The Rational Optimist (20 page)

This is not disproved by the success of two empires from around the beginning of the Christian era: both Rome and India realised the benefits of economic unification before they managed to endure the disasters of political unification. The Mauryan empire in India seems to have harvested the prosperity of the Ganges valley to combine an imperial monarchy with expanding trade. It was ruled at its zenith in 250
BC
by Asoka, a warrior who turned into a Buddhist pacifist once he had won (funny, that) and was as economically benign a head of state as you could wish. He built roads and waterways to encourage the movement of goods, established a common currency and opened maritime trade routes with China, south-east Asia and the Middle East, sparking an export-led boom in which cotton and silk textiles played a prominent part. Trade was carried on almost entirely by private firms (
sreni
) of a recognisably corporate kind; taxation, though extensive, was fairly administered. There were remarkable scientific advances, not least the invention of zero and the decimal system and the accurate calculation of pi. Asoka’s empire disintegrated before it had become totalitarian, and its legacy was impressive: for the next few centuries the Indian subcontinent was both the most populous and the most prosperous part of the world, with a third of the world’s people and a third of the world’s GDP. It was without question the economic superpower of the day, dwarfing both China and Rome, and its capital city Pataliputra was the largest city in the world, famous for its gardens, luxuries and markets. Only later, under the Guptas, did the caste system ossify Indian commerce.

From Ganges to Tiber

Asoka was a contemporary of Hannibal and Scipio, which brings me to Rome. Rome’s particular speciality, from its very first days until the end of its empire, was simply to plunder its provinces to pay for bribes, luxuries, triumphs and soldiers’ pensions nearer to home. There were four respectable ways for a prominent Roman to gain wealth: land-owning, booty from war, money lending and bribery. Cicero pocketed over two million sesterces (three times the sum he had previously quoted to illustrate ‘luxury’) from his governorship of Cilicia in 51 and 50
BC
– and he had a reputation as an especially honest governor.

Yet there is no doubt that Rome’s hegemony was built on trade. Rome was the final unification of Greece’s and Carthage’s trade zones, with a smattering of belligerent Etruscans and Latins in charge. ‘The history of antiquity resounds with the sanguinary achievements of Aryan warrior elites,’ wrote Thomas Carney, ‘but it was the despised Levantines, Arameans, Syrians and Greeklings who constituted the economic heroes of antiquity.’ The populous and prosperous cities of southern Italy, Sicily and points east that were the core of Rome’s world were Greek-speaking; they did the hard work of keeping people rich while legionaries and consuls strutted their triumphs. The fact that standard histories of Rome barely mention the markets, merchants, ships and family firms that sustained the empire, preferring instead to bang on about battles, does not mean they did not exist. Ostia was a trading city as surely as Hong Kong is today, with ‘a vast piazza housing the head offices of some five dozen companies’. Much of the Campanian countryside was devoted to slave-manned plantations growing wine and oil for export.

Moreover, Rome’s continuing prosperity once the republic became an empire may be down at least partly to the ‘discovery’ of India. Following Augustus’s absorption of Egypt, the Romans inherited the Egyptians’ trade with the East, and soon the Red Sea was alive with massive Roman cargo ships carrying tin, lead, silver, glass and wine – the latter soon becoming an exciting novelty in India. Thanks to the discovery of the monsoon, which reliably blew ships eastward in summer and back westward in winter, the journey across the Arabian Sea was cut from years to months. At last Rome’s ships made direct contact with the world’s economic superpower. In the first century, the anonymous author of
The Periplus of the Erythrean Sea
described the navigation and trade of the Indian Ocean; Strabo wrote that ‘now great fleets are sent as far as India’; and the emperor Tiberius complained of Indian luxuries draining the empire of its wealth. Peacocks from India became a favourite possession of Roman plutocrats. Indian ports like Barigaza (modern Bharuch in Gujarat) seem to have blossomed through exporting cotton cloth and other manufactures to the West. Soon, even within India, there were enclaves of Roman traders, whose hoards of amphorae and coins still sometimes come to light. Arikamedu, for example, on the east coast near modern Pondicherry, was exporting to China glass imported from Roman Syria (glass blowing was a new Roman invention and glass was suddenly much better and cheaper throughout the empire).

Think about this from the consumer’s point of view. Nobody in China can blow glass; nobody in Europe can reel silk. Thanks to a middleman in India, however, the European can wear silk and the Chinese can use glass. The European may scoff at the ridiculous legend that this lovely cloth is made from the cocoons of caterpillars; and the Chinese may guffaw at the laughable fable that this transparent ceramic is made from sand. But both of them are better off and so is the Indian middleman. All three have acquired the labour of others. In Robert Wright’s terms, this is a non-zero transaction. The collective brain has expanded across the entire Indian Ocean and lifted the standard of living at both ends.

Ships of the desert

But the plundering, the lack of invention, the barbarians and above all Diocletian’s red tape did for Rome in the end. As the empire disintegrated under this bureaucratic burden, at least in the west, money lending at interest stopped and coins ceased to circulate so freely. In the Dark Ages that followed, because free trade became impossible, cities shrank, markets atrophied, merchants disappeared, literacy declined and – crudely speaking – once Goth, Hun and Vandal plundering had run its course, everybody had to go back to being self-sufficient again. Europe de-urbanised. Even Rome and Constantinople fell to a fraction of their former populations. Trade with Egypt and India largely dried up, especially once the Arabs took control of Alexandria, so that not only did oriental imports such as papyrus, spices and silk cease to appear, but those export-oriented plantations in Campania became the plots of subsistence farmers instead. In that sense, the decline of the Roman empire turned consumer traders back into subsistence peasants. The Dark Ages were a massive experiment in the back-to-the-land hippy lifestyle (without the trust fund): you ground your own corn, sheared your own sheep, cured your own leather and cut your own wood. Any pathetic surplus you generated was confiscated to support a monk, or maybe you could occasionally sell something to buy a metal tool off a part-time blacksmith. Otherwise, subsistence replaced specialisation.

This was never, of course, absolutely true. Within each village or monastery there was a degree of specialisation, but it was not enough to support large towns. At least there were now, as there had not been in slave-powered Rome, incentives to improve technology. A steady trickle of innovations began to improve productivity in northern Europe long after the end of the western empire: the barrel, soap, spoked wheels, the overshot water wheel, the horseshoe and the horse collar. Fitfully, Byzantium prospered from what was left of the Mediterranean trade, but plague, war, politics and piracy kept getting in the way. The predatory expansion of the Carolingian Franks in the eighth century, caused by a modest revival of regional trade in grain and manufactures, began also to stimulate trade in spices and slaves across the Mediterranean. The Vikings, paddling their boats down the rivers of Russia to the Black Sea and the Mediterranean, partly revived the oriental trade (with a little pillage thrown in) – hence their sudden prosperity and power.

But meanwhile the torch passed east. As Europe sank back into self-sufficiency, Arabia was discovering gains from trade. The sudden emergence of an all-conquering prophet in the middle of a desert in the seventh century is rather baffling as the tale is usually told – one of religious inspiration and military leadership. What is missing from the story is the economic reason that Arabs were suddenly in a position to carry all before them. Thanks to a newly perfected technology, the camel, the people of the Arabian Peninsula found themselves well placed to profit from trade between East and West. The camel caravans of Arabia were the source of the wealth that carried Muhammad and his followers to power. The camel had been domesticated several thousand years earlier, but it was in the early centuries
AD
that it was at last made into a reliable beast of burden. It could carry far more than a donkey could, go to places a wheeled bullock cart could not, and because it could find its own forage en route, its fuel costs were essentially zero – like a sailing ship. For a while even the Byzantine sailing ships of the Red Sea, waiting for the right winds and running the gauntlet of increasingly numerous pirates, found themselves at a competitive disadvantage compared with ‘ships of the desert’. With the route down the Euphrates disrupted by wars between Sassanid Persia and Byzantine Constantinople, the way was open for the people of Mecca, like dry Phoenicians, to become rich through trade. Spices, slaves and textiles went north and west; while metals, wine and glass went south and east.

Later, by adopting two Chinese inventions, the lateen sail and the sternpost rudder, the Arabs extended their commercial tentacles deep into Africa and the Far East. A dhow that sank off Belitung in Indonesia in
AD
826 was carrying objects of gold, silver, lead, lacquer, bronze and 57,000 ceramics, including 40,000 Changsha bowls, 1,000 funerary urns and 800 inkpots – mass-produced exports from the kilns of Hunan for the wellheeled consumers of Basra and Baghdad. Not coincidentally, the free-trading Arabs exchanged ideas as well as goods and culture thrived. As they spilled out of their homeland, Arabs brought luxury and learning to an area stretching from Aden to Cordoba, before the inevitable imperial complacency and then severe priestly repression set in at home. Once the priesthood tightened its grip, books were burned, not read.

The merchant of Pisa

In due course, these Muslim gains from trade began to lift Europe out of its self-sufficiency thanks largely to Jewish traders, who in the tenth century abandoned the increasingly oppressive court of the Abbasids in Baghdad for the more tolerant regime of the Egyptian Fatimids. Settling along the southern shores of the Mediterranean and in Sicily, these Maghribi traders developed their own rules of contract enforcement and punishment by ostracism, quite outside the official courts. Like all the best entrepreneurs, they thrived despite, rather than because of their government. And it was they who began to trade with the ports of Italy. Italian peasants started to discover that instead of dividing their land among impoverished heirs they could send sons to town to trade with Maghribi Jews.

Northern Italy, because of a stand-off between the Holy Roman emperor and the pope, was temporarily favoured by an absence of greedy rent-seeking kings. When Arab piracy and papal plunder paused under the influence of the first Otto, the towns of Lombardy and Tuscany found themselves free to set up their own governments, and since towns were there because of trade, these governments became dominated by the interests of merchants. Amalfi, Pisa, and above all Genoa began to flourish on the back of the Maghribi trade. It was a Pisan trader living in north Africa, Fibonacci, who brought Indian–Arabic decimals, fractions and the calculation of interest to Europe’s notice in his book
Liber Abaci
, published in 1202. Genoa’s trade with North Africa doubled after an agreement for the protection of merchants was reached in 1161, and by 1293 the city’s trade exceeded the entire revenue of the king of France. Lucca acquired a strong position in the silk trade and then in banking. Florence became wealthy through weaving wool and silk. Milan, gateway to the Alpine passes, flourished as a market town. And Venice, long independent in the safety of its lagoon, gradually became the epitome of the trading state. Despite competing and often warring with each other, republican city states, run by merchants, not only took care not to tax or regulate trade into extinction, but did everything they could to encourage it: in Venice, for example, the government built and leased ships and arranged convoys.

Italy’s prosperity was felt in northern Europe, too. Venetian merchants crossed the Brenner pass into Germany in search of silver and began to appear at Champagne fairs in Flanders – another no man’s land between kingdoms – bringing silk, spices, sugar and lacquer in exchange for wool. In the early 1400s, for instance, Giovanni Arnolfini settled in Bruges as an agent for his family silk business in Lucca, and was immortalised in the famous painting by van Eyck. Although a small percentage of the European population in the Middle Ages would have even encountered silk and sugar, let alone regularly, and a tiny proportion of Europe’s GDP came from such trade, none the less it is undeniable that Europe’s reawakening was boosted by contact with the productivity of China, India, Arabia and Byzantium through Italian trade. Regions that participated in Asian trade grew richer than the regions that did not: by 1500 Italy’s GDP per capita was 60 per cent higher than the European average. But historians often put too much emphasis on exotic trade with the Orient. As late as 1600, European trade with Asia, dominated because of transport costs of luxuries such as spices, was only half the value of the inter-regional European trade in cattle alone. Europe could trade with Asia because it traded so much with itself, not vice versa.

Inexorably, gains from trade could be rediscovered – people could become consumers again, which meant that they could also become producers of cash crops to sell to each other. If I grow a bit more wheat and you tan a bit more leather, then I can feed you and you can shoe me ... Eventually in the twelfth century towns started to grow at a rapid rate. By 1200, Europe was once again a place of markets, merchants and craftsmen, though heavily dependent on the 70 per cent who worked the land to produce food, fibre, fuel and housing material. In an unusually warm climate the continent was enjoying an economic boom. Living standards rose all across the continent of Europe, especially in the north, where the Hanseatic merchants from Lübeck and other cities, equipped with new, slow, but capacious sailing ships called cogs, did for the Baltic and the North Sea what the Genoese had done for the Mediterranean. They brought timber, fur, wax, herrings and resin west and south in exchange for cloth and grain. Like the Maghribis they developed their own
lex mercatoria
, merchant law, with sanctions against those who broke their contracts when abroad, quite independent of national laws. Through the rivers of Russia and the Black Sea, the merchants of Visby on Gotland even reestablished contact with the Orient via Novgorod, bypassing the Arabs who controlled the Strait of Gibraltar.