Hautcoeur on Fontaine, _L’économie morale, pauvreté, crédit et confiance,dans l’Europe préindustrielle_

[Book Reviews in Economic and Business History]

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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