1. In spite of the declining GDP…growing per capita income is feasible

2. 4.EXPLAINING RAGUSA’S RISE, PROSPERITY AND DECLINE Location+Naval Power or Policies? a) Good Governance b) Strong Doing Business climate c) Prudent finances d) a sufficiently “fair” social policy e)minimal military, maximal diplomacy

3. 4 a.GOOD GOVERNANCE Not a democracy (low VO) but at time comparatively benevolent oligarchy (Grubisa ’11) Felt need “to improve institutions [as] stability and prosperity only way to strengthen city” (Krekic ’80) Steady increase in role of rich merchants, upward mobility (Krekic, Luetic, Vekaric,Zlatar) Lot of evidence on effective ROL

4. 4b.FAVORABLE “DOING BUSINESS” CLIMATE Stipetic (00) details early economic philosophy, market and business friendly Diversis(1440) “ the first permanent institution …to preserve justice and order among … merchants and customers, foreigners or citizens” The acid-test of this: Ragusa courts ruled against own citizens in favor of foreign claimants: seized assets of bankrupt Paboras, conveyed to Peruzzi Bank, etc. Ragusan Noble Bunic embezzled Sultan´s Balkan taxes, Ragusa court seized his assets. Bojovic( ’98 ) recount numerous similar instances

5. WHAT DID PERUZZI DO WITH PABORA MONEY ?? BY 1450 PERUZZI BANK OF FLORENCE WENT BANKRUPT PERUZZIS LATER EMIGRATED TO US AND ------- 

6. 4b…EARLY MARKET INSTITUTIONS Benedikt (Benko) Kotruljevic(1440) now shown by scholars as first to develop double-entry bookkeeping– also justify interest as price of capital(early Austrian?) importance of credit to fuel trade, against usury laws if < 5-6% Notary and contract registration rules, agencies as early as 1200 Bankruptcy laws and procedures : avoid Debtor’s Prison solution, instead “help debtor overcome inability to pay [promote ] future doing business together” Palic (08)

7. 4.c.PRUDENT FINANCES History lit. virtually unanimous on financial prudence of state- debt problems rarely mentioned, minimal Data to test this only available for 1800 (Tab. 3), in theory Arhiv has full books Monetary stability claimed by most, apparently little debasement, low inflation, but no hard data to test Banking : Zecca or mint a bank-like institution, minted coins, appears to have done lending to state, large “corporations” (bratovstva), held official deposits.BUT more research needed for fuller picture

8. TABLE 3. STRUCTURE OF RAGUSA BUDGET ABOUT 1800 Revenue category Percent of Total Expenditure Category Percent Of Total Dividends on Deposits 25.3-----Consular/ Representation Expenses 10.9 Taxes on Shipping Activity 30.2Tributes,+”good relations” Expenses 31.9 Levant Consulates Profits and Property Rents 6.2-------Administration, Police, Civic officials 36.6 Consumer Taxes12.2-------Public education6.8 Producer Taxes (agricultural ) 4.4-------Interest on Loans1.7 Customs Revenues 9.3------Army+ Fortifications Maintenance 12.2 Salt Monopoly12.3--------------------------------- --------------------------------------- TOTAL REVENUES 100.0-------TOTAL EXPENDITURES100.0

9. TESTING SOME FISCAL HYPOTHESES WITH TAB.3 1.BUDGET OF 1800 SURPLUS=10% REV.-this at a time long past “Golden Years” 2.DEBT PAYMENTS 1.7% :cf Kormer(95) for 25 mediaeval states17-36% 3.IN FACT NET ASSET POSITION VERY STRONG: DIVIDENDS ON DEPOSITS ABROAD 25.3% OF REV.!! ( held in “MONTI” of Italian banks and Vienna…Ragusa did not play the “Full Monti” …and won ) 4.HYP. ON SOCIAL FAIRNESS, LOW MILITARY, HIGH DIPLOMACY ALSO CONFIRMED … BUT ONLY FOR THE 1800 PERIOD!

10. 4.d. A “SUFFICIENTLY” FAIR SOCIAL POLICY NOT EQUITABLE, BUT FAIR COMPARED TO OTHER STATES SOCIAL INFRASTRUCTURE: streets paved in 14 th c., sanitation, water supplies (viz. Onofrio Fountain now for tourists!), schools, hospitals, hospices, orphanages, poor-houses GRAIN RESERVES(RUPE): a case of good mercantilism ? HEALTH-CARE: state-salaried physicians, hospitals, FIRST quarantine in region,1377 EDUCATION: Tab. 3, 6.8% high for the time.

11. 4e. MINMAX OPTIMIZATION: Minimal Military… HISTORIAN’S CONSENSUS:SMALL ARMY, NAVY, MIL. EXPENDITURES. Luetic(69) entire chapter “Most Modest Naval Fleet”; numbers vague, perhaps 10-20 ships cf. 100- 200 merchant fleet– Venetian Period small war-time obligation=1 ship per 30 Venetian TAB.3 FOR 1800 CONSISTENT WITH THIS. Army+Fortifications 12.2%-- though some of Admin., Police could be “defense”. HOWEVER: COULD HAVE BEEN MUCH MORE IN EARLIEST PERIODS TO BUILD CREDIBILITY-15 MONTH Saracen siege in 866-7;Carter(72) claims Balkan Kings “discouraged from attack by the likely high costs of breaching the fortifications”. AN INTERESTING HYP. FOR RESEARCH

12. MAIN DEFENSE EXPENDITURE? AN IMPREGNABLE RAGUSA

13. 4e. MINMAX OPTIMIZATION: Maximal Diplomacy LITERATURE REPLETE WITH PRAISE FOR RAGUSA/DUBROVNIK DIPLOMACY: Berkovic(09) “ in defense of independence, econ. growth [resorted] almost exclusively to diplomatic means and skills”; Carter (72) “in diplomatic affairs Dubrovnik was a past – master”; height of byzantine intrigue late 17 th.c, Ragusa was city of “Le Sette Bandieri” playing off seven powerful states with treaties, tributes, constant negotiations ( see Diplomat Vucic!) HARD DATA?up to seventy consulates; TAB 3: 11% exp. on last; huge 32% on tributes and “good relations expenses”; Fig.9,Customs revenues highest during regional wars!!

14. 17 th.c. DIPLOMAT VUCIC(Bona) PROGENITOR OF 21 st c. LEADERS!

15. 5. CONCLUSIONS FINDINGS SUBJECT TO DATA QUALITY… RAGUSA IN 14-16 c. VERY PROSPEROUS AND IMPORTANT STATE IN EASTERN MEDITERRANEAN DESPITE TINY SIZE-based on entrepot trade,first Balkans-Italy, then Levant- Europe LOCATION WAS FAVORABLE BUT MORE IMPORTANT WERE POLICIES: Good governance, business-friendly, Rule-of-Law, enlightened social policy, prudent finances  low debt, skilled diplomacy substitutes for military expenditures

16. 5.CONCLUSIONS … cont’d. 17 TH c. DECLINE DUE TO CAPE OF GOOD HOPE ROUTE 1500, OVERWHELMING ADVANTAGE OF NEW NAVAL POWERS: PORT. NETH. ENGL.; RISE OF W.EUROPE HOWEVER, IMPACT NOT IMMEDIATE AS OFTEN THOUGHT: PEAK OF RAGUSA SHIPPING TONNAGE ALMOST CENTURY LATER RAG=VENICE? LITERALLY FLEET SIZE DID REACH THIS FOR SHORT PERIOD, BUT ONLY WHEN VENICE WAS AT ITS LOWEST AFTER WARS. NEVERTHELESS WITH 1/20 TH SIZE OF VEN. EVEN BEING CLOSE AND A TOUGH COMPETITOR WAS A GREAT ACHIEVEMENT

17. Table 4 Quantitative Tests of Most Common Hypotheses about Economy of Ragusa HISTORICAL HYPOTHESIS TEST RESULTISSUES RAISED BY TEST HH1:population capacity limitedCONFIRMED despite econ.growth pop. falls from 1500 -how did pop. fall occur?natural?emigration ? where to ? HH2: golden years of prosperity 1550-75 CONFIRMED with ???? -shipping tonnage, best proxy peaks 1575 -GDP falls earlier, but estimate too broad to use -GDPpc, wages, wealth consistent with shipping proxy HH3: silver period also very dynamic econ. MAYBE: (need better data) the only data is very crude=key construction activity -most writers focus on golden years, Stuard tries to show silver period important for build-up; not confirmed for lack of good data, but merits more study HH4: Ragusa fleet equals that of Venice ONLY SHORT TIME Shipping data do show this about 1425 and 1575, but only due to large war losses of Ven. -somewhat exaggerated contention, but Ragusa less than one-tenth Venice having a fleet that even approached rivalry itself a great achievement HH5: Ragusa decline due to discovery of better route, rounding Cape of Good Hope UNCONFIRMED: -decline begins almost one century after new route to Asia -a difficult hypothesis to test, makes sense in long-run, but need to understand why Rag. grows rapidly for 50+ yrs after Cape Hope HH6: Ragusa neutrality allows big gains in times of third-party wars TENTATIVE YES. -customs revenue data show sharp peaks in war periods -needs more verification with other indicators of econ. activity ( exports, other tax revenues, deflated data, etc) HH7: Low military expendituresYES-but only in 1800 Tab. 3 : mil.exp=12% budget,far below 20-50% range estimated by Bonney in other states -concrete data on mil.exp. nonly available for 1800, for earlier and more important periods, only fragmentary and qualitative information.

18. FUTURE RESEARCH THE LIMITED AND IMPERFECT DATA SET FROM SECONDARY SOURCES IMPLIES ABOVE CONCLUSIONS SHOULD BE CHECKED WITH PRIMARY ARCHIVAL DATA IN ADDITION, A NUMBER OF NEW HYPOTHESES HAVE BEEN RAISED BY THE ANALYSIS (TAB.5), AND COULD BE RESEARCHED IN ARCHIVES: 2 examples: was silver period also a high-growth period albeit at lower levels of incomes? ; what happened to GDP, GDPpc, POP, in the “ decline “ centuries- did revival of shipping 1750 on raise GDPpc as POP fell ?