The story of Venice from 800 to 1350 is of incredible political and institutional change of a remarkably modern sort, sparked by international trade

How Globalization Created And Destroyed The City Of Venice

Max Nisen

Egalitarian institutions and economic mobility threatened the power of Venice's elites, and they used their wealth and power to choke off competition, ending Venice's dominance.

A new NBER working paper from Diego Puga and Daniel Trefler takes a deep look at the data and history of how it happened

..................

The move to Oligarchy

The wealthiest and most powerful families feared erosion of their status. In 1297, they managed to pass the first of a series of laws (known as the Serrata) that gave control of Great Council elections to a few powerful families. 

A series of subsequent votes and laws further ensconced a legally ensconced Venetian nobility that had not existed before. The populace did not take it lying down, there were succession of revolts and protests, culminating in an armed insurrection in 1310 that was nearly successful.

In response, the Great Council was enlarged to co-opt would be revolutionaries, and the state's coercive powers were dramatically increased.

After they consolidated power, the now oligarchs embarked on a campaign of regulation, restriction and rent seeking. They essentially cut off the poor from engaging in long distance trade by limiting the most lucrative routes and goods to a select few, most notably with a 1324 law called the Capitulare Navigantium.

Additionally, they nationalized the Galley fleet. Galleys, because of their speed and small holds, transported the most valuable goods. The Venetian elite auctioned off the services of these fleets to a small group of rich friends, protected them from competitors, and collected huge rents.

Read more: www.businessinsider.com

International Trade and Institutional Change: 

Medieval Venice's Response to Globalization

Diego Puga, Daniel Trefler

NBER Working Paper No. 18288
Issued in August 2012
NBER Program(s):   ITI 

International trade can have profound effects on domestic institutions. We examine this proposition in the context of medieval Venice circa 800-1350. We show that (initially exogenous) increases in long-distance trade enriched a large group of merchants and these merchants used their new-found muscle to push for constraints on the executive i.e., for the end of a de facto hereditary Doge in 1032 and for the establishment of a parliament or Great Council in 1172. The merchants also pushed for remarkably modern innovations in contracting institutions (such as the colleganza) that facilitated large-scale mobilization of capital for risky long-distance trade. Over time, a group of extraordinarily rich merchants emerged and in the almost four decades following 1297 they used their resources to block political and economic competition. In particular, they made parliamentary participation hereditary and erected barriers to participation in the most lucrative aspects of long-distance trade. We document this 'oligarchization' using a unique database on the names of 8,103 parliamentarians and their families' use of the colleganza. In short, long-distance trade first encouraged and then discouraged institutional dynamism and these changes operated via the impacts of trade on the distribution of wealth and power.

Source: http://www.nber.org

Download .pdf here