One of the more ridiculous myths about the ‘Reformation’, is the puerile concept that ‘capitalism’, or trade and exchange supported by complex financial instruments, banking and shipping; was somehow a ‘Protestant’ invention, arising magically, perhaps from ‘Darwinian’ processes, de novo, in the 17^th century.  The ignorance of this claim is simply astounding.  Post Roman era states in Europe all had various forms of developing market economies and the great monastic estates were certainly ‘capitalistic’ as far back as the 10^th century.  The long duration of market economies is apparent in every region within Europe from 500 AD to 1500 AD.  The Catholic Knights Templar established the world’s first international banking systems in the 12^th century, Catholic Italian families the first international banks of lending (especially to royalty who often reneged on their loans and destroyed the families and banks), and ‘individuality’ was enshrined in hundreds of inventions from the fall of Rome to the creation of the printing press of 1450; all of which needed capital, innovation, exchange and designs.

As Stark comments, ‘….(studies) using GDP per capita as well as growth of GDP per capita from as far back as 1500 for the 15 major European nations, found no significant correlation between Protestantism and the rise of industrial capitalism.’  Monasteries were the great engines of economic trade, arising in the 6^th century and dominating many regions until well into the late Middle Ages.  These centres invented various agricultural techniques and technologies, including the horse collar, 3-field rotation, natural pharmacopoeias, industrial production, wool production, distilleries, wine, beer, textiles, wind and water mills, local banking and a cash-based system of exchange, not to mention Justinian, Canon and Secular laws.

Stark assigns the role of monasteries a prime place in the development of trade and by its derivative social and economic wealth to build a modern society: ‘..they (monasteries) began to specialise in particular crops, or products, and to sell these at a profit allowing them to purchase their other needs, which led them to initiate a cash economy.  They also began to reinvest their profits to increase their productive capacity and, as their incomes continued to mount, this led many monasteries to become banks, lending to the nobility…’

The monks also created paid and skilled labour forces.  This further improved productivity and innovation.  Specialisation of labour was known long before Adam Smith codified the concept in the 18^th century.  As Stark explains, ‘….the great monasteries began to utilise a hired labour force, who not only were more productive than the monks had been, but also more productive than tenants required to provide periods of compulsory labour.  Indeed, these tenants had long since been satisfying their labour obligations by money payments.  Thus, as ‘religious capitalism’ unfolded, monks still faithfully performed their duties, but aside from those engaged in liturgy, the rest now ‘worked’ as executives and foreman.  In this way, the medieval monasteries came to resemble remarkably ‘modern’ firms – well administered and quick to adopt the latest technological advances.’

In you read unbiased accounts of the medieval era, it is obvious that by the 12^th century, forms of capitalism, banking, cash exchange, credit financing and extended trade routes and terms of trade, were already established.  By the 13^th century influential Catholic theologians including Aquinas and Abertus Magnus, had reaffirmed the right to make a ‘reasonable’ profit, as long as laymen were not treated unjustly through price manipulation or usurious loans.  Their comments on pricing indicate an approval of market rates and matching supply and demand.  The medieval era was also rife with price and quality regulation and surveillance, including loan rates which were managed by state and church to match ecclesiastical expectations.  There is little difference when compared to the state regulation of rates and prices today. 

The monastic conception of capitalism was of course copied and improved by Italian city states, starting as early as the 10th century.  There was a veritable explosion of capital, credit, banking innovation, accounting and other features of a modern economy in Italy from the 10^th to 16^th centuries.  Italians became the financiers of the European economy, including much to their detriment in many cases, the provisioners of loans to Kings and their wars, many of which would default causing the invested Italian families and their banks to fail.  This expansion in Italian merchant activity is often equated with ‘Reformation’ but like so many myths, it an absolute nonsense.  Long before the 16^th century, the Italians were at the forefront of wool, textiles, manufacturing, and long-distance trade and its associated investments and insurance.  This was due to many factors, including geography, proximity to Mediterranean trade routes, a long history of interconnectedness with Mediterranean regions and beyond, capital and intellectual flight from Christian Byzantium in the face of the Muslim Jihad and destruction of Constantinople (completed in 1453, but after 1204, it was a failing state).  As Stark writes concerning Italy, ‘In the tenth century they rapidly began to emerge as the banking and trading centres of Europe, exporting a stream of goods purchased from suppliers in Northern Europe, especially in Flanders, Holland and England, their primary customers being Byzantium and the Islamic states, especially those along the coast of North Africa…For example, eyeglasses…were mass produced in both Florence and Venice and tens of thousands of pairs were exported annually.’

The competition between Catholic Italian city states starting in the 10^th century, created innovations in capital organisation.  Banks proliferated.  This gave the needed grease and oil to move the machine of industry and manufacturing along with associated trade and exportation.  As Stark states, ‘By the thirteenth century there were 38 independent banks in Florence, 34 in Pisa, 27 in Genoa, 18 in Venice – a combined total of 173 in the leading Italian city states.  Moreover, most of these Italian banks had foreign branches.  In 1231 there were 69 Italian banking houses operating branches in England and nearly as many in Ireland.’

It is thus ridiculous and contrary to facts to make the oft-cited claim that ‘Protestantism’ or the ‘Reformation’ initiated the modern capitalist-trade systems, along with aligned institutions, mores, and culture.  Any artefact of a modern system already existed during the Medieval period, including Parliaments, national laws, regulations, price controls, exchange controls, banking, international credit, local credit, and culture adopting technology and innovation.  The ‘Reformation’ did not invent anything to do with a modern political-economy.  That is simply a factual truth.