Thursday, May 26, 2016

Economic reflections on the Fall of Constantinople

This Sunday, May 29 marks the anniversary of the Fall of Constantinople in 1453. I have been recently reading (and in some cases, rereading) books on the last period of Constantinople, after the reprieve of 1402, brought about by the Ottoman defeat by Tamerlane, and how and why this period was not better used. But thinking of Roman Empire and of what is called (somewhat inaccurately) Eastern Roman Empire, led me to two, I hope interesting, observations.

First, why the Industrial Revolution did not happen in Eastern Roman Empire? Asking this question is  going back to the famous query posed by Michael Rostovtzeff in the 1930s: “Why was there a detour of some ten centuries; why did not seemingly modern-looking market institutions of Rome produce at least a Lombardy-like economic development, not in the 14th but in the 4th century?” There are many answers to that question. From those who emphasize external factors like the “barbarians at the gate” to those who, like Rostovtzeff himself, believe that the weakening and the break-down of the Empire came because of its inability to incorporate lower classes and because of the “dead hand” of a rising military bureaucracy;  to those like Marx and Aldo Schiavone and Bob Allen who believe that the culprit was slavery:  cheap labor that provided no incentive for the use of labor-saving machines that technically could have been developed.  Finally, there are those who in the debate between the “modernists” and “primitivisms” thought, like Moses Finley and Karl Polanyi, that Roman institutions did not contain at all the seeds that could have led to capitalist development.

Where does Eastern Roman Empire come into that discussion? It seems to me that the most appropriate answer to Rostovtzeff’s question would be to look to the “country” about which he posed the question: the country that was the continuation of the Roman Empire, nay that was the Roman Empire itself (Constantinople become the capital in 330 AD, some 80 years before the first sack of Rome) and that lasted for another 800 to 900 years with no interruption. (That is, if we want to date the end of the Roman Empire in 1204 when Byzantium was conquered by the Crusaders).

Wasn’t there enough time to find out if ancient institutions could become capitalistic? Eight or nine centuries seems plenty. Moreover, what, culturally and institutionally, better place to develop than the Eastern Empire: direct continuator of the larger Roman whole with an educated elite, same institutions, stable currency (solidus, “the dollar of the middle ages”), reasonable protection of property rights, people knowledgeable of Greek and Latin and thus able to read everything from Herodotus to Columella’s agricultural treatises without the intermediation of translation, with Roman laws codified and simplified by Justinian. Why did not there develop “bourgeois virtue”, “inclusive institutions”, Landes’ “culture”?  Or does it all have to do with “serendipity” of having coal and expensive labor in one place? Yet despite all of these advantages, no one reading the history of the Eastern Roman Empire would come thinking that there was any chance of it developing in the capitalistic direction. It was as feudalistic as they come.

I do not know why market economy with wage labor failed to develop there and can only speculate that it might have been because of a militarized bureaucracy, land magnates (and thus high inequality), obsession with Christian theology which sucked the best minds into sterile disputes (it would be nice to have an anti-Christian like Gibbon tell us why the Eastern Empire could not become a capitalistic power!), its frequent wars with Arabs, Persians, Russians, Normans, Bulgars, Pechinegs, Avars, Ottomans… Any other candidates?

There is plenty of recent scholarly work on why China failed to become capitalist and start the Industrial Revolution (for an excellent discussion  see Peer Vries “Escaping poverty”, and especially the chapter entitled “Why it does not make sense to call Qing China capitalist…”), but it seems to me that equally revealing and rewarding would be to study why the  Eastern Roman Empire, seemingly full of all the necessary prerequisites, failed to do so. The ingredients were present in both China and Eastern Rome, but in neither case did development occur: why?

The second observation has to do with trade and war. The reading of Eastern Mediterranean history is extremely instructive  for a way in which we should think of trade. A benevolent approach, starting with Ricardo, always regarded  trade as an activity freely undertaken by two parties with no extra-economic compulsion. No reader of history of the Eastern Roman Empire can share that view. Trade and military underpinning of it went hand-in-hand. This is at its most obvious not in large empires which anyway had to have armies but in trading city-states like Venice and Genoa. If you believe that trade is all about peace there would be no reason why these city-states had to maintain large naval fleets, fight battles, conquer islands, negotiate, under military threat, special rights to tariff-free imports and exports. Trade, debt and the army always moved together. No tourist to any Greek island today will fail to observe large Venetian  and Genoan fortresses that could not have been built without money and labor but also without a naval presence that allowed the control or conquest of the islands in the first place.

When the Fourth crusade started, the first city to have been sacked by the Crusaders was a Christian port-city of Zara (today’s Zadar in Croatia), a rival to Venice. The doge paid the Crusaders to start their path of destruction with a city populated by their co-religionaries. The association between trade and war which continued throughout the rest of history, and certainly throughout the 19th century, helps us to have a much more clear-eyed view about colonialism too.  As said by a Dutch Proconsul in Batavia in a letter written to the Directors of the Dutch East India Company (that I cite in my recent book),

Your Honors should know by experience that trade in Asia must be driven and maintained under the protection of Your Honors’ own weapons, and that the weapons must  be paid for by the profits from the trade, so that we cannot carry on trade without war nor war without trade.

Trade followed the flag in Africa and Asia (Leif Wenar and I wrote an article on that criticizing Rawls’ rather quick acceptance of the “doux commerce” view of trade).  “The unequal treaties” with China would be unimaginable without European military superiority and the threat it implied; the Opium War—another example of the close association between the two—was won by arms.  “Free trade” came to India and Africa “out of the barrel of a gun”.

Trade, helped by arms, was often at the origin of the fortunes which grew further by monopolistic or monopsonistic  practices, lending or usury, or in some cases through entrepreneurship. The origin of fortunes was thus often extra-economic. But that need for military power, if one wishes to trade and be rich, is best seen on the example of trading city-states that, in a world without coercion and ruled by the benevolent comparative advantage, would not require fleets, cannons and mercenaries.

History is useful---even for economists.

PS. The electoral/referendum season is upon us, so tempers flare, and I should explain more clearly my own thinking on trade and war. When Leif Wenar and I argued that trade and war are linked, we took a position against a somewhat na├»ve and mechanistic view (shared by Rawls) that liberal peoples who trade are necessarily peaceful. Indeed, military power was often used to extract advantages in trade or simply to pillage weaker nations. But that does not imply that military power is always used for that purpose. Sometimes, as in the US control of today’s shipping routes in the Pacific or Pompey’s campaign against the Cilician pirates, the military underpinning is needed to make trade and development possible.  There, arms play a role similar to domestic monopoly of violence which guarantees  property  rights and human rights more generally.

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