Shylock, the Elizabethan Financial Crisis and the Invention of the Stock Market

The story of Shakespeare's The Merchant of Venice comes from an Italian book (Il Pecorone, or The Simpleton) published in Milan in 1558. No English editions of the Milanese tale are known. Orthodox scholars are left to assume English translation(s) popped into Britain long enough for the Bard to get his hands on it -- then, having discharged their duty to posterity, the books completely disappeared from history. All in a day's work.

The first story of the fourth chapter ("day") of Il Pecorone recites the tale of a rich merchant of Venice who takes out a loan from a Jewish moneylender so the merchant can seek his fortune on the seas. If the merchant defaults on his loan, the Jew takes as collateral a pound of the merchant's flesh. Pecorone's story continues on from here involving the wooing of a "Lady of Belmont," who disguises herself as a lawyer to extract her new fiance from the bloody, contractual bonds of his ultimately defaulted loan.


Like any other text in the Shakespeare canon, Merchant of Venice is conventionally seen as a work-for-hire play. Through perhaps the same London bookseller who provided Shakspere with all his books (the same one who erased any trace of them from the historical record), the Stratford actor acquires Il Pecorone or some "lost English translation." He reads the book and thinks, 'Hey, I'll write a play.' Inspiration strikes. And like Joseph Fiennes in Shakespeare in Love, the Bard dashes off another masterpiece at the desk of his second-story walkup.

Meanwhile, in the alternate universe of the Oxfordian theory, the author, de Vere, writes plays based on his own life experiences, telling stories that personally mattered to him. (Scandal! Heresy!) In the case of the Merchant of Venice, the tie-in comes with de Vere's sometimes reckless financial investments in voyages to discover the fabled Northwest Passage to China. In 1578, for instance, de Vere laid out an exorbitant £3000 -- the lion's share of it bought from a merchant named Michael Lok -- to underwrite a shipping venture that ended up mining an inlet of a bay in what is now the Canadian province of Nunavut. The explorers returned to England with more than a thousand tons of ore that they claimed contained untold riches. Instead, after the adventurers had set up smelting works on the Lower Thames, the rock proved to be worthless. The investors were ruined.

In 1580, de Vere's private secretary Anthony Munday published his one and only novel, Zelauto, which tells a variation of the Merchant of Venice story. (A London pamphleteer Stephen Gosson wrote the year before about a play treading the London boards called The Jew that Gosson said "represent[s] the greediness of worldly choosers and the bloody minds of usurers." Some scholars argue that Zelauto was a re-working of The Jew.) Munday dedicated Zelauto to de Vere.

As seen from an Oxfordian vantage, The Jew, Zelauto, and Merchant of Venice all arguably draw elements of inspiration from the same source: Edward de Vere's experiences in the wake of his £3000 shipping venture loss at the hands of Mr. Lok. (Recall that shipping investor Antonio in The Merchant defaults on a 3000 ducat bond with the financier Shylock.)


Here is where very recent history comes in. Last month, Penguin published Harvard historian Niall Ferguson's omnibus book, The Ascent of Money: A Financial History of the World. C-SPAN Book-TV aired an hourlong interview with Ferguson (streaming video of which can be viewed here or here).

The interview is absolutely fascinating, in and of itself, as a primer on the origins of money, bonds, banks, stocks, stock markets and the financial industry. And even just on the level of pure storytelling, it's also quite a riveting tale.

As Ferguson says, the very first publicly-traded company in history was the Dutch East India Company in the early 17th century. This Amsterdam-based venture invented the notion of stocks as an easy way to finance their shipping voyages to far away lands. And the notion of limited liability -- shielding investors from assuming any losses above and beyond the amount of their own individual investments -- also appeared around the same time to protect its existing investors and further encourage others to speculate some of their own captial.

"Since capitalism is about taking risk in pursuit of profit and weighing the rewards against the risks, then limited liability and the joint stock companies are critical inventions," Ferguson said.

In other words, the very biographical wellspring of inspiration for The Merchant of Venice -- those financially risky maritime investments that sometimes decimated its investors -- just a few decades later inspired Dutch traders to invent two of the most important cornerstones of free market capitalism today.

De Vere's and his fellow investors' financial crises in the failed Elizabethan Northwest Passage ventures did not bring about any economic innovations that would alter the course of history, as the Dutch did.

But, in the end, fodder for immortal Shakespearean drama is probably reward enough.

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UPDATE (Dec. 16): Just posted on the Internet today is a New Yorker Talk of the Town piece on a recent New York moot court re-trial of Antonio v. Shylock. A plurality of the justices found for Shylock. A propos of the above discussion, the following snippet is excerpted below:

“The trial was a travesty,” [First Amendment expert Floyd] Abrams said, of Shakespeare’s litigation scene. “Beautiful sometimes, funny sometimes, and ugly sometimes, but that judgment is not something that we sitting here today can enforce.” [Federal appeals court judge Richard] Posner said, “I’m particularly critical of Antonio’s conduct. His failure to insure his cargoes was completely irresponsible.”