Published by EH.Net (June 2014)

Thomas Max Safley, editor, The History of Bankruptcy: Economic, Social and Cultural Implications in Early Modern Europe. New York: Routledge, 2013. xi + 250 pp. $130 (hardcover), ISBN: 978-0-415-68730-0.

Reviewed for EH.Net by Bradley A. Hansen, Department of Economics, University of Mary Washington.

The papers in this volume demonstrate that bankruptcy provides an avenue to explore cultural, as well as economic, dimensions of early modern Europe. The book makes available the work of several scholars that had not been previously available in English. The papers are grouped into three categories: social context, business practice, and institutional change. The categorization is a largely matter of emphasis since most of the papers contain information about each of these areas. In general, the authors take two different approaches to bankruptcy. The first approach uses evidence from bankruptcy cases to provide a window into business practices in early modern Europe. The second approach explores how the methods of resolving bankruptcy cases evolved over time.

Many of the papers in the book use the failures of particular merchants to examine business practices, while others examine large numbers of failures. Mark Häberlein examines the failure of the Sulzer brothers in late sixteenth century Augsburg, with particular emphasis on the ways in which bankruptcy was connected to issues of honor, kinship and gender. He notes, for instance, that bankrupt merchants “had to take their seats among the women during weddings and funerals.” Similar to Haberlein, Mina Ishizu uses the records from the failure of John Leigh, to examine British finance of Atlantic trade, and Dana Stefanova examines how one Viennese bank dealt with the failures of two businesses. Several papers examine the failures of public, or at least semi-public, firms. Paulo Avallone examines public banks in Naples, Mauro Carboni and Massimo Fornasari examine the Monte de pieta in Bologna, and Andre Wakefield examines the failure of Celle’s Zuchthaus.  Thomas Brennan examines court records of over 750 defaults in Champagne between 1769 and 1772, mapping the network of debtors and creditors to explore the development of markets in the region. Similarly, Natacha Coquery examines the bankruptcy records of 120 Parisian shopkeepers during the eighteenth century, and Klas Nyberg and Häkan Jakobsson use merchant bankruptcy cases to reconstruct financial networks in eighteenth century Stockholm.

The remaining papers examine the evolution of institutions, both formal and informal, for dealing with bankruptcy. Paul Fischer compares German legal texts from 1447 and 1749 to document changes in bankruptcy law in the early modern period, noting the decreased emphasis on “shame and infamy” and increased emphasis on efficient administration.  John MacLeod provides a detailed review of changes in laws governing fraudulent transfers by debtors in seventeenth century Scotland. Dave De ruysscher chronicles the changes in the ways that Antwerp merchants dealt with bankruptcy between 1490 and 1540; he finds that Antwerp was an early mover in the shift away from a focus on punishing debtors toward a focus on efficient handling of insolvency. Jerome Sgard provides a comparative analysis of bankruptcy and debt renegotiation in France and England. He finds that, although English bankruptcy law, unlike French bankruptcy law, did not provide mechanisms for renegotiation, English merchants used other legal procedures to facilitate private renegotiation.

The wide variety of the approaches, in terms of geography, time period, and central questions, is both the strength and the weakness of the book. Anyone interested in any aspect of bankruptcy, business practices, institutional change or early modern Europe will be able to find one or more papers they should read. On the other hand, even the scholar most interested in bankruptcy in early modern Europe may not be interested in every chapter.  The papers on the Italian banks and the German Zuchthaus, for instance, are in many ways more concerned with issues of public finance and administration than with business insolvency.

A wide variety of perspectives are represented in the book. Methodologically, however, the approach is fairly uniform.  There is some quantification, but explicit economic theory and statistical analysis are not employed. The methods employed are appropriate for the questions that are asked, but the book raises questions that will probably require more explicit use of theory and statistical analysis. To what extent were the credit networks of bankrupt firms representative of all firms? What consequences did differences in institutions, from one country to another or over time, have for economic performance? To what extent, were different institutional arrangements associated with different rates of business formation, default, or economic growth?

Although Sgard’s paper is the only one that is explicitly comparative, there are several recurring themes throughout the essays. Credit transactions were an essential part of commercial life. Merchants were embedded in dense networks of credit, in which they typically acted as both borrowers and lenders. Credit transactions and insolvency were not just economic issues, narrowly construed, but involved issues of kinship, religion, honor and gender. Changing economic conditions led to changes in the institutions, both public and private, that governed the resolution of insolvency.  In general, the institutions that governed the resolution of insolvency became less focused on the punishment and more focused on efficiency, especially resolving collective action problems among creditors. This book should provide an essential starting point for the comparative historical analysis of one of the central features of capitalism. In addition, it suggests the rich sources that the records of economic failure can provide for historians to answer a wide array of questions.

Bradley A. Hansen is the author (with Mary Eschelbach Hansen) of “Crisis and Bankruptcy: The Mediating Role of State Law, 1922-1932,” Journal of Economic History (2012); “Religion, Social Capital and Business Bankruptcy in the United States, 1921-1932,” Business History (2008), and “The Role of Path Dependence in the Development of U.S. Bankruptcy Law, 1880-1938,” Journal of Institutional Economics (2007).

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