Augsburg: A Capitalist Hub at the Birth of the Modern

Beautiful Augsburg, city of bronzed doors and glory of the German Renaissance, occupies an unusual and mostly unknown position in the history of capitalism as the ‘birthplace of the modern’ in both in free-market theories and self-made magnates. The gable-roofed imperial city did not seem, at first, destined for such: up through the middle of the high Renaissance it was out-ranked in economic importance by the great Italian city-states; by Vienna and Nuremburg, the Swiss cities of St. Gallen and Berne, to say nothing of the Hanseatic League cities. It was certainly no easy feat to surpass these kinds of powerhouses. Yet Augsburg emerged richer, more glamorous, more austere than the others and stayed there for the course of her trailblazing decades, shaping the course of German and European history at the threshold of the modern era

Rarely had a city of the Middle Ages experienced so complete a transformation of its economic structure as had this city in the second half of the 16th century. During the first decades of that century, “Augsburg rose with extraordinary rapidity to the uncontested leadership of South German, indeed all of German, economic life,” wrote Jakob Strieder, a German historian and author of the 1927 classic Jakob Fugger der Reiche (Jacob Fugger the Rich). At home and overseas, the reputation of Augsburg for wealth and for financial strength of its citizens “spread like a fable.” Whenever money was needed in the power centers of the world, loans were sought in Augsburg; the source seemed inexhaustible. Even Martin Luther was impressed. He remarked “Augsburg could produce thirty tons of gold in three weeks, which is more than the Kaiser could do.”

Augsburg, like the “Hansa” that commenced its decline as Augsburg rose in strength, rose with little to no imperial impediment from a weavers’ guild to the seat of continental mining and banking. It turned out families so wealthy and respected their names alone sufficed as an ‘IOU’ or bond-note among Venice’s finicky mercantile class. It spawned the mythological Jacob Fugger, the Catholic priest turned “first capitalist” of the modern era. It also produced Konrad Peutinger, a theorist and humanist who defended the “art of profit” in his writings and wrote exhaustively in support of the rights of business rather than solely those of the consumer.

Throughout most of Medieval Europe, business was controlled by regulations imposed by guilds, rulers, and the Church. The guilds restricted the number of persons allowed to enter a profession and exercised control over the volume of production. Yet, in the 15th and 16th centuries, these practices underwent a radical change. This was due to two main factors: the rapid rise of mining in the economic sphere and new philosophies and theories of Individualism, first fostered in Renaissance Italy and through the Protestant Reformation, in the intellectual sphere. This latter was a response to the growing business needs of the time.

In the transition from the Middle Ages, mining developed rapidly in the Holy Roman Empire giving Germany an economic advantage over other European countries. With the decline of Florentine banking — which ruled everything from Papal finances to the financial administration of England — came a substantial boom in South German international trade. Holy Roman Emperor Charles V described the mines as “the greatest gift and source of profit.” By 1600, hundreds of family trading companies were active in Augsburg and sister city Nuremburg. The majority of this centered upon Augsburg.

In that lovely town, trading networks were in place owing to the old fustian (heavy cloth) weaving craft. This then grew into an industry and then into a prized and mighty guild. Astute families — the Welsers, Hochstätter, Binnen, and those intriguing Fuggers — keen to the sign of the times, began to focus on mining and ore with profits from that textile trade.

Jacob Fugger, who had trained to become a priest when called into take over the family’s prosperous weaving dynasty, became the fountainhead of the economic development of his native city. “Following the example of Jacob Fugger and his business methods one great Augsburg trading company after another, rising with and after the Fugger house, entered the mining field. Fugger repaid a hundred fold what he had taken over from his Augsburg and other south German predecessors,” writes Gregory Steinmetz in his lively biography of Fugger, The Richest Man Who Ever Lived (2015). Fugger became the undisputed master of Europe in the economic realm owing to his mining and later banking fortunes. He was the predecessor to the great captains of industry of the 19th and 20th centuries.

This gained Fugger respect from the imperial ruling class and, as Steinmetz points out, it added power to his promotion of an idea then very radical at the time: Government interference in the marketplace was usually counterproductive. “It was an argument he sometimes won but wasn’t fully appreciated for centuries.” Steinmetz adds: “He crusaded for personal and economic freedom at a make-or-break time in the history of capitalism.”

“The story of the development of the capitalistic spirit in Europe is the story of the rise of the powerful individual, the outstanding personality in the field of material culture and of economic life,” writes Strieder, quoted above, in Jakob der Reiche. The rise of Jacob Fugger and of Augsburg was within this context. For more than two decades, “the great Augsburg merchant prince” was chief financial aid to emperors, popes, and great city-states far and wide. “If the Augsburg mercantile genius finally outgrew his early model and became the chief exponent of economic rationalism and business capacity of his time, this was chiefly because of his own great initiative in developing the capitalist spirit, his chief inheritance from Italy, hitherto unattained,” as Steinmetz writes.

Thus, the economic movement that had started in the great commercial centers of Italy, for instance in Venice, Florence, Bologna, and Rome, now followed the main trade routes spread into Germany — especially Augsburg — and also Nuremburg, Ulm, and Regensburg. Augsburg emerged as a powerhouse of capitalism in the space of a few decades. New theories of capitalism followed as well.

Enter Konrad Peutinger. He was one of the wealthy-scholar-gentlemen of his day, born to a well-to-do merchant family and the kind of well-heeled thinker-activist who wields social and political power. The late scholar Mary Catherine Welborn pioneered a study of the obscure Herr Peutinger and of early capitalist/free-market theories in Augsburg and southern Germany in a remarkable essay entitled, An Intellectual Father of Modern Business (1939).

The Augsburg humanist put forth an attack on the medieval practice of strictly regulating the production of goods and fixing prices of goods in favor of the consumer. He advocated absolute freedom of merchants to set as high a price as he thought best and pointed out that this freedom would not hurt the consumer because merchants would not always charge high prices. Furthermore, he argued the benefits left by the merchant class far exceed what they gain in high prices. For example, he and his equally energetic brothers gave the city some of the earliest and most beautiful Renaissance buildings north of the Alps; Jacob Fugger also founded one of the first European public housing projects — the Fuggereri — paid for by individual private means. As for monopolies, Peutinger argued that if strong entrepreneurs like the Fuggers and Welsers gained control of certain commodities — as was the complaint from even the stately likes of the Hanseatic League — it is because they have outperformed the weaker party. And so be it.

It is true that the great trading families such as Fugger had close relations with “the State,” whether the state be in the form of Maximilian I Habsburg or Emperor Charles V. Yet in this historical context, such involvement was not a case of red-tape regulations and the stifling of initiative so much as favoritism shown to a Fugger who shouldered the debts of these imperial adventurers. It was, indeed, Peutinger’s close relationship to Emperor Maximilian that helped pave the way for Fugger to control the mines of Tyrol. But it was Fugger and he alone who made something of them.

As Steinmetz recounts, this public-private mix consisted, for example, of a loan to Archduke Sigmund, the owner of the mines of Tyrol, who paid it back by delivering silver to Fugger at a discount price. Fugger immediately sold the precious metal in Venice at a 50 percent markup.  He went on to fund the rise of the Habsburgs “as global players” and when, in 1495, Hungary’s financial establishment feared an invasion by the Turks, Fugger swooped in “and bought up all the copper mines that he could and made a killing.”  In 1505, he began sponsoring Portuguese explorers, investing in the first expedition to what is now Mombasa, Kenya, “which returned with shiploads of peppers that he sold for a 300% profit.” The Fuggers’ mercantile and banking empire stretched from the Adriatic up to the North Sea and from the Atlantic Ocean across to Eastern Europe. It was he who persuaded Pope Leo X (born a de Medici) to legalize for-profit lending.

“[H]e had an extra quality that lifted him to a higher orbit,” writes Steinmetz. “His coolness and self-assurance allowed him to stare down sovereigns, endure crushing amounts of debt, and bubble confidence and joviality when faced with ruin. Nerve was essential because business was never more dangerous than in the 16th century.”

What maintained this outlook, such nerve? “[T]he drive of strong, creative individualism, the unceasing desire for activity which spurred them on in whatever field they found themselves. … In the final analysis it must be accepted as something inherent in all creative natures,” as Strieder explains. Fugger, even as his health declined, told his family that he had “no intention of stopping” and that he would “seek profit until the end.”

Of all the cities of the Holy Roman Empire, Augsburg received the largest share of the Renaissance spirit. In no other place in Central Europe did economic, political, and intellectual conditions converge in such a way as to foster a new kind of business environment and a new kind of businessman and theorist — whether a Fugger, a Peutinger, or the other hundreds of great families. As gallant as she is gorgeous, Augsburg gave birth to European liberal economics and nurtured the rise of the Individual. Let us hope that spirit may infect the continent once more.


Marcia Christoff-Kurapovna contributed feature pieces and op-eds on Swiss and Liechtenstein banking issues for The Wall Street Journal Europe while based in Vienna, Austria; she also authored a column, ‘Swiss Watch.’ She currently lives in Washington, DC where she is a speech and op-ed writer to foreign dignitaries.