Lessons of institutional stability and persistence from the Hanseatic League : a case study of historical institutional change

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Lessons of institutional stability and

persistence from the Hanseatic

League

A case study of historical institutional change

Master Thesis Political Science

Political Economy

Jan Offierski – 10107398 Prof. G. RD Underhill Second Reader: J.G.W. Blom

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Abstract

The Hanseatic League was a powerful multinational institution consisting of merchants and cities. It became powerful through a combination of political will of individuals, a significant external shock and rules set by earlier institutions. Its longevity and relative stability makes for an interesting case study, because through it we can learn what makes institutions effective and persist. They achieved their longevity due to a couple of factors. The Hanse optimized their rules of the game, becoming more inclusive as a club and more effective in managing resource to overcome collective actions problems These conclusions form general lessons that can be applied to modern multinational institutions.

Keywords: Institutions, Clubs, Critical Juncture, Voice, Exit, Loyalty, Institutional Change,

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Chapter One: Introduction

In 1466, the English and Burgundian fleet was defeated by the Hanseatic League thanks to a privateer by the name of Paul Beneke (Gdańska, 2015). Upon capturing the enemy flagship, Beneke found a formidable treasure of sixty-thousand-pound sterling and the famous painting “The Last Judgement” by Hans Memling. The painting had been commissioned by the influential Medici family who demanded the artwork to be returned. However, the power of the Hanseatic League was at its zenith and the lord of Burgundy intervened. Despite being the offended party due to the loss of his flagship, the prince himself sided with the League and was rewarded with trade privileges (.:ibid).

This short story is an example of a moment of power for the Hanseatic League. The Hanse was a cooperation between various cities and wealthy merchants. Their economic power was significant within the Baltic sea, and their influence spread from Novgorod, Bruges, Amsterdam and London (North M. , 2015). The League was initially an organisation and institution that protected the German merchants, and could rely on the pooled resources of these merchants. . Their vast wealth and network of economic and political influence allowed them to compete for resources against Nations such as England and Denmark. Their success can be seen in the longevity of the organization which persisted from roughly around the 13th up to the 17th century. Their activities however, existed before and after this time period. Their control over trade made other rulers vie for their favour in order to receive trade privileges. Without them, merchants were hard pressed to accumulate wealth through mercantile endeavours (Wubs-Mrozewicz & Jenks, 2013).

Their institution was unique considering the historical context, as it spanned across multiple nations. Moreover, their process of decision making was inclusive and consensus based. They would organize general assemblies, known as a hansetag, where each member was given the opportunity to voice their opinion and push their agenda. The Hanseatic League's unique longevity makes them an interesting case study for understanding institutions. Longevity means the institution had well established rules of the game and was relatively stable. Therefore, the research question is; how can we account for the extreme longevity and relative institutional stability of the Hanseatic League under conditions of political and economic legitimacy and external challenge?

This question in turn has been broken down into three sub questions. The first: how did the Hanseatic League deal with the problem of conflicting member interests under conditions of market integration and supranational decision making? This question looks at the political structures and how it

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organised interaction between members. Examples of such structures are their decision-making processes and what a single member could do when they were dissatisfied. The second sub question is: what mechanics accounted for their institutional stability, despite both external and internal challenges posed by crisis? Here we look at two primary mechanics; the implementation of the rules of the game and the economic effectiveness of the institution. In other words, how can the effects of an institution be measured. The last sub question is: are there lessons that other supranational organizations, such as the EU or UN, might learn from this experience? This last question is the niche this thesis aims to fill. By analysing a successful and effective institution in history we can learn what mechanics, decisions and institutionalised rules were beneficial and which were detrimental. By considering them through historical context and theory, we gain the ability to generalize certain lessons.

Institutions are a complex academic matter that have inspired academics to research and write many articles and books. Most of these works can be categorized into one of three great questions: what is an institution, how/why do they change and finally what purpose do they serve (North, Wallis, & Weingast, 2013; Ostrom, 2005; Cole, 2013; Greif, 2006)? The first question is more than just a debate of definitions. Different scientific disciplines have varying approaches to what an institution is, however there is a consensus that institutions are “rules of the game”. Specifically, rules that are also honoured (Greif, 2006). This thesis employs this final perspective and hopes to add to it. The question of when and why change happens suggests that institutions are dynamic by nature. Some academics argue that it is incredibly difficult to change an institution; they are static. While agents can affect an institution, it generally transcends them. This means that institutions reinforce the behaviour and identity of agents as much as they affect the institution. This entails that institutions can be sticky, meaning they get stuck in self-reinforcing patterns (Boettke, Coyne, & Leeson, 2008). However, institutions can exchange if they are sufficiently shocked; implying a disruption of the self-reinforcing pattern, which in turn forces an institution to change its rules or potentially fail (Capoccia, 2016).

Failure and success means an institution has a certain function, and as was mentioned, they are generally considered to be rules of the game. An institution can be optimal and desirable or not, and agents can honour or ignore the rules (Greif, 2006). If an institution is desirable, agents will follow the rules and can therefore rely that other agents will do the same. This creates a more predictable playing field. If a warlord can reliably predict whether another warlord will invade, they can use their resources in a better way. If the playing field is not predictable, many resources are wasted on

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suboptimal actions. Healthy and stable institutions correlate with the complexity of society, and as complexity grows, so does the need for new institutions. Furthermore, this potentially leads to a society that is more transparent and accountable. More citizens can reliably predict the behaviour of others, and therefore better use resources. In other words, healthy institutions tend to historically lead towards more fair nations (North, Wallis, & Weingast, 2013).

Returning to the research question, there are certain theoretical concepts that help answer it. We have the notion of an exogenous shock, which can force change in an institution; such moments are called critical junctures (Capoccia, 2016). A critical juncture is a good unit of measurement because it shows what the rules were previously, how they were insufficient to deal with the shock, what changes happened and how effective those changes turned out to be. Change comes from actions, whether they happened with an agent's intent or through messy social interactions. A shock reveals a weakness in the system and causes agents to suffer from it. A weakness is undesirable if it produces many losers, which means it becomes in their best interest to solve it. The theoretical model of voice, exit and loyalty (Hirschman, 1981) is effective in understanding the options of each agent. It is preferable to an institution that an agent remains loyal (and accepts the situation), but in crisis agents should voice rather than exit. If many members exit it could result in the institutions failure. Finally, the theoretical concepts of collective action problems (Buchanan, 1965; Greif, 2006) play an important part in seeing how effective an institution is. In a way each shock is actually a collective action problem.

The Hanseatic League fits this theoretical narrative well. Its purpose was to make merchants more accountable to each other and pool resources. This allowed for more reliable trade opportunities and markets. Because of the historical context, merchants were not a formal part of political decision-making. They often had to defend against a rent seeking aristocracy (Schwartz, 2010). Therefore, the League had become something bigger than an institution for trade among merchants. This happened when the League was attacked by a foreign nation, causing an exogenous shock. To overcome this threat the Hanse had to overcome the collective action problem, and did so by formalizing the rules and becoming more inclusive as a club.

The combination of theory, historical context and empirical data of the Hanseatic League answers the research question. It does so by testing three conjectures. The first conjecture states that a significant shock forces an institution to change, and if it does so optimally, it will persist (Greif, 2006; Capoccia, 2016). The Hanseatic League managed to do so after an attack by the kingdom of Denmark, which united the members of the League to formalise the rules and organise better (North

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M. , 2015). The second conjecture claims that an inclusive political structure is beneficial to a club because it forces the club to remain attractive for its members (Buchanan, 1965; Greif, 2006; Cole, 2013). Inclusivity means that members can easily voice their concerns and exit the club when their cost-benefit calculus is no longer desirable (Hirschman, 1981). The Hanseatic League made its decisions based on consensus during general assemblies (Wubs-Mrozewicz & Jenks, 2013), where members could easily voice but also exit. The institution had to remain beneficial to its members to make it less likely for members to exit, and remain loyal instead. Where the second conjecture is more about rules of the game and the motivations to respect them, the third conjecture looks at the use of resources and power to overcome collective action problems. An institution that is incapable to be a solution for the problems that members face is not effective and therefore undesirable (Greif, 2006).

In order to maintain its longevity, we will see that the Hanseatic League managed to do three things. Firstly, it managed to change from an informal organisation into a formal institution; this successful change happened as they were facing an exogenous shock. The new formalized institution had inclusive political structures that allowed members to easily participate in the decision-making process and voice their concerns. That last part meant members were willing to risk voicing dissatisfaction and remain loyal to the institution during the critical juncture. Finally, they gathered a large pool of resources through their wealthy members and cities. This vast amount of money allowed them to not only participate and win wars against other nation states, but also to be a dictating power in many markets of Northern Europe. Non-Members had to rely on trade privileges with the Hanseatic League to trade effectively due to the Hanses monopoly position in Baltic trade (North M. , 2015). These factors explain why the Hanseatic League managed to last as long as it did; it was inclusive to its members which allowed it to easily reinforce its rules without members disserting ranks. Membership was also attractive because the institution proved itself capable of dealing with collective action problems such as hostile nations. For merchants and cities, the Hanse offered stability and a reliable calculus for decision-making and reaffirmation of membership. This thesis is structured into five chapters. This current chapter is meant to introduce the reader to the case study and research. The purpose, research question and results of this thesis are presented in a succinct way. The following chapter is the literature review that explores the expansive academics work on institutions. The third chapter bridges the abstractness of the literature and formulates the theoretical concepts used in the research, Furthermore, this chapter combines the previous chapters in three conjectures, and these are predictions on how the theoretical concepts

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explain the case study and vice versa. The argument section gives the clearest overview of the thesis`s purpose and structure. This chapter also explains the methodology and strategy of the research as well. The fourth and largest chapter is the analysis that will test each conjecture. It will start with a brief historical overview and will then go into scientific analysis using historical context, theoretical concepts and the empirical data of the Hanseatic League. The fifth chapter begins with a discussion, and it aims to extrapolate the observations made in the analysis to create general lessons which could be applied to modern institutions. The last section of chapter five is the conclusion that sums up the research process, goes into potential weaknesses and future research, and gives a final overview of the lessons that can be gotten from the Hanseatic League.

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Chapter Two: Literature Review

History is filled with constant political and economic endeavours; it is rich, eventful and it is concrete. However, to understand the case material, it is important to take a step back, and look at the more general trends, venturing into the abstract. The cornerstones of this thesis are institutions, a term so complex it has been the focus of a rich body of academic literature. Over the course of the chapter, that body of literature will be explored and presented. Firstly, it will go over what institutions are and how they can be defined, followed by how and why institutions change. These two parts will be the guideline of this chapter as they will explore various scientific research, such as collective action problems, clubs, institutional stickiness, legitimacy and critical junctures.

2.1 The definition and purpose of institutions.

As has been mentioned, institutions are a broad and complicated term spanning multiple disciplines. There is a variety of definitions of institutions, debating what can be included and what the role of an agent is. However, the majority of definitions have in common that institutions should be seen as the “rules of the game” which structure human interaction and exchange (Cole, 2013; North D. C., 1990; Ostrom, 2005). This idea will be a recurring theme in the academic works of institutions. The most common definitions stem from the discipline of political science and economy. According to North (1990), institutions are “rules of the game” which can either be informal social norms or formal laws; these are constraints that have been shaped through human interaction. These rules therefore incentivize the way people interact and exchange. However, Ostrom (2005) argues that it does a little more than incentivize; (Greif, 1998).

Nevertheless, these definitions are broad as not all rules or social factors can be considered as institutions. Indeed, Greif (2006) argues: rules that do not affect interaction should not be considered institutions. In other words, if a rule is not followed, it has no purpose. There must be a motivation or incentive for people to follow those rules. That is why institutions often come with some forms of sanctions.

These approaches can be sorted based on two criteria. Firstly, there is no consensus whether an organization should be considered an institution. The exclusion of organizations stems from the idea that they bind individuals with a certain common objective (North D. C., 1990). These groups have

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their own sets of institutions while also being influenced by external institutions, and in turn such an organization can influence the institutions of the given society. This makes organizations fall short of certain definitions of institutions. Secondly, whether institutions are dynamic or static (Cole, 2013). The differentiation between dynamic and static relates to ideas of “stickiness” or “path determinacy”. In other words, whether change is so difficult for institutions that they are practically unchangeable and static. This will be explored further in chapter 2.2.

The problem with these mentioned definitions is comparable to that of Durkheim: if we define institutions as a centralized aggregate of social behaviour, we place few analytical borders (Durkheim, 1953) on this term. In other words, how do we measure institutions? Williams and Coase (1964) argue that a system can have more or less optimal results or be desirable by the people affected by it. To measure how optimal the system is we must break down an institution into components which consist of rules, regulations and rights. Each part is created through large-scale decision-making processes as explained in chapter 2.1.1 (Cole, 2013). Each decision would therefore reveal the interaction between agents that lead to the creation of rules. We could also judge an institution by its economic effectiveness, such as its ability to have agents overcome collective action problems. Both measurements require an understanding of the role of the agent within the institution, and this will be explored in the subchapter below (2.1.1.).

In summary, institutions are systems formed from social factors with the purpose of incentivizing or regulating social interactions. This is also referred to as the rules of the game. To measure an institution, we must understand both the rules and the motivations to follow those rules. An institutional rule that is not respected sees no realistic implementation and therefore serves no real purpose (Greif, 2006). An institution can be broken down into many decision processes that on one hand result in rules, regulations and rights, and on the other lead to the efficiency of overcoming collective action problems.

2.1.1 The role of agents in institutions

An institution is made up from various agents: people that are part of the institution and who follow its directive. The aggregate of these rules, agents and interactions means institutions are a structure that is larger than any one individual. Therefore, institutions strongly influence the individual and the societal interactions and exchanges. However, they can be the result of human agency, the

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individual can intervene and determine aspects of the institution (Morgan, Campbell, Crouch, Pedersen, & Whitley, 2010). In other words, we can see the agents as rule-takers, rule-makers or both.

As was mentioned before, rules of the game are only valuable if they are followed. Whether a rule is followed depends if it is optimal for the agent to do so (.: ibid). To understand individual choice, we must first explore the notion of rationality. Classical neoliberal theory argues that the optimal transaction costs are when individuals focus on maximizing their individual consumption and utilization. Within this theory there is an assumption that an economic agent is rational (Caporaso & Levine, 1992). This is a shortcoming according to Buchanan, who argues that often the action that maximizes utility is that of sharing resources (Buchanan, 1965). Some goods have an optimal user pool of one, such as a coat that can be worn by one person at a time. However, many goods can be consumed by multiple people, like a large pie for example. An individual would be hard pressed consuming all of it before it spoils. Ideally the pie is cut into smaller pieces and shared. There is a measure of exclusivity required, too many people would mean everyone receives only a crumb (.: ibid). What this means is that the optimal way to use a resource is often by sharing it in an exclusive club, as opposed to individuals or everyone.

This notion not only challenges the neoclassic ideal of self-regulating markets, but it shows that agents do not always act rationally. However, sometimes, if an agent does not act optimally, they can choose to forgo the use of a resource they need just to appear of higher status. An example would be buying an expensive car while being poor just to appear wealthier (Polanyi, 2001). This relates to institutions because the validity of an institution is based on how motivated agents are to respect its rules. Their motivation is often tied to a social aspect, as rules are not developed just by law or agreements but also myth, taboo, religion or culture (Greif, 2006). These, in turn, are fluid constructs that offer space for interpretation per actor involved. Even an actor that is highly rational must base his decision on the people he interacts with, which means that one must assess how rational the other players of the game are. Not only do the fluid social constructs and bounded rationality curtail decision making based purely on logic, it also based on knowledge. Not every actor possesses the same knowledge, and an actor is not always aware whether his information is accurate or correct. Therefore, the assumption of rationality within decision making should be approached with care, and an analysis of the decision-making process leading up to an institution should leave space for irrational behaviour.

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So, what can an agent do when confronted with an undesirable situation? The agent can choose to do one of three things: voice, exit or loyalty (Hirschman, 1981). Voice means that the agent makes his dissatisfaction known. This is often costly in time, risk, and resources, and reveals information about the agent. Exit means the agent leaves the institution. This is a low-cost option that reveals little about the agent, aside from being dissatisfied. Finally, loyalty means the agent decides to accept the undesirable situation out of loyalty for the institution itself. The agent could accept that while most policies are in their favour, some degree of unfavourable changes are acceptable. The cost-benefit difference remains positive enough to remain a member (.: ibid). Hirschman argues that exiting is often the safer choice because the agent takes less risks and reveals less information. Revealing information could potentially give an unwanted advantage to others. Furthermore, it is often difficult to know what the actual cost of voice will be if the rules of the game are unclear. Depending on the context, the agent risks being fired, arrested or worse. Situations where voice becomes more common is when voice could lead to communal improvement which would also improve the institutions effectiveness (.: ibid). For example, an employee could demand that workers should take a break, which would help the workers rest and be more productive overall.

While exiting seems the safer route it is not without risk. Exiting often indicates physically moving to another location, such as a different country, shop or company. This comes with the costs of transportation, but more importantly the loss of any benefits such as reputation or contacts the agent had accumulated so far. The new location might not be an improvement as the value of reputation and social contacts could outweigh the cost of the unwanted policy (.: ibid).

2.2 The how and why of institutional change

Some institutions persevere when time changes, and others perish or fall into irrelevancy. This section will address the question: how and why do institutions change? A large part of this correlates with the role of agents and how their decision-making processes affect change and stability. There are two perspectives on this matter and they tie back to the agent as a rule-maker or a rule-taker. One side argues that institutions are intentionally created through the political will of a group of agents. The other perspective is that of the Austrian school that claims institutions take shape because of many social interactions which are primarily of the non-rational kind (Greif, 2006). This chapter will compare these two perspectives, and explore literature that tries to bridge the gap between them.

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The intentional perspective assumes that a group of forward thinking individuals could influence the political arena, resulting in the creation of an institution. Institutions have a direct purpose, otherwise the agents would not have created them. This however, creates a problem in explaining change. The focus with institutional change is on external factors (North D. C., 1981; Williamson, 1985). Every time an institution changes it is the result of coordination between agents. However, considering the complexity and costs of such an endeavour, it becomes questionable if they can change at all (or easily). After all, each time a group tries to change the institution to gain from it, they must deal with the group that will lose something from that change (Olson, 1982). The evolutionary perspective doesn`t believe a progressive club could create an institution. As was argued earlier, individuals are not fully rational and generally act in retrospection (Hayek, 1937). This means that an institution incidentally becomes based on the accidental interactions and the general environment of these actors. Sometimes the institution will bring more stability, but sometimes it will not. Change is tied to these general social inertia (Greif, 2006).

Both perspectives offer limited tools in analysing change in institutions, and neither necessarily investigate how previous institutions influence future versions. It is this process that leads the perspective of institutional change through historical process. Greif (2006) argues that mutations, social inertia but also the forward-thinking individuals are defined and strongly influenced by existing institutions. To understand these perspectives, we must explore what factors make institutions stay their course and remain stable (.: ibid).

2.2.1 Mechanisms that make institutions persist

When an institution takes shape, it does not last indefinitely. Every now and then, depending on the context, an institution must reaffirm itself. That means that the actors involved should agree that the institution is still desirable enough to keep (.: ibid). An institution should be self-reinforcing in that case, so that agents keep adapting their behaviour to the rules of the game created by the institution. If actors are likely to respect the rules then other actors can rely on the shared knowledge of the rules of the game. The predictability of actions created by stability suggests a level of internal cohesiveness. Da Conceição-Heldt and Meunier (2014) argue that this can be characterised with three criteria, namely: convergence of preferences, consistency and coherence. The higher an institution scores on these three, the more likely it is to persist.

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The first criterium of convergence looks at how much the goals of individual members align; meaning there are few disparities between members (Hooghe, 1996). It could be argued that cohesiveness in this case means that there are similarities between members, culturally or ideologically. The second criterium is consistency. Members of an institution share the assumption of the rules of the game, but this can also be applied to external actors. Those that stand outside an institution but have relations with it will also build their actions based on the predictability of the institution. A consistent institution is predictable. Consistency also means that different external policies do not oppose each other. For instance, trading with country A should not negatively influence trading with country B if both countries are important trading partners for members (Nuttal, 2000). Finally, coherence means that the structures of the institution are harmonized. A high harmony can be achieved by integrating technological advances, defining matters of hierarchy but also maintaining external consistency (Gebhard C. , 2011).

These three criteria do not only say something about the stability the institution offers, but they can also be correlated with the expected effectiveness. Jupile and Caporaso (1998) argue that we can correlate the two factors by four measures; authority, autonomy, recognition and cohesion. The last measure is the same as was explained above. Authority measures what powers are delegated to how many and which members (.: ibid). Autonomy measures how much freedom there is for independent actions taken by members. The measure of recognition is broken down in two types, namely by law (de jure) and factually (de facto). The prior relates to recognition of the institution under international law while the latter simply means third parties accept and deal with the given institution (.: ibid). According to da Conceição-Heldt and Meunier (2014) these mechanisms give one of three options: an institution is most cohesive when it represents a common position towards external actors. Cohesiveness is lower when both the institution and members represent a position, and finally the lowest cohesion is when the institution has no say over a certain matter in which multiple members are involved.

2.2.2 The role of history in institutions

The mechanisms of institutional persistence don`t necessarily reveal the role of previous institutions in future behaviour. Of course, consistency and stability require that actors can rely on predictable behaviour. This subchapter will explore why institutions and actors would chose to be predictable and how they are influenced by historical factors.

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Schelling (1960) argues that individuals follow the patterns of previous behaviour when rationality is not enough to discern what action maximizes utility gained. Rationality can be insufficient in decision making when an actor must choose between multiple and comparable options or when there is very little information available. Greif (2006) argues that in such a case the actor will look at what actions proved most effective in the past. Certain behaviours can become institutionalized, much in the same way as people can develop habits, or get accustomed to a routine. Following that logic, if an institutionalized behaviour has proved effective in the past, then an actor will also choose that action in the future. This process further empowers the self-reinforcing pattern of institutions. (.: ibid).

The pattern explained earlier can never be an indefinite hard rule, as there will come a time where the rule or pattern will be challenged or broken. This possibility plays a constant role in the decision-making of an agent, meaning that each time they want to fall back on institutionalized behaviour, they must reflect how likely it is that the rule will continue to be respected. A stable institution reinforces itself and plays a part in shaping the identity and behaviour of the agent (.: ibid). Boettke et al (2008) argues that the self-reinforcement works two ways: an institution that properly reflects the identity and behaviour of the agents has a higher chance of persisting.

2.3 The role of institutions in society

Having defined institutions and explored the theories of institutional change; we are left now with the question of what the role of institutions is within a society. This is an important question because it answers why institutions matter and why they are worth exploring. One theory is that institutions help move away from a violent all against all society, and achieve a stable and predictable one. Stability and predictability were explained in the previous parts of the literature review, predictability means that actors can rely on others to abide by the rules of the game. North et al (2013) argue that this process can be seen through three types of society; a natural state, an open access order and the transitional phase between them.

Hobbes (1651) argues that the natural state of the world is absolute anarchy, a war of all against all. Scarcity of resources will eventually force two people to compete, and without external prevention, competition would conclude in violence. This violence ends when everyone agrees to a sovereign; an individual powerful enough to control the population. This idea falls in line with the natural state as presented by North et al (2013). They argue that historically most societies fell in this category,

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and its key elites were the violence specialist. This elite individual made it their purpose to be stronger than their neighbours. A violence specialist is strong enough to defend against attacks or to take from those too weak to protect themselves. This could be a robber, a thief or according to Schwarz (2010) the aristocracy and sovereign. The aristocrats had their soldiers and that allowed them to force others into servitude and the ability to conquer or pillage other lands. The sovereign does not differ much from this idea, in that the sovereign had to be strong enough to force obedience from his nobility. The historical trend of uprisings and assassinations show that the contention between sovereign and the nobility was a constant competition. Furthermore, the violence specialist must also constantly defend against others, resulting in an arms-race. Considering the bound rationality of the agent, we can assume they will not attack unless relatively certain of their victory. This leads to a highly ineffective system because elites constantly had to spend time and resources to prevent attacks, or the potential of an attack. After all, if one seemed weak, others might believe to have a chance to win (North, Wallis, & Weingast, 2013).

To overcome this system of wasted resources, the actors needed to set rules of the game, and someone to enforce them, such as a king. However, a sovereign is a violence specialist himself, but his competition was more against other kings and queens. Wars between rulers required armies which were enlisted form the aristocracy (Schwartz, 2010). When the aristocrats went to war, their lands remained unprotected, which meant rules had to be made to ensure that their property would remain upon return. The sovereign served as the main motivation for those rules, because breaking them would result in sanctions. This gave birth to land laws and to a further extend inheritance laws (North, Wallis, & Weingast, 2013).

When the natural state reaches its first institutions, they achieve a form of accountability. However, only the elites are accountable among themselves and most of the society have little to no mean of protest. From this point onward, the natural state has the potential of becoming an open access society. North et al (.: ibid) do not offer an exact explanation on how this can be achieved but they do see patterns in the few nations that have managed to do so. The institution of law allows for the violence specialists to waste less resources on competing in an arms race which opens the ability to spend resources on other things. We then witness a rapid creation of cities, markets and a relatively stable economy. With that, more individuals gain the ability to benefit and improve (Schwartz, 2010), in turn demanding (North, Wallis, & Weingast, 2013). This does not necessarily mean there is no more competition between neighbours, but it has moved away from violence towards

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economics. Tilly (1985) argues that modern states have institutionalized violence and agents now combat through tariffs and regulations.

While these theories cover the historical progression of various European states, they do not offer an answer to the effects of foreign-introduced exogenous institutions (Boettke, Coyne, & Leeson, 2008). What this means is that European states introduced their institutions in regions that were in a different phase of development. Boettke et al (.: ibid) argued that institutions which do not represent the culture and identity of the indigenous population rarely persist, this is the regression theorem. This resulted in natural states with the institutions of an open access society. This brought complexities that did not overlap with the required needs of that society. This often resulted in institutions that simply did not work or were used by Europe to maintain control or gain access to desired resources, this argument is what Acemoglu and Robinson (2013) named the theory of the extractive institution. This part is to point at an important historical omission of the North and Schwartz theories. However, this thesis is not about colonialism, the modern state or development. Therefore, there is no need to explore these theories further.

Chapter Three: Analytical Framework

In order to answer what accounts for the longevity and stability of the Hanseatic League's institution, we must conceptualise an analytical framework. We do this by distilling from the literature mentioned in chapter 2. This chapter presents the analytical framework used for the research. It opens with a quick reminder of the research question (3.1), followed by the theoretical concepts (3.2) that will be used during the analysis (chapter 4). Section 3.3 introduces the conjectures that will be the leading focus of the analysis. Finally, section 3.4 and 3.5 will present the methodology used for the analysis and an explanation of the historical data and sources used.

3.1 Research Question

The Hanseatic League was a unique institution, because of its multinational membership pool, its longevity and general stability. Longevity means the institution had well established rules of the game and was relatively stable. Therefore, the research question is; how can we account for the

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extreme longevity and relative institutional stability of the Hanseatic League under conditions of political, economic legitimacy and external challenge?

The first two sub questions are meant to help with answering the research question, as they go into a smaller part of the thesis:

1. How did the Hanseatic League deal with the problem of conflicting member interests under conditions of market integration and supranational decision making?

2. What mechanics accounted for their institutional stability, despite both external and internal challenges posed by crisis?

The third sub question aims to generalise the observations acquired by the research question, and it also distils policy advice for modern institutions. This would be the societal contribution of this thesis:

3. Are there lessons that other supranational organizations, such as the EU or UN, might learn from this experience?

3.2 Theoretical Concepts

The primary unit of analysis and the focus of this thesis are institutions. Institutions are constraints on social behaviour that come from human interaction (North D. C., 1990). These constraints are incentives on behaviours that need to be honoured and reinforced in order to function, or in other words, to become rules of the game (Greif, 2006). A distinction that has to be made is that between institutions and organisations. If the institutions are the rules, then organisations are the platforms where collective decision making takes place (Greif, 2006). As with agents, they can both be rule-makers or rule-takers; depending on their influence on the institutions. However, an organisation should also be seen as a part of an institution. If organisations are the platforms where agents interact, they do so based on the institutions-as-rules. The organisation has social norms and rules to which agents are expected to adhere. Furthermore, membership adds to the identity and expected pattern of behaviours of an agent (.: ibid). The Hanseatic League could be seen as both an organisation and an institution. Indeed, the organisation is a platform for agents to engage and interact, which the Hanse does through its general assemblies and by promoting merchants and markets. The institution

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is the set of rules, and the Hanse`s position lets them set the rules of economic engagement, both between members and with outsiders (North M. , 2015).

The utility of an institution can be measured in two ways. We could look at how and why the rules are respected and reinforced. As was mentioned above, rules that are ignored by all agents should not be seen as rules of the game. The other way is by seeing the effectiveness of the institution in attainting the purpose of its creation (Greif, 2006). Therefore, it can be expected that the League had methods to reinforce the rules of the game it put out. If it did not, it would logically not have been able to persist as long as it did. The Hanse had the clear purpose of promoting trade and merchant activities, but this came with the constraint that it primarily promoted these things for its own members. Nevertheless, as an institution it was deemed large enough to influence the rules of economic engagement of foreign markets as well (Wubs-Mrozewicz & Jenks, 2013). That means that the success of Hanse, as an institution, should be measurable by seeing how well they overcame collective action problems. In the case of the Hanse, that was through improving trade opportunities and privileges, but also lowering costs and risks of trade. Merchants had to travel long distances which exposed them to risk such as robbery or environmental hazards, but also being overtaxed or exploited by local lords. The theory would suggest that the Hanse, being a successful institution, found a way to deter predatorial lords and robbers from taking advantage of their merchants. At the same time, we should observe an overall increase in membership for the most part of its existence. Another important unit of analysis is that of the individual agent. As a smaller unit of analysis, their decisions give insights into the desirability of membership of the club. When a club is not functioning well and becomes undesirable, most agents will be motivated to either protest (voice) or cut ties (exit). Through Hirschman`s theory (1981) we get a general idea of the cost-benefit calculus of an agent. Even if we accept the agent as not fully rational, we can still accept there are margins of dissent. So, an undesirable situation might see an agent choose loyalty because he values the long-term gains as opposed to the short-term costs of a given situation. This could also mean that he believes exiting is too big of a risk and he would rather suffer the cost of the unwanted change than compete against the club. The political structure influences the options an agent has; an inclusive institution gives more opportunities for agents to voice their concerns. As stated earlier, a sustainable institution reinforces itself which in relation to Hirschman`s theory (1981) suggests that members regularly chose to remain loyal, even when decisions are not optimal. In relation to the Hanse, this could mean one of two things. This could mean they were an inclusive institution, where merchants and cities could easily voice their concerns or cut ties. However, it could also mean the

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Hanse was oppressive, and agents would rarely voice dissatisfaction. In this case we would see a larger use of exit, and an artificial form of loyalty.

The primary units of analysis would be institutions, organisations and agents. By applying the theoretical concept of voice, exit and loyalty we can deduce the desirability of membership. This combines well with the theoretical concept of clubs. A club is a cooperation between agents to overcome a collective action problem (such as an external threat or high transaction costs) (Buchanan, 1965). An institution and organisation could both function as a conceptual club. Members in the club must constantly revaluate their membership, in the same way as the rules of the game need to be constantly reaffirmed. A good club sees a good interaction between agents as rule-takers and rule-makers.

All of this fits in with one of the three theoretical perspectives on institutional change. i) Change could come from intentional political will of agents, making them rule-makers. ii) Change could also be the result of messy and unintentional interactions, being reactive to exogenous factors. Nonetheless, these two competing perspectives do not completely explain the many reasons an institution can change. iii) This thesis embraces the third theoretical perspective of institutional change as a historical process (Greif, 2006). This perspective accepts that changes can come from endogenous and exogenous factors, intent and reaction. However, the change is most strongly influenced by already existing institutions-as-rules. This means that to understand the rules of the game, we must look at what they were before X and after Y. This presents the factor of time and X and Y would most likely be critical junctures. Whether institutions are dynamic or static depends on the institution and context, but a strong shock to the system does force an institution to change (.: ibid). That means critical junctures are good moments to investigate because it is likely when new institutions take shape or old institutions change (Capoccia, 2016). During this period we can also see if the changes are the result of intent or if they are reactive and unintentional, or perhaps a mix. For the Hanse, this would be their first and second war with Denmark, and this critical juncture is the first time the merchants faced an external threat as a single unit.

The theoretical concepts presented int his chapter were: critical junctures, Hirschman’s agent choice, three perspectives on institutional change, clubs and collective action problems. They allow us to make predictions when applied to the case study of the Hanseatic League. The section below (3.3) will present three conjectures; thus, showing our expectations as to why the Hanse was as persistent and stable as it was.

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3.3 Argument

Not all institutions manage to last long; some get replaced when power shifts and others simply become irrelevant. What makes an institution last or stick? This is a complex question that has propelled research for a long time. Each institution is unique to its cultural, historical, economic and political context but there are elements that are generalisable and extractable. The Hanseatic League makes for an interesting case study because of its aberrant lifespan. Therefore, there is a potential wealth of lessons that could be extracted and concluded from it. With that, the Hanseatic League could teach us how to improve issues which institutions face today.

This section is the end of the conceptual funnel and serves the purpose of making the abstract ideas tangible and gapping the bridge with the analysis. In the previous section, an explanation was offered on how the theoretical concepts fit into the case of the Hanseatic League. This section presents a couple of conjectures: expectations of how the theoretical concepts help answer the research question in relation to the Hanse. Each conjecture comes with an explanation of how the theoretical concepts fit. These conjectures will be used in the following chapter to lead the analysis. Having explained the purpose of this section, it should be clarified what this chapter is not: the conjectures will not be answered or analysed, they are simply presented to the reader coupled with the reasoning for choosing each conjecture respectively.

There are three conjectures that aim to answer the research question: “How can we account for the extreme longevity and relative institutional stability of the Hanseatic League under conditions of political and economic legitimacy and external challenge?”. Stated below is an overview of the three claims, followed by a more detailed explanation of each conjecture.

• H1: Critical junctures are moments where a significant internal or external shock forces an institution to change (Capoccia, 2016). The Hanseatic League faced an external shock when they were openly challenged and attacked by Denmark. It is expected this shock has forced the Hanseatic League to effectively formalise its rules, resulting in better political structures and economic efficiency.

• H2: Members of an institution can do one of three things when facing unwanted policies. They can either voice their concern, exit the body, or remain loyal (Hirschman, 1981). The best option depends on the costs and the benefits of each choice and institution. The Hanseatic League was a consensus based institution, and members could make easy use of both voice and exit. It is expected that the relative low cost and risk of voice and exit reinforced the

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inclusivity of the League as a club. In other words, the League would have worked towards being an optimal and desirable organisation to prevent members from choosing “exit” over “loyalty”.

• H3: The purpose of a club is to have more members and lower the costs of everyone. Costs could relate to different things such as action problems, shared goods or risks (Buchanan, 1965). Each member can add their resources to the club, creating a larger pool to work with. Considering members of the Hanseatic League were merchants and cities, it can be expected that they had access to a significant pool of resources. In turn, they could effectively rely on hard power (warfare and mercenaries) and soft power (tariffs and boycotts) to overcome its collective action problems.

3.3.1 First Conjecture: the formalization of rules and critical junctures

A significant part of the Hanse`s success could be attributed to its ability to adapt to the political and economic context of their time. Nonetheless, it was not until a significant external shock took place that they truly started operating as a multinational institution. This moment of great uncertainty was the war with Denmark which helped the League reach a dominant position. This is an example of a critical juncture, and as theory has shown, critical junctures force an institution to choose a certain path (Capoccia, 2016). The conjecture is that the external shock (critical juncture) of Denmark kickstarted the Hanseatic League as a multinational institution and organization, because it created an external threat that united the relative loose ties between members. Indeed, the Hanse (plural) began forming between the 11th and 12th century, but mostly in the form of a cooperation between individual merchants and cities (North M. , The Baltic, 2015).

The critical juncture began when Denmark attacked a Hanseatic city and became a significant threat to most members of the League. This created a problem most members felt had to be solved. Indeed, this led to an increase in general assemblies and with that to a formalization of rules, as the previous informal approach was deemed insufficient. These rules became the bedrock of the institution, as the Hanse developed rules for decision making, risk sharing, market integration and warfare (levies). After the war with Denmark, the Hanse had a more united front and the established rules and general assemblies allowed the institution to stick (Boettke, Coyne, & Leeson, 2008). In short, critical junctures force institutions to take a certain path, and if the new path is more optimal than the previous path, the institution becomes more solid and lasts. In the case of the Hanse, it led to a

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formalization of rules which allowed the institution to become united and better in overcoming collective action problems, this partially explained their longevity.

3.3.2 Second Conjecture: legitimacy through inclusive institutional structures

The previous conjecture states that external shock helped the Hanse as an institution; this is a more meta or macro perception of the League. It does not however make a claim as to how it made the Hanseatic League “stick” as an institution. Part of it was moving from suboptimal (loose relations) to a more optimal (formal rules) institution, which in turn allowed it (singular) to use its resources and structures to overcome the collective action problems. Resources and structures are what lent the Hansa its legitimacy as an institution, and this conjecture is about how this related to internal relations. A club has the benefit of being better equipped to overcome an action problem (Buchanan, 1965), and the League functioned as a club. It offered exclusive membership to wealthy (primarily protestant) merchants and wealthy cities, but was inclusive to its members. This meant that there was a fair distribution of executive power amongst members, as every decision was made through consensus (Hammel-Kiesow, 2015). If a respective member disagreed, they could voice their concern or not join in the endeavour, with the chance of being sanctioned through another consensus based decision. That meant that members had easy access to the use of voice and exit, which inevitably led to two things (Hirschman, 1981). Firstly, a member could fairly object against a decision, knowing their chances of blocking said decision. If the decision would still go through, a member could decide to leave the Hanse if his membership was no longer beneficial to him. Continuing from the first point, this meant that the League had to make sure they remained an attractive club because members would otherwise exit.

In other words, the Hanseatic League was consensus based and every member could easily recalculate whether membership was beneficial to them or not. This in turn forced the League to maintain the consensus based decision making to remain attractive as a club. As we will see in the next conjecture, more members meant a larger pool of resources which in turn made the League more effective in solving problems. Furthermore, we will see in the analysis that it was not uncommon for stronger members to pay more to help cover costs and risk for weaker ones. This is another example of making sure joining was attractive. Everyone could get sanctioned for dissent, this meant that everyone was held accountable and would be rewarded or punished by the consensus of all attending members. These elements show how the formal rules lent the Hanseatic League

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legitimacy through inclusive political and economic structures, and that they account for a significant part as to why the League as an institution managed to persevere.

3.3.3 Third Conjecture: legitimacy through political and economic power

Political structures and inclusiveness explain a portion of the Hanseatic League`s success, since these constructs made it easier for them to overcome collective action problems. This conjecture states that the wide range of members, consisting of wealthy cities and merchants, gave them a significant pool of resources. While small clubs cut down on transaction costs between members and sped up decision making processes (Buchanan, 1965), extensive resources allowed a club to tackle larger problems. As we will see in the analysis, the pooled resources gave the Hansa the ability to wage war against a nation and win. Warfare and violence are a recurring theme in medieval history. Nations and lords often competed through warfare (North, Wallis, & Weingast, 2013) and merchants or independent cities were not exempt from this. Moreover, merchants often faced large risk when traveling long distances such as robbery, state racketeering or excessive taxation. This was a problem which merchants tried to overcome by working together and pooling resources (Pye, 2015) (Greif, 2006). The Hanseatic League could protect its merchants in much the same way as it was able to protect itself. They had two primary methods to ensure safety: by hard power (warfare and mercenaries) and soft power (tariffs and boycotts).

Violence was a tool for the Hanseatic League as much as it was for kings, as their large amount of money allowed them to have large mercenary armies and materials to construct ships, weapons and armour. This allowed them to dissuade potential poacher sovereigns, protect trade routes for merchants and in the extreme scenario: fight and win wars. Denmark was the first collective enemy of the Hanse, and was defeated because of the Hanse`s ability to pool resources, raise a larger army and attract stronger allies (North M. , 2015). The Hanse were a very reliable and attractive trading partner. This was partially due to resources, stability and safety from violence. Moreover, if warfare was not the optimal route to follow, then they were just as easily able to effectively raise trade barricades and boycotts. Therefore, these two powers coupled with its inclusive structures made the Hanse more attractive as a club for its members. As was pointed out in the second conjecture, more members meant more resources, which in turn let the Hanse overcome bigger collective action problems. By being able to deal with problems effectively, it made them an equal player to a nation-state, which in turn legitimized them more as a trading partner and a club.

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These three conjectures answer three parts of the research question. The first conjecture focuses on the role of external shocks (critical junctures) and how it made the institution choose the path of formal rules. The second conjecture focuses on how those formal rules led to inclusive internal structures which made them attractive to join for wealth merchants and cities. The final conjecture explains how a large and wealthy member pool gave them access to plentiful resources, which in turn let them overcome collective action problems. This made them a significant player on an international level as they could pressure external players to do what they wanted, using hard (war and the threat of war) and soft power (tariffs and boycotts). The following chapter will explain how the theories and conjectures manifest as an analytical methodology.

3.4 Methodology

Research on institutions has often been approached through either a deductive or inductive approach. Indeed, one could focus on what is observable (inductive) but would miss critical elements such as social norms and culture. Even if a researcher could attempt to deduce through theoretical models what would be the most logical prediction; this would be an impossible task as institutions as a construct are influenced by history and context (Greif, 2006). Context is important because an institution is more than the sum of its components. The elements that helped it succeed at one point could very well result in failure in another context. Indeed, institutions are messy and this poses a challenge for any researcher with the intent to study and understand them.

For this purpose, this thesis will make use of a context-specific method that combines elements of both the inductive and deductive perspectives. Much like the two competing perspectives on institutional change, intent versus natural evolution, there is a degree of complementarity between them. Some institutions are more influenced by intent and others are more reactive and evolutionary in nature. Context is paramount, as historical context allows us to understand the process of change. When institutions change we can see the influence of past institutions and rules in that process (Morgan, Campbell, Crouch, Pedersen, & Whitley, 2010)).

More specifically, institutions will be measured in two ways. The first method is to break down the institutions of the Hanse into clear rules, regulations and rights (Cole, 2013). What this means is that the analysis will be conducted by looking at: actions of politically forward-thinking individuals, incidental creation of rules through complex and messy interactions and by assessing

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the influence of previous institutions and institutionalized rules on actions (.: ibid). The second method looks at how the Hanse overcame the collective action problems it faced. How did it make use of its resources to defeat Denmark, gain more allies, broker new trade privileges and reinforce the rules on their members? Both methods will be analysed by combining three sources of information, the empirical data from the historical archives of the Hanseatic League (explained further in section 3.5), the historical context through secondary literature and finally by applying the theoretical concepts presented in section 3.2. This is called the interactive context specific analysis model (Greif, 2006).

The three conjectures from section 3.3 are the red thread in the analytical chapter. Each conjecture was constructed by the combination of empirical data, historical context and theoretical concepts. The strength of this combination of sources is that it allows for a robust methodology in identifying institutions (Greif, 2006). It respects the historical context of institutions. However, the weakness of this method is that it doesn`t produce predictive models or theories. This is in a large part because we agree with Greif that institutions and history are too messy and complex to effectively extrapolate predictive models. There are many non-observable elements that are hard to account for.

Therefore, the analysis will be qualitative and primarily descriptive in nature. After all, we mean to identify the institutions that account for the Hanse`s longevity and relative stability. We do not mean to predict which institutions could make all institutions last the same. While there are similarities between the Hanse and modern institutions such as the EU, their historical context is very different. That means there is room for policy advice, but each advice should be tested for the unique contextual factors of a modern institution. Aside from the descriptive elements of the analysis, there is an important theoretical element as well, as the theoretical concepts are being tested in relation to the Hanse and the historical context.

3.5 Sources

As is the case with historical research, it must rely on archaeological findings and historical archives. In the case of the Hanseatic League, there is an extensive digital database publicly available by the Hanseatic History Society. These archives are accessible via internet through the following link: http://www.hansischergeschichtsverein.de. The two primary sources used are the Hanseatic Book of Charters (also known as the Hansisches Urkundenbuch or HUB) and the proceedings of the

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Hanseatic Diets (also known as the Hanserecesse or HR). These cover the periods up to the year 1521.

These sources come with a few challenges. Firstly, there are few to no methods to triangulate their internal legitimacy. The available historical sources are the records as gathered and preserved, and any errors or missing pieces are lost in the annals of time. However, the historical archives relating to the Hanseatic League are extensive and have been used in a wide range of research. In other words, the academic world has deemed these sources as reliable.

The specific sources used for this research are the recess, these are the official documentations of every Hansetag the Hanseatic League has had. From these recess, we can extract all attendees, the established and agreed upon treaties and an overview of the matters spoken about. Every recess is written in three languages, but the primarily used language is ‘Low German’. Every record has been translated into Latin by other researchers and bundles together. Finally, every record is explained in early 20th century German. The historical institution that takes care of the archives has summarized and described every recess.

These three languages (German, Low German and Latin) cover the same grounds and can be used for nuances in language differences. The modern German and Latin parts have been translated using translation software. The Low German parts have been directly analysed due to linguistic similarity to the researchers known primary language of Dutch. However, certain nuances can be lost in translation and the researcher does not have perfect command of Latin or modern and medieval German. This is an unavoidable flaw within the thesis.

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Chapter Four: Analysis

This chapter will make use of the empirical evidence of the Hanseatic archives and combine them with historical context from secondary sources. These two elements will serve as a test of the theoretical concepts as they were presented in the previous chapter. Furthermore, the analysis chapter will be split in four main parts. The first part is a short historical overview, it shows background information about the formation of guilds. It will go into the early history of the Baltic region, which is the primary region of activity for the later Hanseatic League. Aside from a succinct overview of early history, this paragraph is not critical to answering the research question, but helps with understanding the historical context presented further in the chapter. The next three subchapters relate to the three conjectures presented in chapter three. Every conjecture makes a claim relating to how the theoretical concept combines with the case being studied. This chapter will dive deeper into the case and test how likely each conjecture is to be true.

Over the course of this chapter we will consider a specific historical period, namely between 1361 and 1370. During this period, the League faced two external shocks and held approximately 80

hansetage1. Not every hansetag was recorded or came with sufficient details resulting in gaps, in the appendix is a table overview of all the hansetage. Each section will test the conjecture by looking into the empirical data of the Hanserecesse and link it with relevant historical context. Finally, these observations will be integrated with the theoretical concepts as presented in chapter 3.2.

4.1 Historical overview of the early Baltic region.

The history of the Hansards is irrevocably tied to that of the Baltic Sea, a region that has known trade long before the League came to be. It connects the modern nations of Denmark, Norway, Sweden, Finland, Germany, Poland, Lithuania, Latvia, Estonia and Russia. However, in early to late medieval age, the political map was quite different, as most modern nations consisted of many smaller kingdoms, fiefs and (free) cities. Aside from the Baltic region, the North Sea played an equally important role and the two regions were often connected. Indeed, while the Baltic states traded in furs and wood, Poland traded in grain and Amber and Scandinavia in salt and herring. All

1_{There is a complete list of al hansetage in the Appendix. This table shows all attending members, the hosting city and}

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these products would continue to be mainly sold on markets such as London, Bruges and Antwerp (Pye, 2015). Before the Hanseatic League came to be, the region had two populations that heavily relied on naval trade; the Frisians and the Vikings.

The Frisians were the first people to rely almost fully on trading and crafting rather than their own agriculture (North M. , The Baltic, 2015). Their main port, Dorestad, became an important trade hub in the North Sea because of it. The Frisians had to share both seas with other travellers; the Vikings. Historical records show that the two peoples traded heavily with one another. However, it was not uncommon for raiders to attack the Frisian city. The importance of the Frisians was not lost on Charles I who fought the Vikings on many fronts throughout his reign. In turn, the Vikings had their own way of seafaring trade, as they applied violence as regularly as trade and used the Baltic Sea to spread and settle as far as modern-day Ukraine. Even the Arabs and Persians have many records of encounters, showing how far the Viking merchants managed to get via the Baltic Sea (Pye, 2015). The Frisian trade became so central to the surrounding kingdoms that the idea of money was reborn (Pye, 2015). Not just the coin, but the idea of money as a political and economic tool; a method to quantify, tax and show status. Indeed, archaeological findings show Frisian coins with images of serpents and Wotan spread out in Europe followed by many imitations, until Charles I adopted the mint and extended it across the known world. Furthermore, they laid down the groundwork for a trade network. Already around the year 700 to 800; Frisian cloth was sold in Baghdad, and silver from Asia was used to press coins in Dorestad. This network was an organic construct and the Hansards (and other merchant and guilds) could simply grow into that system. It is important to remember that the slave trade was a large and integral part of long-distance trading of most merchants, Vikings, Frisians or Franks. This network also came with specific trade routes, between Cologne and Denmark/Sweden, from the Baltic States such as Courland and Riga towards the merchant city Novgorod and finally the connection between the Baltic Sea and the long Vistula river that connected into the Slavic and German hinterland (Hammel-Kiesow, 2015).

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Figure 1: Map of the Baltic Region. Source: (Harreld, 2015).

Aside from the Germanic, Slavic and Scandinavian tribes; there were also the Finns and Balts. We do not go into their activity much, but there is a mingling of tribes that set the foundation for a multi-ethnic network of trade hubs (North M. , 2015). Many of these hubs were built where rivers and the sea came together. These regions were Scania (the region where modern day Malmo, Sweden), northern Poland, the islands of Gotland and Oland and finally the two eastern edges known as the gulf of Riga and Finland (.: ibid).

Lessons of institutional stability and persistence from the Hanseatic League : a case study of historical institutional change