markets worked from the sixteenth
to the nineteenth centuries, what was that change and where did it come
from? The author could have linked the emancipation towards the power
element in aristocratic relationships with the development of legal and
representative institutions; nevertheless, law is little present except
in the chapter on women, and politics is altogether absent. Finally,
contemporary economic thought and modern theory are absent. Both have
nevertheless proved to be useful in order to understand early modern
economies (see e.g. Grenier’s _L’économie d’Ancien Régime_ as an attempt
based on contemporaries). Fontaine actually uses some concepts from
imperfect information theory, but quite clumsily. These remarks suggest
that an even broader synthesis would be welcome in order to provide a
truly comprehensive view of early modern credit.

Some of the book’s arguments are not well presented, and would have
gained from better writing. The author frequently makes the point that
personal debts were extended for long periods, but does not relate this
clearly to the annuities model which was so dominant in farming and
public debt in the period. Over-indebtedness is forcefully asserted, but
insufficiently demonstrated in economic terms, since payment flows
should be related to incomes rather than volumes of debts to assets.
More seriously, the author argues that the fact that the poor invested
all their income in clothes or jewelry reflected a “preference for
illiquidity” (e.g., p. 132), when actually these goods were chosen
because they were highly liquid (thanks to the pawnshops the author
describes so well), and were given preference over money because of the
riskiness of money that could be stolen or be forcefully borrowed by
relatives.

Other remarks are more formal. Although the book is quite beautiful, it
is not well edited. Chapter two is somewhat repetitive of chapter one,
some developments (e.g. on women’s legal status on pp. 134-56) are too
long and are not well integrated into the general story. A more careful
reading by the publisher would also have avoided the repetition of
entire sentences (pp. 164 and 165, pp. 185, 186 and 189, pp. 244 and
265) or quotes badly cut (p. 172).

In spite of these small shortcomings, this book remains an impressive
synthesis and a brilliant essay. One should hope that it will be rapidly
translated into English in order to get the wider readership it deserves.

References:
Jean-Yves Grenier, _L’économie d’Ancien Régime: un monde de l’échange et
de l’incertitude_, Paris, Albin Michel, 1996.
Philip T. Hoffman, Gilles Postel-Vinay, and Jean-Laurent Rosenthal,
_Priceless Markets: The Political Economy of Credit Markets in Paris,
1660-1870_, University of Chicago Press, 2001.


Pierre-Cyrille Hautcoeur is Professor of economics at Ecole des Hautes
Etudes en Sciences Sociales and Paris School of Economics, Paris. His
recent publications include _Le marché financier français au 19e
siècle_, Paris, Publications de la Sorbonne, 2007, the edition of a
special issue of _Histoire et Mesure_ on bankruptcies, "Bankruptcy Law
and Practice in 19th Century France," in _Insolvency and Bankruptcy
Laws: Issues and Perspectives_ (JAI University Press, 2008) and "Why
Didn't France Follow the British Stabilization after World War One?"
(with M. Bordo), _European Review of Economic History, 2007.

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