The Third Pillar: How Markets and the State are Leaving Communities Behind. Raghuram Rajan

5 With little to buy, market transactions and the use of money diminished, and feudal relationships proliferated.

      The feudal manor was thus a closed, hierarchical community, producing much of what it consumed. The peasant’s land holdings were typically in the form of strips in two or three large open fields, intermingled with those of his neighbours. Each peasant followed the same rotation of crops as the others, and had free access to common pastures and woods where each peasant had grazing rights for a certain number of cattle, sheep, or pigs, as well as the right to collect firewood. All this required a fair amount of coordination and give-and-take (the strips were not separated by fences and the commons were open to all in the manor), which required building consensus in the community.

      Each peasant had enough to ensure a subsistence existence. There was little incentive to produce more, since there was not much of a market to sell the surplus in.6 Because the peasant was tied to the land, though, the feudal community was stable, albeit poor. As one historian noted, ‘Most men have never seen more than a hundred separate individuals in the course of their whole lives, where most households live by tilling their great-grandfather’s fields with their great-grandfather’s plough.’7

      The Commercial Revolution

      The nonmonetary feudal economy did relatively well when there were few trading opportunities. Over time, though, Europe learned to trade with, and through, the Muslim lands. Moreover, demand for agricultural products from the growing towns, as well as travel routes that were safer from brigands, helped the revival of trade and commerce. Feudal lords now not only had the opportunity to convert the manor’s produce into money, the money could buy an increasing variety of goods. The growing attraction of producing for, and consuming from, the market did not sit well with traditional feudal practice.

      For key to the feudal system was that the individual did not own the land outright; instead, the peasant managed it while he was able-bodied and passed the management on to his kin when he could no longer manage.8 Everyone in the family had customary rights to the land, which made those rights difficult to sell or turn over. In turn, this ensured that a long-lived community built around that land, but productivity was generally low, since a farmer’s kin were not necessarily good farmers. In fact, the absence of a market protected the peasant – his low productivity hurt his household’s production, but did not jeopardize his right to farm land.

      As feudal lords became more attracted to monetary income, and as land became easier to sell, this changed. In order to enhance production, the feudal lord had to be able to transfer land to more productive tenants or owners. In England, soon after the turn of the millennium, the courts started overlooking the customary rights of kin, making freehold land easier to bequeath or sell.9 Even tenancy that was tied in with feudal obligations, known as copyhold tenancy, became better defined and easier to transfer over time.10 Scholars argue over whether there was a dramatic change in the legal treatment of property, or whether England was intrinsically more favourable to sales. Whatever the reason, the interests of the Church also lay in freeing property from customary entanglements. If the rights of inheritance, for example, narrowed to direct relatives rather than residing with all kin, land would be easier to bequeath to third parties or to sell. And a primary beneficiary of bequests to third parties was the Church. An elderly childless widow or widower could easily be persuaded that their route to salvation lay in willing the bulk of their property to the Church. Even if they were not persuadable, often the only one who could write down a will or hear last orders was the not entirely disinterested parish priest.11

      The net effect of a freer land market was that less-productive peasants had an incentive to sell or were strong-armed into doing so, often to larger landowners who had surplus cash, and who could farm the combined land more profitably. Land holdings became more concentrated in fewer hands but agriculture also became more productive. Unfortunately, a number of peasants were forced into marginal holdings or entirely out of the manorial community as they sold, or were evicted from, the land that tied them to it. At the bottom, holdings became smaller as the size of the peasant family grew. As the small peasant’s holdings were subdivided and average incomes fell, a growing number of second and third sons had to fend for themselves outside the feudal manor. The expansion of the market, as is sometimes its wont, resulted in growing inequality.

      These were therefore extremely difficult times for many European peasants, especially those who no longer had the protection of the manorial community. Average incomes were not only barely above the level needed for subsistence but also were highly variable over time.12 The failure of a harvest or the death of livestock were not infrequent events. One estimate suggests that even the relatively wealthy English peasant could expect to face serious calamity every thirteen years.13 Some work did open up outside farming, especially in the growing towns where merchants and artisans prospered, but it was rarely enough.

      Despite their low and highly variable incomes, death by starvation was surprisingly rare among the peasantry. The reason was simple: informal community support within the manor for those who still belonged to one, and formal charitable institutions run by the Church, such as almshouses, leper houses, pilgrim centers, educational institutions, and monastic hospitals, for those outside the manor, constituted a social safety net. Harder times for the poor explain why the Church became more aggressive in its fight against usury.14

      Usury prohibitions limited the profits that anyone with excess wealth could make by lending to those in difficulty. At the same time, a lender faced a loss of social status and even excommunication if he was condemned as a usurer. Perhaps the businessman was willing to take this risk when young. As he grew older and came closer to the feared inevitable meeting with his Maker, the graphic pictures painted by the clergy of the torments that awaited him in hell were an increasing source of worry. The prohibition on usury thus helped channel the wealth of the rich away from making usurious consumption loans and toward helping poorer unfortunates. Such help could be given informally, or formally through charitable donations to the Church. As in the Hebrew tribes, the prohibition on usury suppressed the market in favour of the community. Thus as the commercialisation of agriculture created greater numbers of the poor, the Church took their side by restricting the debt market.

      The Church’s actions were also not unrelated to the political battles it was fighting at that time with the secular authorities. The reforms initiated by Pope Gregory VII in 1075 – the so-called Papal Revolution – attempted to separate the Church from the feudal hierarchy, especially the domination of the Holy Roman Emperor.15 The details of the conflict, which culminated in the victory of the Church, need not concern us but some aspects are important. In order to attract support for their cause, Church scholars systematised and rationalised the Church’s vast legal traditions. A comprehensive body of canon law emerged, which could now guide ecclesiastical courts, and which helped reaffirm that all Catholic authorities, including the powerful emperor, were constrained by a higher, principle-based, law. Furthermore, in response to competition from the now-more-reliable ecclesiastical courts governed by canon law, feudal rulers developed their own legal system.

      Both the Church and the ruler competed to offer better justice to attract plaintiffs into their courts. Since the poor and the powerless benefited disproportionately from the law, courts consequently became more sympathetic to their problems. Better-enforced usury prohibitions became one element of that competition.

      The Church’s actions thus had mixed effects on the poor peasant. The Church may have helped make property more alienable in order to expand its own wealth.16 Easier alienability allowed feudal lords to move unproductive peasants off their land, rendering them destitute. However, the Church was probably also motivated by the welfare of these very same