This project has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme under grant agreement No 724544
Average-Transaction Costs and Risk Management during the First Globalization (Sixteenth-Eighteenth Centuries)
Overarching goal of the project
This project focuses on economic institutions and their impact on economic development through the investigation of a legal instrument – general average (GA) – which underpins maritime trade by redistributing extraordinary costs across all parties engaged in the business venture. With very few exceptions, this topic has been neglected by scholars, even though rich and substantial (serial) documentary evidence about it has survived for the early modern period. The project is articulated along two principal axes: one principally concerned with economic analysis, which will analyse (and make available) data extracted from archives in Italy (Venice, Livorno, Genoa), the Low Countries and Spain; the other concentrating on the legal and political elements behind GA historical development.
‘Averages’ – the expenses which can befall ships and cargoes from the time of lading until their unloading (due to accidents, jettison, capture and unexpected expenses) – were (and still are) a crucial mechanism for the redistribution of costs in maritime trade. Although their definition was common across Europe, in practice substantial differences existed between states, fostering diplomatic exchanges and litigation during the early modern period. Secondary literature on their historical development is very limited for three reasons: they are wrongly considered not to have evolved since the Middle Ages; they are technical financial instruments which require considerable effort to be properly interpreted; and, analysed in isolation, they provide results with only local relevance. A few studies have local relevance and do not provide quantitative data; and several studies concentrate instead on the extremely peculiar Spanish case, where average was transformed into a proper duty – the avería – supporting the protection costs of Atlantic trade.
The project will analyse the development of GA from the sixteenth to the end of the eighteenth centuries, with the specific chronological foci of research in each country attuned to the specifics of each case (see below). A particularly intriguing element of GA is that its actual functioning (and procedures) is put into question whenever new players enter the system – this happened with the English and Armenians in the seventeenth century Mediterranean, and is happening with the Chinese on the global scale today – thus making them a very sensitive bellwether of structural changes within maritime trade. The periodic emergence of such attempts at discussing, and possibly reforming, the mechanisms underpinning mutual cost redistribution, is evidence of the cultural specificities of risk analysis, and further points in the direction of the crucial importance of trust within business activities, now investigated in a transnational manner across early modern Europe. Furthermore, it highlights the existence of substantial variations across different cultures in both ‘risk perception’ and in the legal mechanisms created to minimise it. The transdisciplinary and international scope of this project will allow for a comprehensive and long-term analysis of GA, which shall provide a substantive advance in our knowledge of the business structure and institutional changes underpinning the extraordinary productivity growth experienced by the maritime sector in these centuries.
Objectives of the project
This project will contribute to several current historiographical debates:
- a) The comparative history of European economic and legal developments, analysed through the distribution of transaction costs across the maritime business cycle, thus contributing to the debate on the relative efficiency of the maritime sector in different European states, through the study of a ‘non-market’ phenomenon.
- b) The articulation between private commercial enterprise and state intervention in several European states (republics of Venice and Genoa, Grand Duchy of Tuscany, United Provinces, Spanish Netherlands, Spain and France); and the relative performance of Italian states’ maritime sectors.
- c) The history of comparative legal institutions in Europe and the development of international commercial law, especially regarding the vexed issue of the possible existence of pan-European maritime and commercial law systems (lex maritima and lex mercatoria).
- d) The development of private and public institutions connected with the evaluation and management of risk, and their role in the North-South economic divergence in Europe.
- e) The status of foreigners in early modern commercial courts, and the balance between formal and informal resolution of controversies.