The source: “The Rise of Hamburg as a Global Marketplace in the 17th Century: A Comparative Political Economy Perspective” by Erik Lindberg, in Comparative Studies in Society and History, July ­2008.

Its ancient name means “lovely,” and the German port city of Lübeck in 1400 was one of the glories of Europe and a leading merchant trading center. In that distant era, as Europe recovered from the devastation of the Black Plague, Lübeck and its neighbor, Hamburg, had roughly similar social, econom­ic, and religious profiles, writes Erik Lindberg, a historian at Uppsala University in Sweden. They could have been twin cities: Lübeck connected to the Baltic Sea via the Trave River and Hamburg to the North Sea via the Elbe. Their divergent fates illustrate the perils of extreme ­protectionism.

At the dawn of the early modern period, the two cities veered in opposite political directions. In the face of increasing Baltic Sea competition from upstart traders from London and Amsterdam, Lübeck chose to protect its powerful land­own­ers and leading merchant guild by prohibiting importers from selling copper, furs, and grain to anybody other than a Lübeck merchant. Ham­burg, by contrast, encouraged trade with Dutch, Flemish, and English merchants, and even a score of Portuguese Jews were invited to move ­in.

The ­copper-­trading capital of Northern Europe, Lübeck began in 1607 to rigorously enforce a ­12th-­century imperial privilege that al­lowed it to prohibit “transit” trade. Commodities coming from Sweden had to be resold and re­loaded for transport down the 40-odd miles of the Stecknitz Canal and connected waterways to Hamburg for ship­ment to the Atlantic, or inland along the Elbe River. This “right of staple” medieval privilege was considered a corner­stone of the city’s wealth. It was rigorously guarded by the five or six aristocratic families who domin­ated the ruling council and the approximately 20 merchant families that con­trolled trade. Growth in the number of burghers was severely restricted to protect the income of the incumbents. For nearly two centur­ies Lübeck’s social and political structure remained frozen as cities elsewhere in Europe changed and ­grew.

This was the period of the Re­form­ation, and as it swept through German cities such as Lü­beck, the elite managed to stay in power even as Cath­olic institutions were abolished. In Hamburg, however, the religious upheaval led to the pas­sage of the “Long Ordin­ance” constitution in 1562, which guaranteed merchants substantial clout in city affairs and thus ensured that medieval guilds would not feel obliged to maintain a united front against the aristocrats. Aspiring merchants established the Ham­burg Ex­change, a market that brought in foreign traders and opened up business opportunities.

The presence in Hamburg of so many “merchant strangers” with knowledge and important contacts generated a commercial infrastructure. With 17th-century Europe convulsed by the Dutch revolt against Spain, Philip II’s annex­ation of Portugal (with its accompanying threats to the country’s Jewish mer­chant families), and King Louis XIV’s expulsion of Protes­tants from France, the relative freedom of religion and com­merce Hamburg offered attracted refugees and entrepre­neurs. And when the English parliament passed the Navigation Acts in the mid-17th century to protect England’s nation­al shipping from competi­tion, Hamburg was given a lucra­tive exemption—­a payoff for its earlier open door to London.

The for­tunes of the two German cities diverged, with Lübeck fading into near insignif­icance and Ham­burg be­coming the third most im­portant trading center on the continent. In the absence of reliable trade statistics and other busi­ness data, population serves as the best measure of relative econ­omic devel­opment, Lindberg says. In 1400 Lübeck and Hamburg were approximately the same size, and by 1700 Lübeck was still a city of around 25,000. Hamburg’s population was roughly 75,­000.