commercial-diplomacy
David the Economist
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In 1122, King David the Builder liberated Tbilisi from the
Arabs. Late medieval leaders typically dealt harshly with a defeated enemy.
Thus, the logical consequence of David’s victory would have been to exterminate
the former invaders. But David did not do so. He not only spared the lives of
the former invaders, but also made sure that the city was not emptied of its
Muslim population. As a sign of respect and friendship, David exempted Muslims
from state taxes for a year.
In 1089, when David became king, Georgia had already been
under the rule of invaders for at least three centuries. Through wise
administrative and military reforms, the king strengthened the power of the
local aristocracy and led successful battles against foreign invaders. The
Battle of Didgori, which ended with the Georgian victory over the Seljuk Turks,
can be considered the greatest military victory in the history of Georgia.
The builder’s goal was to create a strong and independent Georgia, but he did not want to isolate his country from the rest of the world, especially economically. Although he is known primarily for his military and political achievements, David was also a great economist. Several centuries before the emergence of modern economic science, Georgia had a king who understood the importance of human capital and the role of free trade for the country’s well-being. David even managed to introduce an international currency in the Middle Ages. In the 12th century, Georgia was ruled by a man who was centuries ahead of any country in modern Europe or beyond!
Creating favorable conditions for foreign investors
Turning Georgia into an economic center is not the idea of
either the World Bank or modern Georgian politicians. Even David the Builder
wanted to develop Georgia’s international economic relations and turn the
country into a trade center, although the abstract concept of an economic
center (Hub) was unknown to him. The Georgian population mainly worked in the
agricultural sector and did not produce many goods that could be transported
over long distances and bring profit. On the other hand, many Muslims,
Armenians, and Jews were skilled in crafts and trade. The king created
favorable conditions for these ethnic groups to engage in economic activity in
Georgia. In particular, the annual contribution for a Georgian to the state
treasury was 5 dinars, Jews had to pay 4 dinars, and Muslims only 3 dinars.
During David’s reign, the city of Gori, which had previously
been a small settlement, became a center of trade and crafts. This was the
result of the king’s deliberate policy. It was by his order that the ethnic
Armenian population of Gori was settled and favorable conditions for trade and
living were offered.
The above-mentioned changes were taking place at a time when
foreigners and minorities were treated mercilessly throughout the world. In
much of Europe, Jews did not even have the right to settle, and even in those
territories where they could settle, they had to pay inadequately high taxes
for incomprehensible security guarantees, which was a heavy burden on them. At
the same time, the laws of droit d'aubaine and droit de naufrage were in force
in Europe. According to droit d'aubaine, a deceased foreigner did not have the
right to leave property to his heirs, and after death, the foreigner's movable
and immovable property was confiscated by the state or local feudal lord.
According to the Droit de naufrage, the feudal lord who owned the coast was
considered the owner of a ship, its cargo and people stranded on its shores.
Although this law was condemned by the Pope in 1079, it was still used in
Germany and Italy until the 18th century.
The idea that infrastructure promotes economic growth and that
it helps develop markets and facilitate trade is not a new idea. Even in the
Roman Empire, a network of well-guarded stone roads allowed goods to be
transported safely, quickly and relatively cheaply over long distances. Many
maritime cities had protected ports that protected ships anchored on the coast
from storms, and lighthouses along the coast that provided navigation services.
During David's reign, great attention was paid to the
development of the country's infrastructure, bridges and paved roads were
built. In addition, caravanserais were built - hostels in which foreign
merchants could spend the night without paying taxes. The word
"caravan" comes from the word "caravan" - these are groups
of Eastern merchants who traveled together, helped and protected each other.
Therefore, the country's infrastructure policy also shows that David understood
well how important international trade was for a small country like Georgia.
David's far-sighted policy soon bore fruit. In the twelfth
century, Georgia became an exporter of wooden furniture, pottery, plates and
gold jewelry.
Modern market economies are often associated with the
emergence of so-called fiat money. The word “fiat” comes from the Latin word
for “let it be.” Whereas traditional, commodity money derives its value from
the value of the precious metal used to make the coin (so-called intrinsic
value), modern money expresses value only because there is a public agreement,
and sometimes a legal obligation, to accept a particular currency as a means of
payment. As the term “fiat” implies, sometimes we simply declare, “let it be.”
So, guess who was the first to introduce “fiat” money in the
West? Yes, it was David the Builder, the king of Georgia.
David introduced a new coinage that was made not of silver,
but of copper. He declared that these copper coins were to be accepted for
payment at the same value as silver coins. Eventually, silver coins were
withdrawn from circulation, and Georgia became the first country outside of
China to adopt “fiat” money (we put “fiat” in parentheses because this coin had
inherent value, although its inherent value was far below its generally
accepted value). Moreover, in addition to being accepted in Georgia, the new
coins became popular throughout the Caucasus and even in the Muslim world. How
did David manage to introduce an international currency similar to the modern
euro and dollar in the twelfth century?
First, a new currency gains value based on its own
purchasing power. This, in turn, was a direct result of Georgia’s strong
economy. There were so many attractive goods that could be purchased with
David’s currency, and therefore no one worried about what it was made of,
silver or copper. In addition, the new coins were engraved with both Georgian
and Arabic letters, which made them more attractive to Muslim merchants who
could read the face value of the coin in their native alphabet. Thus, the
transformation of Georgian money into an international currency was not
accidental. It was the result of David’s foresight and rational plan.
In modern political debates in our country, one thing must
always be remembered. Namely, that Georgia is a too small country to maintain
economic independence. Georgia needs foreigners to bring capital and knowledge,
the so-called know-how, into our country, and Georgia depends on foreigners to
purchase local goods and services. David the Builder understood well that his
former military enemies could become economic partners. The vision of economic
success conflicting with nationalism and chauvinism in Georgia is 900 years
old, but it is as relevant today as it was in David's time.
Source: iset-pi.ge