CHAPTER 1: THE MAKING OF
EUROPE
THE GEO-ECONOMIC CONTINUITY OF EUROPE
• How do we define ‘Europe’?
• The role of trade: Europe trades therefore she is!
• 80% of population of the Roman Empire in 100 CE lived within the borders of the present EU
• Carolingian Empire around 850 CE saw restoration of order after the disintegration of the Roman Empire, but note the continuity in borders up until the EU
THE ROMAN EMPIRE AROUND 200 CE
THE CAROLINGIAN EMPIRE AROUND
850 CE
THE EUROPEAN UNION 2010
NATIONS AND BORDERS
• Nations and unions of nations defined by borders
• Borders represent the limit of political authority and state capacity
• States tax to provide e.g. roads and public goods, e.g.
– Defence
– Law and order
• Nations form because they offer economies of scale when providing these public goods
THE GRAVITY MODEL
• The gravity model demonstrates that the volume of trade is determined by
– Size, i.e. national income – Distance between countries
• Larger countries trade more, but trade declines with distance
• There are also border effects
– Cultural, religious, jurisdictional, etc. differences reduce trade
BILATERAL TRADE BETWEEN
ECONOMIES OF EQUAL SIZE
THE COMMERCIAL REVOLUTION
• The fundamental problem of exchange
– How to get strangers to trust and trade with each other
• From the second millennium, trade increased over space and time
• How was this possible?
• Trade evolved from taking place within families to between strangers due in part to the use of formal contract enforcement mechanisms
HENRI PIRENNE AND BORDER EFFECTS
• Henri Pirenne (1862-1935) sought to understand why the Northern African countries traded so little with Europe after the Arab conquest (8th and 9th centuries)
• His argument rested on what later became known as border effects
– Cultural and religious divide
• More recent research suggests that it was mostly the poverty of Europe which led to the decline in trade
• Lack of trade reinforced these border effects
THE ROLE OF DISTANCE IN HISTORY
• In the past long-distance transport costs were
prohibitively high for anything except luxury goods
– E.g. silk and spices
• Land transport costs were particularly high, so most goods shipped by water, but this added mileage
• Then ships became larger, insurance mechanisms improved
THE COMMERCIAL REVOLUTION
• One of the first signs was the Champagne fairs southeast of Paris
• Merchants from all over Western Europe met to trade
– Contracts could be enforced by threat of exclusion
• As trade moved onto the sea, trading emporia with financial and more formalized contract enforcement services emerged
IMPORTANCE OF PROXIMITY AND SIMILARITY
• Proximity means lower transport costs
• Similarity can mean standardization, and is in turn stimulated by trade
– Standardization of weights, volumes, qualities
• For long distance trade, it must be possible to describe commodities using a terminology understood by both trading partners
• Allows complete contracts, in turn promotes
TRADE AND STANDARDIZATION
• Trade generates standardization of measures, law and preferences
• Early examples are maritime law, now codified as the Hague-Visby rules
• The 19th century was a breakthrough for the metric system
• Why did Britain not follow continental Europe and why does the US still not have a mandatory metric system?
COMMON LANGUAGE
• Promotes diffusion of ideas and goods, and exercise of authority
• 10th century Europe much more heterogeneous than Roman Empire
• But Roman alphabet gradually replaced local alphabets in Western Europe
• Regionally uniform languages adopted:
– German in Baltic Sea area, Latin promoted by the Church
© Paul Sharp and Cambridge University Press
THE EAST-WEST DIVIDE
• All trading nations will become closer culturally (preferences, law) over time
– cultural ‘distance’ falls but at different rates depending on the volume of trade
– Faster growth of trade means faster erosion of cultural differences
• Groups of nations that become relatively closer
culturally and pass a ‘cultural homegeneity threshold’
will form clusters, normally called regions, or unions of nations, such as the EU
WHAT ABOUT RUSSIA?
• The Roman Empire never touched the Russian heartland
• Russian isolation imposed by poverty, distance (and policy)
– Initial lack of similarity not broken down by trade
– Russia late to embrace emancipation, industrialization, standardization, educational reforms, etc.
– Russian Revolution and subsequent Cold War policies isolated it further
• The East-West divide is closely linked to the differential
INTRA-EUROPEAN TRADE AND TRADE
WITH THE REST OF THE WORLD, 2005
REFLECTING ON PREVIOUS TABLE
• Why is Denmark’s trade with the UK larger than with (equal size, equal distance) France? Trade is also
stimulated by similarity of nations
– Similarity refers to culture in a broad sense: commercial law, institutions, religion, language, consumer preferences
• Lack of similarity impedes trade: it is a ‘border effect’, an additional trading cost
• Border effects determine the extent of a regional unit
THE EUROPEAN UNION
• Gradually expanded since the 1950s
– First France, Germany, Italy and the BENELUX nations – Admission of the UK and others in the 1970s
– Then Southern and Eastern Europe
• A new and historically unique experience
• European Economic Community became the European Union
– More political ambitions, often elites versus sceptical public
• Geo-politics now in tune with geo-economics
SUMMARY
• Larger units such as Europe limited by initial differences in income and technology, declining gravitational force
• Trade breaks down border effects, but they remain if trade is weak
• Implies that regional entities such as Europe remain because they are self-reinforcing
• Border effects can also be deliberately created, e.g. by EU’s protectionist Common Agricultural Policy, and the
