False Economy - Alan Beattie [43]
But trade in bulk items grew only slowly. Heavy and consistent demand was often not enough to overcome problems in supply. The need was certainly there: in medieval Europe, people spent about half their income on food, and around half of that was on bread. Bread had a low price elasticity of demand—the amount consumed changed little with the cost, with the result that a shortfall in supply in one place drove up prices rapidly and hence the incentive for others to come in and make up the shortfall. Writing at the end of the seventeenth century in England, Gregory King, a civil servant with a preternaturally good grasp of statistical economics, formulated a law stating that a 10-percent fall in supply pushed prices up by 30 percent.
The inelastic demand should have encouraged the growth of international trade in grain in the same way that oil, another commodity with few close substitutes, is heavily traded in the twenty-first-century economy. Yet under the "tyranny of distance"—transport costs and the uncertainty of trade—international commerce in grain was slow to develop. As late as the sixteenth century, even the seagoing Mediterranean zone probably traded only about 10 percent of its grain output.
During a food crisis in the sixteenth century, the Italian republic of Venice sent a representative to the grain-growing Baltic states to investigate the possibility of securing supplies. He reported back that carrying grain across Europe would have been prohibitively expensive, quadrupling its price en route. (By comparison, silks traded across the world from China to Italy only trebled in price, at least while the Mongols were protecting the trade route.) Even food from Sicily, with a long tradition of exporting grain, more than doubled in price on the relatively short journey to Spain. A load of grain that cost 10 Spanish reales at the Sicilian farmgate ended up costing 22.5 reales on arrival, with overland transport adding 3 reales, an export license 5 reales, the sea-freight to Spain 3.5 reales, and insurance another real. The competitive advantage of the exporter had to be considerable to overcome such a cost disadvantage.
Only for very large concentrations of consumers, generally cities like London with excellent transport access, was there a particularly big and efficient commerce in basic foods. Even then, as with ancient Rome, this owed something to governments intervening in the market rather than letting it run freely. The London authorities lobbied hard for commerce in food to be skewed toward their interests. When London outgrew the ability of the surrounding area to supply it with grain, its population having been swollen by rural migrants, it started a vocal political campaign. As early as 1516, the Lord Mayor of London began to send out agents to English ports to monitor whether grain was being sent abroad that might otherwise be destined for the capital. Later that century the London authorities proposed, somewhat ambitiously, that no laden grain ship putting in at an English port for any reason be allowed to carry its cargo away again.
Such suspicion of open commerce may have created some new trade routes. But it also helped to retard the development of more sustainable trading patterns. Active and influential groups of merchants were often important in assembling a critical mass of trading infrastructure that brought down costs. Dutch traders, for example, helped to pioneer commerce in perishable goods like fruit, vegetables, and flowers, for which the country remains famous. But food shortages have a way of putting the