The World Economy by the OECD Development Centre
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The Venetian Republic

Venice played a major role in reopening the Mediterranean economy to West European commerce and developing links with Northern Europe. It created an institutional basis for commercial capitalism, made major progress in shipping technology, and helped transfer Asian and Egyptian technology in cane sugar production and processing, silk textiles, glassblowing and jewellery to the West.

Venice was the most successful of the North Italian city states in creating and maintaining a republic dominated by a merchant capitalist elite. Thanks to its geographic position and willingness to defend itself, it was able to guarantee its autonomy and freedom from exactions by feudal landlords and monarchs.

It created political and legal institutions which guaranteed property rights and the enforceability of contracts. It was a pioneer in developing foreign exchange and credit markets, banking and accountancy. It created what was effectively a government bond market, starting with compulsory loans on which interest was paid regularly. Its fiscal system was efficient and favourable to merchant profits and the accumulation of capital. The revenues came from excise levies and property taxes based on cadastral surveys.

It was a tolerant and fairly secular state where foreign merchants (Armenians, Greeks and Jews) could operate as freely as locals. Although it was theoretically part of the catholic world, it enjoyed privileged relations with the Byzantine empire. It buttressed its ecclesiastical independence by acquiring the relics of St. Mark from Alexandria in 828. It was effectively independent of both Pope and Patriarch.

Venetian diplomacy was highly professional, pragmatic, opportunistic and dedicated to the pursuit of its commercial interests. It adjusted amazingly well to political changes. In the ninth and tenth centuries its main commerce was to provision Constantinople with grain and wine from Italy, wood and slaves from Dalmatia and salt from its lagoons, taking silk and spices in return. Towards the end of the eleventh century, Byzantium was under pressure from the Seljuk Turks who seized Anatolia, and Frankish incursions into its Southern Italian territories. Venice secured commercial privileges (exemption from excise taxes) from Byzantium in 1082 in return for help in bolstering its naval defences. In 1204, by contrast, it played a major role in persuading the leaders of the fourth crusade to target Constantinople instead of Islam. As a result Venice acquired bases in Dalmatia and an empire in the Aegean. It took the southern half of the Peloponnese, Corfu and Crete. It occupied nearly half of Constantinople and gained access to trade in the Black Sea and Sea of Azov. In 1261, the Byzantine Emperor recaptured Constantinople and gave trade preferences and a territorial base to Venice’s rival, Genoa. However, Venice retained its Greek colonies and Venetian shipping was soon able to re–enter the Black Sea where trade was booming due to the Mongol reopening of the silk route through Central Asia.

West European crusaders successfully attacked the Syrian and Palestinian coast and established small christian states in Antioch, Acre and Jerusalem between 1099 and 1291. They gave commercial privileges to Pisan and Genoan traders who had helped finance their conquest. The Venetians had not helped, but nevertheless managed to establish a trading base in Tyre.

The Turkish Mameluke regime recaptured Syria and Palestine in 1291 and ruled Egypt until 1517. Here too, Venice managed to establish a privileged trading relationship, buying a large part of the Asian spices which the Karimi merchants of Alexandria brought to Egypt from Asia via the Red Sea. In return the Venetians sold metals, armour, woollens and slaves. The slaves came from the Balkans and Russia: males were destined for service in the Mameluke army, females for their harems.

When the Ottoman Turks captured Constantinople in 1453, Venice quickly negotiated the maintenance of its trading rights, but in 1479, the Ottomans closed their access to the Black Sea. In 1517, they took over Egypt and terminated most of the Venetian trade in spices.

Venice had important connections with Northern Europe. Trade with Flanders was carried out mainly at the Champagne fairs where Italian merchants bought woollen goods and sold silk, spices, alum, sugar and lacquer8. When the sea route was opened between the Western Mediterranean and the Atlantic, trade with Flanders was carried out directly by ship.

A second route linked Venice with Augsburg, Nuremberg, Prague and Vienna via the Brenner Pass. German merchants brought metals and metal products (including silver). Venetians traded these metals up the Po Valley and in the Mediterranean. In 1318 the Fondaco dei Tedeschi was created in Venice to provide for the trading needs and lodging of German merchants.

In building up its trade, Venice created a political empire. In 1171, the city had about 66 000 inhabitants, and was one of the three biggest in Western Europe until the sixteenth century when its population peaked around 170 000. Venice experienced three demographic catastrophes. In 1347–48, nearly 40 per cent of the population died when a galley brought the plague from the Black Sea port of Caffa. Two other attacks occurred in 1575–77 and 1630; each killing about a third of the population of the city.

The Empire overseas (dominio da mar) included about half a million people. Between 1388 and 1499, Venice acquired territory on the Italian mainland (terraferma) which included Udine, Friuli, Vicenza, Padua, Verona, Bergamo, Rovigo and Cremona. In 1557 the population of these territories was about 1.5 million.

The Venetian state played a leading role in commercial activity, being the major shipbuilder, leasing state–owned galleys to private enterprise, arranging the organisation and timing of convoys. It developed types of ship suitable for Venetian commerce and the conditions of trade in the Mediterranean. This state activity reduced costs for private traders by making commerce more secure from enemy attack. It also permitted smaller traders, with limited capital, to participate in international trade.

The biggest enterprise in Venice was the Arsenal, a public shipyard created in 1104. It was operative for centuries, and employed thousands of workers.

There were major changes in ship construction and navigation techniques between the tenth and fourteenth centuries. Roman ships had been constructed hull first, held together by careful watertight cabinetwork of mortice and tenon; the second stage was the insertion of ribs and braces. In the eleventh century there was a switch which made a major reduction in costs. The keel and ribs were made first and a hull of nailed planks was added, using fibre and pitch to make the ships watertight. A later development was the stern–post rudder which replaced trailing oars as a more effective means for steering ships. The power of the rudders was strengthened by use of cranks and pulleys. There were improvements in sails, notably the introduction of a triangular lateen rig set at an angle to the mast instead of a rectangular sail square to the mast. There was a long run increase in the size of ships.

Soon after 1270, the compass came into use in the Mediterranean. This, together with improved charts, made it possible to sail all year round. Previously ships trading with Egypt had not ventured out between October and April. With the compass the same ship could make two return trips a year from Venice to Alexandria instead of one.

There were two main kinds of Venetian ship. General purpose cargo ships (“cogs”) were built in private shipyards. Their length was about three times their breadth, and they relied entirely on sails. Galleys for passengers, high value cargo and naval duties were built in the Arsenal. These were longer, had a wide beam and a crew of 200 most of whom were oarsmen. Galleys were speedier, more manoeuvrable for entering and leaving harbour, and for occasions when there was no wind. The general Venetian practice was to have 25 benches on each side of the galley, each bench having three oarsmen. The benches were set at an angle and the oars were of different lengths so that the rowers would not interfere with each other. On such a ship there would be 150 oarsmen and about 30 crossbowmen for defence and attack, who would also take turns at rowing. Galleys were owned by the state and rented out for each venture to the highest bidder in public auctions. Galleys also acted as public carriers, as those who leased the ships had to accept goods from other merchants if they had spare capacity.

In 1291, the Genoese defeated a Moroccan fleet controlling the straits of Gibraltar, and opened the way for European commerce from the Mediterranean to the Atlantic. Thereafter Venetian galleys used this route to trade with London and Bruges.

Although international trade, banking, shipbuilding and associated trades in timber, carpentry, rope and sailmaking etc. were the biggest sectors of the Venetian economy, there were also sizeable manufacturing activities producing goods for local use and export. One of the earliest was the glass industry which had already started in the tenth century. Venice was a pioneer in glassblowing technology in Europe and made glasses, goblets, pitchers, dishes, bottles, vases, mirrors, jewellery, candelabra and decorative products of very high quality. From the thirteenth century Venetians produced delicate, carefully blown sand–glasses as a time–keeping device for mariners. From the fourteenth century onwards they started making spectacles — an Italian invention which greatly increased the productivity of artisans and scholars. Angelo Barovier, the most famous glassblower of the fifteenth century, perfected the process for making crystal. By that time, polychrome, engraved, filigree, enamelled and gold– leafed glassware was available in a profuse variety of designs. In 1291 all glassblowing was shifted to the island of Murano by decree of the Maggior Consilio. This enabled Venice to keep tighter control of its trade and technological secrets.

Equally precocious were the skills and products of Venetian goldsmiths, mosaicists, woodcarvers and decorative artists who were in heavy demand in turning the inside of churches, civic monuments and private palaces into works of art. Venetian style was influenced by the work of previous generations of mosaicists and iconographers in Ravenna and the thirteenth century inflow of objects looted from Constantinople.

The trade with Asia in raw silk and silk products eventually led to import substitution in Europe. Silk production had already spread from China to India and Syria, and came to Italy in the twelfth century — initially to Lucca, then to Venice, Florence, Genoa, Milan and Bologna, and later to Lyon in France. Within the Arab world, silk production came to Spain from Syria. Venetian silk production is documented as early as the thirteenth century. The Venetian government regulated production to guarantee quality, keep out competitors and reduce the risk of industrial espionage. The silk, satin and velvet products of Venice were of the highest quality, and designs were a distinctive mix of indigenous creativity and oriental influence. Multicoloured velvet brocades, often executed with gold and silver thread, were produced as items of ceremonial clothing for Venice’s governing elite, for furniture, wall hangings, table coverings, decorative items for gondolas etc. These products made a substantial contribution to Venetian exports.

Another important field was book production. In the ninth and tenth centuries, scribes and illuminators were mainly active on sacred books in the scriptoria of monasteries. Later there were civic records, histories, translations of Aristotle and other Greek texts destined for the libraries of San Marco, ducal, civic and private collectors. This gave employment to professional scribes, bookbinders, specialists in ornamented calligraphy and illustration. Less than 15 years after Gutenberg’s invention of printing, a German immigrant brought the technique to Venice in 1469. It led to an enormous improvement in the productivity of the industry, with print runs up to 4 500 copies. A very much larger proportion of output was destined for export than had been the case for manuscript books. Venice quickly became the principal Italian typographical centre, and one of the biggest in Europe. By the middle of the sixteenth century, some 20 000 editions had been published. Venetian publishing helped invigorate the cultural and intellectual life of Europe by providing music scores, maps, books on medical matters and translations of the Greek classics. The Aldine Press (set up in 1494) edited and published original Greek texts, and Venice became the major publisher of books for the Greek–speaking world.

Sugar was another major product. Venice created plantation agriculture and processing facilities with slave labour in Crete and Cyprus, using techniques borrowed from Syria. Venetian practice was copied later by the Portuguese in Madeira and in Brazil.

The Venetian role in the spice trade was greatly reduced at the beginning of the sixteenth century because of restrictions on trade with Syria and Egypt imposed by the new Ottoman authorities, and competition from direct Portuguese shipments from Asia. Lane suggests that Venetian spice imports fell from around 1 600 tons a year towards the end of the fifteenth century to less than 500 tons by the first decade of the sixteenth century. Lane thought that the absolute size of the pepper component of these shipments had recovered by the 1560s, but Venice’s leading role in this trade had obviously evaporated.

Venetian shipping also faced increased competition on Western routes to England and Flanders, and its sugar industry in Crete and Cyprus declined because of competition from Portuguese production in Madeira and later in Brazil.

There were also changes in shipbuilding technology in the Atlantic economies which quickly rendered the oared Venetian galley obsolete. The two main changes were in the rigging of round ships and the development of firearms during the fifteenth century. Lane (1966, pp. 15–16) described these changes as follows: “The transformation of the one–masted cog into a full–rigged, three–masted ship possessed of spritsail, topsail and mizzen lateen occurred about the middle of the century — the sailing ships of 1485 differed less in appearance from the sailing ships of 1785 than they did from those of 1425 — equally important in robbing the merchant galley of the special security which had alone justified its existence was the increase in the use of guns in naval warfare.”

As a result there was a sharp decline in the main product of the Arsenal and a rise in the share of cogs in the Venetian merchant fleet. There was increased purchase by Venetian merchants of ships from abroad, as problems of adapting to technological change were compounded by much poorer Venetian access to cheap timber than shipbuilders in the Atlantic economies.

From 1500 onwards, a significant proportion of Venetian capital was reoriented to agrarian reclamation and development and creation of Palladian villas and country estates in the terraferma.

Over the sixteenth, seventeenth and eighteenth centuries, Venice did not expand much in population or per capita income, but it remained one of the richest parts of Italy and Europe until overtaken by the Dutch in the seventeenth century.