September 3, 2015
Dubrovnik, Croatia
For much of the 9th century, the Byzantine Empire was on the defensive, fending off one invasion after another.
That all changed on today’s date, September 3rd in the year 863, when three Byzantine armies massed together to crush Arab invaders.
This was exactly the decisive victory that the Byzantine Empire needed to secure its position as the world’s dominant superpower.
They had just shown everyone that they had the biggest, baddest army on the planet. And military power meant world dominance.
That’s how it had almost always been throughout history: whoever had the strongest military was king of the world. They ruled through intimidation.
Then something interesting happened.
Sometime in the 10th century, a few cities in Italy began an experiment that defied convention across the rest of the continent: they decided to become free.
While the rest of Europe wallowed in the feudal system, cities like Venice and Florence offered opportunity for a better life… as long as you were willing to work hard and take some risk.
Italy was truly the America of its day.
One popular innovation in medieval Italy was a very early version of the limited partnership. It was known as a commenda, and it’s still the same basic model that many investment funds use today.
A commenda was a standard contract whereby a veteran investor would put up the money for an overseas trade voyage, but a young, energetic, entrepreneurial hotshot would do all the work to make it successful.
The two parties split the profits according to the commenda, which meant that even if you came from absolutely nothing, bright and talented people could prosper.
It was an unparalleled level of economic freedom at the time.
And like the early days of the United States, Italy’s experiment in freedom led to one of the greatest expansions of wealth ever seen.
In time, their dizzying economic growth had propelled many Italian cities to become major world powers with enviable standards of living.
They issued the most widely accepted reserve currencies in the world. They ruled global trade routes. They created lasting trends in art and scientific achievement.
Bologna in particular became the Hong Kong or Manhattan of its day, with dozens of soaring towers that dominated the skyline.
(Sadly, most have been destroyed by war…)
What’s incredible is that these city-states became global powers purely through their economic might.
Unlike previous superpowers throughout history that conquered the world through military campaigns, the Italians were among the first to do so as a result of their prosperity.
By being the freest place in Europe, they became its most prosperous society. And prosperity was the new source of power.
This is a hugely important lesson: free nations become world powers through prosperity. And as freedom wanes, both prosperity and power decline.
This is such a simple concept; yet few governments ever understand it.
It’s also precisely the same model that marked America’s own rise and fall as the world’s dominant super power.
Freedom was once proudly the foundation of the United States.
But long gone are the days of the American (or Venetian) dream, where if you’re willing to work hard and take a bit of risk you can achieve great prosperity.
Today, children’s entrepreneurial instincts are stamped out by bureaucrats who demand that they apply for permits to sell lemonade.
Or Homeland Security agents who find their door-to-door snow shoveling business too suspicious.
Becoming successful in America has become so much more difficult these days as people have to claw their way through a morass of regulations and bureaucracy that didn’t exist even a few years ago.
It’s no accident that as the number of federal regulations has exploded over the years, median household income (when adjusted for inflation) has declined.
It’s clear that as the US has ceased being the Land of the Free, it has also ceased being the Land of Opportunity… as well as the undisputed global superpower.
History is repeating itself once again. But there’s one important difference today.
A thousand years ago, people were inextricably tied to their governments.
When the Roman Empire and Byzantine Empire went into terminal decline, most people had no choice but to suffer a decline in freedom and prosperity.
But today that’s no longer the case.
We’re not tied to the land like medieval serfs. We don’t live in a time where government has monopolistic control over freedom.
Today when governments go down the warpath to reduce freedom and prosperity, we have a world of options at our fingertips to do something about it.
Technology has truly transformed society into a platform that celebrates the individual and empowers each of us with real choice.
No matter where you live, freedom, prosperity, and opportunity still exist in the world. It just takes a different mindset to realize it.
