CHAPTER 1: THE MAKING OF EUROPE © Paul Sharp and Cambridge University Press THE GEO-ECONOMIC CONTINUITY OF EUROPE • How do we define ‘Europe’? • The role of trade: Europe trades therefore she is! • 80% of population of the Roman Empire in 100 CE lived within the borders of the present EU • Carolingian Empire around 850 CE saw restoration of order after the disintegration of the Roman Empire, but note the continuity in borders up until the EU © Paul Sharp and Cambridge University Press THE ROMAN EMPIRE AROUND 200 CE © Paul Sharp and Cambridge University Press THE CAROLINGIAN EMPIRE AROUND 850 CE © Paul Sharp and Cambridge University Press THE EUROPEAN UNION 2010 © Paul Sharp and Cambridge University Press NATIONS AND BORDERS • Nations and unions of nations defined by borders • Borders represent the limit of political authority and state capacity • States tax to provide e.g. roads and public goods, e.g. – Defence – Law and order • Nations form because they offer economies of scale when providing these public goods © Paul Sharp and Cambridge University Press THE GRAVITY MODEL • The gravity model demonstrates that the volume of trade is determined by – Size, i.e. national income – Distance between countries • Larger countries trade more, but trade declines with distance • There are also border effects – Cultural, religious, jurisdictional, etc. differences reduce trade © Paul Sharp and Cambridge University Press BILATERAL TRADE BETWEEN ECONOMIES OF EQUAL SIZE © Paul Sharp and Cambridge University Press THE COMMERCIAL REVOLUTION • The fundamental problem of exchange – How to get strangers to trust and trade with each other • From the second millennium, trade increased over space and time • How was this possible? • Trade evolved from taking place within families to between strangers due in part to the use of formal contract enforcement mechanisms © Paul Sharp and Cambridge University Press HENRI PIRENNE AND BORDER EFFECTS • Henri Pirenne (1862-1935) sought to understand why the Northern African countries traded so little with Europe after the Arab conquest (8th and 9th centuries) • His argument rested on what later became known as border effects – Cultural and religious divide • More recent research suggests that it was mostly the poverty of Europe which led to the decline in trade • Lack of trade reinforced these border effects © Paul Sharp and Cambridge University Press THE ROLE OF DISTANCE IN HISTORY • In the past long-distance transport costs were prohibitively high for anything except luxury goods – E.g. silk and spices • Land transport costs were particularly high, so most goods shipped by water, but this added mileage • Then ships became larger, insurance mechanisms improved © Paul Sharp and Cambridge University Press THE COMMERCIAL REVOLUTION • One of the first signs was the Champagne fairs southeast of Paris • Merchants from all over Western Europe met to trade – Contracts could be enforced by threat of exclusion • As trade moved onto the sea, trading emporia with financial and more formalized contract enforcement services emerged © Paul Sharp and Cambridge University Press IMPORTANCE OF PROXIMITY AND SIMILARITY • Proximity means lower transport costs • Similarity can mean standardization, and is in turn stimulated by trade – Standardization of weights, volumes, qualities • For long distance trade, it must be possible to describe commodities using a terminology understood by both trading partners • Allows complete contracts, in turn promotes standardization of legal procedures© Paul Sharp and Cambridge University Press TRADE AND STANDARDIZATION • Trade generates standardization of measures, law and preferences • Early examples are maritime law, now codified as the Hague-Visby rules • The 19th century was a breakthrough for the metric system • Why did Britain not follow continental Europe and why does the US still not have a mandatory metric system? © Paul Sharp and Cambridge University Press COMMON LANGUAGE • Promotes diffusion of ideas and goods, and exercise of authority • 10th century Europe much more heterogeneous than Roman Empire • But Roman alphabet gradually replaced local alphabets in Western Europe • Regionally uniform languages adopted: – German in Baltic Sea area, Latin promoted by the Church – French from the 18th century, then English © Paul Sharp and Cambridge University Press THE EAST-WEST DIVIDE • All trading nations will become closer culturally (preferences, law) over time – cultural ‘distance’ falls but at different rates depending on the volume of trade – Faster growth of trade means faster erosion of cultural differences • Groups of nations that become relatively closer culturally and pass a ‘cultural homegeneity threshold’ will form clusters, normally called regions, or unions of nations, such as the EU © Paul Sharp and Cambridge University Press WHAT ABOUT RUSSIA? • The Roman Empire never touched the Russian heartland • Russian isolation imposed by poverty, distance (and policy) – Initial lack of similarity not broken down by trade – Russia late to embrace emancipation, industrialization, standardization, educational reforms, etc. – Russian Revolution and subsequent Cold War policies isolated it further • The East-West divide is closely linked to the differential © Paul Sharp and Cambridge University Press East-West rates of growth INTRA-EUROPEAN TRADE AND TRADE WITH THE REST OF THE WORLD, 2005 © Paul Sharp and Cambridge University Press REFLECTING ON PREVIOUS TABLE • Why is Denmark’s trade with the UK larger than with (equal size, equal distance) France? Trade is also stimulated by similarity of nations – Similarity refers to culture in a broad sense: commercial law, institutions, religion, language, consumer preferences • Lack of similarity impedes trade: it is a ‘border effect’, an additional trading cost • Border effects determine the extent of a regional unit like Europe and the West-East divide of Europe © Paul Sharp and Cambridge University Press THE EUROPEAN UNION • Gradually expanded since the 1950s – First France, Germany, Italy and the BENELUX nations – Admission of the UK and others in the 1970s – Then Southern and Eastern Europe • A new and historically unique experience • European Economic Community became the European Union – More political ambitions, often elites versus sceptical public • Geo-politics now in tune with geo-economics © Paul Sharp and Cambridge University Press SUMMARY • Larger units such as Europe limited by initial differences in income and technology, declining gravitational force • Trade breaks down border effects, but they remain if trade is weak • Implies that regional entities such as Europe remain because they are self-reinforcing • Border effects can also be deliberately created, e.g. by EU’s protectionist Common Agricultural Policy, and the common currency © Paul Sharp and Cambridge University Press SUGGESTIONS FOR FURTHER READING © Paul Sharp and Cambridge University Press
