FIG. 11.2. A Numerical Example of the Game Set Up at Worms
The historians, however, are mistaken, in my opinion. If we look at differences in the income from dioceses in France, for instance, during the reign of Philip Augustus (1179—1223), we discover that the pope overwhelmingly chose people from his own court in poor dioceses, but he chose relatives of the king in moderately well-to-do bishoprics. That is exactly what the game set up at Worms back in 1122 leads us to expect, and that is the key fact that will make the pope want to limit the economic growth that kings can tap into.
When the income is worth 4 points instead of 1, the king gets more value by rejecting a candidate to be bishop who is a papal loyalist than from agreeing to the nominee (4 points versus 3). But if the pope chooses a relative of the king to be bishop, the king is better off saying yes to the candidate than saying no, even though this means giving up the bigger income. The king receives a value equal to 5 points if his relative becomes bishop and only 4 from the income earned in a moderately well-off bishopric. So in wealthier sees, an attentive, politically savvy pope switches his strategy and gives the king someone the king wants. Then the pope earns 3 points for the choice of bishop and another 4 in income. That is the best he can do when he knows the king has an incentive to reject a candidate for bishop that the pope really wants.
Now imagine a really wealthy diocese where the income is worth 6 points. The income from the diocese is worth even more to the king than getting along with the pope. The Church can no longer compete with the monarch for political control—the king just doesn’t care about bishops anymore. He just wants the income, and so he rejects any and all nominees. The Concordat at Worms breaks down and we are in a new world in which kings keep incomes in their territory and popes can pick whomever they want as bishops. That, of course, is essentially the situation for the modern Catholic Church. It remains a major religious body, but it is not a major political-military player.
We can see that Worms set up a system that creates some interesting incentives. The higher the income from a see, the harder it is for the pope to get his preferred candidate as bishop. Valuable sees require the pope to make sacrifices. He has to agree to a bishop who in a pinch is more likely to support the king than the pope—or else the pope loses income. This gives the pope a reason to stymie economic growth outside the Church’s domain. In fact, shortly after 1122, the Church adopted a series of new programs that were likely to hinder economic progress outside the Church. Was that a coincidence? We cannot know, we can only see that changes introduced by the Church—and by kings—after 1122 were consistent with their new incentives created at Worms.
For example, in the First Lateran Council (1123), a gathering of Church leaders to agree on important new rules, we can see that the role of celibacy for the clergy was made more important. The council prohibited the clergy from marrying or having concubines. The Church was clear about the motivation behind the stricter celibacy rules. They seem not to have been designed to promote purity so much as to clarify the Church’s claims on property. The new rules improved the odds that the property of the clergy would belong to the Church rather than to heirs. At the Second Lateran Council (1139), more serious changes were instituted. This council dealt with questions of inheritance and usury. On the inheritance of the private property of deceased bishops, the Church raised the stakes and ensured that they, and not any secular venue, would be the beneficiary:
The goods of deceased bishops are not to be seized by anyone at all, but are to remain freely at the disposal of the treasurer and the clergy for the needs of the church and the succeeding incumbent. … Furthermore, if anyone dares to attempt this behaviour henceforth, he is to be excommunicated. And those who despoil the goods of dying priests or clerics are to be subject to the same sentence.1
By imposing excommunication on violators, the Church raised the risks that families or monarchs ran in trying to seize the “personal” property of deceased clerics. That put the money right where the Church wanted it: in its coffers.
The council went on to make usury “despicable and blameworthy by divine and human laws,” and cut off usurers from the Church, depriving them even of a Christian burial unless they repented. “Usury” in those days just meant lending money with the expectation of making a profit, not necessarily a big profit as the term implies today. Before 1139, usury had been forbidden to the clergy, but it had not been elevated to a mortal sin for ordinary people. The effect of banning moneylending for profit was to raise the price of money and to create a potential shortage of would-be lenders.
Just as modern-day central banks increase interests rates to slow growth, so the twelfth-century Church raised interest rates by denying heaven to those who lent money for profit. Though the Church used scripture to justify its action, there was a widely held view among Church canonists—the Church’s lawyers—that there was no doctrinal ban on usury in early Catholic teachings or scripture. As they noted, Jesus threw the moneylenders out of the Temple. He thought it wrong to engage in such business in the Temple, but he did not argue that the business was wrong. He just wanted it taken outside. And of course we should remember that the Church had not used scripture to ban usury in its preceding thousand years.
Enforcing the ban on moneylending for profit (and why else would someone lend money?), however, proved to be a difficult problem. The sin of usury required intent: the moneylender had to intend to make a profit, so whether the moneylender did or did not actually make a profit was beside the point. The Church recognized how hard it was to determine whether a lender intended to make a profit.
To deal with intent, the Church wisely shifted enforcement from its lawyers to its theologians. They reasoned that while human law might fail to recognize a usurious loan, God knew whether a lender intended to make a profit no matter what subterfuge was used to mask the return. Therefore, anyone having made such a profit and failing to make restitution or to show sufficient contrition before death was condemned eternally.
To facilitate restitution for usury, and to heighten the threat of damnation associated with lending, the Church established new institutions. The Fourth Lateran Council (1215), for instance, made annual oral confession mandatory. The Church distributed confessor’s manuals with specific instructions for dealing with merchants and others likely to have engaged in usury. Through the confessional, the Church provided a means by which those otherwise damned for usury could save their souls. The path to forgiveness, however, generally included making financial restitution to the Church rather than to those from whom a profit had been made. While the threat of eternal damnation was powerful indeed in the twelfth century, still, moneylending continued.
Of course, merchants and others continued to devise clever schemes to hide what they were doing. They not only manipulated exchange rates but also wrote misleading contracts and created false stock companies (sound familiar?) to hide their true financial arrangements. The risks (including eternal damnation) had been raised, so naturally the expected rate of return had to rise too. The consequence was to make loans costlier and thereby to diminish money for investments and growth relative to what it otherwise would have been.