Wed Jun 13, 2012, 01:22 PM
Mira (15,333 posts)
Mission Accomplished - a different take and a good read - The Sovereign Man
Date: June 13, 2012
Reporting From: New York City
In Medieval Europe when most people were living short, brutish lives wallowing in muddy serfdom, there was one city that served as a shining economic beacon for the rest of the continent: Venice.
At the time, Venice was one of the richest places in the known world, underpinned by its dominance in trade and the upward mobility of its citizens.
The concept of what we know today as "America" was alive and well in Venice during the Middle Ages; Venice was a place where, with guts, hard work, and a little bit of luck, you could become very wealthy and live the Venetian Dream.
The modern Limited Partnership structure, in fact, is derived from an early Venetian model called the 'commenda', a sort of special purpose vehicle for trade missions.
A standard commenda involved young entrepreneurs with a lot of energy but no capital partnering with older veterans with a lot of capital but no energy. The old guys would finance a trade mission to Asia, and the young guy would head off to foreign lands to make money.
If/when he returned, they would split the profits, the young guy receiving 25% to 50%.
A lot of people became very wealthy through this model, and even the poorest serf could come to Venice and rise up in social and financial status.
As you could imagine, though, they managed to find a way to screw it up.
In the early 1300s, the ruling elite eliminated the commenda structure that had made so many people so much money. Shortly afterward, the state started charging exorbitant taxes to merchants and nationalizing trade.
A police force was introduced in 1310 for the first time ever... not to protect the people from criminals, but to protect the criminals (government) from the people.
It didn't take long for Venice to decline into insignificance. Any opportunities to create wealth and live prosperously vanished as Venetian politicians engaged in the wholesale destruction of their economy, the livelihoods of its participants, and the 'Venetian Dream.'
With 20/20 hindsight, we can look back upon medieval Venice and pinpoint the early 1300s as the turning point to rapid decline... when there was a great unraveling of economic foundations and personal freedom.
It certainly makes one wonder whether future historians will look back upon this period in Western civilization and draw the same conclusion.
While I'm no fan of economist Joseph Stiglitz or the neo-Keynesian ideals he espouses, his new book proves this point more than just about any other recent work.
In The Price of Inequality, Stiglitz provides copious data showing that individuals in the United States now have a lower likelihood of moving up in social/financial status than any other developed country in the world.
This fact is reinforced by the Federal Reserve's most recent Survey on Consumer Finances, which showed that median US household net worth fell nearly 40% from 2007 to 2010.
This is the natural effect when you base an entire system on the whims of a very small elite that has awarded itself the ability to spend recklessly, rack up unsustainable levels of debt, and conjure money out of thin air.
As in Venice before them, US politicians have been engaging in the wholesale destruction of their economy, the livelihoods of its participants, and the American Dream.
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Mission Accomplished - a different take and a good read - The Sovereign Man (Original post)
Response to Mira (Original post)
Wed Jun 13, 2012, 04:14 PM
jtuck004 (5,070 posts)
2. I think that writer is perhaps taking some liberties with history, because it was
their greedy bankers that did them in (and a lot of the world around them), not getting rid of a type of contract. Mostly, though, it was the Ottomans kicking their ass all the way to a peace treaty in the mid 1500's. He also leaves out the idea that it was the Muslim world that very likely contributed to the formation of the commenda. (After reading a bit of that blog I suspect he would rather choke than suggest that). I wish I had time to read more of that history, make up my own mind. Nevertheless...
Below is an interesting paragraph...it would take me a lot longer to see if I trust even this perspective, however (Dang, pesky skepticism. One would think there is a whole world full of people willing to rewrite history for their own purposes...)
"More revealing is the latest work of the historian of Venice, Frederick C. Lane, Money and Banking in Medieval and Renaissance Venice.† This work shows that it was Venetian finance which, by dominating and controlling a huge international “bubble” of currency speculation from 1275 through 1350, rigged the great collapse of the 1340’s. Rather than sharing the peace of mutual greed and free enterprise with their “allies,” the bankers of Florence, the merchants of Venice bankrupted them, and the economies of Europe and the Mediterranean along with them. Florence was the Fourteenth-century “New York,” the apparent center of banking with the world’s biggest banks. But Venice was “London,” manipulating Florentine bankers, kings, and emperors alike, by tight-knit financial conspiracy and complete dominance of the markets by which money was minted and credit created."
I wonder if Jamie Dimon had relatives there...
Thank you for posting the above. It's an interesting take. I keep finding that no matter how much we learn, there is always more.