Shaping Medieval Markets: The Organization of Commodity Markets in Holland, C. 1200 – C. 1450
Review by Anne EC McCants, MIT, August 2013
In a growing body of scholarship that explores the medieval origins of the early modern Dutch economy, many economic historians now expound the thesis that the prosperity of the 'golden age' was presaged, or even made possible, by the fortuitous resource allocations and resulting market conditions that date back to the early settlement of the reclaimed marshy land that would in time become Holland. Much of the detailed archival work that stands behind this literature has been published in Dutch, but increasingly works of broader synthesis are appearing in English. Jessica Dijkman's new contribution to this literature fits squarely within this basic framework.
Her study adds to the tradition of regional inquiry, however, by offering up a serious engagement with another currently fashionable project, that is the documentation of the so-called 'institutional origins' of a given economic outcome, in this case a highly successful one. Dijkman defines the terms of her study from the outset as a response to the oft-cited work of Acemoglu, Johnson, and Robinson (2001), but with the explicit acknowledgement that we must actually explain where the much-touted 'good institutions' came from, and how they are situated in time. That is, she sets for herself the explicitly historical task of explaining origins and change, and not just the social scientific task of identifying and categorizing states of being. To do this, she borrows from A-J-R, what she calls the 'social conflict view' (p. 18). Institutions arise, she argues, not just (or perhaps not even usually) as the most efficient response to a set of circumstances, but as the most advantageous to those who wield the political power necessary to enforce them. Unlike A-J-R though she places a greater emphasis on exogenous forces that shape that political process rather than relying so overwhelmingly on endogenous factors alone (p. 20).
Dijkman's argument draws on one other older theoretical tradition, namely that immortalized by Adam Smith in the Wealth of Nations — the idea that commercialization (the widening and deepening of markets for commodities in particular, but with spin-off effects in markets for labor and land) can be found at the root of what we now think of as modern economic growth. As she puts it at the outset of her study, her "aim is to discover whether favourable commodity market institutions rooted in Holland's specific social and political structure contributed to the remarkable economic development Holland experienced in the late Middle Ages" (p. 15). From the literature on institutions she defines the relevant markets as "sets of institutions: Rules, customs, and practices that structure the exchange of goods" (ibid). But her question, and her method of probing it, are fundamentally historical in nature, namely to ascertain if the specific timing of Holland's geographical emergence from previously uninhabited swampland was critical to the formation of one set of institutions and not another; and to execute that investigation by means of a comparative analysis with Flanders and England, both places that shared a range of important characteristics with Holland, but also differed from Holland in critical, and easily distinguishable, ways.
A major strength of the book is the detailed historical work that is both carried out directly and distilled from the research of others. The first part of the book, titled "The Institutional Framework: Trade Venues" (begins p. 33) reviews the actual places where trade took place: Fairs, rural markets, urban attempts to control rural trade, and successful small urban staple markets. Here the main advantage enjoyed by Holland relative to either Flanders or England appears to have been the absence of a feudal past. Because of the relatively late start date for land reclamation in the northern Low Countries, feudalism never had time to put down sturdy roots in this region. Neither did any one urban place manage to exert strong control over rural production as had been the case with the major Flemish cloth towns to her south, bolstered as they were by large scale urban industry as well as noble power.
Part II, "The Institutional Framework: Rules and Practices" (begins p. 191) shifts gears to examine the actual practices that facilitated trade. Here the emphasis is on the emergence of agreed-upon weights and measures which were not as standardized as they were officially in England, but neither were they so loose as to stifle trade since both Dutch towns and the counts exercised more effective control than it might appear on a first glance at the evidence. Moreover, the early development of international trade demanded a fair degree of conformity in any event (p. 235). Similarly, the other great test for the Institutional explanation for economic success, reliable contract enforcement, again finds Holland lagging behind England (with her royal courts) and Flanders (with her few large and dominating cities). Here Dijkman suggests that the enduring strength of local courts in every town and village was the "Achilles' Heel of Holland's system of debt litigation" p. 267. Yet once again, this factor proves not to have been "decisive"—because in "medieval Holland a solid foundation for a locally-based system of contract enforcement grounded on individual responsibility was laid at an early stage" (p. 271).
Part III (begins p. 273) "Market Performance: Quantitative Tests" is where the rubber really hits the road as it were. It is in Dijkman's quantitative tests of both price convergence and market density that Holland really begins to outshine its neighbors across the Channel or south of the great rivers. Holland demonstrates a remarkably well-integrated price system (for wheat) vis-a-vis international markets from a very early stage. This does not mean that prices were not volatile; but they did track developments on the international trade circuit very closely. Dijkman attributes this to the very poor land quality for wheat agriculture in the north, leaving no hope of sustaining the local population. This forced Holland into international grain markets with an unusual precocity. England by contrast had a relatively self-contained grain market so prices varied much more by distance than in Holland (pp. 306–7). But dependence on imports still left Holland vulnerable in times of dearth as "export restrictions in the producing regions could cause acute problems in Holland" (p. 311).
Finally, her most remarkable finding is the incredibly high level of market orientation in Holland from a relatively early date, with already 60–66% of the population involved in the market for their sustenance by the mid-14th century. rising to around 90% by 1500 (p. 325). Market participation in Flanders had been somewhat higher (at approximately 70% of the population in the early 14th century) but it had been entirely eclipsed by 1500 (p. 332). Meanwhile, market density in England never even came close. In the early 14th century its population involved in the marketplace ranged around 50% and that number had only edged up towards 65% by 1500 (p. 338).
How can we account for these incredibly high levels of market penetration already in the years prior to the Black Death? or for that matter, for the perhaps even more amazing feat of increasing market saturation in the period of population collapse following? Dijkman has this to say: "Returning to Holland, we can conclude that the strong growth of market orientation between 1350 and 1500 would not have been possible without the support of an efficient organization of commodity markets (p. 342)." Nonetheless, she goes on to argue that Holland's favourable institutions did not generate high levels of commercialization of their own accord: The process was ultimately triggered by non-institutional forces. But the contribution of the institutional framework was still essential: It facilitated and supported flexible adaptation to changing circumstances.
So where does this leave her readers interested in testing the theoretical usefulness of the institutional approach? This reader remains somewhat uncertain. In the final analysis Dijkman gives us a well-nuanced 'just-so story:' Her strongest explanation is "the absence of a truly feudal past"—in the formulation of De Vries and Van der Woude (1997), coupled with "the near absence of urban coercion over the countryside" (p. 374). Or as she argues elsewhere "the weakness of both vertical ties (constraints ensuing from the exertion of lordly power) and horizontal ties (constraints ensuing from collectivities such as guilds)" account for Holland's unique experience (p. 351). But of course, for anyone wanting to use the Dutch case as a guide for best practice, this conclusion is not terribly helpful.
Nonetheless, I am not satisfied to end this review on that critical note. Just-so stories are often actually very good history—even if they don't meet the abstractness criterion of best-practice social science. The historian's primary task is, of course, to explain how things came to be, not how to alter the future. In our future-besotted present this may not seem worth much. But understanding how things came to be is a worthy enterprise in its own right. There is yet much to learn from the ever-more-clearly delineated medieval origins of the early modern Dutch economy. Prosperity often has long roots—understanding that can indeed help us make wiser assessments in the present, and hopefully, offer more people better opportunities for the future.
Citations
Acemoglu, Daron, Simon Johnson, et al. "The Colonial Origins of Comparative Development: An Empirical Investigation." American Economic Review 91, no. 5 (2001): 1369–401.
van der, Woude, Ad, and Jan de Vries. The First Modern Economy: Success, Failure, and Perseverance of the Dutch Economy, 1500–1815. Cambridge University Press, 1997.