INSTITUTIONS ALWAYS “MATTERED”
Quantitative Evidence of Favorable Institutions in
The (forgotten) Republic of Ragusa ,1000-1800
Oleh Havrylyshyn and Nora Srzentic.
1
Draft.1. CPE (17,700 words)
INSTITUTIONS ALWAYS “MATTERED”
Quantitative Evidence of Favorable Institutions in
The (forgotten) Republic of Ragusa ,1000-1800
{Author deleted}
“Among permanent state institutions [activities? au.}
the primary is a responsibility to preserve justice and
order among wholesale and retail merchants , and
customers, irrespective of whether they are foreigners
or citizens”
Filip de Diversis, Ragusa : 1440 1
1
As cited by Stipetic (2000); he translates t the Latin ???? as institutions which may be a stretch , though the spirit
is right. Filip de Diveris was an Italian teacher in Ragusa’s gymnasium who wrote in 1440 the book Situs
Aedificiorum,Poilitiae et Laudabilim Consuetudinum Inclytae Civitatiis Ragusii.
2
I.
INTRODUCTION AND MOTIVATION
The vast literature of the New Institutional Economics (NIE) relies mostly on historical
examples of Western Europe and its colonies, with only a few references to Venice and
other Northern Italian City-states. But an excellent historical example of good
institutions, the tiny Republic of Ragusa has been overlooked by economists.. Over the
period 1300-1800, Ragusa (today Dubrovnik), despite its small population never
exceeding 90,000 , with a mere 1,100 sq.km of very small infertile territory that was
difficult to defend, achieved a remarkable degree of economic prosperity and
disproportionate importance in Mediterranean trade. Lane’s (1972 ) history of Venice
frequently notes Ragusa was considered its main rival in maritime trade.Fernand
Braudel in several places refers to this ‘jewel of the Adriatic.” Shakespeare and others
glorify it implicitly by the frequent use of the term “Argosy “ , a fast ship with rich cargo.. 2
Most historians attribute its success not to mere luck of location, but good governance,
an atypically benevolent rule providing many basic needs of commoners, institutions
favorable to commerce, upward mobility, and meaningful rule-of-law.3
This work on Ragusa is motivated by three considerations. First , most historical
evidence of the NIE paradigm ,that “institutions matter for growth “ , is based on 1719th c. Europe and its colonies , with surprisingly little attention to the earlier economic
growth spurts in Northern Italy, despite its being known as “the Cradle of Capitalism .”
While some work on Venice exists , we wish to add to the NIE literature an example of
a very small but highly successful economy , Ragusa. Secondly, while both Croatian4
and other historians have produced a considerable literature on Dubrovnik , very few
economists have written about it, and the analysis is sorely lacking in quantitative
evidence . We thus propose to compile as much data as possible to retell its story.
Finally, the economic histories that do analyse the role of institutions in earlier periods,
are not yet linked to the most recent developments of the Institutional Paradigm and the
various categories used for quantifying institutional quality as in the many indicators or
scores reported in the World Bank’s two main publications : The World Governance
.Both Oxford and Webster’s clearly define Shakespeare’s “argosies with portly sails” in The merchant of Venice
as ships of Ragusa.,Though he used poetic license to imply they were Venetian.,contemporaries knew better.
3
This paper might be considered a mirror-image of the approach in Kuran (2011) on the Ottoman empire. He starts
with the same principle we do -”when communities differ in their economic accomplishments, the reason often lies
in the legal regimes under which they conduct business”- though his purpose is to show that inadequate institutions
explain why the Ottoman-Muslim Empire fell behind in the Middle Ages.
4
Indeed , Yugoslav writers earlier as well.
2
3
Indicators (WGI ) and the Doing Business Report (EDB). We present data on Ragusan
institutions that are analogous to now-common categories.
Our aims in this paper is to make three contributions to the literature. . First we will
briefly test and confirm the conventional histroian’s views on the prosperity and
importance of Ragusa with quantitative proxies of economic activity . Second, using the
concepts of today’s NIE, we will provide some quantitative measures of highquality institutions of governance, Rule-of –Law (ROL),contract enforcement,, and social
measures. Based on these we then conclude Ragusa provides a very early historical
example of how institutions “ matter “ for growth. We do not claim Ragusa was unique
in that regard, as several Northern Italian city-states followed similar development
models,5 but it is nevertheless an excellent example of how good institutions contribute
to growth
. The rest of the paper is structured as follows. Sec. II summarizes the aspects of the
NIE relevant to this paper., while Sec. III briefly reviews the history of the republic of
Ragusa., including a quantification of its economic evolution and high degree of
prosperity in its “Golden years “6 , the 15th -17th centuries. Next, Sec. IV discusses
argues that the main explanation of its success was good institutions, with several
quantitative measures of the high quality of its institutions supplemented with more
traditional qualitative assessments. Sec. V draws the main conclusions and points to
potential future research.
Two clarifications are in order. First, we generally use the Latin name Ragusa, as
Dubrovnik was then known. Second, we do not claim Ragusa was the only example of a
prosperous city-state with sensible economic policies and good institutions ;indeed we
accept the view of some scholars that a lot of Ragusa’s wise policy emulated –but
perhaps Improved upon – those of its main overlord and rival , Venice.. This paper begs
the question “ how exactly was Ragusa better than Venice or other Dalmatian portcities”, a more difficult analysis left to future research.
II.
RELEVANCE OF THE NEW INSTITUTIONAL ECONOMICS (NIE)7
Perhaps the best definition of economic institutions remains that of North (1994, pp359360) : “Institutions form the incentive structure of a society, and the political and
economic institutions, in consequence, are the underlying determinants of economic
performance. Time as it relates to economic and societal change is the dimension in
which the learning process of human beings shapes the way institutions evolve.”.
Indeed this definition also states succinctly the central thesis of the NIE, that institutions
matter for growth. While North and Weingast pioneered this paradigm as early as
their 1973 book, it did not permeate into standard growth and development economics
until 20 years later when numerous econometric studies of growth began to include
Venice is given some attention here , as Ragusa’s model, nemesis, and main competitor in trade.
Sec.III is based on the extensive analysis in (2013 ) publication by author –to be given)
7
This section is based on an extensive survey of the NIE in Ch. 2 of a forthcoming book by the authors .
5
6
4
variables “measuring “ the quality of institutions.. Doing so was facilitated by the vast
efforts to develop numerical indicators of institutions: those of the World Bank stand out
but many others now exist –indeed some writers consider there is a surfeit of
measures.. many are altogether skeptical of such measures. As often happens in a
paradigm’s evolution,theory comes first, they are applied empirically, and the literature
then returns to revisit the theories, A key contributions to the latter is the survey of
Acemoglu , Johnson and Robinson (2005 ), a central finding of which is that despite the
uncertainty about measurement and many econometric disputes, on balance the
literature shows that “institutions matter”. Our paper’s title and content is launched
from this , arguing that institutions always “mattered”, even much farther back in history
than the literatures’ general coverage from about 18th c. Europe and its colonies.
Today one might summarize the NIE literature under five main issue or debates:
1. is there a metric for measuring institutions quantitatively ?
2. do institutions truly play a significant role in explaining growth?
3. how large is this effect compared to traditional neo-classical determinants?
4. are some institutions more important than other
5. how do institutions come about ?endogenously as per the Coase theorem of
efficient-markets , or by the exogenous actions of state authorities?
Before addressing these we give a short sketch of the main theoretical tenets of the
NIE, that is how institutions affect growth .As already noted the argument is first laid out
in the pioneering works of Douglass North, his co-authors Thomas, and Weingast,
and somewhat independently those of Oliver Williamson( 1985 ). These pioneers pay
tribute to earlier theoretical building blocks for the NIE ,like Coase (1937 , 1960 ) on
efficient marketswhich develop endogenously institutions protecting property rights, and
Olson (1965,1993) ), on state authorities maximizing their “income “ (=taxes ) byt
protecting such rights and motivating economic growth.. Somewhat forgotten ,North
also relied on the American ( the “old ? “ )School of Institutionalism ( Veblen,
5
Commons, Berle ) which saw institutions-qua-entities ,-i.e. public and private agencieswhose rules and actions affected the behavior of economic agents.. North’s wove all
this into a whole-cloth comprising
theoretical thesis:
a new paradigm with a focused and clear
: to understand economic prosperity one needs to study which
institutions best promote it.
The NIE focuses on the mechanisms that support and enforce property rights in a way
which facilitates rather than hinder the pursuit of economic activity. Unlike the earlier
American Institutionalism of the late 19th , early 20th century , NIE is not a critique of
orthodox neo-classical economics or its utility and profit maximization axioms. Indeed
institutions are considered a hand-maiden to the market -a view nicely reflected in the
now-common term “ market –enhancing- institutions .”i Compared to the earlier
Institutionalism a first insight of North was to define institutions not as entities ,as
organizations of society like governments, courts, enterprises - but as the rules-of-the
game by which actors in the market must play. Good institutions were those that
allowed free enterprise, secured property rights, and enforced contracts, but also put
constraints on monopolistic, non-competitive activity, His second important insight
was to distinguish formal institutions ( laws , regulations , judicial procedures, diktats )
from informal ones ( habits, mores, ethical norms). The reason for such a distinction
was that laws can be subverted or unequally implemented , and what determines the
quality of institutions in the end is how the informal implementation of formal laws
affects the quality of the entire structure of institutions. This is not to say formal laws are
irrelevant, rather that in the notional basic equation of the North model with the
dependent variable “economic performance” , the independent variable “institutions “
6
has to be properly defined as the combined effect of both formal and informal
components. This is far from easy to do in practice and has spawned the first key
debate of the NIE: can institutions be measured .
Some early but very broad measures like Polity IV with its democracy scores were
used by analysts at first. More concrete economic-institutions began to be given
numerical value
by The Heritage Foundation , The World Bank, Transparency
International and so on. These were based on a combination of “expert” judgments
and surveys of economic agents’ views on such things as : how easy is it to deal with
tax-authorities; how easy is it to open , conduct , or close a business; how effective, is
governance; how much corruption is there; how quick and fair was the rule-of-law.
Most such measure’s were criticized as being subjective unlike the objective metrics of
other economic variables such as quantity of items, value of production, sales , exports.
The counter-argument noted North’s warnings that it was not formal laws that mattered ,
but their practical application, and who better to judge this than the objects of
implementation of rules?
We cannot of course obtain for Ragusa t systematic historical judgments of this sort,
but often a consensus exists in historical writings , contemporaneous and recent , about
the nature of governance in a state. Surprisingly, we are able to get specific , albeit
limited , objective measures analogous to todays’ “Ease of Doing Business “ measures
( World Bank, Doing Business Annual Reports ), like the amount of time to settle
bankruptcy /contract disputes; these are reported in Sec. IV..
7
Debates 2
and 3 have been addressed by numerous empirical studies using the
above quantitative indicators. Both Williamson (2000) and AJR 2005 ) conclude that
there exists a wide consensus : institutions do matter. There is also agreement the
effect of institutions is important enough that traditional factor input variables alone do
not tell the full story. Indeed , some like Rodrik , Subramanian and Trebbi ( 2004)
contend that in the long-run institutions “rule “, that is they are the sole explanation of
success needed.. It is beyond our scope to go into this debate, but our analysis of
Ragusa , though necessarily not done as econometrics, strongly suggests that even in
the long run, fiscal and monetary prudence
sum, the
view
that
were important contributors to growth.In
market-enhancing quality of institutions matters for growth has
become widely accepted, almost to the point of an axiomatic status.
The fourth debate , on the relative importance of different institutions is very much open
and the subject of current research.. Haggard and Tiede(2011), show that for
developing countries in particular, institutions underpinning political and social stability
are m opre importan than those protecting property rights. Havrylyshyn ( 2008)
suggests that for transition economies , the most important institutions for early
recovery were basic price , market , and external liberalization were initialy more
important than good legal or financial institutions.. Understandably , soft historical
data from the 15th c. are hardly good enough to compare the importance of different
institutions, so we do not address this debate.
8
On the fifth debates, how institutions develop, .AJR (2005 ) end their review by
suggesting future work needs to concentrate on asking what determines the quality of
institutions , and why they are ”better “ in some countries and some periods than in
others. At the start, North and colleagues posited a Coasian efficient-markets view
that demand by merchants rather than exogenous provision of good laws by mostlymonarchical governments were the source of good institutions AJR (2005) take a
somewhat more eclectic view, that both exogenous actions of governments, and
endogenous developments by merchants, business people do create institutions—a
view held by many “ liberal” ( in the American sense ) economists . Of equal interest is
the debate with historians, many of whom increasingly question North’s interpretation
that mediaeval kingdoms and courts were too rapacious, too little developed, too biased
to provide market –friendly institutions and ROL. Thus Ogilvie (2011) provides
extensive evidence of governments in fact being the main developers of commercial
courts, and clear evidence that merchants, guild-members, citizens and foreigners,
relied heavily on government courts. Our finding s for Ragusa are that the bulk of
rules and legal procedures did indeed come from governments. However, given
Ragusa’s very small size and the fact that it ruling class of “nobles” were almost
universally involved in some commerce, this leaves open the question whether the
genesis of institutions was exogenous or endogenous.
III.
REVIEW OF RAGUSA’S HISTORY 1100-1800
III.1. Timeline of Historical-Political Development
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The first “records [of] Dubrovnik’s arsenals (shipyards) date from the year 782,”8 which
is broadly consistent with the popular founding story/myth
as a significant settlement
by Greek-Roman
9
that Ragusa was founded
denizens fleeing from the 639 Avar
invasions of ancient Epidaurus (Cavtat)..Its rise was quick: even informal views such
as Wikipedia’s , that “from the 11th century Ragusa emerged as an important maritime
and mercantile city”,10 are widely shared by contemporary and modern writers. In 1153
Andalusian geographer Idrisi wrote: “Ragusa was a large maritime town whose
population were hard-working craftsmen and [it ] possessed a large fleet which traveled
to different parts.” (Carter, 1972, p.74). In 1553 .Giustiniani noted its nobles had
fortunes far in excess of other Dalmatian cities, and comparable to the Venetian elite,
with “many individuals having [wealth] of 100.000 ducats and more“11.
While most historians describe Ragusa an independent Republic with relatively
democratic procedures, relatively benevolent attitudes to commoners,,12 in fact de jure
it was usually in a suzerainty, tributary, or protectorate status under one or another of
the larger powers. Nevertheless de facto it was
quite autonomous in its internal
governance and external commerce for the better part of a millennium, justifying its
motto LIBERTAS13. Just how much more democratic and benevolent it was than others
is debatable, and we elaborate on this in Sec, IV.. Historians vary slightly in classifying
the main periods of Ragusa’s history a broad consensus gives the following:
8 Nicetic (2002, p.11)
9
As all early history, there is a mixture of myth and fact, which Carter (1972), and Stuard (1992). inter alia try to
sort out. Note Epidaurus was a mere 15-20 km. south of Ragusa.
10
http://en.wikipedia .org/wiki/Maritime_Republics; accessed 8/1/2011
11 Krekic (1997, p.193) Well-paid sailors could earn a few hundred ducats yearly, captains 3-4 times.
12 Author’s (2013) publication discusses these claims.
13 .Kuncevic (2010) elaborates on the reality and myth of LIBERTAS.
10
 The Byzantine period about 8th/9th century to 1204: Ragusa was mostly under
Constantinople’s suzerainty, with periods of submission to Venice, Hungarian
kings, Normans in Naples, and even some years of independence. But it enjoyed
considerable autonomy and enough neutrality to have trading rights with all sides.
 The Venetian period, 1204 to 1358: Ragusa accepts formal submission to Venice,
a Republic at least 10 times larger, with a vastly more powerful naval fleet.
Venetian Counts were appointed formal heads of state, tribute was paid and in
war it contributed one vessel per thirty Venetian ones In return it retained internal
autonomy and importantly, with Venetian “protection “ was allowed the valuable
privilege of trade intermediation between the Balkans and Venice. Paradoxically
during this period Ragusa begins to develop a maritime prowess which eventually
leads to its becoming a major rival of Venice in Mediterranean trade.
 Hungarian suzerainty, 1358-1526: Under the 1358 Treaty of Zadar Ragusa
becomes a dependency of Ludovik I after he drives Venetians from most of the
Dalmatian coast. But the Hungarian kings were content with inland superiority over
Venice and not interested in Mediterranean trade, allowing full trading rights to
Ragusa-under its “protection” allowing it to sign separate treaties.
 The Ottoman period: 1526-1684. The Hungarian defeat at Mohacs formally puts
Ragusa in a protectorate status under The Porte., though given the preceding
loose control of Hungary, relations with the Ottomans began much earlier. The
first treaty was in 1392, with expansion of its terms in 1397 to fully free-trade in
Ottoman regions, and yet another treaty in 1459 after Turkish occupation of
Serbia. The well-remembered defeat of Serb forces at Kosovo Polje in 1389, and
Ottoman’s crowning achievement with the fall of Constantinople in 1453, clearly
signaled the need of Ragusa to deal directly with the Porte despite its formal
dependency on Hungary.
 The Austrian period, 1684-1806 was a faint echo of the earlier periods. Ragusa
retained considerable autonomy particularly for Balkan trade ,however its relative
( but not absolute ! ) economic importance began to decline in the 17 th c. With its
economic strength sapped by the overall decline of the eastern Mediterranean..
diplomacy was decreasingly effective. Indeed some interpretations suggest
Austrians did not seek firmer authority over Ragusa ,now generally called
Dubrovnik, precisely because its relative commercial importance was much
reduced.14,
 French occupation in 1806 ends independence of Dubrovnik, not just de facto, but
de jure. During the Austrian-French wars too weak to use its earlier diplomatic
efforts to retain neutrality, surrendered to overwhelming French forces and lost
Republic status. With Napoleon’s defeat the 1815 Congress of Vienna returned
14 “Relative” is the operative word here: In Sec III we show data suggesting absolute level of economic activity might have been still very large .
11
Austrian control over Dalmatia, but not Dubrovnik’s city-state privileges15. It becme
merely a city in the Dalmatian province. By 1900 railroads had further undermined
Dubrovnik’s advantages.
 The Modern Pariod : 1918-present. As the Versailles Trety created the SouthSlav ( Yugoslav) Kingdom , Dubrovnik’s importance continued to fall , with Rujkeka
and Split becoming industrial and poert cities of far greater importance and size.Its
former maritime fame disappeared , but it gradually grew into an important tourist
destination,> the crowning achievement was a designation as a UNESCO World
Heritage site in 1979.After the Yugoslav wars ended and calm returned by the late
nineties, a new worldwide fame took over: Dubrovnik becomes a standard stop in
Eastern Mediterranean cruises. While few people , even erudite ones, know the
name “Ragusa”, .the ubiquitous photo of its majestic city-walls in brochures and
TV commercials now means almost everyone will say “ sure I heard of
Dubrovnik”!
III.2. Economic Periodicity
Virtually all histories of Ragusa are structured on historical political models, with period
classifications dependent on key events: wars, victories, treaties, regime changes.
Given this paper’s focus on economic evolution we propose a new classification based
on the nature of the economic development. This is shown in Table 1 with approximate
dates. And a brief description of the main economic activity driving growth. 16 The paper
will focus on the Silver and Golden-Years period , the apogee of Ragusa’s economic
achievements since for the preceding Foundation Period quantitative indicators are
virtually non-existent, while the later periods are of much less analytical interest. As by-t
hen-Dubrovnik becomes a minor entity in the region.
TABLE 1. CLASSIFICATION OF ECONOMIC PERIODS
15This lends truth to the assertion by Luetic (1969, p107) : “the French occupation…overthrew the 1,000 year historical thread of Dubrovnik’s sea-based livelihood, and destroyed
the significance of Dubrovnik as a world-class maritime power.”
16
This is explained in fuller detail in Author (2012)
12
Economic period
Years
(approx.)
Foundational Period
To 1250
Subsistence agric, fishing, short-distance maritime
trade,small-ship building , Balkan trade(-including slaves)
Silver Period
1250-1400
All above continues; plus with strong growth in hinterland
trade of Balkan raw materials . This period saw a boom in
trade of silver and other minerals, to Northern Italy,as well
as gradual increase in long-distance entrepot trade
beyond Adriatic
Golden Years
1400—
1575/1600
All above plus : significant increase of long-distance
Maritime trade between Levant and Europe , initially
through Venice , Ancona, later direct.. Some historians
suggest maritime trade more important than Balkan trade.
1575/1600
Levant trade gradually lost to new West European
to- 1750
Competitors( Portugal. Spain, Netherlands , Englandreact with efforts to trade more directly in West
Mediterranean and even Atlantic
Cape Hope Route:
Gradual Decline of
Ragusa
Revival Interlude
Post-Independence
Nature of Economic Activity
1750-1806
Balkan trade continues, maritime trade to Ponent and
Atlantic expands. As new naval powers in West dominate ,
Ragusa turns to new activity: building or hiring-out ships
and sailors to Spain, Netherlands England., etc.
1806-1900
Decline sharpens, maritime advantages undermined by
railroad sin late-19th.c. However small beginning of
tourism-economy, the eventual new source of prosperity.
Source: Authors’ classification
It is nevertheless useful to give some idea of the relative economic dynamism of
different periods; we do this in Figure 1, which shows for each period the absolute
numbers of monumental building constructed in that period, the share of the total in the
13
millennium , and a crude index of “building intensity” (=number of buildings per 100
years) as a proxy of economic dynamism17.
Figure 1: Principal buildings in Ragusa by period 9th-19th century
Sources: Authors’ calculation using Chart XIII Carter (1972).
Taking this at face value the numbers
seem to confirm the conventional view that the
Golden Years ( about 1450-1600) were indeed the peak period of economic prosperity
and growth., with the largest number of buildings, the highest share by period and the
highest per century intensity. The foundational period shows a start but still very
modest. However, perhaps most interesting in this table is how large a share of the
major structures were put in place in the Silver period, with an intensity of building far
greater than the late periods and second only to the Golden Years. This is interesting
because it is largely ignored and unrecognized by historians—with the possible
exception of Stuard ( 1975-76). Admittedly this is a very crude proxy for economic
17 This may underestimate the number in later periods since it shows only buildings within the city walls, and territorial expansion over time likely meant more major building
projects outside as well.
14
dynamism “ it does not adjust for size or complexity, elegance of monumental buildings,
and perhaps underestimates
numbers in later centuries as
Carter’s list excludes
buildings outside the old city walls. But with the exception of the new conclusion about
the Silver period , it is very consistent with the conventional history of Ragusa. We go
on to provide some quantitative evidence on the degree of Ragusan prosperity and
comparison with Venice and others states.
III.3. Quantitative Evidence of Economic Growth
Before the11th. c .the economy was very simple, largely self-sufficient, based on
fishing, some agriculture, building of small craft. This was nevertheless an important
period in building the foundations of future prosperity and dominance in Dalmatia. One
sees a gradual movement into nearby coastal entrepot trade, as well as intermediation
between the Balkan hinterland and thriving Italian cities like Venice, Florence, Bari,
Ancona. With the first shipyard already in 782 -within a century of its founding- Ragusa
was clearly already moving into maritime activities. Early evidence
of its shipping
prowess notes that in 783 Charlemagne hired Ragusean ships to transport Croatian and
Serbian mercenaries across the Adriatic in his campaign to drive Saracens out of
Apulia18.Another indicator of an early economic development was its ability to withstand
for 15 months the 866 Saracen siege until Byzantine ships lifted it -indirect but strong
evidence that: 1) Ragusa was worth seizing, and 2) defenses were already quite
strong. The literature also contains accounts of caravan trade between Balkans and
Italy through Ragusa involving
cattle, leather, wood/lumber, honey, wax, traded for
textiles, household goods, metal products, and various luxuries .
18Carter (1972, p.53), based on writing of the Byzantine Porphyrogenitos-though Carter warns in many places such early writings probably had many confusions.
15
In subsequent periods , both Balkan trade and maritime trade increased over time,
though the relative importance varied. In the “Silver period, starting gradually about
1250 minerals trade surged as old Roman mines in the hinterland re-opened ( and new
ones opened ):Srebrenica, Novo Brdo, Rudnik. The main item was silver, but gold, lead,
iron, also played a role.19 Stuard (1975-76) describes how Ragusa quickly became a
principal conduit meeting the high demand for silver in Europe; Stipetic (2000, p.26)
states Balkan silver production about 1400 was almost one-third of European totals, and
of this almost one half (i.e about 16% of European total) was exported through Ragusa.
Required sales to the Ragusa mint generated considerable seigniorage profits for the
state treasury. Significantly, the earlier Balkan trade in raw materials also continued.
.An important parallel development was a rapid expansion of ship ping capacity as
Ragusean elites recognized that greater benefit would come from Balkan-Italian trade
of the goods were transported in their ships. Already in the 14th. century one finds
discussion of
a burgeoning maritime trade rivalry with Venice, Ragusa’s nominal
suzerainty. We show in Figs. 2,3,, some quantitative evidence of growth in the two
central economic periods. Fig. 2 shows for the period 1300-1500 the first surge in
population as well as the expansion of territory – the latter largely based on purchases
from neighboring Bosnian or Serbian rulers. True, for population, Vekaric (1998) argues
much of the expansion prior to 1500 was due to the push of Balkan-Slavic refugees
fleeing the advance of Ottomans. However, economic attraction pull factors
also
played a role:. There is little doubt the level, of per capita income in Ragusa was well
above that of the immediate Croatian hinterland (Stipetic 2004). There is also a steady
19 Often the location names define the mineral: e.g. Srebrenica for silver, Olovo for lead, but Rudnik simply mine.
16
increase in the commercial fleet size, with a probable doubling from about 22 longdistance ships in 1300 to 40 by 1325 and even larger increase in Tonnage ( Fig. 3.).
.20
Figure 2: Population and area: Ragusa 1300-1800
Source: Appendix tables in :Author (2013
The data confirm the dynamism of the Silver Period., but also
traditional view of scholars that
Ragusean
make clear that the
the Golden Years were indeed the apogee of
prosperity: population reaches its maximum in 1500 of about 90,000,
though tonnage continues to expand until 1575. The main basis of prosperity in this
period becomes maritime trade intermediation, not only throughout the Adriatic but
increasingly with the Levant territories under Ottoman rule bringing goods from the Far
East such as spices, silk, oriental perfumes, grains, and other raw materials. But the
20
The charts are taken from -----authors (2013) to be provided -. It is not unusual to use shipping tonnage as a
proxy for economic activity and most certainly justified for a tiny state whose major activity may have been
shipping. In the cited paper , the correlation coefficient between tonnage and GDP for the years the later is available
is 0.53—with population it is 0.88
17
structure of trade with the Balkans remained the same, and there is little doubt that the
strong
preceding
experience
as
well
as
the
extensive
Ragusa/Dubrovnik, provided a critical comparative advantage.
slavicization
of
It is a tribute to the
governing elites of Ragusa- both nobility and merchants- that early on they leveraged
their economy on this comparative advantage which provided the capital, skills and
experience to capture so much new maritime trade in the 15th and 16th centuries.
Figure 3 : Ship capacity (in 000 tons): Ragusa and Venice 1300-1600
Source: As for Figure 2
A prominent American historian of Venice, Lane (1973, p.379, p.381) notes this was
also the period in which Ragusa became “Venice’s most damaging competitor, bidding
cargoes away from the Venetians on all seas, even in the Adriatic…[as] their ships were
18
increasing in number and size”21. Other accolades include claims of Ragusean equality
with Venice, based on fleet size and tonnage about 1575. ( Luetic 1969). Fig. 3 may
seem to confirm this “patriotic hypothesis” as indeed in some years the two are very
close. However this is misleading and exaggerated as equivalence only occurred when
Venice had lost numerous ships during wars, as both in defeat and victory many ships
were destroyed, then the fleet was rebuilt to even higher levels. But at other times it was
significantly larger than Ragusa’s –and this is excluding the naval fleet which could be
used for commerce in peaceful times. Nevertheless that Ragusa’s merchant fleet could
even approach that of much larger Venice is strikingly impressive .given its much
smaller size and infertile
territory. The large maritime role it played is further
emphasized in a comparison with mighty England: about 1575-1600 the latter’s fleet
was about equal to Ragusa’s, approximately 50,000 Tons. OF course immediately after
that it expanded rapidly and outpaced both Ragusa and Venice by multiples.
Historians vary in dating the beginning of the decline, from early 1500’s to about 1600.
We use 1575 as the end–date based on the peak value of shipping tonnage (Fig.3).
Population began to decline even earlier (Fig. 2) , but Vekaric 1998)
attributes this
the plague and the “correction “ of excess population of refugees from Ottoman
advances, rather than the economic situation.
. If indeed shipping capacity is a good
proxy for otherwise unavailable economic activity data, one must tentatively conclude
that Ragusa’s
aggregate GDP continued to grow, population decline cannot be
attributed to economic decline., and of course GDP per capita continued to increase-a
question for future research.
21 This is also reflected in the work of Fernand Braudel who writes of Ragusa’s ability to “snatch away goods from under the eyes of Venetian merchants” as cited in Stuard
(1992)
19
There is a broad consensus on the reasons for the decline if not its timing:
the
discovery of the Cape of Good Hope eastern route by Vasco da Gama with the first
Portuguese colony in India in 1503. The far lower shipping costs compared to the
previous Levant route with onward land-transport, made Venice, Genoa , Ragusa and
other traders in the region overwhelmingly non –competitive. True , as the shipping
data suggest , and detailed studies of the spice trade show ( Carter , 1972 nd Lane
1973 elaborate ) , these traders continued to find new advantages ( including prior
monopolies, established networks with suppliers and buyers contacts) to offset the
higher costs ,maintaining their absolute if not relative position for a century or so.22 But
in the end the new route and enormous expansion of the Western fleets –Netherlands
and England came to dominate this trade Furthermore , this century was the beginning
of an economic growth surge in western Europe making these markets -already much
larger in
population - vastly more important than
Northern Italy. The center of
economic gravity simply shifted west. . In Venice this is remembered as ‘The Collapse”,
which eventually became
n ot just a relative but an absolute decline of its trade,
economy, naval might , and wealth.. So too for Ragusa.
After the decline from 1575-1750, a short revival occurred, not in population, but in the
size of the fleet (Figure 4), though the average capacity probably fell23. This revival does
not seem to be given much attention by historians, either because it is not clearly
understood, or perhaps because by this time the uniqueness of Ragusa /Dubrovnik has
22
This long period of continued competitiveness hints at another hypothesis common in modern studies of global
shocks : that small , open , and institutionally flexible economies have great resilience, and are bet at mitigating
external demand shocks.
23 Luetic (1969 m) and other fleet estimates generally agree on this.
20
long passed and academic interest in the later periods is not as great. The decline and
growing irrelevance of Dubrovnik continues in 19th c. as modern shipping and railroads
destroy all of its mediaeval advantages and other Adriatic cities dominate : Split , Rijeka
,Trieste. But the seeds of its 2oth c. fame are laid , as it becomes a popular summerretreat area for the wealthy in Austria Italy, and Northern Croatia. . Mass tourism would
come much , but bring fame and new fortunes.
IV ASSESSING THE QUALITY OF INSTITUTIONS
IV.1. Overview: Ragusa’s Main Institutional Strengths
Innumerable authors over the centuries have attributed Ragusa’s success to effective
governance based on a political regime of republicanism that may not have been
democratic but relatively fair and benevolent providing pioneering social provisions like
education, health care, quarantine systems, and provision of grain reserves for times of
shortage. To this was coupled a generally liberal, open economy, with prudent state
finances, limited market intervention, and encouragement of private enterprise. The
Croatian economic historian Vladimir Stipetic ( 2000, p.24): captures this nicely in a
recent article “Dubrovnik traded like Hong Kong, Singapore, Taiwan …but did so some
five hundred years before ..[and like these countries] became prosperous ..because of
their adopted economic policy .” In short , he suggests Ragusa was the Adriatic Tiger of
Mediaeval period, While this section focuses on institutions for which data could be
found -fiscal prudence; business contract enforcement, and fair and effective legal
procedures. given the widespread accolades for its effective republicanism , benevolent
21
social policies,
and diplomat skills
par excellence , we provide some qualitative
evidence of these too. Thus IV.2 summarizes the nature of republican governance, IV.3
looks at fiscal history, IV. 4 presents data on “ease of doing business”, IV. 5 shows data
on speed, and efficiency of courts. Social programs are considered in IV.6, and the
trade-off between military and diplomatic expenditures is discussed in IV. 7.
But first we address the main competing explanatory hypothesis in the literature:
Ragusa’s economic success was due to luck of location.
Many
historians
emphasize Ragusa’s location at the edge of the Christian and Muslim worlds, noting
that by sea it was close to thriving Italian cities and kingdoms, but by land immediately
adjacent to Balkan territories occupied by the Ottomans from the 14th c.
Filip de
Diversis (1440 ) devoted a full chapter to this, “De bono situ Ragusii” (The Good
Location
of Ragusa} noting
both
its politically favourable geographical location
between Christian and Muslim world , on the edge of Balkan hinterland , also on the
sea routes eastward ,and its allegedly
ample water resources. This last
is most
doubtful; indeed huge expense was put to provide water by viaduct from the Ombla
River-then a considerable distance over ten kilometers.
The “luck” explanation is further put into question by the fact that Ragusa was far from
the only possible intermediary on the Adriatic Coast, and in fact had much poorer
“natural’ advantages in terms of productive lands, easy water supplies, sheltered
harbours. Indeed many coastal cities like Kotor or Ulcinj to the south, and Split, Zadar
to the north had similar location , generally better natural resources, even larger quiet
harbors .All were also entrepot
traders
competing with
but never attaining the
prosperity of Ragusa. Geographically they too were “on the edge of Christian and
22
Muslim worlds”, but the Ottomans gave preference to Ragusa.. Why ? We have not
studied this explicitly and merely suggest two points: they recognized Ragusans were
far better entrepreneurs and traders ; and
Ragusa amplified these skills with very
effective diplomacy.
In short it is entirely logical to say that without the luck of such a location, Ragusa may
not have prospered, but it prospered more than other Dalmatian sites due to other
factors , primarily wiser policies to leverage the location into greater prosperity than
local competitors. This accords well with the view of Machiavelli (1966 translation ,
p.8) who briefly points to Ragusa as an example of his thesis on the ideal site for a city
: “it is better to choose sterile places for the building of cities so that men , constrained
to be industrious and less seized by idleness, live more united, having less cause for
discord, because of the poverty of the site , as happened in Ragusa.” In sum one
could accept that location was at most a necessary , but far from a sufficient condition.
IV.2. Effective Governance
Ragusa was by no means a democracy , government roles being almost entirely in the
hands of a hereditary nobility mythically based on the “original” settler families from
Epidaurus, though in fact in early centuries many rich merchants and Balkan nobles
‘were often quietly “ennobled” in return for financial
benefits they could bring the
state..24 Following the 1272 Venetian “Serratta” or closure of membership in the nobility
Ragusa did the same in the early 14th.c. But Ragusa differed in two critical ways. First
24
Vekaric (11) , Vol.1 shows in Table 7 the roots of the noble families; it is clear that a large proportion were not
from Epidaurus. Illustratively, and indicative of name roots is the case of one of the most powerful , the Sorgo
(Sorgocevic). They were rich merchants from Cattaro in Albania, “ rewarded by the Grand Counci lfor bringing
large amounts of sorghum and other victuals to Ragusa, at the time of the great shoratges in the year 1292” ( see
p.68 for Italian original text. )
23
while it also had the Senate elect a head of state -Rector after 1358 “independence”
from Venice- he served ffor one month at at ime, essentially a titular head with some
managerial responsibilities. Thus, Ragusa avoided the Venetian evolution of informal
dynasties which came as a result of Doges serving for very long periods , able to
impose their personal or family interests into state affairs.
Second and more important Ragusa did not follow Venice’s “Serratta “ which imposed
a monopoly of commerce for those in the new list of nobles25 Ragusa did not create this
monopoly, and
allowed new commoner
entrepreneurs to
enter commerce.. To
understand the importance of this, one need only think of how much emphasis is put
by modern development thinking on promoting new entrepreneurs, small and medium
enterprise
with
such reforms as simplifying procedures for opening and running
business By itself this is already strong evidence of institutions favorable to commerce.
It follows this open environment probably contributed to the economic prosperity of the
Silver and Golden periods--
though we leave to future research testing of this
hypothesis.
This crucial orientation to promote commerce by avoiding monopolization not only
explains the good institutions we discuss later , but also the relatively benevolent
position towards commoners , whose “voice” while
was heard in two ways:
not manifested in voting rights,
some rich merchants and skilled professionals were given
positions in government26 ; and the poor were not ignored in noble’s deliberations for
provision of many social programs. It is widely agreed by historians contemporaneous
25
True, the list was in 1272 greatly enlarged to co-opt then existing major merchants,but new ones were not allowed
, or at a minimum highly constrained.
26
Many writers note that in very early years before about 1200 , in fact “Agora democracy” did exist with
assemblies of all citizens (The Laudo Populii)-making key decisions. E.g. Carter 972-p.500)
24
and modern, that compared to most other states/nations in this period the nobility
ruled with a relatively soft hand and provided considerable support to meet the needs
of the populace. Thus Grubisa (2011) shows Ragusa was perhaps less open than the
Florentine system of “democratic republicanism:” (and
thereby more stable, he
contends), but it was far more concerned that the basic needs of the populace were
met, than was the case in most regimes of that period such as the very narrowly-based
republicanism of Venice.
The Ragusan political regime
might thus
be most
appropriately characterized as a benevolent oligarchy rather than a rapacious one.
From the early 14th. c. movement by rich merchants into the nobility was indeed rare ,
but real upward mobility did not cease. That non-noble merchants
had great indirect
influence –indeed increasing influence -is made clear in the literature , for example in
Krekic (1980, Ch. XIX) , who characterizes the regime rather nicely albeit somewhat
sardonically
as a “ government of the merchants , by the merchants, for the
merchants.” Most importantly as we elaborate below ,the governing class generally
meted out justice not arbitrarily in a feudal fashion, but on the basis of laws , legislation,
judicial process- in today’s jargon ROL. The start is in legislation , best symbolized by
having a very early a constitutional document –the 1272 “Liber Statutorum Civitas
Ragusii” -
which codified earlier laws
and informal practices . While many
shortcomings in practice are noted by historians , numerous instances of well-applied
justice in the law in practice are also found in the literature.27 reflecting the nobility’s
admittedly self-serving but nevertheless “reasonable” treatment of commoners , rich or
poor. .SIsak (2010) typifies the literature’s consensus when he argues this rules-based
27
We note on example using a quantitative review of 2,440 court cases, Lonza(02). She concludes large numbers of
cases were settled out of court, a practice authorities encouraged.
25
treatment of the populace helped contribute to the long-term stability of the Republic,
with virtually no significant peasant uprisings as seen frequently elsewhere, and far
fewer internecine revolts within the elite.28
The legitimacy of the nobility was to a large extent a myth but the other side of this coin
was that it was not nearly as rigid in practice as in the law. Vekaric (2011) and earlier
others –Krekic (several works) Kedar (1976),
Carter(1972)- document the shifts of
noble lineage, the impoverishment of many noble families, and the rapid growth of
wealth of non-noble merchants who before 1400 were gradually and volens-nolens
“absorbed ‘ into the nobility29, or at least into
the ruling elites
and
government
officialdom.
A quantitative indicator of informal upward mobility is the increase over time in the
share of credit issued by commoners, which ,Krekic(1980) estimates for the years 12801440 was already about one third- Zlatar (2007-p.139) gives a higher value of 42%. An
imperfect but striking statistic suggesting continued upward mobility is in Luetic(1969p.101): by the mid-18th.century, of 380 registered ship-owners , only 80 were of noble
class..30 Indeed it is from the non-noble ship owners category that perhaps “the richest
man in Dubrovnik “ in the 16th c. arose, one Miho Pracatovic from the island of Lopud
( Tadic ,1948, p.143). He is recognized by most historians not only for his great wealth.
But also
for his
tremendous informal influence, symbolized by the fact that a
monument to him was erected in the “sanctum sanctorum “ of the nobility, the courtyard
28
The failed efforts of a revolt about 1402 and the short-lived and futile one by Lastovo island nobles being two
major exceptions ),
29
As noted the closure made this rare , but not impossible.
30
This is not the actual share of the value just the number of people , hence it may overstate the role of commoners.
In the Zlatar data, the size of holdings was higher for nobles; we have not found evidence for later years.
26
of the Sponza Palace ( Krekic ,1997, Ch.I, p.p.253-255). Another ship-captain from the
island of Sipan , Stjepovic-Skocibuha is considered in the same category, who allegedly
refused an offer to become a noble. Krekic dismisses this as unlikely, but a motivation
for such a refusal existed: it is often written by historians –Krekic first among them – that
many nobles fell into poverty because “noblesse oblige “ required so much time in
various government duties as consuls, judges , treasury officials , that they did not pay
enough attention to their commercial ventures. It is not impossible Skocibuha thought
twice whether nobility was worth more than wealth and the “:eminence grise “ influence
the later permitted. In conclusion it is clear that upward mobility continued , a factor of
great relevance to the central argument of Sec. IV..4 that Ragusa provided a good
business climate.
IV.3.Evidence on fiscal prudence
Ragusa is thought to have practiced a very prudent policy with respect to state
finances, debt, expenditures , as well as minting of currency. .Quantitative evidence
under this rubric in is available for only one very late period, about 1800, but not for
earlier. But indirectly it points to prudence in earlier periods : interest expenditures are
unusually low, and a strong positive asset position is evident in very large dividends
earned. Furthermore, numerous qualitative references in the literature point to
the
same conclusion. Consider first the available fiscal data.
Figure 4 summarizes the percentage structure of revenues and expenditures in about
the year 1800 ( not further specified) based on a later report to the new Austrian
27
Governor after 1815 , by a financial expert named Bara Bettere, later translated into
Croatina by Krizman (1952). The absolute data , not shown , point to the first important
conclusion : the budget has a surplus of about 10% of Revenues., fully consistent with
the prudence hypothesis. There is unfortunately no such data to confirm this prudence
in earlier years, though the richness of the Dubrovnik Archives with myriad financial
documents might make this feasible with considerable research effort. But the Bettere
numbers on interest payments and dividends received by the state point to as trong
fiscal position in preceding decades at least. Tab. 4 shows very low interest share of
1.7% of the budget far below what was common in the region for those centuries. Thus
Lane (1973) estimates that at this time Venice paid out a third –and even more in earlier
years-to service its debt .Kormer (1995) analyzing about 25 kingdoms, principalities and
city-states from 1500 to 1800 ( not including Ragusa), concludes that “service on the
debt varied between 17 and 36% of total expenditures.”
The main message in the
popular work of
Reinhartt and Rogoff
This Time it’s
Different (2009) is that the current recession is NOT that different from earlier ones
over centuries, and points to the fact that high debts and defaults were very common
in European economies historically. In contrast, the historical literature on Ragusa we
have researched so far does not give any specific instances of debt defaults... Perhaps
equally important , it appears that all or most Government borrowing was domestic,
either from the Zecca (the MINT) or the elites. The latter were however often obliged to
provide lending at low interest,- in Italian cities these were referred to as “imprestiti” ,
best translated today as “forced loans.” ( Cipolla , 1986) .When financial difficulties
28
occurred –and they did – they had to accept “haircuts’, reduced repayment,
restructuring and the like. 31
Figure 4: Structure of Ragusa Budget about 1800.
Sources: Shares are calculated using absolute ducat values in Krizman (1952)
Indirect evidence of earlier prudence is in the very high share in Revenues of dividends
earned, at 25.3%. Ragusa’s net asset position was strongly positive with large amounts
of deposits held in Italian banks and by 18th century in Vienna. In Author (2013), some
Krekic in his many writings ,as well as others (Sisak(10) discussing the role and obligations of the nobility” , note
that in this small noble group, it was a “social obligation” that services be rendered to the state not only in the form
of time in political and bureaucratic positions, consular activities, but also by “sharing “ proportionately in lending
to the state when exigencies arise, or accepting less than full payment on previous loans.
31
29
numbers for 15th.-17th.confirms Ragusans held considerable private deposits in the
“Monti” or Funds : of Italian banks.
For earlier centuries, qualitative assessments of Ragusa’s prudence and conservatism
throughout the centuries abounds, starting with contemporaneous writers like Diversis
and Kotruljevic, first noted the sensible financial stance of the Republic. More recently
Stipetic (00-p26ff) notes that
adding
“precise books were kept on the finances [of the state]”
that prudence was ensured by “requiring the
main officials in charge –
registrars, clerks and accountants …must be foreigners [In addition ]there was the
institution of auditor with power of supervision of communal goods, a duty to investigate
whether revenues are collected fully and expenditures are viable, not spent for
unintended purposes.” They served five years when new ones were elected... Stipetic
recognizes that the system was not perfect, indeed that building barns with doors
implies horses do run out, that is corruption does occur. Krekic (97-p.32-5) notes the
reality of bribery, but concludes that efforts to curtail it by punishing offenders were
generally as effective as can be expected.
Thus both the qualitative evidence on fiscal prudence in early centuries and the harder
budget data of 1800 are very consistent with the hypothesis that Ragusan finances
were generally strong, prudent, able to absorb shocks. Incidentally, Figure 4 gives
numerical credence to the observation of Carter (72.p.535) about the enduring nature
of this financial prudence -that even at the end, in 1806 after French occupation, “the
state’s finances proved still to be in good condition in spite of all the troubles and the
requisitions, and large sums were invested in Italian banks.”
30
IV.4. Evidence on “ease of doing business”
It is generally agreed that Ragusa’s government was strongly commerce and trade
oriented , and the ruling nobility understood well this was the basis of their wealth. It
would seem they also understood that it was necessary to extend this good business
climate for commoners as well , which spawned a flexible and adaptive merchant class
quickly able to react to demand changes or external shocks, seek new markets, adapt
trade routes, change products. The frontispiece citation from de Diversis on institutions
symbolises how this attitude was already well established by the 15th c. Historians’
writings contain innumerable references as well as illustrations of this business friendly
environment. The new contribution of this paper consists of providing some quantitative
evidence of this. We start with Tables 2 and 3 which respectively quantify the timelapse for a number of
bankruptcy cases as given in the literature, and the share of
notary entries for commercial and personal activities.
In Table 2 for a benchmark we note from the World Bank Doing Business Report (2013)
that in 2012 , the average time to complete settle a contract dispute in different regions,
a now-common measure
of the ease of doing business in modern
analysis. The
shortest was about 1.7 years for the OECD countries , the longest was 3.4 for the
Middle East and North Africa region – though for some individual countries it was much
higher. Note the value of 3.1 for Croatia today.. For Ragusa in the 16th c the the very
limited information available gives a range of 1-3 years to complete a bankruptcy case
brought to courts.. True the sample is small,,one has no idea how systematic it is ( in
both sources the information is only vaguely presented) start times and finish times are
not always explicit or precise, and sometimes not stated at all. Hence our conclusion
31
has to remain very tentative and conjectural. If however if the real time-range is even
double this ( 1.5 -6.0 years ) this would still seem very efficient for the times, given
realities of travel, documentation etc. In fact many of the cases shown here deal with
Ragusan ventures in other countries/states , which even today would
complicate
matters and generally add to the time required.
TABLE 2. TIME FOR BANKRUPTCY PROCEDURES RAGUSA 16th and 17th. c.
Year/
Nature of
Years
Period
Case
To
Source
Time to
start
Final
2012
WB Doing Business
-
Report 2013
www.doingbusiness.org/d
ata
2012
2012
2012
Dec.1566
1577
(Sept??)
BEST:OECD high y
WORST REGION:
Mid.East.N.Africa
CROATIA
MEDIAEVAL RAGUSA
CASES
Nobles Sorgocevic&Lukarevic
Florence/Venice
business
bankrupts;Rag & Italian creditors turn to
Ragusa courts, some local assets frozen
immediately-final decision May 1570
Joint business of Cveta Zuzoric&
husband Peshonija fails, immed. Put
under oversight , claimants given 3
1.7
3.4
“
“
3.1
“
3.3
Tadic(48)
pp.287ff
<week
2.5—
(but
new
Tadic (48)
pp.327 ff.
3 days
32
Year/
Nature of
Years
Period
Case
To
Source
Time to
start
Final
1575
1571
days to file claims with court notary –
numerous do -- court process begins,
most seem done/agreed/decided by Mar
. 1580, but new claims arise as late as
1583
Ivanivic&Dabovic Ragusa merchants in
Serbia bankrupt, courts seized Ragusa
assets against claims of 5,850 ducats.
In judgment they were to send 860
ducats value of ox-skins immediately,
pay rest in yearly annuity at 6% interest
(no further time details given
A partnership in Smederovo and
Belgrade, but registered in Dubrovnik
1565 , announced bankruptcy:
but
creditors proposed continuation with
restructuring (“sanacija”), and accepted
annual payment of 200 talers
claim in
1583)
About
1 yr.?
Palic (08) p.79
???
n.a.
Palic (08)
p.79
Seques
ter
Within
dys.
Weeks
??
Source: author’s compilations from writings noted in Table
Historical references to bankruptcy which do not give time-lapse statistics are much
more frequent , and they generally describe the Ragusan system as very efficient,
effective , and even-handed. Palic(06/07) in particular emphasizes the thoroughness
and speediness of the process, the comprehensiveness of the underlying law and
practices which contain many
terms familiar even to the present day : sequester,
liquidation , restructuring (sanacija in Croatian ),rescheduling of term , etc. He claims
(p.23 ) that ‘at that time , Dubrovnik was admired by Europe for its court procedures
methods , being the exception from the middle ages darkness, showing justice and
honorableness.” Speed and efficiency of courts in all cases , civil and commercial ,is a
point also made by others such as Nella Lonza whose works are the basis of the next
33
sections.It is also noteable that the apparent time required
to initiate cases in the
courts, time given creditors to file claims, was very short—a matter of days or weeks.
This is consistent with the qualitative judgments about court efficiency in the literature.
Palic (2006 &2008) describes briefly numerous cases of bankruptcy of Dubrovnik
merchants in Balkan states/cities, but details are not always complete: in some cases
amounts are given of debts, repayments, in others partially. In most cases a year is
given for the initial bankruptcy insolvency, but not for time for making claims, or dates
for final resolution. Hence we do not include them in Table 2 , but it is abundantly clear
in these articles that most cases once started went through a
thorough process
apparently speedy in the early stages, even if the two parties kept returning to courts to
obtain satisfaction, sometimes after a long pause , and therefore any final resolution
may have taken years.
Palic (08) further attests to another aspect of bankruptcy which demonstrates a
favourable business climate; (p.83) unlike the “debtor’s prison” practices elsewhere “the ultimate aim of bankruptcy…was not just settling [with] the lenders, but it was
rightfully considered … helping the debtor overcome the state of inability of paying their
debts… creates an atmosphere for further co-operation and doing business together.”
This tendency to encourage out-of-court settlement is also seen in the general activities
of
courts
beyond
cases
of
bankruptcy
presented
below.
In modern quantitative analysis of institutions perhaps the first and most common
measure is days and costs needed to start a business We have not been able to find
34
data approximating this concept in the secondary literature—though this may be
obtainable in the rich Dubrovnik Archives . However , it would appear that starting a
business or venture was frequently done by a relatively simple process of registration
with an official Notary., apparently uncomplicated and almost immediate as is the
case in many advanced countries today.
In Table 3
32
showing the percentage
distribution of 1,492 Notary entries in the years 1299-1301, such a measure is not given
but we see indirect evidence of the extensive use of notarization If we consider
Testaments, Dowries , and Personal Service and Employment notarisations as personal
at least 33 % of notarizations are business related—starting or operating a venture,,
dealing with debts , sequesters, guarantees. In fact this must be a lower bound, since in
TABLE 3. RAGUSA NOTARY ENTRIES BY CATEGORY 1299-1301
# OF
ENTRIES
PERCENT
TESTAMENTS
149
10.4
DOWRIES
68
4.7
SERVICE/EMPL(zaduznica)
741
51.9
APPRENTICESHIP
39
2.7
AUTHORIZATION(punomoc)
29
2.0
RECEIPT/VOUCHER/AUTHORIZATION/POWR
OF ATTORNEY
13
0.9
PROPERTY TRANSACTIONS
171
12.0
GOODS TRANSACTIONS
119
8.3
SHIP/CARGO TRANSACTIONS
19
1.3
BUSINESS/PARTNER AGREEMENT
17
1.2
CATEGORY
32
The data are compiled from an extremely informative listing by Lucic(1993) of all such entries by just one notary;
the list not only transcribes each from the Archival Notary books, but defines the category, provides an overview of
the process , and an extensive index of individuals named , which allows some further analysis in later tables.
35
# OF
ENTRIES
PERCENT
DEBT
1
0.07
COLLATERAL
40
2.8
APOHA (related to collateral )
15
1.0
GUARANTEE
3
0.2
FRAGMENT ( this may be incomplete
information )
5
0.3
1429
100.0
CATEGORY
GRAND TOTAL
Source : Authors’’ computations based on Lucic (1993)
Testaments there were surely business-related elements, as well as in the rubric
Services ( in household ) and Employment., and even Dowries – which were often
designated for partial commercial use.
The qualitative evidence of ease of doing business merits some elaboration and we
show below it almost universally confirms the conclusions implied by the data. That
well-functioning notary and registration procedures and records for business contracts
were established at least as early as the 13th century are referenced by many writers,
and according to Stipetic(00-p. 18), existed from as early as 1200 , with formalization in
the 1272 Statut (Constitution). Further details established In 1277 this was expanded
by the Customs Book, with a focus on economic rules. That Ragusa was among the
earliest states to formalize commercial registration and contract procedures is a
common claim of its many historians. All of the above imply such an early development ,
and their periodicity , at least as early as the beginning of the 13th c., does suggest it
was among the first to implement “pragmatic literacy”
33,
only marginally later than
33
A term suggested by Nella Lonza in a private communication , in which she also indicates the beginnings of
document formalization in Italian cities, in the 11 th C., with Zadar probably the first in Dalmatia,soon followed by
Ragusa
36
Italian cities and the first Dalmatian city ,to do so, Zadar. Dates for Western Europe
given
by Kuran (2011, p.242 ) allows a broader comparison : “In Venice written
contracts became mandatory on matters of importance [in court cases-au.] in 1394, in
France in 1566, in Scotland in 1579, and in Belgium in 1611. In England they became
mandatory on all contracts with the Statute of Frauds of 1673.” Kuran (p.243) also
mentions that the first agreement of Ottomans with western trading states imposing
documentation requirements for court disputes involving foreign merchants, was that
with Dubrovnik in 1486, preceding the Mamluk-Florentine treaty of 1497 which did the
same, and one of the most important “capitulations “, that was agreed with France in
1536. It needs verification to
ascertain whence came the initiative for the 1486
Dubrovnik agreement, but given the history of passivity in
Ottoman actions and
initiatives of Dubrovnik trading efforts, the best quess would be from Dubrovnik.34
Many other early institutional elements that today would be labeled
“a favorable
business and rule-of-law climate” , can be pointed out. Thus Luetic (1961-p.107), and
Carter (1972 –p.157) note the beginnings of the first maritime insurance policies were
organized as early as the 14th c, while Doria (1987) discusses how thoroughly this had
become elaborated by
procedures in 14th-15th c.
the 16th.century. A revealing description
in several articles
by
of bankruptcy
Palic ( 2006.a, 2006.b, 2008 )
concludes in (2006.a –p. 23) : ”court decisions … were kept in very thorough transcripts
with notified damage compensations, punishment types and dispute settlements .” he
also claims that “at that time, Dubrovnik was admired by Europe for its court procedure
34
The depth of formal and informal institutional support for commercial activity is also evidenced by the renowned
richness of the Dubrovnik Archives –the records are so large that it required 61 pages for Carter (72 Appendix 3,)
merely to list the names of documents, under 40 categories such as Council Proceedings, Miscellaneous Notary
Documents, Manufactures, Customs, Administration Receipts , Expenditures, Acquisitions,etc.
37
methods, being the exception from the middle ages darkness , showing justice and
honorableness.” 35
The early and pioneering development of modern accounting by Kotruljevic (1440) is
described by . Stipetic (2000-p32) as well as Krekic in his many works , and several
others . Indeed there is now solid scholarly evidence that this was the first formalized
‘handbook “ on how
all good merchants/traders should
accounting books, use double-entry bookkeeping,.
36
maintain balances in
use banking instruments for trade
such as bills of exchange, letters of credit. This alleged “first ‘ has put on the table of
the modern accounting literature a debate : was the first as was always considered the
1496 manual of Venetian Lucca Paciolli, or should this honor be given to Kotruljevic’s
1440 chapter on double-entry ?The issue is beyond the scope of our paper, and we
leave it at the following; in a personal email communication from the Dutch scholars
Postma and van Helm
they suggest that while indeed Kotruljevic briefly describes
double-entry bookkeeping in 1440 , the first truly complete manual on how to do it, and
the one which had the greatest future impact was that of Paciolli in 1496.
But for the argument in our paper about early presence of good institutions, , the nowaccepted fact that Kotruljevic did have such views and wrote them in a manuscript
passed around manually,
is clear
evidence of the right attitudes to promote
commercial activity and prudent state finances. Indeed .Kotruljevic was also very early
in the history of economic thought expounding views that were very radical for the times
35
While this claim is consistent with other writings, unfortunately Palic does not provide references to European
writers of the time to substantiate this claim.
36
Stipetic(00) refers to non-Croatian scholars – presumably less-biased- who have found clear evidence that
Kotruljevic was the first to develop double-entry book-keeping, in 1440,well before the 1496 work of Lucca
Paccioli which had earlier been thought to be the first. ,
38
, such as interest being the price of capital,; credit being critical to fuel commerce and
only usurious if excessive ( 5-6% was his proposed limit) ; His 1458 treatise “Il Libro
dell’Arte di Mercantura” argued all these were requirements to achieve prosperous
trading, and not least important he noted the need for the state to ensure an open
mercantile and trading environment conducive to making money, creating wealth ,
minimal interference of state in commerce. , prudent
state finances. Kotruljevic
presaged by six centuries today’s received wisdom about ROL and a good business
climate. He would well deserve honorary mention by the World Bank’s Governance
and Doing Business Report.
Numerous writers state that the first quarantine station in the Mediterranean was
established in Ragusa in 1377 (the Lazareti,which were
eventually moved to the
mainland still stand today as a commercial-entertainment centre).Three recent studies
by public health specialists explore this world-first:: Frati (2000)., Lang and Borovecki
20(01), and Cliff, Smallman-Raynor and Stevens (2010) While thje quarantine station
might
be
considered a social fairness measure Frati documents extensively
deliberations of the Great Council confirming that the motivation was first of all the
need to continue doing business. after the first waves of the Black Death.
In sum considerable evidence in the form of indirect quantitative measures of business
related formalities, bankruptcy treatment in courts, as well as extensive qualitative
indications from historians , strongly suggest , that the climate for commerce, or doing
business in the modern jargon, was quite favorable.
39
IV .5. Evidence on Effective Rule-of-Law
Numerous historians
emphasize the rules-based governance of Ragusa and its
relevance for the prosperous economic development; the spirit of which is succinctyly
captured in the frontispiece citation from De Diversis . Stipetic ((2000) provides a good
overall summary of the favorable legal basis and practice of Ragusa and adds a vivid
history of Ragusan writings on economic theory.
But with the exception of several
works by Lonza which we rely upon considerably in this paper, the literature is largely
non-quantitative We will begin by presenting some selective quantitative evidence ,
sometimes indirect, which is consistent with the view that ROL was established early
and was generally implemented effectively and fairly; then we will add some qualitative
evidence for the literature to buttress the case.
TABLE 4: RAGUSA 1299-1301 NOTARY ENTRIES RELATIVE TO POPULATION
#of Individuals named
City
Republic
2,00038
2,000
3,066
3,066
Population
Range 37
(4,000)
(7,000)
(10,000)
(15,000)
% of Population
using Notary
50
29
31
20
Source: Author’s calculations based on Lucic(1993) and population estimates as discussed in Author (2012)
We start with some data on the use of a Notary in very early years ,1299-1301, based
on the work of Lucic (1993) covering 1,492 Latin entries involving 3,066 individuals,
already used for
Table 3.. In Table 4 we
calculate approximately the percent of
population involved in those entire, as an indicator suggesting that Ragusans utilized
37
No reliable estimates exist much before 15th.c but many historians seem to accept range 14th c. of three to four
thousand in city, a total of 10,000 -12,000 for Republic ( see Appendix Table 1) . To avoid overestimating percent
column we use range of 4-7 thousand and 10-15 thousand respectively
38
Author’s rough guess, based on details of entries suggests large proportion from city – we use 2/3. Even when
entry deals with activity outside city , it often involved city people , not surprising as wealthiest lived there.
40
formal notarization procedures quite extensively. As population estimates for this period
are not very solid, and not verifiable, we choose numbers that bias against our claim.39
Taking them at face value suggests
that anywhere between 20% and 50% of the
population was involved in some way – surely a very substantial and wide coverage of
population for the year 1300- though we have not yet been able to find comparator data
for other states- and consistent with the claim that ROL was widely practiced for all
categories of the population as early as the late 13th. c.
There is reason to believe that many of the individual named were “professional “
witnesses( who did get a fee for this ), hence we also test this claim of widespread use
of Notaries from another angle in Table. 5. The number of individuals who appear more
than 10 times accounts for only 10% of the total which is to say that 90% were users a
limited number of times. It would seem reasonable to posit that any merchants skilled
craftsmen and middle income people might turn to a notary 2 or more times in a 3-year
period, and those at the bottom of the social-economic ladder at most one time , so it is
very suggestive of widespread reliance that 55% of the individuals were named only
once. The middle group, 35%
were likely those with somewhat greater wealth or
economic activity status.
TABLE 5. FREQUENCY OF INDIVIDUAL’S INVOLVEMENT IN NOTARY ENTRIES
RAGUSA 1299-1301
# OF TIMES
NAMED
One Time
# OF
INDIVIDUALS
600
PERCENTAGE
DISTRIBUTION
55
39
The Republic did not yet include much of the territory added later ( as in Fi.g.2) hence we take a a mximum
population 15,000. The ciuty within the walls at no time had much more than 5,000 inhabitants , but we take as an
upperbound 7,000; even the lower bound of 4,000 may be an overestimate as in 1300 and later many new houses
were being added on empty lands—indeed at least 100 of the entries were for new construction, additions .
41
2-10 Times
11-25 Times
25+ Times
385
80
35
35
7
3
Source: Author;s compilation based on Lucic (1993). The Lucic editing of these archival sources has an appendix of all
individuals named , with reference to the entry number , which greatly eased the above computations
We turn next to some data supporting the hypothesis that ROL was well implemented,
relatively efficient and effective. Table 6. shows for the 15th c the distribution of a large
sample of 589 criminal court cases by type and outcome. The first point to observe is
TABLE 6. COURT ACTIONS BY TYPE AND OUTCOME (Average percent for 1423,
1466 and 1487)
BODILY HARM
VERBAL ABUSE
PROPERTY
VIOLATIONS
DISTRIBUTION
OF 589 CASES
49.4
19.2
31.4
DID NOT GO
BEYOND
CHARGE,PLAINT
7.22
3.54
70.27
END BEFORE
HEARING
COMPLETED
55.67
54.87
22.16
% OF TOTAL
21.31
20.35
0.54
[% adjusted-see
note]
[23.0]
[21.1]
[ 1.8]
JUDGMENT-
SOURCE: extracted and calculated from Lonza (2002) Tab 4, p.85
Note: Row 4 calculation relative to total may not be conceptually correct measure of settlements; Lonza makes clear that most of
those in row 2 were terminated because evidence or witnesses not available,; we adjusted this by taking a percent of the
remainder from those terminated , shown in [..]
that
while these were civil cases,
nearly one third (31.4%) did involve property
violations of various sorts , hence the study does throw some light on the issue of EDB
as well. Further it confirms the claim made by Palic and others discussed earlier , that
Ragusean courts strongly encouraged out-of-court settlements. The percent of cases
42
going to final judgment was about 20% or less for bodily harm or verbal abuse cases, 40
and many were ended in the midst of hearing the case , presumably because the two
sides came to an agreement. This tendency was far greater for property cases with less
than one percent going to final judgment (0.54% in Lonza’s raw numbers) – and even
with the adjustment noted in Table 6 notes this was at most 1.8%.
The inclination to settle out-of-court and its encouragement by the courts only increased
over time , as Table 7 shows. In a sample of 2,142 cases spread over nearly two
centuries studied by Lonza, one sees clearly that the percentage going to final judgment
in first half of 14th .c. was about 40% , and declined steadily so that in the later years of
the 15th. c it was about 14-17%. Lonza (2002 , p.104) indeed concludes that courts on
the one hand encouraged this, and plaintiffs on the other hand “used “ the courts as a
form of pressure, bringing charges ,or accusation s even though they were altogether
disposed to settle out of court . That the legal institutions of Ragusa facilitated this
TABLE 7. TREND OF TERMINATION /FINAL JUDGMENT PROPORTIONS OF
CASES, 1312-1499
PERIOD
COMPLAINT FINAL JUDGMENT
ONLY
1312-1313
7.35
41.18``
1348-1350
4.26
42.55
1372-1374
11.32
26.95
1401-1402
19.05
16.40
1423
25.73
16.40
1447
36.33
22.10
40
the latter account for a perhaps surprising 29% of the sample , though this is also seen in Northern Italy and may
reflect the ‘sowing wild oats “ behavior of young nobles typical of the time .
43
1466
48.59
2.1
1487
20.65
17.4
1499
17.02
13.8
Source: Lonza (2002) , Tab.3, p.82 ( total of 2,142 cases studied )
system more than perhaps others in the region is suggested by Palic ( 2006a, 2006b,
,and 2008) who notes such services were often provided for free or at very low costexcept for possible costs if found guilty – while in Venice and elsewhere there were
potentially discouraging up-front costs. He also suggests there was very little political
influence which was limited to a few very big or significant cases and hence a level
playing field; but this last conclusion is more qualitative and perhaps conjectural .
The last set of quantitative information on the legal process ,in Table 8
provides
support for the view that the efficiency and speed of court procedures was quite good .
The data is based on another archival study by Lonza (1997) , though mostly for the
18th .c
which may or may not give a fair representation of earlier periods; but a small
sub-sample does cover the years 1276 and 1418.
The first conclusion is that in all
years well over half the cases were completed within a year. Note that in the last four
rows the numbers are cumulative hence the values comparable to the first four rows are
: 93,92,71,78. The very early values show that cases taking more than one year were,
at 47% and 39%, much higher than in the 18 th c. , as little as 7-8% in some years
between 20 and 30% in others. That the speed was affected by case-load is also made
TABLE .8. SOME QUANTITATIVE EVIDENCE OF EFFICIENCY AND SPEED OF
RAGUSA COURTS: 13th.-18th.c-Percent of cases completed , by months
YEAR
1m 1-3m 3-6m 6-12m 12m+
44
1276
1418
1736-38
1780-83
1738
1776
1750
1783
23
15
-
-23
14
-
31
42
7
34
53
61
75
64/78
15
15
64
44
[47?]
[39?]
[25?]
[22-36/]
7
8
29
22
Source: Lonza (1997..PP.265-272)
clear by Lonza’s work . In two years of average case –load ( 1738, 1776) over 90% are
done within one year, indeed more than half within 6 months; in years of a heavy caseload (1750,1783 ), percent completed in one year is less, but still about 70-80% .
Thus, the limited quantitative evidence , while not precisely the same type of
measurements as in modern day EDB assessments of institutional quality, would
appear to be consistent with
the hypothesis
that Rule-of-law was widespread,
generally efficient and well implemented . The quantitative evidence for a level-playing
field is very limited and indirect: the use of Notary registration for all sorts of personal
and commercial contract appears to have covered a large part of the population. In
addition to the quantitative evidence we have been able to compile here , it is worth
adding there exists extensive qualitative indications of this in the literature.
It is important to repeat there were already numerous laws and regulations in the 12 th
c. ,and the 1272 Statut (Constitution ) was first of all a codification of these.41
Furthermore the codex of commercial, laws continued to expand and be modernized .
throughout the following centuries. Virtually all historians agree that while the myth of
noble blood and democracy are just that, and the primacy of nobility in governing the
A tourist to Dubrovnik today, if taking a day-trip and picnic on one of the local “Carracks”, will be shown by
the guide , a copy of the section from the Statut on the the rights of sailors and obligations of the captain,
prominently displayed inside.
41
45
state was quite rigid, the application to all of the ROL was not simply paper laws, but it
was quite effective in its implementation. A fairly strong “acid-test” is that in a historical
period of great rivalries among states and nations, there exist numerous instances of
Ragusa authorities enforcing claims by foreigners on citizens of Ragusa. Thus , the
Pabora family
of Ragusa was bankrupted
in 1315, and over the coming years
Ragusan courts ruled in favour of claims by many creditors from Venice, and the wellknown Peruzzi bankers of Florence, conveying Pabora family assets to these foreign
claimants.. (Krekic97, XI,p.13 ff.).The Ragusan noble and merchant Bunic-whom we
met above as Bona- a “tax-farmer “ in the Balkans on behalf of the Porte,-became in
1471 a fugitive from the Sultan after an alleged embezzlement of 55,000 ducats to his
own account.42 The Ragusan courts seized his local assets to cover the claim, and
years of litigation followed, with Bunic , the Porte ,and the Ragusan courts coming to an
eventual settlement. (Bojovic (98 p.114.-117). Bojovic goes on to cite many other court
claims, noting further that “cases of a similar sort were repeated numerous times.”
IV.6. A “sufficiently fair” social policy
We use the word “fair” and not “equitable “ in the neo-classical economics sense of
equality of opportunity, as there is no question about the monopoly role of the nobility in
government, or the fact that a large portion of the population lived at very low levels
of income, particularly in the countryside. However, the consensus seems to be that
42
This was a very large fortune.:in comparison, the annual salary of Diversis as teacher in the local gymnasium in
1440 was 180 ducats plus housing and living costs; ; Luetic (69) notes well paid sailors in 16th. c received 2-4
ducats per day,,, working half a year typically, this gave them 200-300 ducats per year,while shipmasters would
have about about three times this amount , ie.600-900 per year.
46
the nobility paid sufficient attention to the well-being of those who must necessarily be
the work force on ships , shipyards and trade-related activities, to ensure a degree of
social stability unusual for the times. This may have been a self-interested action, and
not altruism, but still quite enlightened for the times.. Furthermore , economic mobility
was certainly possible for the most enterprising , many of the rich coming from amongst
the “puk” ( commoners), as shown earlier.. Sisak(2010-p.182) typifies the literature in
contending: “ The loyalty of the Dubrovnik population to the social order and hierarchical
structure of government was atypical compared to other cities in the Adriatic”. His
sketch of this social order may be too positive, but is worth quoting at length :
“ political monopoly of the nobility was accepted as the normal state of
affairs…the welfare which prevailed in the city…and the possibilities to make profit
and, to some extent to climb up the social scale…were also important . ..The
nobility [had ] a privileged position, but they in turn had to ensure the well-being of
the rest of the population… The government saw to it that there was no shortage
of food or anything else, so it procured grains and kept up the commodity
reserves…Moreover the state was mindful of social welfare (assisting the poor
who were directly sustained by the government),it secured the material lifeconditions (waterworks, sewage, public fountains),it paid the doctors and
apothecaries who treated everyone [without charge] from the Rector to the city’s
poor…it appointed teachers…{etc.}.”
While most other writers agree broadly that social provisions were relatively unique,
they are generally more realistic than the above citation.43 Carter (1972-p.116) concurs
that “on the whole, the ‘cittadini’ and peasants were ruled with wisdom and without
Sisak is also more positive than others on concordance of elites (p196): “ never in the long existence of the
Republic, except on rare occasions, did dissent among the nobility come out in public”. True, peasant revolts did
not seem to occur, and internecine nobility disputes were much less than elsewhere, but dissent did occur many
times and had to be defeated, sometime brutally. Vekaric (05) recounts the largest such revolt of the Lastovo Island
nobles.
43
47
oppression”, but balances this by noting (p.116) “[appointed governors of the territories]
governed despotically…Dubrovnik’s ideas of liberty were not only restricted to a limited
class, but did not extend a yard beyond the walls.” Diversis (1440 as cited in Stipetic
(00) p.25) was blunter: ”many noblemen and merchants have great wealth, but the
majority live in sheer poverty…[the best
of these] are sailors and peasants “ This
comment on peasants may be at odds with Carter’s judgment of despotic governance
in the territories ;since grains were always in critical shortage, and as he notes the
territory could at best provide one-third of needs, it is questionable that peasants who
could not produce much surplus would be overly harshly treated, and the view of
Diversis on the position of peasants makes more economic sense . The resolution of
this inconsistency may lie in the fact that a regional governor or local knez was usually
a very junior appointment for young nobles to as they began to fulfill their government
obligations – and many may still have been in the usual stage of incomplete maturing
attended by brash or even cruel behavior towards commoners. But as Krekic (1997..Ch.
V) notes , oversight from the city was close and punishment for “immature” excesses
of young nobles , including recall to the city ,was quite common.
As to the true extent of poverty and how much social support was provided, Krekic-,
(whose extensive works can by no means t be characterized as romanticizing the
Ragusan idyll ,44)-in his study of urban life in Ragusa (1997 , Ch. V) goes into great
detail to show that while indeed there was considerable poverty, especially at times of
famine or other shocks , there was continual attention paid by state agencies from the
44
He provides many demythifying studies , including for example on the notion that slavery was completely
abolished already in 1416 in Krekic 91997, Ch.IV ) he makes clear from the written records that this was a mere
beginning , limiting the trade in slaves from the immediate hinterland to avoid conflicts with Bosnian bans.
48
Senate on down to consider measures to alleviate poverty. The main types measures
are listed below, but one specific episode reflects nicely the spirit of this attitude. In the
1406 the decision to
minimize fire-risk by prohibiting wooden buildings , including
destroying existing ones , the relevant
legal document
stated : “simultaneous
destruction of all (wooden houses) would harm very much the [poor persons who own
such houses “, hence the program was to be implemented by having groups of twentyfive demolished each year.In addition “not to burden too much the poor men in
demolishing the said houses” they would be reimbursed for one-third the value, allowed
to keep the materials, and build on the same spot anew stone or dry-wall house. 45
Leaving aside some uncertainty on “ just how fair was fair “ in Ragusa, we turn to
illustrate some of the specific measures aimed at social welfare., starting with basic
infrastructure of benefit to all the population. For some analysts, given the historical
context, the building of churches and monasteries was a form of social welfare. Carter’s
Table of principal buildings (p.484-5) used for our Table 1 also notes a synagogue built
in15th.c, though whether it was state-financed like the Catholic churches
is not
indicated Not shown there are both a Mosque and an Orthodox Church which were
approved in later years by the state, but it is unclear how they were financed.
Other infrastructure for the populace included street paving
as early as the 14th
century, sanitation infrastructure, limitations on wooden buildings ( to minimize fires)
provision of water with wells , aqueducts, public fountains –including the famous Onofrio
Fountain built in 1437 and still used today .
46
. Hospitals and hospices, homes for
45
Krekic 91997, Ch. V, p.7. This study gives numerous other examples of actions to alleviate poverty.
Stuard (92) also confirms the many efforts at providing water supply by boat , and when this became
insufficient the bui;lding of an aqueduct from the Ombla river ( about 10km distant ), with the Onofrio fountain at
46
49
orphans and indigents should be included as infrastructural provision for the populace ,
and a part of the health care system.
The provision of health care and facilities is considered by many a pioneering high
point of Ragusan social fairness achievements., and many of the historical volumes we
have cited
( Bojovic, Harris, Krekic, Stuard ) emphasize this. A recent systematic
review , by modern-day specialists on health policies
from the National School of
Health in Zagreb, Lang and Borovecki (2001) , provides many details using archival
data and concludes: “ it is obvious that Dubrovnik had a high level of health and social
care organization ( home for foundlings, residential home, { probably a ‘hospice”;au}
various health regulations. Similarly , Frati (2000) details the introduction of quarantine ,
as well as other measures like seeking the best physicians in Italy, sending talented
youth to learn medicine there , and so on. As noted, Frati realistically notes that the
motivation for the famous first quarantine station 0f 1377 “originated mainly from the
need to protect the safety and quality of the commercial network rather than for medical
aethopathogenic purposes”, but she emphasizes that this definitely also provided a
great social benefit to the entire population.
Provision of education for all classes in the city-but not in rural areas – provides
additional evidence of “the patrician’s enlightened attitude toward talent” (Bjelovucic,
1970.p.62.). As early as 1323 a master Nicholas of Verona was appointed as a teacher
on state salary, followed by a long series of Italian teachers in greater numbers, so that
the city-end. She notes that with these projects, a new set of archival books began to be kept , Libri reformationes
with data on many community projects. Unlike some other authors who attribute much of Ragusa’s effective
governance to Venetian customs , or make no attribution, Stuard in this chapter mentions several times the legacy
from Byzantium for health care, public infrastructure. Jenekovic-Rohmer (06) also gives Byzantian legacy a lot of
credit.
50
by the mid-15th c. the famous De Diversis was in fact Director of a gymnasium. Many
writers cite him and other documents to the effect that these teachers should” teach
well, solicitously and assiduously all the pupils citizens and inhabitants of Dubrovnik
{our emphasis} … without accepting any payment from those pupils.”
47
This policy
continued as Bjelovucic notes in later , decline centuries , with the Jesuits being given
state funds “to teach all youth who wish to attend public schools” and “sending bright
boys (sic) overseas to study at government expense . 48
The only hard data on education is the 1800 budget analysed earlier which suggests
education expenses were in 1800 as high as 6.8 % of total, but some dispute exists on
this value with some sources indicating the value for this category is half that .
49
Is
this high or low ? Unfortunately the Bonney (1995) volume on state finances we cite
does not provide comparative values on education - though this very fact is suggestive
of public education expenditures being so low that they are not shown in
any of the
tables or charts there. 50
The last category we will mention concerns the strategic reserves of grain and other
staples . , storing them in so-called “rupe “ or granaries. built often as part of the city
walls .. The largest set of these- which can still be visited today- was built between
1542-1590, but earlier , simpler ones started from the first centuries Related to this
were interventions in grain markets such as capping prices in times of shortage to
47
Krekic (1997, Ch. VIII, p.226. This article provides extensive detail on education , literacy, the first public library
in 1465, book holdings, sales, and printings. In Ragusa.
48
Most historians make reference to this—we cite here only Bjelovucic, partly because she discusses , the late 16th
c, , suggesting that despite the decline of 200 years, Dubrovnik was still thriving and wealthy—an indication that
while its aggregate GDP may have fallen considerably, per capita values may have held up or even increased—a
hypothesis that merits further research..
49
We thank Rina Kralj-Brassard for these clarifications.
50
It is beyond the scope of the present paper to research further sources on public education expenditures in other
mediaeval states, but this clearly is a potential topic for further research.
51
minimize price-gouging, direct sales by the state, and limitations on how much land
peasants could plant in vines which gave far more yield in the rocky , hilly terrains of the
Republic than grains.
In today’s perceptions this seems like an interventionist
policy,but some of these measures were for the mediaeval period arguably justifiable,
as transport time and costs precluded quick filling of gaps in basic food requirements.
To sum up,
the evidence on social fairness is almost entirely qualitative, but
considerable fragmentary estimates and innumerable assessments by historians, do
point to a wide network of
social programs
in support of
the entire population,
including many measures to alleviate poverty. This does not imply an altruistic and
equitable attitude, or always successful alleviation of poverty, nevertheless it seems to
represent a high-point in this period of time .
IV.7. Low Military Expenditures –High Expenditure on Diplomacy.
The onlu data on actual defense costs,in Fig.4
leave no doubt that around 1800
Dubrovnik’s expenditures on defense at about 12% of the total budget, is far below that
typically noted for other states There is an excellent benchmark in the literature in the
work of Bonney (1995) which has collected a large amount of data on
European
states’ budgets for the 13th -17th c; One of the volume’s key conclusions is that for
most states military expenditure accounted for a very large share of at least about 20%
to as much as 80% in times of conflict. Lane (1973.p.426:) gives us some idea about
military expenditures of Venice: in 1736 they were one-third of the total-after a sharp
decline from preceding periods, when they must have been half or more . .
52
Hard data on the extent of diplomatic activity is also
seen in Fig. 4 and strongly
supports the view that diplomatic costs were much higher than military ones, totaling a
huge 42% of expenditures: 11% for consular expenses (though note fees recouped for
services to others yielded 6% of revenues), plus 31.9%- for various tributes, “good
relations”, diplomatic travel costs etc.
However , these data may or may not be
representative of earlier periods. Indeed it would make sense that these represent a
historical maximum, as in very early days defense efforts were more likely needed to
establish a basis for trade and then diplomacy. Over time military/defense would then
have declined proportionately, while diplomacy percentages
could then rise.
Nevertheless this very large share is striking.
V.
SUMMARY OF FINDINGS AND FUTURE RESEARCH
Ours is not the first study of Ragusa to use statistical data , but we believe it may be
the first to do so systematically rather than fragmentarily, and to generate time series of
data proxying economic activity approximately over the period 1000-1800. Our data
bank is based on secondary sources, though most of these are based on archival
research. Most sources provide only fragmentary statistics, often scattered , in text
rather than tables or charts. but there is
enough coverage over a long time to allow
creating crude time series of economic variables. Perhaps surprisingly , considerable
statistics on the legal system, notaries, courts , was also found , especially in recent
works by historians such as Lonza, Palic , Ravancic..Thus we are able to make this new
quantitative contribution to both the literature on Ragusa/Dubrovnik, and the growth –
institutions literature.
53
.The first aim of this paper t was to compile the best possible data-bank of economic
activity proxies
based on secondary sources and test common hypotheses about
Ragusa’s economic success. While our time-series have many shortcomings, they are
a first in the literature on Dubrovnik, and as posited they have been used to largely
confirm -with minor modifications- the most common hypotheses in the literature about
what happened economically in the
mediaeval period. The quantitative evidence
strongly confirms that the ‘Golden Years “ of prosperity were indeed from the mid. 14 th
to the later part of the 15th c.- but probably lasting a bit longer than the common 1550
dating. Similarly, the data confirm the view that carrying capacity for population was far
below the 90,000 peak reached in 1500- the logic here being that a sharp population
decline after that while the economy was booming can only be consistent with the fact
that 90,000 was far in excess of real capacity. It is also confirmed that the period of
decline is most likely attributed to the new sea route to the East after Vasco de
Gama’s circumnavigation of the Cape of Good Hope, which precipitated an unbeatable
new competition by rising West European powers . On this too a slight modification is
pointed to by the data—the decline was not at all immediate with Ragusa’s absolute
level trade apparently continuing to grow for nearly a century after Vasco de Gama.
How they managed this might be an excellent future research topic-in effect a study of
resilience to an external
macro shock. And another test of the effectiveness of
institutions.
The “patriotic” hypothesis proposed by some Croatian historians that Ragusa equaled
Venice in the size of its merchant fleet seems at first
supported by shipping data
54
around 1575, however this was one of the special periods in Venice’s history with its
fleet decimated by one of many wars. For most of the period Ragusa had a smaller
commercial fleet , though in proportion to their populations ,there is little doubt that
Ragusa came surprisingly close to Venice, and the hard data does support the claims
of it being perhaps the major rival of Venice despite its much smaller size.
Finally we propose a new hypothesis not explicit in the literature and based on the work
of Stuard : that the Silver period (about 110-1350 ) while far less prosperous it was
economically extremely dynamic , laying a strong basis for the boom years to follow.
The test is limited but all indicators are consistent with the hypothesis.
The second aim of the paper was to demonstrate with both quantitative and qualitative
evidence that this success can be attributed to favourable institutions. We have been
able to cull from the literature a lot of statistics on fiscal prudence and the legal system
to confirm that the kind of institutions considered in the NIE today as being favorable to
growth were indeed present early on in Ragusa , and apparently continued over its
prosperous centuries, Thus one sees
very early widespread
reliance on formal
notarization and registration of personal as well commercial dealings and contracts>
There is fragmentary evidence of a sensible and relatively speedy legal process for
bankruptcies. Further, for all court processes, be they civil or commercial available
statistics show reasonable completion times, and many instances of non-completion
due to encouragement for out of court settlements. These were an intentional strategy
of authorities meant to encourage continuation of commercial dealings among Ragusa
55
citizens; the approach was of great value in the case of bankruptcy cases, since it
avoided the common mediaval practice of debtor’s prisons
which were more an
impediment to commerce than a contributor thereto.
Our
quantitative analysis was also
complemented by innumerable qualitative
assessments supporting the main conclusion. . In fact the qualitative analysis allowed a
glance at two other institutions of importance to prosperity : an enlightened social policy
for the mass of the population which provided stability;; and a focus on diplomacy as a
substitute for the large military expenditures typical of the period.
The third aim, to demonstrate that Ragusa/Dubrovnik is a good example from a very
early period showing that today’s Institutional Paradigm is not that new and goes
back well before the West European histories most commonly used in the NIE literature
, to the mediaeval period . We do not propose it was unique in that period and that
region, for there is little doubt that broadly similar institutional climates were found in
several successful Northern Italian City-States.
Concerning potential future research we begin with a few general points. On Ragusa
itself , more detailed understanding of its economic history is likely to be found by
turning to primary-source research using the very rich archival sources of Dubrovnik,
widely praised as among the oldest and most comprehensive in the region despite the
small size of the Republic. On the early role of good institutions, the NIE sorely lacks
analysis of the economies of the eastern Mediterranean, ,”The Cradle of Capitalism “.
Indeed despite Ragusa’s disproportionate role; in the region , there is no question that
Venice, Genoa, Florence , Naples , were far larger and more important . Is their story
56
similar ?
This deserves more attention by economists, especially proponents of the
New Institutional Economics.
Turning to some concrete aspects for Ragusa, perhaps the first area to start with is on
budgets in earlier centuries, given our findings that the very late 1800 data do confirm
the prudence hypothesis and that while all indications for earlier centuries point in the
same direction , this evidence is entirely qualitative. The power of more and earlier
budget data
goes beyond a verification of the prudence hypothesis since its
components relate to the many claims about limited armed forces, reliance on
diplomacy, and even on social expenditures. Given Ragusa’s wide trading networks,
one would expect that other archives –in Italy, Ottoman Empire , Vienna, other
Dalmatian cities – also contain considerable material. But given the
wealth of the
Dubrovnik Archives—whose extensiveness we have referenced in the text— that is
surely the place to start.
Another specific issue worth investigating is the precise factors leading to the sharp
population decline after 1500 at the same time that
shipping activity increased
suggesting an increase in GDP. How much of this was due to the plague, outflow of
“excess” population of 15th c. refugees ? And what then happened to per capita income
if population fell while economic activity expanded.
On institutions and their role, this same period of the “decline” raises a question of
policy resilience : since the new European competitors began eastern trading already
by firs deacde of 1500’s, how did Ragusa manage to keep it shipping fleet growing and
seemingly its economic trading activity still rising? Finally on the role of institutions, we
57
were not able to find data of the sort modern analysis typically begins with : speed and
ease of opening and running a business. Could further archival research find such
statistical evidence .
Any such future research would add
and/or “test” our conclusions , and further
contribute to both the literature on the economic history of mediaeval Ragusa and its
neighbors , as well as the literature of the New Institutional Economics.
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