Martin Luther and Free Enterprise

Seth Godin’s book, Linchpin, provoked my attention concerning the impact of the Reformation on Free Enterprise. Seth concludes that one of the unintended consequences of Martin Luther’s life is the increase in prosperity and economic freedom resulting from the birth of Protestantism.  Read this excerpt and decide for yourself.


The Protestant Reformation permitted the explosion of commerce that led to the world we live in now. Once the Reformation began to spread, Martin Luther was heavily lobbied by powerful local interests. In response, he gave princes and landlords the moral authority to take over the commons and rent the land back to the people who lived on it.

The new church was looking for political support, and its embrace of mercantilism guaranteed that it would get that support from power brokers that had chafed under the Catholic Church’s opposition to the practice of charging interest and the commercialization of formerly common lands. (The Catholic Church wanted to keep local lords, princes, and kings weak, of course because it was built around a strong universal leader, the pope.)

One of the factors in the growth of the Protestant Reformation was that commercial interests supported its spread because they needed the moral authority to lend and borrow money. It’s hard to overestimate how large of a shift this led to in the world’s culture and economics.

As Thomas Jefferson wrote, it created a world where “the merchant has no homeland.” If everyone is a stranger, it’s a lot easier to do business. If everyone is a stranger, then we can charge for things that used to be gifts. The merchant class was essential to imperialism and to the growth of the money culture, but it can’t exist without a culture that encourages moneylending.

This thinking destroyed many traditional tribes, but permitted the growth of commerce-based organizations. The East India Company or the fashion houses of France or the banks of Italy could never have existed in a world that honored a ban on usury.

Martin Luther saw that embracing the needs of local power brokers could enhance the spread of Protestantism. With little alternative, the pope followed suit. The ban on usury was refined, double-talked, and eventually eliminated. The money flowed, investments were made, businesses grew, and productivity soared. People could view every transaction as a chance to lend or make money because they were independent agents. Everyone became a businessman, a borrower, or a lender.

Suddenly, your tribe was a profit center. If you knew a lot of people, you could make money from them. Social leadership magically translated into financial leadership.

For the last five hundred years, the best way to succeed has been to treat everyone as a stranger you could do business with. This is one reason that some multilevel marketers and insurance salesmen make people nervous. It seems to cross the tiny remaining gulf between business and the tribe. As the lines have crossed, we’ve abandoned the idea of a village as a tribe. Instead, we’re left with the tribe of our birth family and the tribe at work. We practically live with the people we work with, and we identify with them.

Now we live in a world where corporate tribe members are likely to be as important to us as our family. Do you talk to your sister more often than you talk to your boss? What about the head of Midwest sales?

Human beings have a need for a tribe, but the makeup of that tribe has changed, probably forever. Now, the tribe is composed of our coworkers or our best customers, not only our family or our village or religious group.

This double shift means that the best professional entanglements aren’t with strangers; they are with the tribe. Given a choice between an insider or an outsider, we choose to work with insiders. But tribe members are family, and we shouldn’t be charging them interest! Tighter bonds produce better results, and so the gift culture returns. Full circle, from gift to usury and back to gift.

A loan without interest is a gift. A gift brings tribe members closer together. A gift can make you indispensable.


The Forgotten Act of the Gift

For five hundred years, since the legalization of usury and the institutionalization of money, almost every element of our lives has been about commerce.

If you did something, you did it for money, or because it would lead to money. Sure, you still don’t charge your kids for dinner, but you also don’t encourage your kids to sweep up at the supermarket for free. Why should they? It’s someone’s job.

Real gifts don’t demand reciprocation (at least not direct reciprocation), and the best kinds of gifts are the gifts of art.

Godin, Seth (2010-01-19). Linchpin: Are You Indispensable? (pp. 156-158). Penguin Group.



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