Political money man.

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The Donor Class Doesn't Always Get Its Way

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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It hasn’t been the greatest of months for multibillionaires out to influence the world. Sheldon Adelson, No. 31 on the Bloomberg Billionaires list with $22.8 billion as of this morning, failed in his expensive campaign to thwart a nuclear deal with Iran. Brothers Charles and David Koch, Nos. 5 and 6 with almost $100 billion between them, saw their favorite presidential candidate, Scott Walker, drop out.

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This doesn’t mean an end to the clout of Adelson, the Koch brothers or any of the other super-wealthy donors who have come to play such a big role in U.S. politics since the Supreme Court’s Citizens United decision in 2010. It is an indication, though, that while having and spending lots of money on politics has an impact, it isn't always going to be the impact the donor intends.

I’ve been thinking about this a lot ever since reading Greg Steinmetz’s book,  “The Richest Man Who Ever Lived,” which came out last month. It’s a biography of German banker and businessmen Jakob Fugger, whose wealth at his death in 1525 amounted to about 2 percent of Europe’s total economic output. It’s that ratio that leads Steinmetz, a financial journalist turned financial analyst, to declare him the richest ever.

This claim isn't undisputed; a list of the 10 Richest People of All Time published by Money magazine this summer was dominated by emperors and kings and didn’t include Fugger. Same goes for a Business Insider list from five years ago. But Fugger, a commoner who became stupendously wealthy through shrewd business dealings rather than conquest, does seem like the first of his kind, or at least the first who was so rich he could boss around kings and emperors. He was also, according to Steinmetz, the first millionaire (in florins).

Fugger’s main business was lending money to these kings and emperors, and some princes and dukes and bishops too. What he often got in return was a claim on a local ruler’s mining revenue. He also went directly into copper mining in a big way in Eastern Europe and built a huge foundry and armaments factory. Still, his business always remained inextricably entwined with his lending to nobility -- the 16th century equivalent of political donations. And while that lending made Fugger both rich and powerful, it also ended up unleashing forces he couldn't control.

Fugger loaned Maximilian I and then his grandson Charles V the money they needed to bribe their way to election as Holy Roman Emperor. To secure his copper mining operations, he persuaded Maximilian to marry two of his (Maximilian’s) kids into the Hungarian royal family and in the process create the Austro-Hungarian Empire. Fugger also bankrolled a campaign to strike down the Church’s already much-circumvented ban on charging interest on loans, which culminated in a 1515 papal bull declaring that interest only amounted to usury if the loan didn’t entail labor, cost or risk. Oh, and he built a housing project for the poor that is still in operation.

Those were all cases where Fugger’s money got him pretty much the result he desired. But his unprecedented wealth, and the larger economic changes going on around him, also occasioned a massive backlash. There were two violent uprisings, the Knights’ Revolt of 1522 and the much-bloodier German Peasants’ War of 1524 and 1525. Mercenary armies financed largely by Fugger put down both those revolts, the latter at a cost of more than 100,000 peasant deaths. But another uprising that was intertwined with those two proved too much for him to stop.

It started with another one of Fugger’s lending-to-nobility deals. Albrecht was a young Margrave of Brandenburg who decided in 1514 that he wanted to be Archbishop of Mainz, at the time one of the most powerful positions in Germany. Getting the position required a big payment to the Vatican, and because Albrecht technically wasn’t eligible for the job -- he was too young, he didn’t have a university degree and he was already bishop of a couple of other cities -- Pope Leo X demanded an additional side payment to his personal bank account. The total cost was 34,000 florins, according to Steinmetz. Albrecht borrowed it all from Fugger, and proposed to pay it off through the sale of papal indulgences.

Popes had first offered these blanket absolutions of sin for participating in Crusades, and church officials had subsequently sold them to pay for cathedrals and even bridges. Financing “the bailout of a banker,” as Steinmetz puts it, was a step too far, so Fugger and Leo X cut a deal to use half the indulgence revenue to pay for construction of the new St. Peter’s Basilica, but let Fugger keep the rest.

This infuriated a German monk named Martin Luther, leading him to post his “Ninety-Five Theses” on the door of the church in the town of Wittenberg, unleashing the Protestant Reformation. Luther’s challenge to authority also helped inspire the Knights’ Revolt and Peasants’ War, but he never endorsed either. He wanted to change the Church, not the world around him -- probably because he deemed the kingdom of God far more important than the affairs of man.

Still, Protestantism did have a big impact on worldly affairs. The Protestant Ethic that German sociologist Max Weber famously claimed had paved the way for the rise of capitalism was actually not all that different from Jakob Fugger’s worldview -- work hard, save your money, invest. Other aspects of Luther’s legacy would probably have been less congenial to him. Johannes Gutenberg had built the first printing press in 1450, but it was Luther who first realized its power. Writes Steinmetz:

The presses in Germany produced just thirty-five works in the German language in 1513. In 1520, they printed 208, of which 133 were written by Luther.

The controlling, private Fugger had helped unleash the mass media. Now that’s ironic.

The rise of the billionaires in the U.S. and around the world over the past couple of decades is perhaps not as big a break from the past as Fugger’s ascent was. It is a big deal both economically and politically, though, and it surely will evoke (or is already evoking) a reaction. The prospect of billionaires controlling the U.S. political system has been much discussed, as has the possibility of a political backlash against rising income inequality. But maybe what we’re due for instead is another Reformation. The only question is, a reformation of what?

  1. Steinmetz uses the anglicized “Jacob,” but that seems unnecessary.

  2. Accounts differ. Wikipedia says it’s either 21,000 or 48,000 ducats, and no I don’t know how to convert ducats into florins or, for that matter, into 2015 dollars.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net