Lessons from Venice

“And what if she had seen those glories fade,
Those titles vanish, and that strength decay;
Yet shall some tribute of regret be paid
When her long life haith reached its final day:
Men are we, and must grieve when even the Shade
Of that which once was great has passed away.”
William Wordsworth, On the Extinction of the Venetian Republic , 1807.

Venezia, Italia, October, 2000. Venice in October is pleasantly cool and devoid of the pressing intensity of international crowds which swarm the island city like locusts in the summer. While still murky, the waters of the canal lack their summer odor. The gradual onset of the quiet of winter serves as a metaphor for the decline of this few square kilometers of land along the Adriatic Coast from economic and cultural domination to amusement park status. There is more than a touch of sadness and remorse in Venice, the queen of cities, that is now reduced to a quaint tourist attraction invaded by both McDonald’s and Burger King. Five hundred years ago, Venice dominated Occidental economics and culture. Venice is now an echo of itself, retailing glimpses of its past greatness to largely uninformed tourists.

The dominance of Venice was more than just a consequence of geography. Certainly, it was protected from invasion by its location at the center of a lagoon off the European coast. Certainly, Venice was conveniently situated to as act as a middleman between Europe, the Byzantine Empire, and the riches of the East. However, in many ways, Venice’s greatness rested in its unique government.

Roughly three hundred patricians ruled the city by appointing a ruling council of ten that controlled executive functions. The famous doges of Venice were primarily figureheads whose influence was proportional to their intelligence and persuasiveness. More importantly, Venice established the necessary infrastructure for a prosperous commercial society. Law limited fraudulent transactions, while an agency of government regulated weights and measures. Courts to mediate disputes were established. This should serve as a reminder to Libertarians that free markets do not necessarily arise spontaneously, but can be nurtured by government institutions.

Venice’s gradual decline was precipitated by its loss of a monopoly on Eastern trade as the Dutch and others found alternative routes to the Orient. The Venetians did not adapt and inevitably loss its military and economic power. In addition, they devoted far too many resources to maintaining a military dominance over neighbors.

The United States in the latter half of the twentieth century has found itself in cultural and economic ascendancy. Its geographic isolation between two oceans protected it at its inception. Its relatively free economy permitted a shift from an agricultural to industrial economy. Continued dominance and success depends on the ability of the United States to lead the world in the Internet-linked, knowledge based economy.

In this new economy, the United States enjoys only the advantages of economic flexibility and entrepreneurship. These advantages do not depend on natural resources or geographical advantages. Even small countries can play an important part in this new economy. Supportive tax and regulatory codes and American creative culture can maintain the American head start.

Neither Venice nor the United States is guaranteed perpetual dominance. It is only by continued adaptation to a changing economic environment that the United States will flourish. It is quite possible that this period could mark a new ascendancy for the United Stated or the beginning of its gradual decline.

Note: Venice could have become as economically aggressive as Hong Kong or Taiwan. It is heartening for Venetians to see Venice grasping at the new economy. This change is evident in a small shop barely visible on the west tern side of Campo de San Stefano.

As you walk into the modest shop you pass five meters through a narrow corridor. The corridor empties into a large room populated by more than forty Gateway computers connected to the Internet via a T1 connection. For $7.00/hour, you can browse the Internet and send and receive e-mail. Phones on the wall will connect you to international numbers at $0.25/minute. This is in sharp contrast to the $3.00 per minute rate at the unresponsive, but more ostentatious, American Express office a short distance away. If Venice is to be more than a tourist attraction, it will be lead by the same spirit that created the Internet Cafe.

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