Wednesday, October 17, 2012

'Don't Blame the Capitalists, That's Just How They Are': The Med,vol ii, Braudel

Like I said, I'm in another of those brief periods where a number of different sources are all seeming to say to me basically the same thing --  like watching different threads come together in front of you and twist themselves up by themselves, tugging at the news? What does it mean?
Sources I said, like Sanudo or in this case,

like Fernand Braudel, in The Mediterranean , in the chp 'Is It Possible To Construct A Model Economy?', itself under the heading 'Economies: The Measure of a Century", he gives some example to the contours of long distance trade from Flanders and England to Lisbon, Venice and all the way east to the Portuguese Indonesia of the 1500's. How 'houses' jealously guard their buying and selling rights, control the flow of capital, goods, information and credit, all in order to maximize profit. Often through the use of extended brokers, familial bonds, proxies and alliances, whether short or long-term. It seems sometimes in constructing his analysis that he lets these networks grow almost spontaneously but actually, if one looks at the author Braudel's own history, he helped create and nurture the whole structuralist mid-century post-war global trade way of looking at things along with Claude Levi-Srauss. Still it may be necessary to say, he and his students built much of the models, even the superstructure upon which modern historical inquiries and analyses are hung. So the credibility of what follows is still essentially unassailable. [I broke up this following section and edited some to make it easier to read and added emphasis in bold to point out my enduring theme,]

"The significance and limitations of long-distance trade. The raison-d'etre of long distance trade is that it connects, sometimes with difficulty, regions where goods can be bought cheaply with others where they can be sold for high prices:  buying kerseys or having them made in the Cotswolds, for example and selling them in Aleppo or Persia; or buying linen cloth in Bohemia and selling it in Lisbon, Venice or Lubeck. 
To make them worthwhile these long journeys presupposed wide differences in economic levels, indeed enormous differences at the beginning of the sixteenth century, particularly at Lisbon, where commercial profits sprouted like tropical plants. As Porchnev said of Baltic trade in the seventeenth century, what counted was not so much the volume of trade as the ultimate rate of profit. 
Capitalism in its agile youth... was attracted by these high profits and their rapid rate of accumulation
In the long run of course all differences in price levels tend to be eliminated, particularly when business is good. Long-distance trade then has to change its options.
So there were periods when it was more or less profitable: very profitable was the first half of the sixteenth century; profits leveled off in the second half; and there was renewed prosperity in the seventeenth century.
It was the relative slump in trade that no doubt encouraged so many businessmen to invest their money in government loans and on foreign exchanges, culminating in a kind of financial capitalism in the second half of the sixteenth century. Let it be understood that there is no question of a drop in the volume of trade, which indeed continued to increase during this period. Our remarks apply exclusively to the profits obtained by the larger merchants.
...
So long distance trade depended on a very fine balance. The entire economic history of Castile under Genoese influence provides clear evidence of this .... It was when they had difficulty in exporting American bullion from Spain that the Genoese bought alum, wool, oil, and even wines from Andalusia in order to obtain from their sale the specie they needed either in the Netherlands or in Italy. The last wool boom in Venice seems to have been the result of one of these operations. 
I am convinced that a similar system guided from above also operated in the kingdom of Naples, for the occasional purchase of saffron, silk, oil, or even, Apulian wheat. A whole army of merchants, Milanese, Florentine, Genoese, and Venetians (especially merchants from Bergamo) was stationed in the towns of the kingdom of Naples, for the most part small traders, despite all the airs of importance they gave themselves and the large stocks of oil or grain they possessed; they were only there to provide their masters or correspondents with the advantages of rights and privileges acquired locally over the year. 
And they operated only to order: just as the Marseilles merchants who squandered large quantities of specie at Aleppo or Alexandria were only executing the orders of the merchants of Lyons, who manipulated the strings according to the state of the market. The Spanish merchants too were in the service of influential foreign businessmen.

So at the top commercial capitalism consisted of a series of careful choices; or one might describe it as a system of supervision and control, intervening only when large profits were assured.
An entire 'strategy' can be glimpsed, sometimes even emerging into broad daylight, intervening in one place then another according to variations in the price of commodities and also to the degree of risk involved.
One often stood to gain more, but also to lose more, by handling merchandise than by playing the money markets. [An interesting inversion compared with the finance world of today.]
But we know that on the exchanges businessmen were more likely to risk other people's money than their own, and that the transfer of huge sums of money was concentrated in a few hands. No doubt greater overall gains could be made on the five million ducats that the sea-borne grain trade represented in the Mediterranean at the end of the century than on the million ducats that pepper from Asia may have been worth on its arrival in Europe. But in the one case literally thousands of parties were involved, in the other a few powerful combines dominated the market. It was in their favour that the accumulation of capital operated. ...
And similarly the extremely powerful Genoese bankers and financiers even in their heyday controlled only one sector, and that by no means the most important, of the economic life of Imperial Spain. But they derived great profit from it since their numbers were so small.
Contemporaries were often aware of this relative importance. In June 1598, the Genoese 'financiers' wanted to postpone the fairs of Medina del Campo, which would give them an opportunity to keep a little longer in their hands the money entrusted to them by investors.
But the merchants of Burgos, formerly their liegemen and now their bitterest enemies, refuse to cooperate.... in certain sectors concentration of business had become an established pattern.

Capitalist concentrations. This concentration of firms was a fairly frequent occurrence in the sixteenth century. But its progress might expand or be slowed down by the general situation. During the first of the sixteenth century, when every sector was expanding, there arose the great family concerns, the empires of the Fuggers, Welsers, Hochstatters, and Affaitati. After the mid-century recession a different situation began to emerge, favoring the rise of larger numbers of small firms. At this point the spread of information and the possibilities of speculation increased.... In order to integrate these smaller firms into the outside world, transport had to become independent, work on a commission basis had to become generalised, the role of the broker had to be accepted and extended, and credit had to become easier to obtain and therefore more risky. And indeed a series of bankruptcies marks every flurry of change after 1550.
Little is known about the higher spheres of Mediterranean capitalism. The silence of the Genoese archives reduces us to incomplete explanations. It would be extremely interesting to see how far these higher sectors of commerce, finance, and banking depended on the lower strata of small merchants and large numbers of naive investors. Without everyday affairs, the common or garden transactions of economic life, the banks at Naples or elsewhere would soon have been out of business. Without the cargoes they carried for very small clients, even the fleets of the New World would have been in difficulties. And finally, without the savings of Spain and Italy, which they were the first to mobilise, the asentistas of Philip II would never have been able to engineer their enormous financial operations.
In the Mediterranean the usual pattern was the family firm, at both upper and lower levels , and short-term associations that were rarely renewed. Close ties, divorces, and remarriages could be effective on a certain scale. The Genoese for instance, who lent money to the king of Spain, were in fact a permanent association, although no formal legal constitution bound them together before the medio general of 1597. They operated in twos and threes, or all together in times of crisis or particularly favorable conjunctures. Their small numbers and class solidarity kept them firmly together. They were commonly known as the contratacion, proof if one is required, that they were considered as a group. For firms that were not brought together by necessity, connections could be useful as appears by the genealogical research of Hermann Kellenbenz... [detailing] the network of marriages, family ties, friendships, and partnerships stretching from Amsterdam to Lisbon, Venice and the Portugese Indies. They prepared the way for, or followed, the great geographical shift of world riches that marked the transition from the sixteenth to the seventeenth century.
The availability of these networks may help to explain why the Mediterranean unlike the north never felt the need to set up large combines, the joint stock companies to whom the future was to belong."  pp 80-84, in 

The Mediterranean: and the Mediterranean World, 2nd Rev Ed 1966, vol II, Part 2, Section I: "Economies:The Measure of the Century" by Fernand Braudel. This 3 vol edition was a Harper Collins Publisher special edition with FOLIO books which included all the footnotes and charts and nice illustrations of an approved 1972-3 translation, following the 1966 revision

This is a key set of points in this post that will inform what I'm looking at going forward. It may be months before I come back to Braudel, but I felt had to be included to give example of the closeness to their patterns and our current methods. As if, 'that's just how they do it' but documented to where the abstract is revealed as concrete, theory turned into workable systems that have running parts. Proxy representatives, legal advocates, courtiers, couriers and policymakers all had to work together to extend and maintain influence wherever officialdom was required. And there was all the other stuff that had to get done, too. And a lot more that didn't need to get done that was done, anyway.

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