Many believe that global markets are a new phenomenon. But that is not the case. Not only had the late 19th century already reached a level of global trade and financial flows which approached that of today, but there have been long distance trading circuits across jurisdictions and continents which date back as far as medieval times. In the 12th and 13th century, the Italian city states of Venice and Genoa maintained long distance trading networks that reached as far as North Africa and Central Asia, providing the basis for ‘global’ markets for luxury goods, such as spices and silk.  In the North, the Hanseatic League formed a federation of trading cities along the coastlines of the Northern and Baltic Sea generating cross-border markets for bulk goods such as fish, salt, grain and wood.

These markets were transnational in the sense of their interconnecting economic actors from multiple political jurisdictions (i.e. kingdoms and city states) across the world into a multilayered system of rules and regulations which governed their exchange relationships.

Economic historians have produced a rich literature on these markets which is also instructive for economic sociologist studying the governance of contemporary ‘global’ markets. In a recently published article I combine both approaches to analyse how key coordination problems were resolved in medieval long-distance trading systems.

Coordination problems in transnational markets

The new economic sociology draws our attention to the fact that markets are socially and politically constructed and that exchange relations rely on institutionalized and cultural rules. How could market actors otherwise engage in highly uncertain exchanges without knowing what the value and quality of goods is likely to be and what kind of rules market participants can expect each other to follow in terms of competition and cooperation? Economic sociologist Jens Beckert identifies three key coordination problems: a) how are goods valued and classified by the market actors to be able to trade them?, b) how is competition between market participants regulated to create a level playing field or any organized playing field at all?, and c) how do institutions create a minimum of cooperation among market participants?

Such problems of uncertainty and coordination were particularly pronounced in medieval long-distance trade: merchants had to invest in building and equipping ships for what were often month-long journeys; their goods could easily be lost through accidents and pirate attacks; distant trading partners might not fulfil their obligations and conflicts about contracts might arise.

Economic historians on medieval transjurisdictional markets in Europe

In Civilization and Capitalism, French historian Ferdinand Braudel provides a detailed and encompassing account of how the revitalisation of trade between different cities and regions within Europe from the eleventh to the fourteenth century was accompanied by an expansion of exchange with other continents. Major trade routes extended from the Mediterranean through Persia to China, India and South East Asia as well as into North Africa, and from the Baltic Sea into Northern Europe and Russia. Voyages such as those of the Venetian merchant Polo to Persia and China (1271-1295) were, as anthropologist Eric Wolf explains in his book Europe and the People Without History, not just isolated events; rather they reveal how Europe entered into more encompassing relationships with other continents. From these long-distance exchanges emerged, as Braudel calls it, a European world economy and the first pan-European markets in which by the 12th century prices ‘were fluctuating in unison’. The key actors involved in governing these markets were merchant guilds, city-states, feudal rulers, the populations of merchant cities, as well as producers and trading merchants in distant parts of the world.

Travels of Marco Polo and Ibn Battutah

Long-distance trade in late medieval times was based to a large extent on merchant communities, which were organised according to their places of origin, kinship and ethnicity. Such communities, like the Maghribis, Venetians, Genoese or the merchants of the Hanseatic League, typically concentrated on trade in certain products on specific trading routes. Economic historian Avner Greif has analysed the self-organisation of these trading networks from the viewpoint of how networks generated incentives for self-interested cooperation among merchants. He also highlights, however, the role of public authorities and law in generating a broader institutional framework which supported merchant communities. According to Greif, inter-community trade between merchant of the same city of origin constituted a primary layer of long-distance exchange while cross-border exchange between different communities was organised in central marketplaces in leading merchant cities such as Venice, Genoa or Lübeck.

The role of merchant guilds was at first that of self-organizing associations, while over time they became influential actors in the public administration of the Italian city states. The guilds were particularly important in

  • providing security for members trading abroad
  • establishing and evaluating norms for product quality and the value of goods
  • working out the terms of trade
  • extending the rules of their town of origin to foreign trade posts by means of extraterritorial self-enforcing validation
  • limiting competition from traders from other places of origin.

The self-organization and governance of the guilds, however, was embedded in a wider public order in which public authorities and feudal rulers provided

  • military, political and diplomatic intervention on behalf of their trading guilds abroad
  • inter-city agreements and agreements with foreign rules about the rights of their merchants abroad.

The involvement of the populations of merchant cities in transjurisdictional markets varied with power and social structures. Economic historian Yadira González De Lara attributes the relative success of Venice over Genoa to the more fully developed public-order sanctioning of the Venetian city-state and the broader participation of Venetian citizens of different ranks (noble and non-noble) in financial investments in trading missions. In turn, also a broader part of the Venetian population was able to reap returns from the long-distance trade of the city. Nevertheless, one-third of the Venetian labour force consisted of unorganized workers and the so-called ‘proletariat of the sea’ hired as seamen to work on Venetian galleys during their trade journeys.

The role of the population, thus, was that of

  • investors in future merchant travels (investments in ships, ventures, goods)
  • consumers of luxury goods
  • laborers organized in guilds providing the local infrastructure for long-distance trade
  • unorganized works- and seaman, for example working in the shipyards and on the ships during their travels abroad.

Much less is know about and much more still needs to be explored about the modes of production under which the goods which entered these trading networks were produced in Asia and the Far East, or as far as the Hansa is concerned, in the Baltic and Scandinavian countries.

Comparing the governance of medieval and contemporary ‘global’ markets

Clearly, there are many differences between contemporary and mediaeval ‘global’ markets:

  • Among them, there is, first of all, the rise of the nation-state as a powerful and resourceful actor in the 19th century and the creation of international organisations, such as the Word Trade Organisation and financial institutions, and supranational regimes, in particular the European Union, in the second half of the 20th century. All this has added a thick layer of national, international and supranational rules governing ‘global’ markets.
  • A second and related distinguishing feature of the contemporary period of globalisation is the expansion of multinational enterprises which have ‘internalised’ a significant amount of international exchange as intra-firm trade at the same time as they have sourced many semi-manufactured goods from global production chains. As a result, contemporary ‘global’ markets are populated by resourceful and powerful organisations rather than associations, ethnic or family networks of merchants.

Apart from such differences, however, the analysis also points to intriguing similarities. In particular, some of the institutional features of transjurisdictional mediaeval markets are highly topical for transnational markets in the post-nation-state period.

  • The role of communities in regulating transnational business relations seems to be a pervading phenomenon in history, though the nature of the communities, their relative influence and their functions have changed over time. Nowadays, new types of transnational communities of profession, practice and discourse are participating in the regulation of ‘global markets’.
  • The historical evidence shows that, as much as communities and guilds were essential for the governance of long-distance markets, their informal and self-reinforcing rules interacted in various ways with public authorities and legal systems which, while originating from specific political jurisdictions, were influential beyond their domain. In contemporary transnational markets, a similar blurring of the nature of agents and governance processes is observable: so-called ‘public’ international organisations like the UN increasingly engage in market activities through the sub-contracting of welfare services, while so-called ‘private’ business associations like the International Council for Toy Industries engage in the production of public goods such as product, safety and health standards.
  • Extraterritorial application of national law is another very familiar phenomenon of contemporary ‘global’ trade regulation which parallels mediaeval regulation. From this follows a need to reflect on the usefulness of dichotomous categories of ‘private’ and ‘public’ in the analysis of institutional arrangements in contemporary transnational markets.

All in all, historical comparisons of the governance of transnational markets reveal the various ways in which human societies and cultures have been and are interconnected across borders and reveal their interdependencies. Such studies can also provide a better understanding of the mechanisms through which markets come into being, are maintained and can fade away over time, thereby adding a historical dimension to the study of markets in economic sociology.


Further readings:

Braudel, Fernand, 1992 [1979]: Civilization and Capitalism, 15th–18th Centuries, 3 vols. University of California Press.

De Lara, Yadira González, 2008: The Secret of Venetian Success: A Public-Order Reputation-Based Institution, in: European Review of Economic History, 12, 247-285.

Greif, Arvner, 2006: Institutions and the Path to the Modern Economy: Lessons from Medieval Trade. Cambridge University Press.

McEvedy, Colin, 1984: The Penguin Atlas of Medieval History. Penguin.

Wolf, Eric R., 1997 [1982]: Europe and the People Without History. University of California Press.