From Merchant Capital to Banking (1600–1848) — a part of the book Zurich as an International Financial Centre by Dr Alexander Ressos.
Part C covers the two and a half centuries in which Zurich’s merchant capital took institutional form. Between 1600 and 1848 the city’s silk and cotton merchants organised production in the countryside through the putting-out system, accumulated fortunes and lent them at home and abroad, and the authorities founded the first bank in Switzerland to invest surplus public funds. The period closed with revolution, the collapse of the old order and the creation of the Federal State and its currency.
Chapter I describes the Verlag system of the Zurich countryside and the merchant bankers who financed it: the advance of raw material and wages to home workers, the city’s commercial monopoly, the Kaufmännisches Direktorium and the investment of merchant fortunes in mortgages, lordships and foreign loans. Chapter II examines Leu & Co., founded in 1755 by the Zurich authorities as the Zinskommission, and its model of state-sponsored lending, from its foreign government loans through the losses of the revolutionary era to its absorption into Credit Suisse. Chapter III follows Zurich’s wealth and institutions through the Stäfner Handel, the French invasion, the Helvetic Republic, the Mediation, the Restoration and the liberal regeneration after the Ustertag of 1830. Chapter IV turns to the Federal Constitution of 1848, the unified economic area, the Coinage Act of 1850 that introduced the franc, the Latin Monetary Union and the note-issuing banks that preceded the Swiss National Bank.
Together these chapters explain how Zurich entered the industrial age with accumulated capital, experience of international lending, a liberal legal order and a national currency. Part D follows the half-century in which Alfred Escher and his contemporaries turned these assets into railways, a universal bank, a polytechnic school and an organised stock exchange.
This part belongs to Zurich as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
The Verlag system, proto-industry and the merchant bankers — overview and summary
In 1750 two brothers of an old Zurich family, Caspar and Hans Conrad Schulthess, opened a silk business in the house “Zum gewundenen Schwert” on the Limmatquai. Read more Zurich · From Merchant Capital to BankingZurich’s economy between 1600 and 1790
At the beginning of the seventeenth century Zurich was a city-state of a characteristic Swiss kind. Read more Zurich · From Merchant Capital to BankingThe Verlag system in the Zurich countryside
The term Verlagssystem denotes a form of decentralised production founded on home work. Read more Zurich · From Merchant Capital to BankingMerchant houses as providers of credit
Every stage of the putting-out system involved credit. The merchant who imported raw cotton from the Levant or raw silk from Italy paid for it months before the finished cloth could be sold, often… Read more Zurich · From Merchant Capital to BankingThe Kaufmännisches Direktorium, the post and commercial information
On 30 October 1662 the council of Zurich established the Kaufmännisches Direktorium, the Merchants’ Directorate, to organise the rapidly expanding textile trades. Read more Zurich · From Merchant Capital to BankingCity privileges and rural grievances
The putting-out system in Zurich operated within a political order that reserved trade and the crafts to the burghers of the city. Read more Zurich · From Merchant Capital to BankingThe merchant elite
The merchant elite of eighteenth-century Zurich was small, interrelated and remarkably stable. Read more Zurich · From Merchant Capital to BankingZurich capital abroad
In the Middle Ages the Swiss cities had been net importers of capital, borrowing from Lombard and Jewish lenders and from the rentiers of the Upper Rhine (see Part A). Read more Zurich · From Merchant Capital to BankingEconomic thought of the Zurich Enlightenment
The Zurich Enlightenment reflected on the economy of the city-state from within its ruling class. Read more Zurich · From Merchant Capital to BankingFrom merchant house to private bank
The history of the Schulthess house with which this chapter opened illustrates how merchant houses became banks. Read more Zurich · From Merchant Capital to BankingLeu & Co. (1755) and the state as investor — overview and summary
On 15 April 1755 a small committee of Zurich magistrates began to receive money in a single room of the town hall on the Limmat. Read more Zurich · From Merchant Capital to BankingA republic with money to spare: Zurich’s public finances in the eighteenth century
The Zurich state of the seventeenth and eighteenth centuries was a city republic that ruled a sizeable rural territory. Read more Zurich · From Merchant Capital to BankingJohann Jacob Leu: magistrate, jurist and lexicographer
Johann Jacob Leu was born in Zurich on 26 January 1689, the son of Hans Jacob Leu, a member of the council and bailiff, and of Dorothea Heidegger. Read more Zurich · From Merchant Capital to BankingThe founding of the Zinskommission, 1750–1755
The immediate origins of the commission lie in deliberations of the early 1750s. According to the Neue Deutsche Biographie, Leu, as a member of a commission appointed to address the surplus of… Read more Zurich · From Merchant Capital to BankingOrganisation, mandate and governance
The Zinskommission had a two-tier structure. An extended commission, presided over by Leu and consisting of nine further members of the councils, met quarterly and set general policy. Read more Zurich · From Merchant Capital to BankingThe portfolio: lending to the sovereigns of Europe
The first investments of 1755 set the pattern for the following four decades. The commission bought French obligations, English annuities and paper of the Vienna Stadtbank. Read more Zurich · From Merchant Capital to BankingThe shadow side of the portfolio: colonial entanglements and the archive
For most of the twentieth century the history of Leu & Co. was written by the bank itself, in the jubilee volumes of Julius Landmann (1905) and Theo Keller (1955). Read more Zurich · From Merchant Capital to BankingOther republics, other models: Bern, Basel, St. Gallen and Geneva
Zurich was neither the first nor the largest Swiss investor on the European capital market. That distinction belongs to Bern. Read more Zurich · From Merchant Capital to BankingRevolution, occupation and privatisation, 1798
The collapse of the old Confederation in 1798 is the subject of Chapter C.III, and only its consequences for the commission are considered here. French troops entered Zurich on 27 April 1798. Read more Zurich · From Merchant Capital to BankingFrom Leu & Cie. to the Aktiengesellschaft Leu & Co.: the nineteenth century
The first half of the nineteenth century transformed the former commission into a domestic institution. Read more Zurich · From Merchant Capital to BankingBank Leu in the twentieth century and its absorption into Credit Suisse
By the beginning of the twentieth century Leu had grown into one of the leading banks of the country. Read more Zurich · From Merchant Capital to BankingThe legacy: the state as investor from 1755 to the present
The Zinskommission of 1755 was an early answer to a question that every prosperous small state eventually confronts: what should a public authority do with capital that exceeds its immediate needs,… Read more Zurich · From Merchant Capital to BankingRevolution, Helvetic Republic, Mediation and Restoration — overview and summary
On 5 June 1798 French soldiers opened the vault beneath the Grossmünster in Zurich, in which the republic of the guilds had kept its reserve of coin, and carried the contents away. Read more Zurich · From Merchant Capital to BankingThe Stäfner Handel and the end of the old regime
By the last decades of the eighteenth century the villages on the shores of Lake Zurich had become some of the most prosperous rural communities in Europe. Read more Zurich · From Merchant Capital to BankingThe French invasion, the state treasure and the war of 1799
The French invasion of the spring of 1798 was directed first against Bern. General Alexis Balthasar Henri Antoine von Schauenburg organised the operations. Read more Zurich · From Merchant Capital to BankingThe Helvetic Republic: unitary state, freedoms and fiscal failure
On 12 April 1798, in Aarau, 121 deputies from ten cantons constituted the Helvetic Republic, one and indivisible, on the basis of a constitution drafted in Paris. Read more Zurich · From Merchant Capital to BankingThe Mediation: the canton restored
The Act of Mediation of 19 February 1803, drawn up by Napoleon Bonaparte with the Helvetic Consulta that he had summoned to Paris, served as the fundamental law of Switzerland from 10 March 1803… Read more Zurich · From Merchant Capital to BankingRestoration: the Federal Treaty and the return of the patriciate
The collapse of Napoleon’s power after the battle of Leipzig in October 1813 gave the conservative forces in Switzerland the opportunity to reverse part of the revolutionary settlement. Read more Zurich · From Merchant Capital to BankingThe Ustertag and the liberal regeneration
The July Revolution in Paris in 1830 gave the signal for a wave of constitutional movements in the Swiss cantons. Read more Zurich · From Merchant Capital to BankingMoney and public finance under successive regimes
Between 1798 and 1848 Zurich lived under five monetary regimes in rapid succession. Read more Zurich · From Merchant Capital to BankingThe legacy for the financial centre
The half-century between the Stäfa memorial and the federal state left Zurich with an institutional inheritance that its later financial centre would draw on in several ways. Read more Zurich · From Merchant Capital to BankingThe Federal State of 1848 and the Swiss franc — overview and summary
Every transaction booked in Zurich today, whether a foreign-exchange swap on a trading floor at Paradeplatz, a mortgage drawn down at a cantonal bank or a custody fee debited in a private bank on the… Read more Zurich · From Merchant Capital to BankingFrom the Sonderbund War to the Federal Constitution of 1848
The Confederation that emerged from the Congress of Vienna under the Federal Pact of 1815 was an alliance of twenty-two sovereign cantons with a common Diet (Tagsatzung), a rotating directorial… Read more Zurich · From Merchant Capital to BankingThe economic constitution of 1848: a single market
Before 1848 the Swiss internal market existed only in a very limited sense. The Federal Pact of 1815 had left customs matters essentially to the cantons. Read more Zurich · From Merchant Capital to BankingMonetary disorder before 1850
Switzerland had experienced a unified currency once before 1850. During the Helvetic Republic, the authorities introduced a decimal system in which one franc was divided into ten batzen of ten rappen… Read more Zurich · From Merchant Capital to BankingGulden or franc? The currency debate of 1849 and 1850
The Constitution of 1848 settled the question of competence in two sentences. Article 36 provided: “Dem Bunde steht die Ausübung aller im Münzregale begriffenen Rechte zu. Read more Zurich · From Merchant Capital to BankingImplementing the reform: minting abroad, the great exchange and the federal mint
The Confederation had no mint capable of producing the required volume of coin in time. Speiser, who had written the expert opinion, was also charged with its implementation. Read more Zurich · From Merchant Capital to BankingFrom silver to bimetallism: the Latin Monetary Union
The Coinage Act of 1850 had scarcely taken effect when the international monetary environment changed fundamentally. Read more Zurich · From Merchant Capital to BankingBanks of issue before 1907
The Coinage Act of 1850 regulated coins. Paper money, a different matter, remained for more than half a century in the hands of a variety of cantonal and private banks. Read more Zurich · From Merchant Capital to BankingZurich, Basel and Geneva: three financial places at mid-century
At the time of the founding of the federal state, Zurich was not the leading financial place of Switzerland. Geneva and Basel had older and more internationally connected banking communities. Read more Zurich · From Merchant Capital to BankingThe legacy for the financial centre
The first legacy of the period is the single economic area. The Constitution of 1848 created, within a few years, a customs union, a unified postal system, a common standard of weights and measures,… Read more