The World's Greatest Idea

by Farndon, John

  Yet just as clippers gave sail its finest hour, so the writing was on the wall. Steamships were already beginning to compete because, although slower, they were less dependent on the vagaries of the wind, and needed fewer crew. The death knell was the opening of the Suez Canal, which cut a huge distance off the voyage from Asia to the west, but couldn’t be used by sailing boats. As steam boats got faster, and needed ever fewer crew, the sailing ships disappeared. Nowadays, of course, sail is essentially for recreation or sport, but for those sailors the magic is as alive as ever it was in Coleridge’s day:

  The fair breeze blew, the white foam flew,

  The furrow followed free.

  [1] They were called lateen because they were identified with the Mediterranean and the Latin world.

  #39 Copper and Iron

  If there is anything that clearly marks the end of prehistory and the beginning of history, it is the discovery of metals. The millions of years of prehistory, when humans relied on painstakingly sharpened stones and bones for tools, are aptly known as the Stone Age. The first transition into the historical era is tellingly the Bronze Age. The second is the Iron Age. And the modern age could well be called the Metallic Age.

  Without metals, our cities would fall apart, since the nails and screws that hold things together are metal and the beams that strengthen buildings and bridges are metal. So are the trains, and cars and planes and ships that carry us and all the goods we need for living. So are the tools and machines we need to fabricate it all. And so are many humbler objects from saucepans and washing machines to knives and door handles. A world without metals might be appealingly rustic but would be primitive indeed.

  The idea of metals and metal production is so much a part of our world that it’s easy to take for granted. Yet the idea that metals could be obtained from the ground and fashioned into objects was astonishingly clever. Even today, knowing what metals are and where they come from, it is very hard for anyone but a highly trained mineralogist to even identify a rock that might yield metal. Just think what a discovery it would be if you didn’t even know that ordinary-looking rocks actually contained metal.

  Gold is one of the few metals that occur naturally in a pure state. It is also very distinctive and shiny. So it is not surprising that gold was among the first metals to be used. Yet it was too rare, and too soft, to be used as anything but ornament. The same must have seemed true initially of copper. Pure copper is, if anything, harder to find in the ground, because oxidation covers it in the sheen of dull green known as verdigris. And it is almost as soft as gold. So the earliest copper artefacts are mostly ceremonial or decorative, such as the small copper plates found at Çatal Höyük in Anatolia dating from around 8,500 years ago. The only tools were simple copper hooks and awls, like those from Çayönü Tepesi in eastern Turkey from 9,000 years ago.

  The great breakthrough was the discovery that certain rocks, now known as ores, contained substantial quantities of copper that could be ‘smelted’ out by heating. It may have been an observant potter who noticed what happened when he fired the brightly coloured minerals green malachite and turquoise azurite in his kiln. If the kiln was hot enough, little drops of copper would have melted out of the stones. Once ores and smelting were discovered – maybe about 6,500–7,000 years ago in Anatolia and about 5,000 years ago in China – a copper industry began to develop, and copper tools began to gradually be used more and more in place of stone tools in what is called the Chalcolithic era.

  The copper made in these smelters was very rarely pure, and often contained impurities such as arsenic, tin, zinc and antimony. Around 5,000 years ago in Western Asia, some smiths must have begun to realise that copper with the right quantity of arsenic or tin[1] in it made a metal that while not necessarily as pretty as pure copper, was both very hard and easy to cast into particular shapes by melting and cooling.[2] These impure arsenic or tin coppers, or alloys, are, of course, bronze.

  It’s hard to overestimate just what a technological breakthrough the discovery of bronze was. Making bronze was the world’s first major industry. Bronze axes, spearheads and daggers were so vastly superior to their stone equivalents that everyone wanted them. And bronze allowed for the creation of the first swords and suits of armour. The bronze industry spread quickly west across Europe from Asia and east into India, making fortunes for those with the skill to fashion bronze and creating the first large-scale, organised trade in minerals and the first major mines, as people dug for the valuable ores in places from Timna in Sinai to Mount Gabriel in County Cork.

  Bronze gave humans an ability to shape the world, raise the standard of living and bring the fruits of civilisation in a way that stone never could. But it also brought many of the problems that we associate with the rise of civilisations. Its huge value, and the fact that some places had the resources and technology and others didn’t, created enormous differences in power and wealth for the first time, and with those differences, inevitably, came war. The real motive behind the Ancient Greek attack on Troy, so memorably described in Homer’s epic Iliad, may well have been the lure not of Helen’s matchless beauty but control of the city’s famous bronze trade.

  The rise of the bronze industry, too, may have provoked the first real ecological crisis, as vast areas of forest were cleared, not just to make way for farms but to provide wood to fuel the voracious demands of the smelters. Plato lamented, for instance, how vast swathes of the countryside round Athens were ravaged by deforestation. Cyprus, the island that gave copper its name, was completely stripped of its ancient cedar forests.

  As smiths’ skill and ability to handle bronze improved, and they learned to exploit the subtly different mixtures of ores and alloys, they must have tried out other ores too. Eventually, about 4,500 years ago, Hittite smiths in Anatolia discovered that at very high temperatures, they could smelt certain ores to produce iron.[3] Iron was tougher than bronze and could make even better blades – and, crucially, iron ores were much more widely available than copper and tin. With carbon from the charcoal included in the iron, it made steel, which remains the best tool- and blade-making metal of all.

  The technology of iron-making was much, much harder to master than bronze-making, though, and the first iron suffered from being too weak or too brittle. So for 1,000 years or more, bronze was still preferred to iron and steel. The first breakthrough, dating from about 1100 BC, was ‘quenching’, which means plunging the newly forged blade into cold water while still hot. The second was tempering, which means gently reheating the blade after quenching. Quenched and tempered steel gave a combination of hardness, strength and flexibility that proved far superior to bronze, and the Iron Age began.

  Poets like Homer lamented the shift from the gold beauty of bronze to crude grey iron and steel, but it changed the balance of power. Bronze had been too expensive for all but elite soldiers to use. With iron, vast armies of foot soldiers could be equipped with swords, spears and armour. Moreover, iron was so cheap it could be used for more prosaic, peaceful purposes from cooking pots and spoons to drills and nails. Iron opened up a huge range of everyday technology from the mundane, such as locks and keys, to machines held together by iron nails and braces. When the Romans abandoned the fort of Inchtuthil in central Scotland, they buried 750,000 nails to prevent them falling into the hands of the Picts.

  Further key breakthroughs in iron- and steel-making technology in the eighteenth century quite literally underpinned the Industrial Revolution, and in some ways the Industrial Revolution is as much an Iron Age as the prehistoric era. Making cast iron using coke in blast furnaces enabled iron to be made on an industrial scale, so that iron became a major structural material. The famous Iron Bridge in Shropshire, built in 1778, was just the first of many fantastic iron structures from the Forth Rail Bridge to the Eiffel Tower, not to mention the hundreds of thousands of miles of rails that drove the industrial and urban explosion of the nineteenth century and beyond.

  Anyone who feels that industrialis
ation is at the roots of all that is wrong with the modern world will feel that the discovery of metals was a disaster for humanity. With bronze and iron came swords and shields, soldiers and large-scale warfare. In the Bronze and Iron Ages came the beginnings of large-scale trade, mines where people slaved in dark and danger, industrial spoil, pollution from smelters and deforestation. In the age of the Industrial Revolution and on, blast furnaces added Blake’s nightmare vision of dark Satanic mills, mines dug deeper and darker to supply coke, the landscape was scarred by railways, and iron was used to create the battleships and tanks for the world wars.

  And yet all these things cannot necessarily be laid at the door of the metals themselves. Metals are fantastic discoveries, enabling us to make all kinds of wonderful things, from aeroplanes and spacecraft to robots and computer circuits. It is hard to conceive of any of the technology we so rely on today without metals and in particular copper and iron. Metals have given humankind the ability to shape and rebuild the world in a way that would be unimaginable with stone and clay and wood. Like any powerful idea, however, they can be misused, and it has been our choice that metals have been used to damage the world, and to damage ourselves, as well as improve it.

  [1] It was probably some time before smiths became aware of the dangers of arsenic and switched to tin bronze. Prolonged exposure to arsenic fumes damaged nerves to limbs and may have given rise to the later image of the maimed smith, such as the Greek god Hephaestus and the Roman Vulcan.

  [2] The first bronze items such as axe heads were probably made in a single mould hollowed out in stone. But by the middle Bronze Age, smiths were making more complex items such as daggers by pouring the molten metal through a small gap into two hollowed-out stones put together and then pulled apart when the metal had cooled and solidified. By the end of the Bronze Age, smiths were making wax or fat models then putting clay round them and heating the clay to melt the wax. They then poured in the molten metal, waited for it to cool and solidify, and chipped away the clay.

  [3] Iron was known well before this, but only from rare meteorite iron. This kind of iron was so precious that in Tutankhamun’s tomb, a single iron dagger held pride of place amid the tonnes of fabulous gold objects.

  #38 Banking

  There are few ideas in this book that have come in for so much stick over so long as banking. In the past few years, in particular, the banking crisis has aroused so much fury against the banks that it seems they are being attacked for the first time. Yet the attacks go back to antiquity.

  The trade of the petty usurer is hated with most reason: it makes a profit from currency itself, instead of making it from the process which currency was meant to serve. Their common characteristic is obviously their sordid avarice. – Aristotle

  And Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the money changers … and said unto them, ‘It is written, My house shall be called the house of prayer; but ye have made it a den of thieves.’ – The Bible

  When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain. – Napoleon Bonaparte

  Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good. – John Adams

  I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid by posterity … is but swindling futurity on a large scale. – Thomas Jefferson

  It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. – Henry Ford

  By comparison, Mark Twain’s pungent assertion that ‘A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain’, seems positively friendly.

  So how have banks survived so long? What is it that makes them so apparently necessary?

  From the customer’s point of view, they have three main uses. The first is to facilitate money transfer – making it simpler for people to pay you and for you to pay others for goods and services, and to give you access to money when and where you need it. The second is to look after your money until you need it. The third is to extend credit to you or your business so that you have the money you need when you need it. In the developed world, it is still possible to function without a bank account, and many people do, but life without a bank account is much more of a struggle (not that life with one is exactly easy sometimes).

  On the larger level, banks are deemed pretty much essential for the capitalist system to work. A few very rich people have the capital to start a business without bank funds. But otherwise entrepreneurs need starting capital, and capital to tide them over until cashflow builds up. In theory, banks gather together money from savers and other depositors and funnel it towards those who need it to run businesses.

  This freeing up of money that would otherwise sit doing nothing is essential for economic growth, it is argued. Without this flow of money, economies would stagnate. With it, businesses have the money to start producing goods. They pay wages and salaries that people use to buy things, and the goods that they make can be sold, increasing the flow of money. Hence the recent worry over the way in which banks, in the wake of the banking crisis, have begun to restrict loans in order to build up their reserves. If this restriction goes too far, economic growth could be really damaged – and ironically the money available for building up bank reserves will also be curtailed.

  The origins of banking lie in the ancient world, when people began to put their corn and other goods, and later their gold and silver, in temples and similar places for safekeeping. Using their store of goods and gold, temple priests in eighteenth-century BC Babylon would make loans to merchants. By the time of Ancient Greece, temples and other private institutions were performing a full range of banking services – loans, deposits, money changing and transfers. The island of Delos became a banking centre. In return for deposits, many banking institutions started to give people receipts or credit notes. In the third-century Persian empire of the Sassanids, for instance, traders were using credit notes called S.akks. In effect, all the elements of modern banking were in place thousands of years ago.

  It was in the Crusades, though, that modern banking began to emerge in Europe. Rather than risk carrying large sums of money on the long journey to the Crusades, wealthy soldiers and pilgrims would deposit their money with organisations such as the Knights Templar at the start of their journey, then use a demand note to pay for things at any of the Templar castles and holdings across Europe. The Templars made a great deal of money out of this, and became the first multinational banking organisation, and it may have been their financial clout that eventually provoked the French king to dissolve them in 1307.

  By that time, though, the first of the great Italian banks were beginning to appear – run by families such as the Medici, Bardi and Peruzzi. They avoided the Christian sin of ‘usury’ (charging interest on loans) by creative accounting.[1] Interest was presented in accounts as a voluntary gift or a reward for risks taken. These banks began increasingly to be not just places for keeping money or making transfers, but the major sources of finance in the world. Even kings and queens went to the banks to raise money for wars or building palaces. And because of the high rates of interest charged on finance – 12–45 per cent – the banks became increasingly rich and powerful. With the rise of trade in north-west Europe from the late 1500s on, banking became absolutely central to national economies as merchants borrowed money to buy goods and then paid it back, with interest, when the goods were sold.

  In simple terms, the banks worked liked this. People deposited their gold or other val
uables in the bank for safekeeping. In return the bank gave them a ‘promise to pay’ note should they ever want to retrieve their gold. Soon people began to buy things with these banknotes, rather than paying directly in gold. Even today, of course, banknotes are worthless bits of paper, just a ‘promise to pay.’[2]

  At first, since banknotes are just receipts, the value of notes in circulation matched the value of gold held in the bank. But for economies to grow, the amount of money in circulation needs to grow – and banks can make this happen directly simply by printing more banknotes, or by making loans and investments. They need to hold only a small amount of gold for emergencies. This is called ‘fractional reserve banking’ because the gold reserve is a fraction of the value of notes they print, or the loans and investments. Typically, a modern bank will hold on to only 10 per cent of every deposit and use the other 90 to generate more money.

  Fractional reserve banking works fine as long as savers don’t all ask for their deposits back at the same time. In troubled times, of course, or if people hear nasty rumours about the state of a bank’s finances, there may be a ‘run’ on the bank as people rush to withdraw their savings. The bank’s small reserve will be quickly lost and the bank could go bust, leaving nine out of ten of its savers high and dry.

  No one wants to risk losing their money like this, yet if people don’t put their money in banks, the banks will have no money to invest or lend, and the economy, most theorists believe, will seize up. So in most countries, the banking system is supported by central banks that act as guarantors to prevent people losing out if banks collapse. This way people can, in theory, feel safe depositing their money with a bank, though the recent banking crisis has revealed that even this isn’t enough when the imbalance between a bank’s assets and its exposure (its loans and investments) gets too great.