21H.383 | Fall 2016 | Undergraduate, Graduate

Technology and the Global Economy, 1000-2000

Assignments

Sample Book Review

Cities of Commerce: The Institutional Foundations of International Trade in the Low Countries, 1250–1650

Review by Anne EC McCants

The immediate goal of Oscar Gelderblom’s historically rich study of the medieval and early modern mercantile practices of Bruges, Antwerp and Amsterdam (1250–1650) is to document and then explain the development of “more inclusive, open access institutions” that, he argues, lowered the transaction costs faced by the mercantile community (local and foreign) and facilitated the growth of European trade (p. 208). Behind this stated goal lies a much more ambitious project: One central to all of the long-run economic history being written today, namely to explain why Europe triumphed over the rest in the great game of economic development? Gelderblom offers us an interesting blend of two streams in this vast literature, one more recent (the so-called, but no longer really ’new’ institutional economic history) and the other (Smithian commercial expansion as the primary engine of growth) dominant among a previous generation of historians.

The current vogue in long-run explanations is to see ‘institutions’ as the key to success or failure in the jump from a cyclically-bounded preindustrial economy to one enjoying the great enrichment that has been the concomitant of modern economic growth. Those places that managed to cultivate propitious institutions (i.e. a roughly equal application of the law to all, secure property rights, the consistent and timely adjudication of disputes, curbs against rent-seeking behavior, etc.) moved ahead. Those that remained mired in autocratic institutions of privilege or were otherwise subjected to the depravations of violence and wholesale theft enjoyed no such opportunity. Of course, as Gelderblom’s project nicely demonstrates, it is not unreasonable to combine a concern with the development of good institutions with an appreciation of the economic power of commercial expansion. Appropriately both commerce and institutions make it into his title.

But how does a society win the institutional jackpot in the first place. Two schools of thought on this question dominate the literature. The first, most closely linked with Douglass North, John Wallis, and Barry Weingast (Violence and the Social Orders: A Conceptual Framework for Interpreting Recorded Human History, 2009) and Daron Acemoglu and James Robinson (Economic Origins of Dictatorship and Democracy, 2005), privileges the development of strong states able to protect trade and enforce the rule of law. The second, best represented by Avner Greif (Institutions and the Path to the Modern Economy: Lessons from Medieval Trade, 2006) looks instead to the private-order arrangements of guilds or kin networks to curb violence and protect property. But as Gelderblom rightly points out, strong states can be rapacious and tight-knit groups are notoriously subject to rent-seeking and regulatory capture. He argues instead that Europe was spared the tyranny of the too-strong ruler and the self-dealing of a mercantile oligarchy by the very “political and legal fragmentation” that might in fact have been its undoing; that is, “competition between urban governments that tried to attract trade through the continuous adaptation of their legal, commercial, and financial institutions” led to the rise of a public good shared by all (p. 3).

After a very clear introductory chapter that outlines the broad historiography alluded to above, it is the long middle sections of the book where Gelderblom details the various processes of adaptation as the center of commercial primacy slowly migrated from, first Bruges in the high Middle Ages, to Antwerp in the later Middle Ages, and finally to Amsterdam in the early modern period. For business historians in particular, this detail will be of especial interest as it documents so richly the specific commercial practices, legal and logistical, that kept the system producing the economic surpluses that spurred the competitive forces he says drove the further development of virtuous institutions. As he puts it, “their main achievement was the continuous adaptation of the commercial infrastructure to changes in international trade, even if this required the dismantlement of existing practices, or the relegation of intermediaries to a humbler position” (p. 78). Yet, all the while the agricultural and proto-industrial hinterland that provided the fuel for this commerce remained essentially the same. It was the capacity for the commercial center to move that allowed the system as a whole to keep growing even when one city’s prospects came to be blocked in one way or another.

Is this enough, though, to explain the commercial dominance of Europe on the global stage of the eighteenth and later centuries? Or indeed to explain its (possibly?) unique capacity to foster the beneficent institutions so prized in the current economic growth literature? Has Gelderblom identified a necessary condition, i.e. urban competition, for the European growth outcome? Or is it even a sufficient condition, as he more or less suggests in his conclusion when he argues that “urban competition leads to the creation of inclusive institutions” (emphasis mine), without adding a qualifier such as “might” to soften the claim (p. 198)? His historical narrative—which more or less takes the form of: First success, then stalemate; move, and repeat—is certainly suggestive of a just-so story, rather than the quantitative analytic mode that is predominant in the literature on economic growth. I don’t lodge this observation as a hostile critique however. Much excellent history takes the form of just-so stories, and like the Goldilocks of lore, the medieval and early modern Low Countries might indeed have been positioned “just right” between centralization and fragmentation to promote institutions of reliable justice and ultimately profound prosperity.

Anne McCants is professor of history and director of the Concourse Freshman Learning Community at the Massachusetts Institute of Technology. She is the author of Civic Charity in a Golden Age: Orphan Care in Early Modern Amsterdam (1997) and numerous articles on historical demography and material culture.

Course Info

Instructor
Departments
As Taught In
Fall 2016
Learning Resource Types
Written Assignments with Examples