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Centers of Progress, Pt. 13: Florence (Art)

Blog Post | Human Development

Centers of Progress, Pt. 13: Florence (Art)

The powerhouse of the Renaissance, Florence not only revived lost knowledge from Greco-Roman texts but revolutionized art.

Today marks the thirteenth installment in a series of articles by HumanProgress.org called Centers of Progress. Where does progress happen? The story of civilization is in many ways the story of the city. It is the city that has helped to create and define the modern world. This bi-weekly column will give a short overview of urban centers that were the sites of pivotal advances in culture, economics, politics, technology, etc.

Perhaps no city so perfectly exemplifies the idea of progress as Florence during the Renaissance. Known as “the Jewel of the Italian Renaissance,” and sometimes, “the birthplace of the Renaissance,” Florence was at the heart of too many groundbreaking developments to mention. The city contributed to significant advances in politics, business, finance, engineering, science, philosophy, architecture, and—above all—artistic achievement. Florence produced historic art projects throughout the Italian Renaissance (1330–1550 AD), particularly during the 15th century, the city’s golden age. The Florentines’ wide-ranging contributions to human progress are all the more amazing when one considers that a pandemic killed half of the city’s population in the 14th century.

Today, Florence is the capital city of the Italian region of Tuscany. Tuscany, known for its natural and architectural beauty, may be the most frequently photographed region in Italy. Florence is also Tuscany’s most populous city, with over 300,000 inhabitants and 1.5 million residents in its greater metropolitan area. With its long history and arresting scenery, Florence is a popular tourist destination that often merits a place on lists of the world’s most beautiful cities. The Historic Center of Florence is a UNESCO World Heritage Site. Florence is also a key center of Italy’s fashion industry.

That is fitting because the story of Florence’s rise to prominence began with cloth. More precisely, woolen cloth. Tuscany has plenty of sheep and grazing land, and for centuries Florence produced wool locally. But around 1280 AD, Florentines began to import wool from England. English wool was of higher quality. Florence’s river, the Arno, made cleaning large amounts of imported wool achievable.

Florence enjoyed a central trade location between East and West. Some Florentine merchants realized that their city was perfectly situated to combine top-notch wool from England with the world’s best dyes from Asia—resulting in uniquely luxurious woolen cloth. The Florentine woolen fabric was soon in high demand throughout Europe. By the 14th century, one-third of Florence’s population worked in the woolen cloth industry.

Thus international trade set Florence on a path toward success in the fabric business. The city’s booming cloth industry created a large, wealthy merchant class. As the Florentines grew rich, new finance and banking innovations further elevated the city’s prosperity.

As Florence’s wealth increased, its people needed to exchange larger and larger amounts of florins (i.e., the city’s currency from 1252–1533 AD). Thus Florence became the first city in centuries to mass-produce gold coin currency. Florentine bankers soon became renowned experts at coin valuation, and the florin became the most trusted currency in Europe.

Moreover, Florence became the first city-state whose bankers charged interest on loans. Historically, most bankers throughout Europe would not charge interest because doing so was widely considered to be a sin called usury. However, giving out loans without charging interest is risky and usually unprofitable. As a result, for many years, Jews were among the only Europeans who could enter the money-lending business without going bankrupt. But Florence’s Christian bankers found a loophole with a bit of creative accountancy: they presented interest as a voluntary gift on the part of borrowers or as compensation for the risk taken on by lenders. (Those who failed to pay the technically voluntary fees were often blacklisted by Florence’s banks and unable to obtain future loans).

Charging interest let the Florentine bankers make credit widely available in a profitable and thus sustainable way. Not only did that put loans within reach of many Florentines, but Florence’s bankers soon became the money-lenders of choice for the wealthy and powerful throughout Europe, including royalty and the Pope. The bankers’ financial services also included facilitating trade by furnishing merchants with bills of exchange that allowed them to pay off their debts while in a different town from their creditors—a concept familiar to anyone who has ever mailed a modern check. Florence’s banks accomplished that by opening offices or branches in various cities. Florentine bankers also perfected double-entry bookkeeping.

Through its lucrative cloth trade and innovative banking industry, Florence quickly rose to become the wealthiest city in Europe during the Renaissance. That wealth improved the lives of everyday people throughout the city. For example, Florence became the first city in Europe to pave its streets in 1339 AD.

The city’s wealth resulted in more than improving material conditions—it also prompted a shift in the way people thought. Humanism and classicism came into vogue. Humanism was an intellectual movement focused on human achievement and the enjoyment of life’s pleasures, such as beautiful gardens and art. Humanism contrasted starkly with the prior widely-held belief in asceticism. Florence’s growing upper and middle class increasingly engaged in intellectual pursuits, such as studying history and classical Roman texts, which allowed the former to recover lost knowledge in many fields. It is fitting that the literal meaning of Renaissance is “rebirth.” For example, by studying old Roman writings, the artist Raphael (1483–1520 AD) managed to recreate a rare blue paint pigment invented by ancient Egyptians.

Florentines considered their city to be the “New Rome.” That was partly because they brought back into practice much of the knowledge of the ancient Romans that had fallen into disuse. Like the ancient Romans, the Renaissance Florentines also felt that their home embodied an ideal city-state republic, guaranteeing individual freedom and the right to political participation to a portion of the population. Although, like republican Rome, Florence was not a true democracy but an oligarchy. The republic was also infamous for political intrigue.

Florence’s relatively inclusive political system, classicist appetite for knowledge, humanist zest for life, and the freedom afforded by growing prosperity all combined to give rise to the ideal of the “Renaissance Man.” Many Florentine men strived to attain far-ranging expertise across fields such as art, literature, history, philosophy, theology, natural science, and law. The educator Pietro Paolo Vergerio (circa 1369–1444 AD), who studied in Florence among other cities, wrote the era’s most influential educational treatise. That treatise, “On the Manners of a Gentleman and Liberal Studies,” published in 1402 AD or 1403 AD, helped to create the concept of a well-rounded liberal arts education.

Florence was the first Italian city-state to host a center for learning—the University of Florence—established in 1321 AD and relocated to nearby Pisa in 1473 AD. The scholar Giovanni Boccaccio, today best remembered for authoring the Decameron (a collection of stories also collectively known as l’Umana commedia or “the Human Comedy”), helped make the university into an early capital of Renaissance humanism. Together with the scholar Francesco Petrarch (1304–1374 AD), whose rediscovery of Cicero’s letters is sometimes credited as starting the Italian Renaissance, Bocaccio popularized writing in the vernacular rather than in Latin. Florence’s greatest poet, Dante Alighieri (circa 1265–1321 AD), authored his narrative poem, the Divine Comedy—which is still widely called the greatest Italian literary work—in the vernacular. That work was so popular throughout Italy that it helped establish the local Tuscan dialect as the default, standardized version of Italian, replacing other regional dialects.

While taught less than men, Renaissance women from wealthy families were educated in the classics and sometimes the arts. A notable example was Sofonisba Anguissola (circa 1535–1625 AD), an Italian noblewoman who studied painting under the acclaimed artist Michelangelo (1475–1564 AD). Although he spent most of his life in Rome, Michelangelo considered himself a Florentine (he worked in Florence in his youth). Anguissola attained professional success, and became the official court painter to the king of Spain. Her achievements paved the way for other European women to pursue serious artistic careers.

Florence’s rise was not without difficulties. In the 1300s, the Bubonic Plague pandemic swept through Italy. By 1348, the pandemic had reached Italy’s interior, including Florence, and revisited the city in periodic bouts. The illness is estimated to have killed approximately half of Florence’s population. Such a widespread loss of life created intense economic and social disruption. Yet even in the aftermath of that tragedy, Florence continued to innovate and create. By the 15th century, the city had entered its golden age. The citizens poured their fortunes into patronage of the arts, and the Catholic Church also paid for many artistic projects. Pope Julius II (1443–1513 AD), in particular, was known for artistic patronage. Florence’s wealthiest banking family, the Medicis, also became famous for financially supporting Renaissance artists.

Florence was teeming with geniuses. If you could take a stroll through the city in the 15th century AD, you might run into the polymath Leonardo Da Vinci (1452–1519 AD). Born and raised in Florence, Da Vinci was the quintessential Renaissance Man, whose notebooks spanned topics ranging from anatomy to cartography and painting to paleontology. Or you might meet the artist mentioned earlier, Raphael, considered one of the three great masters of the Renaissance, together with Da Vinci and Michelangelo. You might greet the sculptor Donatello (1386–1466 AD). You might encounter a young Niccolò Machiavelli (1469–1527 AD), who worked as an official in the Florentine Republic, wrote the famous treatise The Prince and is often labeled the father of modern political philosophy and political science. You might chance upon the explorer and merchant Amerigo Vespucci (1454–1512 AD), from whom the Americas get their name. You might pass by the art workshop run by the artist and businessman Andrea del Verrocchio (1435–1488 AD), who mentored many of the city’s best artists, including Da Vinci. Verrocchio’s workshop also helped cultivate Florence’s atmosphere of competition in the development of new artistic techniques. You might cross paths with Filippo Brunelleschi (1377–1446 AD), often called the first modern engineer and the father of Renaissance architecture, who designed Florence’s iconic cathedral. Or perhaps you would happen upon Sandro Botticelli (circa 1445–1510 AD), yet another Florentine artistic legend.

Whereas European art had degraded during the Dark and Middle Ages to simple cartoonish figures, the Renaissance not only resurrected the hyper-realistic and proportional sculpture style of the ancient Greeks and Romans but went further in developing extraordinarily sophisticated painting techniques.

Florentine artists perfected proportionality and foreshortening (shortening lines to create the illusion of depth). Moreover, they developed the so-called canonical “four techniques” of the Italian Renaissance: cangiante, chiaroscuro, sfumato, and unione. Sfumato is a way of subtly blurring outlines to give the illusion of three-dimensionality. Chiaroscuro is a method of contrasting light and dark paint to convey a sense of depth. Cangiante creates the illusion of shadows using a limited color palette, and unione is a color transition technique that produces dramatic effects.

In sum, the Florentine artists’ processes and techniques established the basis of traditional Western painting, with their methods still in use after hundreds of years.

Florentines produced many of history’s most acclaimed paintings and other artworks. Those include The Birth of Venus, Primavera and Venus and Mars by Botticelli; the sculpture David and the artworks of St. Peter’s Basilica and the Sistine Chapel such as the Creation of Adam by Michelangelo; The School of Athens (mentioned in our seventh Centers of Progress installment) by Raphael; and The Last Supper and The Virgin of the Rocks by Da Vinci.

The Mona Lisa—an early 16th-century portrait by Da Vinci depicting a Florentine merchant’s wife—is today the world’s most-visited painting. Situated in the Louvre museum, it attracts around 8 million of the museum’s 10 million annual visitors.

Not everyone was happy with Florence’s prosperity and artistic creations. Progress is seldom without controversy. An anti-humanist, pro-ascetic backlash led by the radical friar Girolamo Savonarola (1452–1498 AD) briefly threw Florence into turmoil. Savonarola encouraged his followers to destroy paintings, musical instruments, fine clothes, jewelry, humanist books (such as the works of Boccaccio), and other allegedly sinful possessions. Mass burnings of such objects were called “bonfires of the vanities.” Savonarola’s movement, sometimes considered a precursor to the Protestant Reformation, eventually got him excommunicated by the Pope and executed by political opponents. The burning of Florence’s so-called vanities ceased, and many of the city’s artistic masterpieces survive to this day.

Innovations in trade, business, and banking helped make Florence wealthy, and the Florentines spent enormous sums toward the patronage of artists. As the writer Eric Weiner noted, “Genius is expensive.” The city’s merchants and bankers were as key to Florence’s flourishing as the artists they funded. In turn, those artists conducted extraordinary experiments in creativity and produced some of the world’s most remarkable artistic accomplishments. The powerhouse of the Renaissance, Florence not only revived lost knowledge from Greco-Roman texts but revolutionized art in a way that would come to define Western painting. Florence is also a symbol of resilience in the face of a pandemic. For these reasons, Renaissance Florence undoubtedly deserves to be our thirteenth Center of Progress.

World Bank | Quality of Government

Côte D’Ivoire’s Land Reforms Are Unlocking Jobs and Growth

“Secure land tenure transforms dormant assets into active capital—unlocking access to credit, encouraging investment, and spurring entrepreneurship. These are the building blocks of job creation and economic growth.

When landowners have secure property rights, they invest more in their land. Existing data shows that with secure property rights, agricultural output increases by 40% on average. Efficient land rental markets also significantly boost productivity, with up to 60% productivity gains and 25% welfare improvements for tenants…

Building on a long-term partnership with the World Bank, the Government of Côte d’Ivoire has dramatically accelerated delivery of formal land records to customary landholders in rural areas by implementing legal, regulatory, and institutional reforms and digitizing the customary rural land registration process, which is led by the Rural Land Agency (Agence Foncière Rurale – AFOR).

This has enabled a five-fold increase in the number of land certificates delivered in just five years compared to the previous 20 years.”

From World Bank.

World Economic Forum | Financial Market Development

How the Rise of AI in Indonesia Is Expanding Financial Inclusion

“Indonesia is at a pivotal moment in its digital transformation. With over 280 million people spread across 17,504 islands and over 180 million smartphones, connectivity has never been higher.

Internet penetration approached 79% in 2024, reflecting the nation’s swift embrace of online platforms. Only a decade ago, nearly half of Indonesia’s adult population remained unbanked. Thanks to rapid advancements in financial technology, the financial inclusion index has climbed to almost 84%. Had AI been as pervasive 10 years ago, this transformation could have been even faster.

Though digital adoption is a global trend, Indonesia’s trajectory is distinct, shaped by supportive government policies, a vibrant fintech sector and a surging digital economy.

Over the past decade, these factors have converged to accelerate financial inclusion – from 49% in 2014 to around 83% in 2023. This remarkable leap is equivalent to adding the population of Switzerland seven times to Indonesia’s banking system.”

From World Economic Forum.

Our World in Data | Financial Market Development

Mobile Money Accounts Are Surging Globally

“Mobile phones and the Internet have enabled the growth of mobile money accounts in regions with limited banking infrastructure. These accounts provide simple financial services like deposits, transfers, and payments to hundreds of millions of people.

As this chart shows, the number of active mobile money accounts globally has grown from 13 million in 2010 to more than 640 million in 2023. This is based on data published by the GSM Association.

While the adoption of mobile banking was almost exclusive to Sub-Saharan Africa in the early 2010s, Asian countries have seen significant growth in recent years.”

From Our World in Data.

Blog Post | Financial Market Development

The Democratization of Investment | Podcast Highlights

Chelsea Follett interviews Jennifer Schulp about how technology and regulation are shaping the future of investment.

Listen to the podcast or read the full transcript here.

Tell me about some hopeful trends or progress we are seeing in the financial industry.

One of the most hopeful trends in the financial industry is broader access to financial investment. Traditionally, investment in the stock market has been limited to the wealthy. Investing in the stock market is really important because, over the past decades, the S&P 500 has returned approximately 8 percent per year, which is way more than other non-equity investments.

Financial access has improved tremendously over the last 50 years. In the mid-70s, to make a stock trade, you had to call your broker on the phone and tell them what you wanted to trade, and they would charge you something like $50. So, you didn’t want to place a trade unless you were placing a large trade because otherwise, the fee would overwhelm the trade. And you didn’t want to trade very often. All of it made it very difficult for regular people to invest in the stock market. Over the course of decades, those fees came down as there was additional competition brought into the brokerage space.

In the 1990s, we saw the rise of internet trading, which allowed you to place trades on your own. In 2015, Robinhood started offering no-commission trading on a phone app, which allows people to trade regularly without worrying about fees eating into their profits or adding to their losses. People can now take some money from each paycheck and put it in the stock market. That’s been huge. The entire brokerage industry is now moving towards phone access for easy, cheap trading, and that’s made a huge difference in the number and type of people accessing investment in the stock market.

In 2020, during the pandemic, we saw a massive rise in retail trading that many wrote off to people being bored while they were stuck in their homes. However, a lot of those investors have remained in the market, so what might have started as a pandemic-induced interest in the stock market has become part of a long-term trend towards additional retail trading that has brought in more racial minorities, more low-income people, and more young people.

Easy and cheap trading has also allowed people to experiment with the stock market and learn by doing. There was a study that came out not too long ago by FINRA and NORC at the University of Chicago that looked at the investors who opened accounts in 2020. And they found that those who stayed in the market showed an increase in their financial literacy. Having this access helped them allocate their capital better. So, we have more people invested in the larger economy, and they are getting smarter about it. The benefits will compound over time.

What are some of those potential benefits?

Certainly better personal financial outcomes. Of course, some people are going to make poor decisions. You can’t say, “Because you put money in the market, you’ll be better off.” But for people looking for long-term investment options, the stock market is the greatest wealth generator we’ve ever seen.

I think this could also drive economic growth for a couple of reasons. One, investment gives people a stake in society and the economy, and that itself can drive growth. Two, having retail investors put money that might otherwise be under the mattress or in a low-interest savings account into businesses allows those businesses to flourish.

Are there any benefits for those who are trying to start businesses?

That brings up a new set of questions. What we’ve been talking about so far has been retail investment in public equities markets. But the stock market doesn’t generally provide startup capital. You have to be a mature company to want to bring an initial public offering that gets you listed on the stock exchange. Private market investing is where startup investing happens. And in the United States, far more money is raised in private markets than in public markets. The average person is not allowed to partake in private investment in the United States, as well as in most economies across the world. In the US, you need to be what’s known as an accredited investor, which essentially means you make more than $200,000 a year or you have a net worth of over a million dollars.

This is a very arbitrary standard. You could win the lottery tomorrow and suddenly become an accredited investor, and that doesn’t make you any smarter at investing than you were the day before. It doesn’t make you any more of a capable investor than someone who, say, studied startup investing in their MBA program but isn’t yet making enough money to be allowed to invest themselves. And all of this is a problem because it means the government is standing in the investor’s shoes and making decisions for them. Are they smart enough? Are they rich enough? Is this a good idea for them?

Let’s talk about entrepreneurs, as you asked. People trying to start businesses tend to turn to their community. They tend to raise money from the people that they know best. But if you are a minority or live in a rural or low-income area, you likely don’t know many people who meet that accredited investor standard. You’re already at a disadvantage in raising money and getting your business off the ground. That hurts entrepreneurs in less wealthy communities, the economy as a whole, and potential investors who don’t have the opportunity to share in the growth of that business.

The house recently passed three bills looking to reform the accredited investor definition; two have codified an SEC modification to the rule allowing people who have passed certain securities tests, such as brokers or investment advisors, to qualify as accredited investors, even if they’re not wealthy enough. The third bill is a bit broader; it opens up the testing concept to allow, if passed by the Senate and signed by the President, anyone who passes a test to be able to invest as an accredited investor. There will be costs associated with the testing, and it doesn’t get at the underlying paternalism, but it is a step in the right direction.

Could you talk about ESG?

ESG is actually two distinct concepts, and it’s important to identify which one we’re talking about. It can be broken down into a dichotomy that I’ve borrowed, which is value versus values investing.

“Value investing” in the form of ESG just refers to using environmental, social, or governance factors to analyze whether a company faces risks that might affect its financial performance. Where ESG sounds a little bit different is when we think about it as “values investing.” That kind of ESG is about sacrificing financial return to reach a certain outcome with your investment, like lowering carbon emissions. Of course, investors should be free to invest their money as they see fit. If they want to invest in saving the whales, they should have that opportunity. But it gets trickier when a company or asset management firm makes those decisions about what to do with their investors’ money without being upfront with them. That’s a question of disclosure and whether or not the funds are being clear with investors.

Government mandates are the key place to focus on here because, ultimately, the market should decide whether investing in ESG is the right way to go. Europe has decided, writ large, that the way to tackle climate change is to centrally plan how money will flow through the financial system to choke off funds for non-green investment. Supporting that is a host of European directives on sustainable finance that include a lot of disclosure by companies about how they, too, will meet net-zero goals. Europe has what we in the securities industry refer to as a “double materiality standard,” where European companies are not only supposed to disclose information that might impact the company’s financial performance but also how their company impacts society and the environment. All of this comes with pretty heavy costs.

The United States is now considering how far to follow Europe down that line. The Securities and Exchange Commission (SEC) has proposed a sweeping climate risk disclosure framework. It’s different from the European framework in that the SEC at least recognizes that they don’t get double materiality; the SEC is only allowed to require companies to disclose information that investors might find useful in deciding whether to invest in the company. However, the SEC’s climate risk disclosure rule goes well beyond that. It would require all US public companies to disclose an awful lot of information about climate risk, including scope one, scope two, and, for many companies, scope three, greenhouse gas emissions. What’s important here is that this type of disclosure is not a small undertaking. It’s going to be a massive drag on public companies.

You also oppose government rules that would restrict voluntary ESG-related disclosures. Can you tell me about that?

Sure. There’s been some legislation introduced, some of it passed, from state-level Republican legislatures that prohibits the use of ESG in investment. But this broad prohibition is also not the right answer. In fact, it is itself values-based and seeks to impose an ideology onto investing.

In addition, there are real costs to blanket prohibitions of ESG. One is that ESG as value investing can sometimes yield better returns. Pensions in some states that have introduced legislation to prohibit the consideration of ESG factors have released analyses showing that over the course of 10 years, the pensions might be losing billions of dollars in returns by having their investment pool artificially limited.

Another example is Texas, which prohibits localities from doing business with financial firms that are, quote, “boycotting the fossil fuel industry.” A study done not too long ago showed that the cost of municipal borrowing has gone up in Texas because many firms exited the market, meaning taxpayers in Texas are now paying more for municipal building projects. We shouldn’t forget that narrowing the scope of investment opportunities also narrows the opportunities for growth.

Could you speak about the potential impact of AI on investment and the financial industry?

Many people don’t understand how much AI is already part of the investment industry. For example, AI is already involved with investment research, predicting stock value, and portfolio management. That’s all going on behind the scenes.

I think that there’s real potential with respect to financial advice. AI could make investment advice as accessible as trading on your phone is today. For a long time, we’ve had what are known as robo-advisors, which are essentially chatbots with a narrow tree of advice based on a set of questions. More sophisticated large language models could give individualized investment advice that considers all sorts of circumstances at a very low cost. In the future, you may be able to go on your computer or phone and tell the LLM, here’s what my investments look like; what should I do next? That’s powerful stuff, assuming that the regulators allow something like that to happen.