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The Importance of "I built this." to "Gold Age Commerce"

by Roger Bourke White Jr., copyright October 2012

Introduction

This article is a further explanation of why "Golden Age Commerce" eras happen, and why they are always self-extincting -- they come, they are glorious in their own time, then they end.

The question is: Why do they end? Why not go on longer? They are clearly a winning game in their own time, everyone can see this. But for some reason the community changes its ways and goes back to mediocrity. And again, the odd part is this change away from success is a consistent one. There are only a few exceptions.

Inspiration

The inspiration for this is a 13 Oct 12 NY Times book review, The Self-Destruction of the 1 Percent by Chrystia Freeland, which reviews the book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” by Daron Acemoglu and James A. Robinson. The article describes in fair detail how the Golden Age of Venice in the early 1300's came and went. The thesis is that the plutocrats of Venice cut off their own continued growth by over-controlling the disruptive economy that was at the heart of their growing prosperous in the first place -- after growing prosperous for a few decades, the "winners" of the day made up a list of winners, gave that list legal teeth, and that brought on an era of stability which ended the era of growth.

Adding to a good idea

I like this article's analysis, but I think their thesis is half the answer, not the whole answer. The other half of the answer is that more than plutocrats were supporting the change away from growth. I contend that many average Venetians also supported the change because part of this change was Venice became an entitlement state.

As Venice got prosperous the average Venetian city dweller also got more prosperous. They got more prosperous, and more optimistic, as this Golden Age went on. Their response to this increase in wealth and optimism was to "want their fair share". I think what closed off the prosperity was that the plutocrats offered the average citizen their fair share in the form of a "bread and circuses" entitlement state if they would support the plutocrats in stabilizing the system... and that average citizen bought in. That is what allowed the closure to happen.

The advantage of including this second, populist, half to the above equation is that it can explain why all these Golden Ages seem to end consistently and end by declining into a mediocrity that supports a stable hierarchical social structure -- instead of supporting more exciting growth, the community transforms into happy to "get by" with what it already has.

Yet another interesting point brought up in the article is that the Venetians could see this problem coming on, they were writing about it, but they couldn't stop it. This was also the case for Cleveland as it suffered from the Midwest Disease (as I write about here) starting in the 1960's. The Midwest Disease is another example of this Golden Age Era ending, and there are many other examples of regions which have boomed mightily for a decade or two, then given up on the booming.

Where "I built it" fits in

One of the hot questions of the 2012 election campaign is, "Who built it?" The correct answer is, "Enfranchisement built it." -- a whole lot of people who feel they have a stake in making the community a better place and feel they can make the changes that will make that happen.

In each of these Golden Era cases the boom times are filled with change, huge change, going on at many levels. In the case of Venice a thriving trading industry was building up, and a thriving new city in the middle of a lagoon. Both of these changes were big and both required lots of enthusiastic involvement by most of the people of Venice.

The Golden Age ended as the enfranchisement was narrowed from most people to just a few -- the plutocrats of this article. As they, not most Venetians, became in charge of deciding which changes would be implemented, average enfranchisement declined and with it exciting growth. The ambitious of Venice voted with their feet, they found opportunity elsewhere. A famous example of this kind of feet voting came a hundred years later as Italian Columbus took his hot world trade idea to the more receptive Spanish royalty.

Conclusion

It takes a special set of circumstances for a community to boom into a Golden Age of commerce. Those circumstances continually recur around the world, but they are also self-extincting -- the community gets its act together for a few decades, then loses its special shine and goes back to being just another community.

The return to mediocrity is powered by community optimism transforming the community into an entitlement state run by a stable plutocracy. This transformation kills the entrepreneurial glow and accompanying economic disruptions that brought on the boom in the first place.

 

-- The End --

(The Fight Between Entrepreneurship and Instinct is a longer discussion of this topic.)

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