War, Trade, and the Roots of Representative Governance Gary W. Cox Mark Dincecco Stanford University University of Michigan Massimiliano Gaetano Onorato University of Bologna June 1, 2020 Abstract We argue that the two most important representative institutions invented in medieval Europe—communes and parliaments—emerged when merchants’ bid prices for urban governance rights exceeded both the monarch’s ask price and competing bids from local lords. The main factors driving ask prices down were political fragmentation (worsening the monarch’s bargaining position) and warfare (increasing the monarch’s demand for ready money). The main factor driving merchants’ bid prices up was the Commercial Revolution, which raised the costs they bore when nobles won the urban tax farm. Exploiting two new datasets, our empirical analyses focus on how war and trade combined to motivate the formation first of communes and then of parliaments. Keywords Self-Governing Cities, Origins of Parliaments, State Formation, Representative Institutions We thank Valentin Figueroa, Jack Paine, Amy Pond, Jonathan Schulz, Htet Thiha Zaw, and participants at the PPEV Seminar at Texas A&M University and the State Capacity Conference at the University of Manchester for outstanding comments; Valentin Figueroa for incredible data help; and Lisa Blaydes and Luigi Guiso for generous data-sharing. Electronic copy available at: https://ssrn.com/abstract=3616438 Among historians, the single most common explanation for the birth of parliaments in medieval Europe is the monarch’s need to finance warfare. Such ideas go back to the early 20th century (see the reviews by Lousse 1943 and Dhondt 1950), are still prominent today (see Graves 2001), and can be viewed as a special case of Tilly’s (1990) more general thesis that “war made the state.” In this paper, we reconsider the origins of parliaments. Our starting point is the observation that monarchs summoned urban representatives to their noble councils, thereby creating “parliaments,” only after they had fostered (or tolerated) the creation of self-governing cities (aka communes). No communes, no parliament. Although one can discern this pattern by reading historical accounts of parliamentary origins in each country, we also document it quantitatively below. The fact that no parliament ever emerged in the absence of pre-existing communes motivates our investigation. Why were communes created and what role did they play in the birth of parliaments? Our answer hinges on war and trade. Urban elites valued rights of self-government and parliamentary representation because both helped them protect their trade profits against sovereign predation (as we explain below). Because these political rights became more valuable as trade expanded, towns became willing to pay more for their liberties during the medieval Commercial Revolution (Lopez 1971). At the same time, monarchs were increasingly willing to sell their rights of urban governance—partly because political fragmentation forced them to compete for merchants’ favor; and partly because warfare increased their demand for immediate funds. Thus, first communes (towns with rights of self-government) and then parliaments were born, as related aspects of a grand bargain over war financing and trade profits. 1 Electronic copy available at: https://ssrn.com/abstract=3616438 To explore our account empirically, we first provide a descriptive analysis of communal origins using a sample of European cities observed at century intervals over the period 1000-1600 (taken from Bosker et al. 2013). We then introduce a new dataset (building on Guiso et al. 2016) that covers 145 Italian towns at annual intervals over the period 1000-1599 and documents each town’s yearly exposure to nearby warfare, as well as it urban potential. This dataset underpins our main analysis of how war and trade affected the birth of communes. Italy is an appropriate setting because it was where the communal revolution started, it displayed considerable North-South variety, and it has systematic data availability. To explore the birth of parliaments, we compile a new dataset covering 44 European polities over the period 1000-1599. This sample of parliamentary births is among the most comprehensive available to date. As in the case of communes, our analyses focus on the role of war and trade. We identify conflict participation by sample polities in 1,225 medieval conflicts, producing the most systematic data on medieval conflict participation available. To assess trade, we compute the average urban potential of each polity’s major cities. In the rest of the paper, we first examine the noble councils out of which parliaments grew, the incentives of monarchs and merchants, and how royal ask prices and mercantile bid prices were determined in the market for urban governance rights. We then evaluate the acquisition of communal rights (the birth of communes) and the acquisition of rights to send urban representatives to conciliar meetings (the birth of parliaments) empirically. 1. Governance Rights in Medieval Europe 1.1 On Noble Councils When rulers faced elites with mobile wealth (Bates and Lien 1985; Congleton 2011) and/or informational advantages (Ahmed and Stasavage 2017; Angelucci et al. 2017), coercion yielded 2 Electronic copy available at: https://ssrn.com/abstract=3616438 low revenue. Rulers thus preferred to negotiate, asking for voluntary contributions in exchange for promises that the new revenue would be used wisely. Noble councils, which appeared in polities throughout the world (Ahmed and Stasavage 2017) and especially in Europe (van Zanden et al. 2012: 837), were the fora in which the necessary negotiations over “taxing and spending” were conducted. Subsequently, these councils evolved in medieval Europe in a unique way. First, while cities everywhere else were governed by officials appointed by the central ruler, many European cities purchased the right to govern themselves. Second, when self-governing cities became numerous and rich enough, European monarchs brought them into their councils. The resulting institution, a council with non-noble urban representatives, was known by various names (Finer 1997, vol. II: 1024). We shall call them parliaments. Were merchants added to pre-existing councils simply because they were new elites in possession of mobile wealth and asymmetric information, making coercion difficult? Were they added because European monarchs’ lacked the legal right to levy new taxes? In our view, these de facto and de jure considerations were only part of the story. Merchants certainly had non- confiscable skills, networks, and information. But their livelihood depended on shipping goods which could be taxed while in transit. Thus, merchants needed to protect their goods-in-transit against sovereign predation. To put it another way, sovereign protection for their confiscable assets (goods-in-transit) was a complement to their non-confiscable assets (skills, networks, and information) in the production of profit. In Eurasia’s empires, sovereign protection was available only from a single ruler (and her/his appointees). By putting merchants in competition for imperial favor, emperors could extract much of the surplus that merchants’ skills and networks created. In fragmented Europe, 3 Electronic copy available at: https://ssrn.com/abstract=3616438 however, competition between rulers for mercantile traffic could protect merchants against sovereign predation (Gelderblom 2013; Cox 2017). How much merchants competed for royal favor, versus monarchs competing for mercantile favor, depended on the ratio of rulers to cities. Where this ratio was low—as it was in most of Eurasia most of the time—merchants had poor exit options, the monarch had the upper hand, and self-governing cities were never in the cards. Western Europe exhibited an unusually high ratio for an unusually long time, leading to a much better bargaining position for the merchants who sought to break into the market for urban governance rights. For example, the average number of sovereign polities within 100km of West European cities with at least 5,000 inhabitants in 1300AD was roughly 6.5, while the corresponding average for the Islamic World was about 1.5 (Cox and Figueroa 2020: fig. 2). Thus, urban elites could play rulers off against one another much more easily in Western Europe than in the Middle East and North Africa. 1.2 Monarchs and Merchants As noted above, historians conventionally argue that European monarchs created parliaments because they needed money (usually to finance their wars) and lacked the legal right to levy taxes unilaterally. The Encyclopedia Britannica, for example, explains that Cortes developed on the Iberian Peninsula “when elected representatives of the free municipalities acquired the right to take part in the deliberations of the Curia Regis…They were admitted because of the Crown’s need for financial aid [to pursue the Reconquista] beyond that provided by its customary levies and because of the Crown’s lack of legal right to impose extra taxation without the consent of the municipalities.” Historians such as Dhondt (1950), Bisson (1966), and Graves (2001) give similar accounts of the birth of European parliaments more broadly. 4 Electronic copy available at: https://ssrn.com/abstract=3616438 Political scientists have agreed. Finer (1997, vol. II: 1026), for example, notes that “the one perennial, common factor” in parliamentary birth was that “the kings and princes wanted to make war, the customary