As a tourist, the only reasonable response to Venice’s all-consuming beauty is to gasp in admiration after rounding every corner. As an economist, another response occurs: once upon a time, this city must have been incredibly wealthy. From Bruges to Kyoto, being eclipsed after making it rich has long been a reliable way for cities to look beautiful a few centuries later. None, however, has achieved the feat quite as completely as Venice.
Venice was originally a community of fishermen, huddled together for protection on some muddy, flood-prone islands in the middle of a lagoon. Invisible, ever-shifting sandbanks in the shallows that defended the early Venetians against attackers were their only natural advantage. They lacked wood, minerals, metals, even arable land. And yet Venice became a major military and economic power, with its churches and palazzi demonstrating its wealth, and the heaps of looted treasure in St Mark’s Basilica bearing witness to its military dominance. How did they do it?
At a time when Elon Musk’s so-called Department of Government Efficiency (Doge) is hogging the headlines for attempting to shred the federal government, I wanted to learn from the Doges of a different age. I draw five lessons, many of them still relevant today.
The first is that trade matters. Venetian wealth was built on trade, on merchants roaming to Egypt, the Levant and beyond Constantinople to the great river ports of the Black Sea, bringing the riches of the east into Europe. Venice never harboured the delusion that international trade was some kind of incontinence that needed to be stoppered. (A parenthetical bonus lesson: Venice did very well out of ignoring or circumventing the Pope’s trade embargoes with the Islamic world. Free traders generally find a way.)
Second, trade needs to be backed up with muscle. Venice’s merchants weren’t just given the freedom to roam across the eastern Mediterranean and the Black Sea, they were supported by Venice’s navy and by an aggressive campaign to secure trading privileges at all the major ports. In the 21st century, where trade appears to happen automatically, and governments seem to contribute nothing to the process except paperwork, it is worth remembering that pirates would find container ships and oil tankers attractive targets, were it not for the presence of a cruiser (often of the US Navy) just over the horizon.
Third, military strength requires physical infrastructure. The most reliable way to get a warship is not to buy it but to build it yourself. Venice’s capacity to do this boggles the mind, with the arsenale, the great naval factory, occupying much of the eastern district of the city.
It was in 1201 CE that the Doge of Venice, Enrico Dandolo, was approached by crusaders asking for Venice’s help in ferrying an enormous crusader army to Cairo. Dandolo may have been both blind and in his nineties, but he was a brilliant operator. He contracted for a stupendous fee, and Venice’s shipyards and rope factories worked around the clock for months to produce 500 vessels, including 50 fast war galleys and enough large ships to carry an army of 33,000 men and thousands of horses. The result was a magnificent navy, acknowledged one of the French crusaders: “The Venetians had fulfilled their side of the bargain and more so.” It was an astonishing feat for what was then a city of about 80,000 people, and testament to the skill of the labour force and the economies of scale gained by standardising parts. It was also a mark of the vast investment Venice had made in its military industrial complex.
A fourth lesson is that governance matters. Venice was by no means a democracy, but it was far more pluralistic than the autocracies that surrounded it. The Doge was elected by Venetian patricians in an elaborate power-sharing process, and the Doge’s authority was checked and counterbalanced by a variety of deliberative and executive councils. Nobody in the Venetian elite wanted a popular dictator to seize control. The system was far from perfect, but the separation of powers gave La Serenissima stable government and pragmatic policy for centuries.
So far, so sensible. Yet for the high rollers in the new US administration, the Venetian experience suggests a fifth lesson that they might enjoy. Back in 1201, it was a huge gamble to agree a contract with the crusaders. For more than a year, Venice’s entire economy would be devoted to creating this great navy. Could the Venetians deliver? They could. Could the crusaders afford to pay? They could not. (A bonus lesson: beware deadbeats who promise the world and then don’t settle their debts.)
Then what? Then a string of risky, bullying, high-stakes improvisations. Dandolo first marooned the crusader army on the Lido, the very doorstep of Venice. Then he pressured them to settle their debts by attacking a troublesome rival city, Zara. After sacking Zara, the debt was still not fully paid, and Dandolo pushed the crusaders to join the Venetians in postponing the crusade to lay waste to Constantinople itself. That was barbarism. As punishment for their escapades, the Venetians were excommunicated by Pope Innocent III.
Still, the spoils of the victory adorn Venice to this day, and the trading privileges they won were perhaps more lucrative still. If there is a final lesson for the 21st century, perhaps it’s this: the richest of all are those who take reckless risks and get lucky. That lesson, I think we have already learnt.
Written for and first published in the Financial Times on 14 February 2025.
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