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Robinson Crusoe’s Adventures with Payment Systems

 

Robinson Crusoe’s Adventures with Payment Systems

Fans of literature have been familiar with Daniel Defoe’s Robinson Crusoe and his adventures, since 1719. Acclaimed for its romantic sense of adventure that resonated strongly in the 1600s and 1700s, this is a tale that has seen countless adaptations and imitations since, a story that would give Captain Jack Sparrow of the Pirates of the Caribbean fame, a run for his money.

If you were to read this story again, this time a little more closely, you would find there is something of interest for the financial industry enthusiasts. Daniel Defoe happens to document an international payment system in his book… yes, way back in the 18th century.

Payment System – In Crusoe’s Fictional World

“I was now set up for a Guinea trader; and my friend, to my great misfortune, dying soon after his arrival, I resolved to go the same voyage again, and I embarked in the same vessel with one who was his mate in the former voyage, and had now got the command of the ship.  This was the unhappiest voyage that ever man made; for though I did not carry quite £100 of my new-gained wealth, so that I had £200 left, which I had lodged with my friend’s widow, who was very just to me, yet I fell into terrible misfortunes.”

“I was in some degree settled in my measures for carrying on the plantation before my kind friend, the captain of the ship that took me up at sea, went back—for the ship remained there, in providing his lading and preparing for his voyage, nearly three months—when telling him what little stock I had left behind me in London, he gave me this friendly and sincere advice:—“Seignior Inglese,” says he (for so he always called me), “if you will give me letters, and a procuration in form to me, with orders to the person who has your money in London to send your effects to Lisbon, to such persons as I shall direct, and in such goods as are proper for this country, I will bring you the produce of them, God willing, at my return; but, since human affairs are all subject to changes and disasters, I would have you give orders but for one hundred pounds sterling, which, you say, is half your stock, and let the hazard be run for the first; so that, if it come safe, you may order the rest the same way, and, if it miscarry, you may have the other half to have recourse to for your supply.”

This was so wholesome advice, and looked so friendly, that I could not but be convinced it was the best course I could take; so I accordingly prepared letters to the gentlewoman with whom I had left my money, and a procuration to the Portuguese captain, as he desired.

I wrote the English captain’s widow a full account of all my adventures—my slavery, escape, and how I had met with the Portuguese captain at sea, the humanity of his behaviour, and what condition I was now in, with all other necessary directions for my supply; and when this honest captain came to Lisbon, he found means, by some of the English merchants there, to send over, not the order only, but a full account of my story to a merchant in London, who represented it effectually to her; whereupon she not only delivered the money, but out of her own pocket sent the Portugal captain a very handsome present for his humanity and charity to me.

The merchant in London, vesting this hundred pounds in English goods, such as the captain had written for, sent them directly to him at Lisbon, and he brought them all safe to me to the Brazils; among which, without my direction (for I was too young in my business to think of them), he had taken care to have all sorts of tools, ironwork, and utensils necessary for my plantation, and which were of great use to me.

When this cargo arrived I thought my fortune made, for I was surprised with the joy of it; and my stood steward, the captain, had laid out the five pounds, which my friend had sent him for a present for   himself, to purchase and bring me over a servant, under bond for six years’ service, and would not accept of any consideration, except a little tobacco, which I would have him accept, being of my own produce.

Neither was this all; for my goods being all English manufacture, such as cloths, stuffs, baize, and things particularly valuable and desirable in the country, I found means to sell them to a very great advantage; so that I might say I had more than four times the value of my first cargo, and was now infinitely beyond my poor neighbour—I mean in the advancement of my plantation; for the first thing I did, I bought me a negro slave, and an European servant also—I mean another besides that which the captain brought me from Lisbon.”

“This was a fair proposal, it must be confessed, had it been made to any one that had not had a settlement and a plantation of his own to look after, which was in a fair way of coming to be very considerable, and with a good stock upon it; but for me, that was thus entered and established, and had nothing to do but to go on as I had begun, for three or four years more, and to have sent for the other hundred pounds from England; and who in that time, and with that little addition, could scarce have failed of being worth three or four thousand pounds sterling, and that increasing too—for me to think of such a voyage was the most preposterous thing that ever man in such circumstances could be guilty of.

It was some months, however, before I resolved upon this; and, therefore, as I had rewarded the old captain fully, and to his satisfaction, who had been my former benefactor, so I began to think of the poor widow, whose husband had been my first benefactor, and she, while it was in her power, my faithful steward and instructor.  So, the first thing I did, I got a merchant in Lisbon to write to his correspondent in London, not only to pay a bill, but to go find her out, and carry her, in money, a hundred pounds from me, and to talk with her, and comfort her in her poverty, by telling her she should, if I lived, have a further supply: at the same time I sent my two sisters in the country a hundred pounds each, they being, though not in want, yet not in very good circumstances; one having been married and left a widow; and the other having a husband not so kind to her as he should be.  But among all my relations or acquaintances I could not yet pitch upon one to whom I durst commit the gross of my stock, that I might go away to the Brazils, and leave things safe behind me; and this greatly perplexed me.”

Payment Systems – In the Real World

The earliest payment systems go as far back in time as banking does. Merchants were the first ones involved in money lending activities. Temples in Ancient Greece and Rome gave loans as well as accepted deposits of money and changed money. Payment transactions, as we know them today, began to see its origins during the Middle Ages. The 12th century saw the beginning of European-wide banking, where the Templars and Hospitallers acted as bankers to finance the Crusades. They would accept deposits in local currency giving a demand note in return, which could be used to redeem the original deposit at any of the Templar castles across Europe. Since the Templars had large land holdings across Europe, this enabled movement of money across the continent without the risk of being robbed when travelling. Medieval transactions also made it possible to transfer large sums of money without having to lug heavy chests of gold and silver across land or sea. In exchange for money, moneychangers at medieval trade fairs would issue documents that could be used to cash-in money at a different fair in another country or redeem it at the same fair at some point in the future. In the case of latter, the value on the document would be discounted by a certain amount which was the discounting of an interest. This was the beginning of bills of exchange.

After the setting up of the first bank in Venice, rapid expansion of banking was seen throughout Italy, Spain, Germany, Poland and Holland. By the start of 17th century, new banking practices had begun to emerge that paved way for modern payment systems. These promoted industrial growth and a constant supply of money shielded from various risks of transportation and robbery, made it possible to be more responsive to commercial needs of the expanding European states. Government regulations begun to take shape and the first central banks were formed. Bank of England became the first bank to issue banknotes in 1695. They were initially hand-written and they promised the bearer the payment of the note’s value on demand. By 1745, standardized notes began to be printed.

Art imitating Life

If art indeed imitates life, it is safe to say that Daniel Defoe, in his exploits of Robin Crusoe, captures much of the action happening at the banking scenes at the time. With an innocuous seeming requirement of moving money from England to Brazil, Crusoe’s money had to undergo a long journey (literally) to reach him.

The sequence of events in Crusoe’s story has many of the same aspects that a modern payment system does. A sum of money is to be moved across borders, there are risks and dangers involved, steps are taken to mitigate those risks, intermediaries are brought into the scene – with an award for each one’s efforts, there is a remote account that holds the money and currency conversion takes place through commodities. Interesting to note that Daniel Defoe had this in print just 23 years after the founding of the Bank of England.

An interesting tidbit on payments history, isn’t it?

Date Modified: 

Monday, June 30, 2014
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