Chapter one of "An Economic History of Europe", Appunti di Storia Economica

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CAP.1 – THE MAKING OF EUROPE 1.1 – THE GEO-ECONOMIC CONTINUITY OF EUROPE formation of Europe → long historical progress which involved political, cultural and economic forces trade → cohesive force → geo-economic persistence of Europe during the last two millennia geographical entity → the origins can be found in Roman and Carolingian empires Russia’s relationship → ambivalent → periods of self-imposed isolation and others of enthusiastic embracing Carolingian Empire → represented the revival of political order after the fall of the Roman Empire & the emerge if Germanic people → they amalgamated their traditions with the adopted culture Germanic tribes → avanced towards the east → kept their own language European Union → result of centuries of conflicts age of empires → not bound to reappear until the european colonial expansion of the nineteenth century borders → we delineate a nation or union of nations → limit of political authority and the capacity of the state to tax and spend on roads and public goods nations → offer economies of scale → providing public goods and a public authority → defence, law and order breakdown of the unified Carolingian Empire → since then national borders have been redrawn repeatedly after conflicts disruptive political forces of Europe → BUT Europe remained as a unit of cultural and institutional homogeneity → strong cohesive forces → trade was the most important 1.2 – EUROPE TRADES gravity theory of trade → we can predict the volume of trade between two nations → two determinants: 1) size of the economies as measured by national incomes → positive effects 2) distance between them → negative effects, it is constant + (for Henri Pirenne) 3) cultural differences 4) religious differences 5) jurisdictional differences border effects → barriers to trade cultural differences or border effects → tend to be eroded by trade → trade promotes common weights, measures, lingua franca and harmonization of comercial law trade → human interchange → transfer preferences, new knowledge, technology, trust and cooperation → it generates similarity commercial revolution → trade becomes long distance → separation in space and in time of contracting and contract fulfilment between shipping goods and payment → trade between strangers fundamental problem of exchange → difficulties in establishing long-distance trade relationships between strangers → asymmetric information, uncertainty and greater risks contract enforcement problems → legal traditions and procedures differed from nation to nation establishment of an institutional framework (1500s) → handle the problem of the fundamental problem of exchange → if the sedentary merchant provided the financing and the goods in the transaction used an agent in another city to conclude the trade that agent could exploit the fact that full information was not immediately revealed to the principal → he might claim the quality of goods wrongly trust relationships → helped to avoid the problem of fraudolent behaviour evolution → from trade relying on family to exchange relations based on the use of formal institutions or contract enforcement Arab conquest (8th and 9th century) → cultural and religious barrier to trade in the mediterranean → core of Europe moved towards western and central Europe → in a long-distance trade exporters and importers need to trust each other → common beliefs and common code of conduct why Northern African countries traded to little with Europe → Henri Pirenne → border effects but more recent reseraches suggest that it was due to the poverty of European geographical diffusion of late Roman high-quality pottery → from a particular production site in France borders of the Empire → obstacle for trade of commodities → population north of the Rhine = lacked the means to buy high quality pottery → poorly developed trading networks and different tastes Arab world → relative backwardness → reduced trade opportunities with Europeans countries border effects in Northwestern Europe → reduced during the medieval resurgence of Europe vibrant economic area → baltic and northern europe → established in the thirteenth century → religious unification volume of trade → stimulated by size, proximity and similarity of nations land transport costs → high → commodities were sent by water because it was cheaper open sea maritime trade → considerable consumption → charges were lost by the long distance over sea relative to the land passage carrying capacity of ships → improved → increasing labour productivity in shipping fourteenth century → merchants pay a fee → fall of prices over time because of safer ships and extinction of pirating beginning of the second millennium → first signs of commercial revolution → periodic fairs → convenient crossing point for merchants and moneychargers continuing expansion of trade → fairs were replaced by permanent trading emporia → financial and more formalized contract → repopulation of abandoned cities of the post-roman period and establishment of new ones proximity → low transport costs similarity → stardandization, stimulated by trade when it is increasingly involving long distances and a separation of time between contracting, delivering and payment as trade becomes international → need for common standards → weight, volumes and quality → terminology understood by the trading partners common standars → reduce transaction costs → contracts easier to write