How the Renaissance Paved the Way for Modern Finance

The Renaissance is largely remembered for the larger-than-life personalities such as Michelangelo and Leonardo da Vinci who defined it, as well as for their immortal works in painting, sculpture, architecture, which stand as monuments to man’s innate creative forces.  However, the Renaissance was equally as important, if not more so, to modern ideas of education, science, and finance.  During the Renaissance, modern ideas such as growth-oriented tax policy, data-based commercial and fiscal policy, and the welfare state all took seed, and laid the foundation for modern society.

In his magisterial The Civilization of the Renaissance in ItalyJacob Burkhardt addresses these topics and more.  Though it is dated (it was published in 1860), Burkhardt’s work is still largely unsurpassed in its scope and depth.  Below are a few of his observations regarding the Renaissance’s impact on modern society and financial systems:

Regarding indirect taxation and increasing government revenues by promoting growth:

“The chief secret of government in the hands of the prudent ruler lay in leaving the incidence of taxation as far as possible where he found it, or as he had first arranged it.  The chief sources of income were:  a land tax, based on a valuation; definite taxes on articles of consumption and duties on exported and imported goods:  together with the private fortune of the ruling house.  The only possible increase was derived from the growth of business and of general prosperity.”

Regarding the rise of merit-based advancement over hereditary preferences:

“The liberality of the northern princes of the thirteenth century was confined to the knights, to the nobility which served and sang.  It was otherwise with the Italian despot.  With his thirst for fame and his passion for monumental works, it was talent, not birth, which he needed.  In the company of the poet and the scholar he felt himself in a new position, almost, indeed, in possession of a new legitimacy.”

Regarding the idea of the omnipotent State as the solver of all problems, and the curer of all ills:

“The prince is to take everything into his charge, to maintain and restore churches and public buildings, to keep up the municipal police, to drain the marshes, to look after the supply of wine and corn; so to distribute the taxes that the people can recognize their necessity; he is to support the sick and the helpless, and to give his protection and society to distinguished scholars, on whom his fame in after ages will depend.”

Regarding the advent of statistics-based policy and commerce:

“A power whose foundations were so complicated, whose activity and interests filled so wide a stage, cannot be imagined without a systematic oversight of the whole, without a regular estimate of means and burdens, of profits and losses.  Venice can fairly make good its claim to be the birthplace of statistical science.”

Regarding the rise of the professional society, or bourgeoisie:

“In 1478 we have again a most important and and in its way complete view of the commerce and trades of this city [Florence], some of which may be wholly or partly reckoned among the fine arts such as those which had to do with damasks and gold or silvery embroidery, with woodcarving and ‘intarsia,’…The inborn talent of the Florentines for the systematization of outward life is shown by their books on agriculture, business, and domestic economy…”

Regarding the identification of education as a necessity in modern life:

“The Florentine merchant and statesman was often learned in both the classical languages…even the daughters of the house were highly educated.  It is in these circles that private education was first treated seriously.”

It is fair to say, contrary to the misconceptions of many, that modern life is a bit older than we’d like to think.  As Burkhardt wrote, the men of the Renaissance, spurred by the regenerative powers of conflict and struggle, embraced anew the idea of the individual and his capabilities, and whether through commerce, science, or art, pursued knowledge and understanding in a way hitherto unimaginable to their predecessors.  Technological advancement, necessary in order to assure the survival of their respective city-states, helped to unleash their energies, and set the stage for modern Western life.