[Smart Economics] The Story of the Renaissance City-States

The Growth of European Cities Owed to the Greek Monetary System and Roman Law

From the late Middle Ages onward, Europe’s growing population made its cities increasingly crowded and vibrant. The main reason people flocked to cities was the revival of commerce. Around this time, improvements in agricultural productivity created surplus output beyond mere subsistence, making exchange in the marketplace possible. Diplomatically, this was also a period when the long conflict with Muslims entered a lull, allowing Mediterranean trade, which had long been suspended, to resume. The Italian city-states revived as entrepôt trade hubs linking the eastern and western Mediterranean. Venice, facing the Adriatic Sea, prospered by trading with Syria to the east and Muslim Africa to the south.

Pisa and Genoa also grew into trading cities that dominated the western Mediterranean commercial sphere. In northern Germany, the Hanse, a merchants’ association, was formed. The German word “Hanse” comes from a Gothic word meaning group or friend, and refers to an association. The Hanseatic League was created by merchants around the Baltic Sea, whose development had lagged behind that of the Mediterranean region, with the aim of increasing exchange among cities. It was joined mainly by German-speaking cities such as Cologne, Bremen, Berlin, and Hamburg. The name Hanseatic League still survives today in Germany’s airline Lufthansa.

The cities of the Mediterranean and the Baltic, like the city-states of ancient Greece, reproduced the model of the city-state: each had nearby rural areas as its hinterland and possessed strong military power. They enjoyed prosperity until the center of trade shifted from the Mediterranean to the Atlantic with the opening of new sea routes. Why was the commercial economy of the city-state system able to revive in Europe around the Mediterranean and the North Sea? It was because these regions preserved better than anywhere else the two great legacies of the ancient commercial economy: the Greek monetary system and the spirit of Roman law. In other words, they protected private property and the principle of freedom of contract. Europe’s city-states were the leading actors of the Renaissance and later served as stepping stones toward the Industrial Revolution and the emergence of the modern market economy.

The Benelux Three, Today’s Small but Powerful Nations

Even today, the tradition of the city-state lives on in Europe in the form of small but powerful nations. Belgium, the Netherlands, and Luxembourg, collectively well known as the Benelux Three, are prime examples. Benelux has a total population of less than 30 million and a land area only about three-quarters the size of South Korea. Even in Europe, where many relatively small countries are clustered closely together, these three are on the smaller side. Yet their economic scale is by no means small: their combined gross domestic product (GDP) totals $1.5098 trillion, larger than Spain’s. Their political role is also far from insignificant. The European Union as we know it today has its roots in the customs union concluded by the Benelux Three. This is also why both the headquarters and the parliament of the European Union are located in Belgium, one of the Benelux countries.

Historically, these three countries were surrounded by larger powers such as Britain, France, and Germany. As a result, they turned their gaze to the sea and opened overseas markets. Their innate commercial spirit shone at this moment. Belgium established colonies in Central Africa, while the Netherlands built colonies in Southeast Asia. New York, now the capital of the world in many respects, traces its origins to New Amsterdam, where Dutch settlers gathered and lived. Dutch merchants also advanced as far as Japan in the distant Far East, helping form a Dutch cultural presence in Japan known as Rangaku.

Even today, trade, logistics, and finance account for an overwhelming share of industry in the Benelux Three. The Port of Rotterdam in the Netherlands, one of the largest in the world, serves as a hub for Europe’s maritime trade. Various raw materials and grains imported from around the world are unloaded at Rotterdam and transported throughout Europe, while products gathered from across Europe are exported to the world through Rotterdam.

Beyond the Benelux Three, Europe has many other small but powerful nations, including Switzerland, Austria, and the Nordic countries. That is why it is only natural for us to look for our future path in these successful countries, which overcame limited territory and a lack of natural resources. At one time, there was a movement in the business community to learn from such nations, and in politics there were even discussions about redefining our national identity around a federal system of small but powerful states. Although attention later shifted to middle powers such as Germany, and talk of small but powerful nations subsided, the enterprising spirit of trade and openness shown by the Benelux Three still offers important lessons for our trade-dependent economy.

Markets Promote the Growth of Civilization

To say that the entire globe has become a market means that sales and profits are now generated on a global scale. The number of digits is different from what it was when business activity was confined to the domestic market. As the world flattens, humanity’s sphere expands, and exchange among people increases, markets develop alongside them. Markets grew together with civilization, and those expanded markets in turn promoted the growth of civilization.

If humanity’s history of development, which began on rivers and seas, extends into space—to the moon or Mars, for example—then some ambitious entrepreneurs will likely throw themselves into ventures such as developing lunar resources or interplanetary trade between Earth and Mars. And that, in turn, will drive the advancement of Earth’s civilization. This is only natural, given that the innate nature of human beings is to pursue profit. The wealthy people who emerge then will attain riches beyond anything that John Rockefeller in the 19th century or Bill Gates in the 21st could ever have imagined. And there is no doubt that, thanks to them, the rest of humanity too will enjoy the most prosperous lives in history.

△ Please remember

The reason the commercial economy of the city-state system was able to revive in Europe around the Mediterranean and the North Sea was that these regions preserved better than anywhere else the two great legacies of the ancient commercial economy: the Greek monetary system and the spirit of Roman law. In other words, they protected private property and the principle of freedom of contract. As humanity’s sphere expands and exchange among people increases, markets also develop. Markets grew together with civilization, and those expanded markets in turn promoted the growth of civilization.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: [스마트 경제 읽기] 르네상스의 도시국가들 이야기

Author: Sung-no Choi

Date: 2021-03-22

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=5&idx=23578