A new paper by Huning and Wolf explore how the Zollverein
was formed. A point it makes is that this episode serves as one of history's most dramatic examples of solving the
"double markup" trap. Before this 1834 customs union, the
German lands were fragmented into hundreds of tiny states, each acting
as a local monopoly over its stretch of road or river. As goods moved
across borders, every state added its own high transit toll, essentially a
successive markup on the wholesale cost. Just as a manufacturer and
retailer both adding high margins can kill consumer demand, these
"stacked" tolls inflated prices so severely depressed the volume of trade,
leaving both the merchants and the states’ treasuries worse off than if
they had coordinated.
The formation of the Zollverein effectively acted as a massive vertical integration
project for the German speaking peoples. Internal customs barriers were abolished and
replaced with a single, uniform external tariff with each state getting a share of the revenue based on its population. This eliminated the destructive cycle of successive markups, reduced final prices, and spurred a surge in cross-border trade. When independent entities in a
supply chain (or a geography) stop competing for individual margins and
start optimizing for the whole, the resulting efficiency gains can build
an empire.
No comments:
Post a Comment