A lesson from Venice for Theresa May

Free trade transformed Venice from a swamp into one of the world’s most powerful cities. But its decline holds a timely lesson for Theresa May, says Dominic Frisby.


The opulence of Venice is staggering
(Image credit: © 2015 Filippo Bianchi Photography)

"Thank God I am here", said the art critic John Ruskin, when he arrived in Venice. "It is a paradise of cities."

I've just come back from few days work there, myself life can be tough and, I must say, Ruskin and I are on the same page.

The sheer opulence of the place is staggering. And that's what we consider in today's Money Morning: how did Venice come to be so rich?

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How Venice turned a swamp into a city

Yet the Venetians turned this abandoned plot of apparently uninhabitable uselessness into the richest city on earth. How so?

It's believed the first settlers here were Romans fleeing the Barbarian invasions of the Goths, Huns and Lombards. They fled to where it was too risky to follow.

With trouble behind them, the Venetians had to look outwards towards the open water and the world that lay beyond. The only way out of the swamp in which they found themselves was to trade. They had no choice. They got stuff from here, often improved it in some way and then sold it there.

But that meant exchange, constant exchange. If you've read your Matt Ridley you'll know that exchange is the means by which human beings progress the exchange of goods, services, ideas, cultures, anything.

And they discovered they were free. They didn't have to answer to anyone. While they had nobody to rely on but themselves, and that made them strong.

Populated as it was by Romans, it became a sort of distant, forgotten outpost of the Byzantine empire. But as that empire faded, Venice prospered.

It was a new republic free of crumbling, expensive state processes. There were few taxes to pay. Any rules were made by traders, for the good of trade. There were no Borgias or Medici here. Douglas Carswell includes a lively account of Venice in his latest book, Rebel, and he observes how, early in its history, Venice was, as he puts it, "free of ruling parasites".

Being autonomous it could ignore, for example, papal edicts banning trade with Muslims. It could ignore diktats that interest must not be charged on loans. It could ignore parasitical demands from nearby rulers for taxes and soldiers. Whatever went on in the Holy Roman Empire to the north or the Ottoman empire to the south, whatever rulings were made were an irrelevance. Venice could do what it liked and what it liked was trade.

We think about the great explorer Marco Polo. We forget that the reason he went off on his travels was to trade. The chronicles of his journey were an afterthought.

Venice cleared the Adriatic of pirates. It imported raw materials, manufactured goods with them, and sold the products on. There was grain from the Po valley, timber from Dalmatia, grapes from Apulia, cotton from Egypt, sugar from Cyprus, metal from Constantinople, silk from China. Venice became the gateway to the rest of the world.

Its impossible location meant that it was safe from invasion. Many tried to take the city. They all failed. The emperor Charlemagne famously lost his son in the process during a sixth-month siege that was eventually abandoned as the swamp decimated his army.

Napoleon was the first to succeed almost 1,000 years later, by which time Venice's best days were behind it.

The cumulative effect of this over time meant that by the 13th century it was the richest city in Europe, if not on earth. And the stunning, fairy-tale opulence of its architecture illustrates just how rich it was. Anything made today, for all of our technological superiority, pales before the buildings of Venice.

Venice's warning for the UK

Today, it is still regarded as the most beautiful city on earth, but, as Carswell rather dismissively (but entertainingly) puts it, today it is not much more than a "floating museum". The story of its decline is a familiar one: expensive overseas conflicts, a bloating state leading to lack of freedom and flexibility, rules and regulations which reinforce existing monopolies and create barriers to progress. All in all, a blunting of its competitive edge.

There is a message here for the state planners of today, especially the to me at least frightening tendency of Theresa May towards interventionist policies that we are discovering in this election. We need as much freedom to trade and exchange as possible.

Which brings me to the next book on my reading list Jamie Bartlett's Radicals. I see Jamie as a kindred spirit his book on the Dark Net was published at the same time as mine on bitcoin and he has spent the last year getting to know political revolutionaries around the world to try and understand the new "alt" movements at work. At his book launch last week, Jamie made the observation that nation states as we know them today are a relatively new phenomenon, and that within a generation many may no longer exist in their current form.

He may well be right. The combined, cumulative forces of unpayable government debt, increasing taxes, disruptive technology undermining current processes, an alienated, non-home-owning generation, and the wealth gap may mean we see new republics emerging by the second half of the century.

If so, they would do well to follow the Venetian model.

Dominic Frisby

Dominic Frisby (“mercurially witty” – the Spectator) is, we think, the world’s only financial writer and comedian. He is the author of the popular newsletter the Flying Frisby and is MoneyWeek’s main commentator on gold, commodities, currencies and cryptocurrencies. 

His books are Daylight Robbery - How Tax Changed our Past and Will Shape our Future; Bitcoin: the Future of Money? and Life After the State - Why We Don't Need Government. 

Dominic was educated at St Paul's School, Manchester University and the Webber-Douglas Academy Of Dramatic Art. You can follow him on X @dominicfrisby