Will We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real Change?

Will the Peasants Go Medieval On Bankers?

While everyone from Tony Blair to Nouriel Roubini is debating whether or not bankers should be hung, the Wall Street Journal and Bloomberg provide some fascinating historical context.

The journal’s Jason Zweig reports:

Financial criminals throughout history have been beaten, tortured and even put to death, with little evidence that severe punishments have consistently deterred people from misconduct that could make them rich.

The history of drastic punishment for financial crimes may be nearly as old as wealth itself.

The Code of Hammurabi, more than 3,700 years ago, stipulated that any Mesopotamian who violated the terms of a financial contract – including the futures contracts that were commonly used in commodities trading in Babylon – “shall be put to death as a thief.” The severe penalty doesn’t seem to have eradicated such cheating, however.

In medieval Catalonia, a banker who went bust wasn’t merely humiliated by town criers who declaimed his failure in public squares throughout the land; he had to live on nothing but bread and water until he paid off his depositors in full. If, after a year, he was unable to repay, he would be executed – as in the case of banker Francesch Castello, who was beheaded in 1360. Bankers who lied about their books could also be subject to the death penalty.

In Florence during the Renaissance, the Arte del Cambio – the guild of mercantile money-changers who facilitated the city’s international trade – made the cheating of clients punishable by torture. Rule 70 of the guild’s statutes stipulated that any member caught in unethical conduct could be disciplined on the rack “or other corrective instruments” at the headquarters of the guild.

But financial crimes weren’t merely punished; they were stigmatized. Dante’s Inferno is populated largely with financial sinners, each category with its own distinctive punishment: misers who roll giant weights pointlessly back and forth with their chests, thieves festooned with snakes and lizards, usurers draped with purses they can’t reach, even forecasters whose heads are wrenched around backward to symbolize their inability to see what is in front of them.

Counterfeiting and forgery, as the historian Marvin Becker noted in 1976, “were much less prevalent in Florence during the second half of the fourteenth century than in Tuscany during the twentieth century” and “the bankruptcy rate stood at approximately one-half [the modern rate].”

In England, counterfeiting was punishable by death starting in the 14th century, and altering the coinage was declared a form of high treason by 1562.

In the 17th century, the British state cracked down ferociously on counterfeiters and “coin-clippers” (who snipped shards of metal off coins, yielding scraps they could later melt down or resell). The offenders were thrown into London’s notorious Newgate prison. The lucky ones, after being dragged on planks through sewage-filled streets, were hanged. Others were smeared with tar from head to toe, tied or shackled to a stake, and then burned to death.

The British government was so determined to stamp out these financial crimes that it put Sir Isaac Newton on the case. Appointed as warden of the Royal Mint in 1696, Newton promptly began uncovering those who violated the financial laws of the nation with the same passion he brought to discovering the physical laws of the universe.

The great scientist was tireless and merciless. Newton went undercover, donning disguises to prowl through prisons, taverns and other dens of iniquity in search of financial fraud. He had suspects brought to the Mint, often by force, and interrogated them himself. In a year and a half, says historian Carl Wennerlind, Newton grilled 200 suspects, “employing means that sometimes bordered on torture.”

When one counterfeiter begged Newton to save him from the gallows – “O dear Sr no body can save me but you O God my God I shall be murderd unless you save me O I hope God will move your heart with mercy and pitty to do this thing for me” – Newton coldly refused.

The counterfeiter was hanged two weeks later.

Until at least the early 19th century, it remained commonplace for counterfeiters and forgers to be put to death; between 1792 and 1829, for example, notes Wennerlind, 618 people were convicted of counterfeiting British paper currency, and most of them were hanged. Many were women.

Bloomberg provides details of one “peasant revolt” stemming from a Libor-like currency manipulation scheme:

During the “Good Parliament” of 1376, public discontent over [manipulation of currency exchange rates similar to the current Libor scandal] came to a head. The Commons, represented by the speaker, Peter de la Mare, accused leading members of the royal court of abusing their position to profit from public funds.

A particular target was the London financier Richard Lyons ….

Initially the government bowed to public pressure. Lyons was imprisoned in the Tower of London and his properties and wealth were confiscated. Other leading courtiers implicated in these abuses, such as Latimer and the king’s mistress, Alice Perrers, were banished from court.

Once parliament had dissolved and the public outcry had died down, however, the king’s eldest son, John of Gaunt, acted to reverse the verdicts of the Good Parliament. Latimer and Perrers soon reappeared at the king’s side and Lyons was released from the Tower and recovered his wealth, while the “whistleblower” de la Mare was thrown in jail. The government also sought to appease the wealthy knights and merchants that dominated parliament by imposing a new, regressive form of taxation, a poll tax paid by everyone rather than a tax levied on goods. This effectively passed the burden of royal finance down to the peasantry.

It seemed as though everything had returned to business as normal and Lyons appeared to have gotten away with it. In 1381, however, simmering discontent over continuing suspicions of government corruption and the poll tax contributed to a massive popular uprising, the Peasants’ Revolt, during which leading government ministers, including Simon of Sudbury (the chancellor and archbishop of Canterbury) and Robert Hales (the treasurer) were executed by the rebels. This time, Lyons did not escape; he was singled out, dragged from his house and beheaded in the street.

If the King had followed the rule of law – and kept Lyons and the boys in jail – everything would have calmed down. The monarchy – just like the present-day government – chose to ignore the rule of law, and protect the thieves and punish the whistleblowers.

We have argued for years that the best way to avoid violence is to reinstate the rule of law.

The Bloomberg article – written by a professor of the history of finance and a professor of finance at the ICMA Centre, Henley Business School, University of Reading – ends on a similar note:

The question now is whether public outrage at the Libor scandal and other financial misdeeds [like these] will lead to fundamental reforms of the financial sector — such as the separation of retail and investment banking or legislation to regulate the “bonus culture” — or just more cosmetic changes that fail to address the structural issues.

Will we have to wait for a 21st century peasants’ revolt before seeing any real change?

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  • john

    Unfortunately, and at our great peril, the ‘rule of law’ is considered purchasable. This ought to hasten the peasants revolt, as it will likely consist of normal work-a-day folks, weary of the mendacity.

  • “Will the Peasants Go Medieval On Bankers?”

    I know one peasant who wishes for it every day.

    • Douglas W. Trantham

      TO; Jolly Rodger.
      I’m with YA’ !

  • It could even go beyond that. The same problem repeated itself again and again in history. It is usury and the people that extract money from the people by charging interest (mostly Jews) have suffered the consequences again and again. Let’s hope there is a good solution to this problem this time.

    Interest causes wealth to concentrate as the poor pay interest to the rich. Interest can be seen as a tax on poverty to the benefit of the rich. Interest disrupts the flow of money in the economy and causes economic crises. Therefore an interest based economy is inefficient. The following example demonstrates this and also that interest on money is unsustainable in the long run:

    If someone brought a 1/10 oz gold coin to the bank in the year 1 AD, and the money remained there until the year 2000 AD, collecting a yearly interest of 4%, the amount of gold in the account would have been 3.6 * 10^31 kilogramme of gold weighing 6,000,000 times the complete mass of the Earth.

    If interest is charged on a limited scale or over a short timeframe then those problems do not surface. Over time it is inescapable that it reduces large numbers of people to a state of servitude to the money lenders. This is a long term development that transcends the life span of a human. Interest is the main reason why a number of civilisations have failed and why Western civilisation is about to fail. Therefore all interest is usury and the current financial system is a usury financial system.

    • Tom Rogers

      You may have a point, but you really lost me a Mostly JEWS, you bigot

  • Barnetnetdotnet

    “When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.”

    French economist Frédéric Bastiat (1801-1850)

  • One corrective measure available to the information-age is evolution to a higher level of democracy which includes the economy. Yes, financial wizards scheme while mere mortals sleep, and what they come up with will always surprise; the answer is to make them play out in the open where observant people can figure out what is going on.

    Modern fully functional democracy includes the economy.

  • Charlie Brown

    Money has always been the blood of the poor. All the skill in the world can’t make anything or any situation idiot proof against a determined idiot.

  • LaBon Walker

    What has changed since medieval times is people are disconected from reality.The sheriffs men don t take your crops,Your masters have perfected mind control,you cannot see the crime.

    Stalin while murdering millions of his people projected a workers utopia,people all over the world believed in.Hitler had the reichstag fire,Johnson had the bay of pigs,Bush had WMDs.there were no revolts.As Dick Chaney said it s so easy to convince people to act against thier own best interest.
    thats all folks

  • LaBon Walker

    Obama calls in and threatens bankers,then the flash trade meltdown happens,an awesome display of power,Obama calls in the bankers and appoints them advisors with treatment reserved for heads of state.Google the timeline,what does it take?

  • Smells like censorship here… are you guys against freedom of speech? My comment (August 5, 2012 at 3:10 pm) is waitin for moderation for quiet some time now…

  • h3rm35

    Just a quick grammatical question: It’s “hanged” not “hung,” right?