DRAFT 3.0

Venice: The Model Turned Upside Down

By Elizabeth Griffith[1]

Paper submitted to European Business History Association 2004 Conference

Barcelona, 16-18 September 2004

Conference theme: "From Industry to Services?"

Abstract

The republic of Venice (697-1797), unique in many ways, developed in the reverse of the traditional economic model. Rather than progressing from an agricultural to a manufacturing to a service to a knowledge economy, Venice started with a transportation service economy, trading salt and fish for grain; it then developed a significant knowledge sector to operate and administer a far-flung (and enormously lucrative) commercial empire; a manufacturing industry followed, featuring luxury manufacturing and a massive shipbuilding facility; and only late in its history did agriculture become at all significant to Venetian economic output. The evidence argues that a service economy, whether or not recognized and whether or not executed on a cash basis, is present at the earliest stages of economic development. As an interesting coda, aspects of the Venetian experience have a distinctly contemporary ring, and economic lessons to offer that we think of as modern concepts. These include ecological awareness, branding, knowledge work, diversity, transparency and accountability, and the business of tourism. Venice’s experience with globalization, and how it puts a premium on services and knowledge work, foreshadows much of what we are experiencing today.

INTRODUCTION

Any assertion that agricultural development necessarily precedes industrial development, which in turn necessarily precedes the development of a service economy, must contend with the peculiar case of Venice, where the order of economic development was exactly the opposite. Is the case of Venice an anomaly, an exception to the rule – or is the model wrong?

In either case, the long history of the republic of Venice – which both outlasted any other European government and conferred upon its populace one of the highest standards of living ever enjoyed by any society[2] – has lessons for contemporary students of economics, business and society.

1. VENICE AND THE MODEL

REFLECTIONS ON THE MODEL

The notion that economic development went from agriculture to manufacturing to service elements[3] is seductively intuitive. In the study of prehistory we trace the spread of settled farming to earlier eras than the manufacture of pottery and metal implements.[4] We in the United States have seen our economy move from primarily agricultural to significantly industrial to primarily service – a similar pattern obtains in many other countries – in three generations[5], and our own family histories, and those of families we know, may have reflected these shifts. This model seems to be one of the things we “know.”

Yet like a photograph that dissolves into disorienting pixels under magnification, this model loses some of its persuasiveness under close examination. What, for example, is our evidence for prehistoric agriculture but tools – and are not tools manufactured items? And the burial sites that provide so much prehistoric evidence – who presided over their preparation but a priestly member of a service profession?

Once one begins thinking like this, the simplification unravels quickly. Reading the stars and the weather, propagating plants, and other activities essential to agriculture look, upon close examination, a lot like knowledge work – the vanguard of the service economy. Deciding what to plant, directing harvests, inventorying stores, dividing them among families – indeed all sorts of primitive leadership – is service. Domestic and medical work – all service. “The oldest profession” is neither agricultural nor manufacturing. Nor is soldiering, a prominent if not overwhelming feature of every early society. It becomes a challenge to think of any area of human endeavor that does not seem to be, in however primitive a way, some early incarnation of a service profession.

PECULIAR, PRECOCIOUS VENICE

An urbanized, industrialized society of artisans and knowledge workers – post-Rome, pre-Renaissance – neither fully Italian nor even fully western – the Venetian republic is a chronological and geographical misfit, defying even the simple categories of time and space. Its history, for the most part, fits uneasily with the themes usually associated with its dates – urban during the time of feudalism, commercial when the rest of the world was agrarian, secular at times of religious extremism, with a government increasingly closed when the rights of all men were being increasingly celebrated – Venice has made itself easier to admire than to understand.

BUYING WHAT YOU NEED: A SERVICE ECONOMY IN THE 6TH CENTURY

The early history of Venice is shrouded in mystery with a thick overlay of myth, but this much seems indisputable: at some point after the fall of the Roman Empire in the west, in response to the Lombard invasions, people from mainland Italy began to settle in the lagoon islands we now know as Venice. They put down roots (in an almost literal way, driving piles into the Venetian mud to anchor their buildings) and launched an ambitious program of land reclamation and rebuilding until, in the late 13th century, the city assumed the basic structure we know today.[6]

Such farming as might have been done on the lagoon islands in these early days would have been incidental, and even the first maps of Venice demonstrate that any fields so dedicated would have soon disappeared in the urgent need for space[7]; the city “swallowed up fields and gardens.[8]” From the earliest days, Venetians augmented their seafood diet with grain, fruits, vegetables and dairy products gotten from the mainland in return for the fruits of the sea, fish and salt. That Venetians plied their flat-bottomed barges along the Po River has come down to us in an explicit and charming passage from a letter written in 523 by Cassiodorus, the Roman-educated secretary to Theodoric the Ostrogoth, in which he is requesting (or ordering in a tactful way – the context is not entirely clear) the Venetians to transport the harvest of the nearby Istrian coast to Ravenna, further south on the Italian peninsula:

For you possess many vessels in the region… and you will, in a sense, be sailing through your native country…. Your ships need fear no angry gusts, since they may continually hug the shore. Often, with their hulls invisible, they seem to be moving across the fields. Sometimes you pull them with ropes, at others men help them along with their feet….

A later passage in the same letter confirms that the barges pulled or sailed by the Venetians are used not only to ship for hire, but to carry on a lively trade of fish and salt for other goods:

Your people have one great wealth – the fish which suffices for them all… your energies are spent on your salt-fields; in them indeed lies your prosperity, and your power to purchase those things which you have not. For though there may be men who have little need of gold, yet none live who desire not salt.[9]

So Venice started as a mixed economy, fishing, harvesting salt, trading for goods, and providing transportation services.

BUILDING AN EMPIRE

Gradually Venice moved further down the Adriatic and then out of it as well, and its trade shifted from hauling bulky foodstuffs short distances to conveying small, valuable articles from the eastern Mediterranean to European markets, always via its own port. Their barges became galleys, long boats powered by the rowing of two, three, or as many as five men to a bench.[10] While galleys were primarily thought of as war machines, Venice used them as merchant ships. Their speed and maneuverability enabled them to elude pirates. If attacked, the rowers, always free men, defended not just the owner’s merchandise in the hold but their own sea chests with their own items, which they were permitted to trade.[11]

The vigor of the Venetian merchant marine enabled it to assist the Byzantine emperor in the mid-eleventh century when threatened by the Norman King of Sicily[12], and the emperor showed his gratitude in 1082 with the Golden Bull, an agreement giving Venice significant trading advantages in the Byzantine Empire, at that time far the wealthiest and most urbanized part of the Mediterranean world. This inducement to establish permanent trading outposts in Constantinople, Alexandria, Tyre and other parts of the empire was coupled with a need that grew apace with the multiplication of trading routes: galleys needed to take harbor nightly. To shelter its traders and wares, and to provision and repair its ships, Venice needed remote outposts it could secure and control; it needed an empire.

The Crusades provided the opportunity. Venice, reluctant on the one hand to battle its non-Christian trading partners, pressured on the other hand to participate in the Christian cause, found its early Crusading role as transporter and quartermaster to the Frankish troops. In 1204, with the so-called fourth Crusade, it took center stage. The leading knights had grossly overestimated the Crusading army they could summon, and had contracted with the Venetians for far more transport and supplies than they could afford. The Venetians proposed that in partial payment the campaign attack Constantinople, where they had a pretext for quarrel. The Venetian doge, blind and aged, led the first successful attack on Constantinople ever, and arranged for some of the riches of that city (including the four famous horses of St. Mark’s) to be conveyed to Venice. More importantly, Venice received a series of islands in the Aegean and Ionian seas from which to operate their trading ventures.[13]

The two centuries that followed featured a series of wars with Genoa, the powerful trading city-state across the Italian peninsula from Venice[14], in the fourth of which Genoa came as close as anyone ever came to invading the city itself. This last effort, in 1381, went decisively in favor of Venice; although Genoa was to remain a hated rival, Venice was to predominate in their once contested trade routes[15].

INSURANCE, SPICES, AND STATE ADMINISTRATION: A KNOWLEDGE ECONOMY IN THE 14TH CENTURY

By the early 14th century, 800 years after Cassiodorus wrote his flattering letter, Venice was the capital of a large, wealthy trading empire, its port serving as the center of sea and land trade routes ranging from the far east to northern Europe, and its holdings stretching from the lagoon area, including Istria and Dalmatia within the Adriatic, and encompassing a number of islands in the Ionian and Aegean Seas, including the large island of Crete. In addition to the lucrative trans-Alpine trade operated in conjunction with German merchants, Venice had trading relationships with the city-states of mainland Italy, the Byzantine Empire, Tunisia, Trebizond on the Black Sea, and Persia.[16]

In order to build up and maintain this empire Venice had developed a large and complex knowledge sector. Consider the needs of trade: weights and measures, accounting and insurance, as well as the intricate know-how traders must possess regarding their merchandise. This would be considerable – according to a commercial handbook of the day, there were 288 different types of “spices”[17]. Consider the needs of the state: languages, diplomacy, espionage. Consider the needs of the navy: shipbuilding and maintenance, strategy, leadership. These brief lists imply that these things were all distinct, when in fact they were often melded in the same activities, and the same person, particularly one who had traveled as a merchant, would have many of these skills.

The finance industry was large and diverse – accounting, banking, insurance and currency trading were advanced (if not founded) in Venice[18]. Shipbuilders, designers, technicians, and specialists in dozens of sub-trades flourished in the shipping world of which Venice was the center. In addition, the tight knit between commerce and government resulted in many services provided (and regulations imposed) by the government. In the course of the encouragement and protection of trade, and the building and maintenance of an empire dedicated to trade, the Venetian state employed diplomats, tax collectors, official recorders, engineers, pilots, dredgers, public health officials, accountants, and the all-important naval warriors who protected the sea lanes and made commerce possible.

The need to keep each of these activities robust required an efficient reinvestment of the profits of trade in the physical and intellectual infrastructure of the city[19] – and in domestic stability. The governance of Venice is a topic that has received a great deal of high quality scholarship, and it is not my subject here, so I will confine myself to the very basics. Venice was very effectively governed by a hereditary ruling class that usually made up from 1-5% of the total population. Men over the age of 25 from this class made up the great council, from which were elected smaller groups and committees and individual posts, the first of which was the “doge,” or duke.

All the noble families had become wealthy through trade, not agriculture, indicating two profound differences between the Venetian nobility and virtually every other European noble class of the time – a respect for trade, and a lack of feudal ties.[20] Nobility and wealth were not, however, synonymous; there are indications that over 40% of Venetian wealth resided with non-noble families[21], and as the centuries passed a number of the noble families lost their wealth. There was a citizen class from which the government secretaries and permanent civil service was drawn, and a large artisan class.