ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

Economic Reasons for the Breakup of Georgia


In the 15th century, the Kingdom of Georgia started a painful process of disintegration from which it did not recover until the modern era, and ultimately, Georgia’s breakup at the end of the medieval age accounts for the regrettable fact that the country could not maintain its status as an independent nation (Florian Biermann and I discussed the cataclysmic Treaty of Georgievsk in our article about King Erekle II).

George VIII. was the last king to rule a united Georgia for about 20 years, starting from 1446. During this period, the country’s unity was already crumbling in the wake of a series of truly dramatic events. In 1463, King George VIII was defeated in the Battle of Chikhori and the Kingdom of Imereti, led by Bagrat VI., declared its independency from Georgia. Two years later, George VIII. tried to punish Prince Kvarkvare Jakeli, the disobedient ruler of the principality of Samtskhe, but Kvarkvare unexpectedly turned the tables when he captured and imprisoned George. Bagrat VI. took advantage of this weakening of his adversary, invading Kartly in 1466 and declaring himself King of Georgia. This was not the outcome Kvarkvare had envisioned, as instead of the weak George, he now had to deal with Bagrat as the new self-declared King of Georgia. Kvarkvare released George VIII. from prison, hoping that he would regain power, but George was not able to return the throne from Bagrat. After messing around for some time, George retreated to Kakheti and formed a separate kingdom. Bagrat remained the ruler in Imereti and Kartly, and finally, in 1490, the Georgian Kingdom had fallen apart into the Kingdoms of Kartli, Kakheti, Imereti, and Samtskhe, and did not reunite anymore.

Internal quarrels and disintegration were not unusual in feudal societies, where the members of the aristocracy were constantly fighting for dominance. What is surprising, though, is the fact that Georgia had such a hard time to reunite. Several subsequent Georgian rulers tried to bring back the glory and the territory of the past, but did not succeed. Even when facing the common threats of the Ottoman Empire and the Iran, the Georgian leaders did not overcome their differences. This is rather remarkable. When in 1683, the Ottoman army stood at the gates of Vienna, it was not left to the Habsburg rulers to prevent Europe from becoming a Muslim continent. Rather, a European coalition led by the Polish King Jan Sobieski threw them back. Yet Georgian rulers, in a continuously hostile neighborhood, failed to unite and jointly pursue their common interests. What are the reasons?


ECONOMICS IS ALL THERE IS

David Friedman, the anarcho-capitalist son of Nobel Prize laureate Milton Friedman, likes to explain everything with economic forces working in the background. His 1977 article “A Theory of the Size and Shape of Nations” (The Journal of Political Economy 85, pp. 59-77) is based on the assumption that rulers and governments are interested in maximizing their tax revenues and in little else. In the medieval ages, there were only two substantial sources of taxes, namely agriculture and trade. While agricultural output and taxes depended on the amount of land, trade taxes depended on the control of trade routes. There is another important difference, however, between both sources of tax income.

Assume that several entities share different parts of a trade route. If one of them raises its taxes, it will negatively affect the revenues of the other entities along that route as well. Trade on the whole route will become less profitable, there will be less trade, and everybody will suffer. In such a situation of “negative externalities” (the technical term used in economic theory), it can be shown that players have an incentive to set tax rates too high compared to what would maximize total tax revenues. In other words, the countries could gain by uniting and lowering the taxes. If, on the other hand, there are competing trade routes, the rulers will engage in competition for trade volume and set their tax rates below what would maximize total tax revenue. Again, joint tax income could increase if the countries would unite.

Regarding agricultural taxation, there is no such incentive for rulers to unite. There are even reasons to believe that agricultural tax collection yields what economists call “diseconomies of scale”, namely an increased efficiency when it is done in smaller units. Collection of agricultural taxes in large areas requires considerable bureaucratic capacities and the ability of tax collectors to communicate with one another.  This is necessary for recording which taxes were paid by whom, making sure tax regulations are obeyed, and preventing double taxation. In medieval ages, bureaucracy was not well developed and communication was cumbersome, and the easiest possibility to circumvent these problems was to form smaller units. Moreover, one might add (though Friedman, fixated on strictly economic reasons, does not mention it) that when rulers do not face economic disadvantages from being independent, they may have a natural tendency to form small units where they can “rule the roost”.

From these arguments follows that countries primarily generating their tax revenues from agriculture have incentives to split up, while countries that depend on trade route taxing have incentives to unite. Friedman applies his theory to the nations of Europe from Roman to modern times and, in line with his predictions, finds that the East-West Mediterranean trade gave rise to the Roman Empire and its roman-germanic successors. Then, in the 7th and 8th century, the Arab conquest in the East locked those trade routes, causing the emergence of small, independent feudal domains in the Mediterranean area. Likewise, the regions of Central and Eastern Europe, lacking access to the sea, were focused on agriculture and, consistent with his theory, subdivided into many small entities throughout most of the medieval age. The trade economies of France, Spain, and England, on the other hand, were united in big, coherent kingdoms.


AND GEORGIA?

Georgia is located on the Silk Road, an important East-West trade corridor, and major trade routes were going through its territory. Florian Biermann and I have touched on the traditional importance of trade for Georgia in our article on David the Builder.

When in 1490, the Georgian Kingdom fell apart into Kartli, Kakheti, Imereti, and Samtskhe, 37 years earlier Constantinople had fallen. The end of the Byzantine Empire and the Ottoman’s control of the Bosphorus made trade between Asia and Europe through Georgia much more difficult. In 1461, the Ottomans also captured Trabzon, closing the remaining land trade routes in the South, and in 1475 the Ottomans conquered the northern Black Sea coast and isolated Georgia from Europe almost entirely. The Black Sea became an “Ottoman lake”, the Caucasus corridor was shut down, and the trade routes to Europe disappeared.

According to Friedman, this situation should have led to the formation of smaller entities. If one subscribes to his theory, the Georgian rulers were simply reacting to economic incentives when they split up the kingdom. Maybe it was not the absence of a second “David the Builder” that prevented unification, but hard economic constraints that could not be overcome, making it impossible to create a united Georgian Kingdom again.

Rate this blog entry:
3 Comments

Related Posts

Comments

 
Guest - Eric Livny on Friday, 09 May 2014 19:59

A great article, Maka, many thanks! Just a couple points to add, one about the past, and another about the future.

In the absence of any compelling reasons to come together, Georgia's feudal rulers often resorted to another means of improving their fiscal situation: PLUNDERING EACH OTHER. As far as I know from reading history classics, this was a very popular source of income for Georgia's princes, in addition to agriculture and trade taxes. What is quite interesting from the economics points of view is that instead of maintaining large standing armies (which would have been expensive).Georgian princes relied on mercenaries from the North Caucasus in exchange for a part of the bounty (think of it as a "profit sharing agreement"). Apparently they cared about economic efficiency :)

While "efficient" in the short-term, mutual plundering and the cycles of violence it has generated was disastrous in the slightly longer perspective. First, it killed the incentives to engage in any kind of productive economic activities: why grow agricultural products or invest if the product of your labor is going to be taken away? Second, it created insurmountable barriers to VOLUNTARY unification. Given the mutual hatred and lack of trust between the small principalities, unification could only come about through 1) conquest of all principalities by the strongest feudal leader (David the Builder model) or through conquest by an external great power, such as Russia. Yes, in today's political realities, the treaty of Giorgievsk is often interpreted as the end of independent Georgia. In my view, however, this treaty led to the political unification of Georgia as part of the Russian Empire, allowing for people like Ilya Chavchavdze and his followers to develop the Georgian language, as we know it today, build schools, establish Georgian language magazines and newspapers, and finally, establish the first national university, TSU.

Going forward, the possibility to re-create the historical Silk Road in our time creates strong incentives not only for Georgia to stay united but also for countries along this trade route to come together, if not politically then at least economically. Countries that part of the trade corridor running from Central Asia to the Black Sea would benefit from servicing increased trade flows. In addition to providing transportation services (rail, road, pipelines, electricity transmission lines, etc.) they could provide logistics services and engage in value adding activities such as storage and regional distribution, as well as processing of primary products, etc. At present, the Caucasus Transit Corridor (CTC) is not fully competitive due to deficient infrastructure on all segments starting from the Black Sea ports to rail/road infrastructure, trans-Caspian particularly

A great article, Maka, many thanks! Just a couple points to add, one about the past, and another about the future. In the absence of any compelling reasons to come together, Georgia's feudal rulers often resorted to another means of improving their fiscal situation: PLUNDERING EACH OTHER. As far as I know from reading history classics, this was a very popular source of income for Georgia's princes, in addition to agriculture and trade taxes. What is quite interesting from the economics points of view is that instead of maintaining large standing armies (which would have been expensive).Georgian princes relied on mercenaries from the North Caucasus in exchange for a part of the bounty (think of it as a "profit sharing agreement"). Apparently they cared about economic efficiency :) While "efficient" in the short-term, mutual plundering and the cycles of violence it has generated was disastrous in the slightly longer perspective. First, it killed the incentives to engage in any kind of productive economic activities: why grow agricultural products or invest if the product of your labor is going to be taken away? Second, it created insurmountable barriers to VOLUNTARY unification. Given the mutual hatred and lack of trust between the small principalities, unification could only come about through 1) conquest of all principalities by the strongest feudal leader (David the Builder model) or through conquest by an external great power, such as Russia. Yes, in today's political realities, the treaty of Giorgievsk is often interpreted as the end of independent Georgia. In my view, however, this treaty led to the political unification of Georgia as part of the Russian Empire, allowing for people like Ilya Chavchavdze and his followers to develop the Georgian language, as we know it today, build schools, establish Georgian language magazines and newspapers, and finally, establish the first national university, TSU. Going forward, the possibility to re-create the historical Silk Road in our time creates strong incentives not only for Georgia to stay united but also for countries along this trade route to come together, if not politically then at least economically. Countries that part of the trade corridor running from Central Asia to the Black Sea would benefit from servicing increased trade flows. In addition to providing transportation services (rail, road, pipelines, electricity transmission lines, etc.) they could provide logistics services and engage in value adding activities such as storage and regional distribution, as well as processing of primary products, etc. At present, the Caucasus Transit Corridor (CTC) is not fully competitive due to deficient infrastructure on all segments starting from the Black Sea ports to rail/road infrastructure, trans-Caspian particularly
Guest - Lasha on Saturday, 10 May 2014 14:08

Unification and independence are different things. We can be unified tomorrow if we declare that we want to be part of Russia. Georgia definitely lost its independence after the treaty of Georgievsk, which was fully farce, Russia did nothing to help the Georgians during the Battle of Krtsanisi (1795). (there are many more examples).

Who knows how many Ilia Chavchavadzes we would have had being a vassals of Persian or Ottoman.

Unification and independence are different things. We can be unified tomorrow if we declare that we want to be part of Russia. Georgia definitely lost its independence after the treaty of Georgievsk, which was fully farce, Russia did nothing to help the Georgians during the Battle of Krtsanisi (1795). (there are many more examples). Who knows how many Ilia Chavchavadzes we would have had being a vassals of Persian or Ottoman.
Guest - Eric Livny on Saturday, 10 May 2014 15:18

Lasha, there is no doubt that Georgia lost its independence to Russia (not in 1783, but almost 20 years later). However, the relevant question to ask in the context of *this* blog discussion is whether the princes of Imereti, Guria, Samegrelo, Abkhazia, etc., came to rescue when the eastern kingdom of Kartli and Kakheti came under attack by Agha Mohammed Khan. Had Georgia stood united in 1795, many things would have been different today.

I've checked just now on Wikipedia, and apparently King Salomon of Imereti (who was Irakli's grandson) did send 2,000 troops to help Irakli's 5,000 contingent. Of course, this was not enough against the 35,000 strong Persian army. The others did little, even though they were much closer by compared to Russia.

Some additional reading I've done just now, suggests that other western principalities, such as Guria, were lying in ruins "due to the Ottoman encroachments as well as repeated occasions of civil strife. Attempts by the Gurian princes to enter into alliances with other Georgian rulers and Russia resulted in a series of Turkish punitive raids. By 1723, the Gurieli had lost Batumi and Chakvi to the Ottomans and the whole coastline of Guria had been garrisoned by the Turks. The Gurian support to the Russians during the Russo-Turkish War (1768–1774) caused a severe reaction from the Ottoman government. Kobuleti and the surrounding area were detached from Guria and subjected to Islamization, an apostasy being the surest way to escape slavery. The rest of Christian population had to move to safer regions of Georgia. This, combined with extensive slave trade and Turkish inroads, resulted in a virtual depopulation of several areas of Guria towards the late 18th century. The population of Guria was estimated by Güldenstädt at 5,000, and by Reineggs at 6,000 families in the 1770s." http://en.wikipedia.org/wiki/Principality_of_Guria.

The kingdom of Imereti - the strongest in western Georgia, was itself extremely weak due to constant revolts by feudal aristocracy and succession wars (the last one, involving Salomon and his cousin David II, ending in 1792).

In 1795, having just emerged from a four-year war against Turkey (1787-1791), Russia -- then under Catherine the Great -- had greater worries on the western front. Since early 1795, it was bracing for a major war against Prussia while agreeing to assist Britain its war against revolutionary France (See for example, http://www.napoleon-series.org/military/battles/c_catherine1.html)

Lasha, there is no doubt that Georgia lost its independence to Russia (not in 1783, but almost 20 years later). However, the relevant question to ask in the context of *this* blog discussion is whether the princes of Imereti, Guria, Samegrelo, Abkhazia, etc., came to rescue when the eastern kingdom of Kartli and Kakheti came under attack by Agha Mohammed Khan. Had Georgia stood united in 1795, many things would have been different today. I've checked just now on Wikipedia, and apparently King Salomon of Imereti (who was Irakli's grandson) did send 2,000 troops to help Irakli's 5,000 contingent. Of course, this was not enough against the 35,000 strong Persian army. The others did little, even though they were much closer by compared to Russia. Some additional reading I've done just now, suggests that other western principalities, such as Guria, were lying in ruins "due to the Ottoman encroachments as well as repeated occasions of civil strife. Attempts by the Gurian princes to enter into alliances with other Georgian rulers and Russia resulted in a series of Turkish punitive raids. By 1723, the Gurieli had lost Batumi and Chakvi to the Ottomans and the whole coastline of Guria had been garrisoned by the Turks. The Gurian support to the Russians during the Russo-Turkish War (1768–1774) caused a severe reaction from the Ottoman government. Kobuleti and the surrounding area were detached from Guria and subjected to Islamization, an apostasy being the surest way to escape slavery. The rest of Christian population had to move to safer regions of Georgia. This, combined with extensive slave trade and Turkish inroads, resulted in a virtual depopulation of several areas of Guria towards the late 18th century. The population of Guria was estimated by Güldenstädt at 5,000, and by Reineggs at 6,000 families in the 1770s." http://en.wikipedia.org/wiki/Principality_of_Guria. The kingdom of Imereti - the strongest in western Georgia, was itself extremely weak due to constant revolts by feudal aristocracy and succession wars (the last one, involving Salomon and his cousin David II, ending in 1792). In 1795, having just emerged from a four-year war against Turkey (1787-1791), Russia -- then under Catherine the Great -- had greater worries on the western front. Since early 1795, it was bracing for a major war against Prussia while agreeing to assist Britain its war against revolutionary France (See for example, http://www.napoleon-series.org/military/battles/c_catherine1.html)
Already Registered? Login Here
Register
Guest
Wednesday, 18 September 2019

Captcha Image

Our Partners