Trading Networks, Monopoly and Economic Development in Medieval Northern Europe: an Agent-Based Simulation of Early Hanseatic Trade

Trading Networks, Monopoly and Economic Development in Medieval Northern Europe: an Agent-Based Simulation of Early Hanseatic Trade

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Trading Networks, Monopoly and Economic Development in Medieval Northern Europe: an Agent-Based Simulation of Early Hanseatic Trade

By Ulf Christian Ewert and Marco Sunder

Paper given at the 9th European Historical Economics Society Conference (2011)

Abstract: That Hanseatic merchants of the late Middle Ages relied on multiple kinship and friendship networks to handle their business is well established. The majority of these merchants had settled down and operated their trade from their hometowns. They committed to reciprocal exchange with relatives and friends at distant markets, often without formal contracts, and their trading networks were based on reputation, trust and culture. Little is known, however, on the emergence of this Hanseatic trading system in the high Middle Ages, a period characterised by a significant migration into the Baltic region and the foundation of numerous towns alongside the Baltic sea’s southern shore. Against the backdrop of severe data limitations, we develop – and analyse the predictions of – a simple agent-based simulation model of Hanseatic trade. We ask how the network pattern of Hanseatic trade could have emerged and developed before the turn of the 13th century, in which way the unfolding of network-based trade might have contributed to the economic development of the Baltic region in this period and whether development paths other than that of an emerging network organisation would have been viable solutions as well.

Concerning the history of medieval trade in general, the institutional arrangement observed in late medieval Northern European trade is to some extent a special case. This trade was dominated, if not to say monopolised, by the merchants of the Hanse, and the persistence of their network-based trading pattern until the end of the Middle Ages and beyond is quite astonishing. Avner Greif analysed a similarly structured trading system of the so-called “Maghribi Traders” who operated in the 11th century at the southern shore of the Mediterranean, but in the late Middle Ages a setting like this appears unusual. While elsewhere in Europe during the so-called “Commercial Revolution of the Middle Ages” merchants had already invented sophisticated techniques, formal contractual schemes and organisation patterns to handle risk capital, to operate cashless payments and to transmit market information quickly via huge distances, many of these elements were only poorly developed or even missing in the Hanseatic world. In 14th and 15th centuries, but even still so in the early 16th century, German-speaking merchants from the Baltic and the North Sea area (the Hanseatics) traded with each other on the basis of mostly informal, only implicitly defined contracts, and usually they had only a small amount of capital at hand. Hanseatic trade was based upon the privileges these merchants had obtained in London, Novgorod, Bruges and Bergen. The Hanse, like the entire merchant community was named, founded Kontore in these important markets. The Hanseatic trading system was instrumental in bringing the “Commercial Revolution of the Middle Ages” to the North of Europe . Hanseatic merchants delivered all sorts of goods to the consumers in the towns that had begun to flourish in the entire Baltic area. During the late Middle Ages, Hanseatic merchants defended their major trade privileges successfully, and even though they had neither formed large firms nor adopted the, by that time, state-of-the-art trading techniques, they enjoyed a nearly perfect trade monopoly in the Baltic, at least until the turn of the 15th century.

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