And how shall we describe the spirit of enterprise? It is the resultant of the combination of all the qualities of the soul necessary for the successful consummation of an undertaking. These qualities may be divided, on the one hand, according to the different functions an undertaker has to carry out; and on the other, according to their importance, which varies with the varying work of the undertaker. But in every case the successful undertaker must be a trinity composed of (1) conqueror, (2) organizer, and (3) trader.

66. CALCULATION AND CAPITALISM1

A great part of capitalist economy is taken up with the making of contracts and agreements concerning commodities and services that have a money value (as the purchase of the means of production, the sale of the finished products, the engaging of labor, and so forth). Moreover, the beginning and the end of capitalist economic activities is a sum of money. Consequently, calculation forms an important element in the capitalist spirit, and this was recognized quite early in the history of capitalism. By calculation I mean the tendency, the habit, perhaps more the capacity to think of the universe in terms of figures, and to transform these figures into a well-knit system of income and expenditure. The figures, I need hardly add, always express a value, and the whole system is intended to demonstrate whether a plus or a minus is the resultant, thus showing whether the undertaking is likely to bring profit or loss.

The mechanism of calculation rests on two branches of study, commercial arithmetic and bookkeeping.

The cradle of commercial arithmetic was in Italy; or, to be more precise, in Florence. The appearance of Leonardo Pisano's Liber Abbaci, in 1202, laid the foundations of correct calculation. But the foundations only, for the true art of calculating was learned but slowly. It was not until the thirteenth century that the Arabic numerals became acclimatized in Italy, and everyone can see how without them quick and exact calculation would be well-nigh impossible. Yet as late as 1299 the use of Arabic numerals was forbidden the brethren of the Calimala gild. But from the fourteenth century in Italy, and from the fifteenth and sixteenth in northern lands, the art of reckoning made swift progress. Calculations with figures

1 Adapted by permission from Werner Sombart, The Quintessence of Capitalism, pp. 125-29. (E. P. Dutton & Co., 1915.)

supplanted the unwieldy method of calculating by tallies. Long before Tartaglia, the mathematical genius of the sixteenth century, who perfected the art of commercial arithmetic, a new kind of "total" calculation in respect of goods had become popular among Italian tradesmen. It was spoken of as the "welsh" (foreign) practice, and, indeed, its origin was in France and Germany, whence it had been brought to Italy at the beginning of the sixteenth century. Its first German exponent was Heinrich Grammateus, who set it forth in his Arithmetic (1518). In the fifteenth century the decimal fractions were "discovered," and from 1585 they became more and more generally used through the influence of Simon Stevin. Furthermore, 1615 is the birth-year of the reckoning machine.

As books on arithmetic came to be increasingly printed, commercial arithmetic was gradually simplified. Then the arithmetic schools, which had been growing up since the fourteenth century, more especially in trading cities, helped to spread the knowledge far and wide. In the fourteenth century Florence (Florence again!) had six such schools, which, as Villani informs us, were regularly attended by 1,200 boys, who were taught "the abacus and the elements of commercial arithmetic." Lübeck was the first town in Germany to have schools of this kind; in Hamburg the need for them arose about the year 1400.

The beginnings of well-ordered bookkeeping stretch back into the thirteenth century. The accounts of Pope Nicholas III, of the year 1279-80, and the expenditure book of the city of Florence, of the year 1303, alike bear witness to the fact that simple bookkeeping was practically perfected at that time. Nor was double entry of a much later date. It is doubtful whether it was being applied in the thirteenth century, but the researches of Cornelio Desimonis have proved that, anyhow in the year 1340, the government of the city of Genoa kept its books on a system of partita doppia, the perfection of which was so complete as to lead to the conclusion that it must have been pretty well established for a long time. Evidence of its use in the fifteenth century, both for private and public accounts, we possess in plenty. The completest and most instructive instance is the extant ledgers of Soranzo Brothers, of Venice (1406). The first theoretic treatise on double entry was that of Fra Luca Paciuoli, in the ninth section of the first part of his Summa arithmetica.

Italy was first in the field as the land where commercial arithmetic was in vogue. Its place was taken by Holland in the succeeding

centuries. England caught up the Netherlands in so far as this matter was concerned, and at the beginning of the nineteenth century German tradesmen pointed to England and Holland as the lands which had an advanced commercial education. In Germany itself Hamburg was pre-eminent in this respect.

67. THE STATE AND CAPITALISM1

[NOTE. The author's statement of the ways in which the state hindered capitalism may be summarized as follows: (1) by taxes so heavy as seriously to reduce profits; (2) by mistaken commercial and industrial policies; (3) by attracting to itself large sums of capital for use especially in warlike undertakings. Money invested in profitable public loans was thereby withdrawn from enterprise; (4) by the traffic in public offices, whereby many became rich without need of further exertion; (5) by its attitude of favoritism toward the nobility, who had no interest in commerce.]

When all is said, the advantages that the capitalist spirit enjoyed at the hands of the state in all manner of ways more than compensated for these obstacles.

In the first place, the state wished to help capitalism forward, and so adopted a number of regulations in its favor. Indeed, as we already know, the state was itself one of the earliest of capitalist undertakers and invariably continued to be one of the largest. In this way it set an example to private enterprise; it showed the way in all matters of capitalist organization, and it was educative in questions of commercial morality. By itself engaging in business the state removed the prejudice against "low callings" which prevailed in the precapitalist era; it raised the artes sordidae to the position of being activities fit for gentlemen.

But greater still was the indirect influence of the state, chiefly because of its particular economic policy. Let it not be forgotten that capitalist interests in the era of early capitalism were favored tremendously by the mercantile system. In accordance with the doctrines of mercantilism the state, as it were, almost led the private citizen by the hand in order to direct his activities into the channels of capitalist undertaking. It pushed him into capitalism; it held out good reasons for his remaining there.

I

1 Adapted by permission from Werner Sombart, The Quintessence of Capitalism, pp. 278-88. (E. P. Dutton & Co., 1915.)

As for England, behind ever so many undertakings in the sixteenth and seventeenth centuries we see the monarch as the direct moving force, for he was financially interested in them. The Drakes and the Raleighs were urged, in long interviews, to set out on new expeditions. The idea that Raleigh should sail to Guiana emanated from the impecunious James I, and in the reign of his successor we find the king's agents up and down the country making profitable contracts with industrial undertakers.

Nor must we leave unmentioned the system of privileges by which the mercantile state favored such capitalist interest as already existed, nursed those that were about to take root, and planted new ones. The real meaning of these state privileges (using the word in its widest connotation) is best brought out in a letter of Henry II of France, dated June 13, 1558, in which he expresses the hope that his privileges and benevolence may act as a spur to honest and industrious handicraftsmen to undertake profitable enterprises. In every case the underlying idea was the same to stir up the spirit of enterprise by the inducement of material or other advantages. The privileges took different forms. Sometimes they were monopolies, negative privileges as it were, in that a monopoly for producing a particular article was granted, or a monopoly of trade, or again a monoply in the means of communication. Sometimes they meted out special commercial advantages to their holders; sometimes, too, they were direct bounties.

Similarly, by the break-up of the mercantile system and the introduction of economic liberty in the nineteenth century, the state. also cultivated the spirit of enterprise to a limited extent, it is true, seeing that it already flourished at the time. More effective in the impetus it gave to the capitalist spirit was the stress laid on education in all its branches. We have already observed how the establishment of educational institutions was to be regarded as a sign that the capitalist spirit in one form or another was in existence; here it is our business to lay stress on their importance as a nursery of that spirit.

Some branches of state activity influenced the growth of the capitalist spirit in a special degree. The first and foremost of these was the army. What was its significance? Specialization had set in, and the demand was no longer for a complete man, struggling for his existence, no longer for a man who possessed both military and economic capacities, but only for half a man-that is to say, for one who devoted himself to military or to economic affairs. The result of

such differentiation was obvious. Those virtues which we have termed "middle-class" had a better chance of growth, and the trading spirit, freed from an admixture of military elements, was able to develop apace. The growth of modern armies has brought two forces to the fore discipline on the one hand, and organizing talent on the other. The influence of standing armies on the capitalist spirit, so far as these two forces are concerned, is plain enough.

Next in importance to the military factor we must consider the finances of the state in their influence on the growth of capitalism. Once more the Jews are the pivot. The princes of modern times were wise enough to utilize for their needs the services of Jewish financiers. The financial system of states was not without effects in other directions too. In its earlier stages its very forms contributed something to the growth of capitalism. We have it on record that the financial methods of the Italian republics are, in many respects, quite modern. In short, public finance furnished the first instance of "applied housekeeping" on a large scale, just as the modern state was the first great "undertaking." In both, therefore, capitalist ideas must have found a model.

As for the public debts, we have in them the first instance of contracts on a large scale which affected larger groups than the clan or the social class, and which therefore looked to other moral forces for their recognition than were to be found in primitive communities. "Social" sanctions had to be created; all those forces on which capitalist intercourse rests-commercial morality, confidence and credit, acceptances in advance over a long period of time with the intention of honoring them. Nowhere did these forces show themselves so early, nowhere was there as much opportunity for their exercise as in the arrangements for the public debts of rising states and cities. But the public indebtedness had other influences also on the capitalist spirit. Speculation was early associated with it; we need only recall the South Sea Bubble in England or the John Law fiasco in France. These may have been swindles; nevertheless they were not without lessons for joint-stock enterprise in later times; and both would have been inconceivable without the peculiar and extensive growth of national debts.

Side by side with the army and the finances of the state we must place as the third great factor the state's ecclesiastical policy. I refer to the creation by the state, chiefly through the institution of a national church, of the conception of the heretic or non-conformist