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The forgotten history of free trade: the Medici dynasty and Livorno

The Medici had everything, almost. They got immensely rich as bankers during the fifteenth century. As patrons of the arts they assembled some of the finest collections in Italy. They placed two scions on the papal throne as Leo X and Clement VII. They won political control over the city of Florence—first as informal rulers and, after 1530, as hereditary dukes. The Medici lacked only one thing to render their earthly felicity complete: they lacked a port city.

The Medici dynasty had big ambitions for their little state, and they turned to the malaria-ridden village of Livorno to realize them. The alchemically-inclined Francesco I (r. 1574-87) began the process of planning a new port in Livorno. His brother Ferdinando I (r. 1587-1609) put aside his cardinal’s cap to take up the grand duchy when Francesco died, perhaps by poison. It was Ferdinando who turned Livorno into “one of the most famous places for trade in all Christendom,” as one English merchant put it.

But, what did a Mediterranean port city mean during the long seventeenth century?

In an earlier age, commercial powers such as Venice had tried to control trade, with violence if necessary; they sought to capture commerce for their own ports and deny their rivals access to the richest routes. But such designs were increasingly out of place by the sixteenth century. The expansion of global trade and the entrée of new powers such as the Dutch and the English made the pursuit of monopoly in the Mediterranean a fruitless endeavor. A program of hospitality toward people and goods was a more profitable avenue for commercial expansion.

Ferdinando I de’ Medici. Uffizi Gallery by Polo Museale Fiorentino. Public domain via Wikimedia Commons.

In 1591, Grand Duke Ferdinando invited foreign merchants of any religion or nationality to settle in his port of Livorno. There they would enjoy security of person, property, and conscience—unlike elsewhere in Europe, where rulers enforced religious orthodoxy throughout their territories, and happily seized the assets of merchants when it suited their interests. Such policies earned Livorno a reputation as “a continuous fair of foreigners,” recalling the freewheeling fairs of the Middle Ages.

The Medici grand dukes also relaxed rules governing goods. In most cities during the Middle Ages, wares were subject to high taxes and a welter of bureaucratic controls—international trade occurred under strict supervision. By contrast, merchants in Livorno enjoyed a package of incentives for the warehousing, transit, and exchange of their wares. These measures culminated in a decree in 1676 that eliminated import/export dues entirely. The 1676 reform instantiated the principle that trade was to be taxed only for the provision of commercial services; that is, only to defray the cost of infrastructure such as harbor and warehouse facilities. “You know exactly what you have to pay, you pay it, and you’re done,” wrote one admirer,” without those annoying inspections that one so often finds in other places.”

Its provisions for hospitality toward merchants and goods made Livorno into Europe’s earliest and greatest free port. The low costs of doing business in Livorno put it at the center of long-distance commerce in the Mediterranean; it became the key entrepôt between northwestern Europe and the Ottoman Empire. Livorno exerted a powerful model in the region and beyond. By 1730 virtually all Italian ports were free ports of some kind, and they also spread to the Baltic and the Caribbean isles.

Free ports lowered ethno-religious and fiscal barriers to trade. They constituted surprising pockets of free trade in a commercial landscape dominated, at least in theory, by mercantilist restrictions on the movement of people and commodities. The reality was much messier than mercantilist fantasy envisioned.

Enlightenment economists were eager to enlist the free port into their arguments about the virtues of free trade. Adam Smith for one believed that “Brittain should by all means be made a free port, that there should be no interruptions of any kind made to foreign trade, that … all duties, customs, and excise should be abolished, and that free commerce and liberty of exchange should be allowed with all nations and for all things.” But free trade in a port city turned out to be something of a different beast than free port for the nation, and the free port dropped out of liberal discourse in the early nineteenth century.

Montesquieu dubbed Livorno “the policy masterpiece of the Medici,” punning on the dynasty’s fame as patrons of the arts. Like any masterpiece, Livorno’s influence is felt both everywhere and nowhere. It is in the principle of taxation solely for commercial services and in the conviction that restrictions on trade ought to be reduced to the bare minimum consistent with national security. And it is present in a more sinister mode in the modern special economic zone, where capitalism reigns untrammeled from social and environmental considerations. The grand duke of Tuscany believed that Livorno was “the key of my states”: and it is also one of the keys to that ambivalent world we call modernity.

Featured image credit: Castello del Boccale, Livorno by Etienne (Li). CC-BY-SA-3.0 via Wikimedia Commons.

Recent Comments

  1. Sumir Sharma

    The world history is generally Eurocentric. To learn World history, learn Renaissance, Reformation, achievements of some monarchs and their dynasty in brief, Industrial Revolution, French Revolution, Rise of National State, two world wars, and similar little bit more. However, there were stories and influence of such people and families, which equally contributed to the making of European and later the World history. The Medici family story is one among them. It is fascinating to find a book devoted to a single act of the Medici family as an one of their ‘masterpiece’.

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