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

Author(s):Gelderblom, Oscar
Reviewer(s):Hohenberg, Paul M.

Published by EH.Net (February 2014)

Oscar Gelderblom, Cities of Commerce: The Institutional Foundations of International Trade in the Low Countries, 1250-1650.  Princeton, NJ: Princeton University Press, 2013.  xii + 293 pp. $35 (hardcover), ISBN: 978-0-691-14288-3.

Reviewed for EH.Net by Paul M. Hohenberg, Rensselaer Polytechnic Institute.

In this book, Oscar Gelderblom, who is Associate Professor of Economic History at Utrecht University, sets out to embed the development of three major commercial centers in the ongoing debate over the rise of market-friendly institutions during the late Middle Ages and the early modern period.   Between them, the ports of Bruges, Antwerp, and Amsterdam held the top rank among north European commercial cities for the entire period.  Amidst all the wars, dynastic rivalries, economic cycles, and demographic and religious upheavals, the ships came and went, the goods piled up in warehouses and streamed out again, and the merchants bargained, bickered and borrowed – and often grew rich in the process.  In this fine book, we get a real sense of the riskiness associated with trade (no mention of the polyglot and multi-specie confusion that must have made things even more complicated) and of the efforts urban authorities made to cope with risk.

The focus on institutions is nothing new in economic history; indeed, the “old” economic history studied little else.  But the “New” practitioners look to the role of trade-enabling institutions in fostering the pervasive capitalist economy that was to come, grounded in private enterprise, laissez-faire government, and heavy use of capital.  One school of thought credits the strong nation state and its willingness to honor its debts to private persons. As Gelderblom points out, while this may hold for England, Continental territorial rulers more often hindered than helped trade.  A second school holds that private merchant networks were largely able to cope with the agency problems inherent in long-distance trade.[1]  Again, Gerlderblom believes (and documents) that it took additional institutional scaffolding to manage risk.

The present book offers a third model, one which puts the emphasis on urban institutions not only created to facilitate trade but adaptable to changing needs and circumstances.  Cities were propelled by the need to compete – not just for trade but for a nodal role in trade networks.  Success meant, in particular, the presence of foreign merchants who would reside, store goods, and engage in financial transactions as well as trade.

The bulk of the book is devoted to a close, highly detailed analysis of mechanisms in the three cities intended to deal with recurring problems.  The chapter headings tell the story: “The Organization of Exchange,” “Crossing Borders” (trade at a distance), “Conflict Resolution,” “The Protection of Trade” (from violence), and “Dealing with Losses.”  Using “thick description,” Gelderblom shows how urban mechanisms were generated, modified, and adapted to meet the needs of a disparate set of trades and traders under changing conditions.  The idea was both to supplement private arrangements and to circumvent often overly-rigid and archaic institutions of territorial rulers.

While giving due credit to the depth and breadth of learning these chapters display, I want to focus briefly on the principal argument that it was competition between cities that motivated institutions conducive to long-distance trade.  To do so requires closer attention to two meanings of the term.  Economists use competition to designate a market structure in which sellers that persist in the market must operate with a level of efficiency such that they can cover all costs at the prevailing price.  None has any special incentive to innovate, nor is there any push toward a hierarchy of “firms” (in this case ports).  Competition can also, however, imply rivalry, where the fight for survival or supremacy plays out between two (or a few) contenders.  Here a first mover advantage can prove decisive, providing ample incentive (in this case) to offer foreign merchants a more hospitable habitat with trade-friendly institutions.

Because the three cities succeeded one another as leading ports in the north European network, one expects the second meaning of competition to prevail.  One also expects to find (at least relative) institutional failure, first in Bruges and then in Antwerp, as they lost their primacy.  Yet this is just what we do not find.  In fact, institutional failure gets almost no attention beyond vague allusions to other places.  The decline of Bruges and Antwerp gets little notice; by implication, the causes were exogenous, largely the result of political struggles and aggression by territorial rulers.  Thus, the core argument loses some of its edge given the book’s near-exclusive focus on successful urban institutions in a world of sharp variation in the fortunes of commercial cities

The book is well-written, and only a few infelicities betray the fact that English is not the author’s primary language (and that copy-editing by publishers has fallen victim to the times).  I close with an observation, not a criticism: three things one might expect to find in a study of European trade in these four centuries shine, as the French say, by their absence: Mercantilism, usury, and the silting up of the Zwin (Bruges’ estuary).

Notes:
1. Full disclosure: the two articles on which much of the recent literature is based appeared in the same issue of the Journal of Economic History.  The present reviewer, though proud as then-editor to shepherd two fine papers into print, did not foresee the impact they would have.  Nor did either win the Journal’s Cole Prize as the best paper published in that year. See Douglass C. North and Barry R. Weingast (1989), “Constitutions and Commitment: Evolution of Institutions Governing Public Choice,” Journal of Economic History 49 (4): 803-32; and Avner Greif (1989), “Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders,” Journal of Economic History 49 (4): 857-82.

Paul M Hohenberg is Professor of Economics Emeritus at Rensselaer and has written widely on European economic history and urbanization.  He is the author with Lynn Hollen Lees of The Making of Urban, Europe, 1000-1994 (Cambridge, MA: Harvard University Press, 1994).

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Subject(s):International and Domestic Trade and Relations
Markets and Institutions
Urban and Regional History
Geographic Area(s):Europe
Time Period(s):Medieval
16th Century
17th Century