In 1339 under Genoa's first doge...a new principal [sic?] was established of paying variable interest on the consolidated debt, depending on the level of customs revenue, which in turn depended on the level of trade. As a result of this change, holding Genoese debt began to resemble holding an equity stake in this state. David Stasavage (2011) States of Credit: Size, Power, and the Development of European Polities, 118. [HT Deborah Boucoyannis]
The passage I quote from Stasavage is an aside in the larger, fascinating argument of the book. The book's main argument is about the relationships among territorial size, the nature of political representation, monitoring costs, and the origin of state debts. His core conclusion is that in Europe (in a band originating in Carolingian Lotharingia) merchant oligarchies in relatively compact territories and with (modestly) representative institutions were able to solve all the monitoring and principal agent problems such that states could establish long term debt on relatively cheap terms. And this allowed these city-states to remain independent (or in the case of the Dutch Republic become independent) in the face of much larger and more populated state rivals. Methodologically, the book is interesting because it combines econometric techniques, historical research, and qualitative research to offer causal history that takes the interactions among geography, political economy, and political history seriously.*
Stasavage is not the first major political theorist to call attention to the significance of Genoese political economy for political theory. Inspired by Machiavelli, Hume had done so in his clever and important (1742) essay Politics May Be Reduced to a Science. Interestingly enough Stasavage mentions and discusses Hume's source, Machiavelli's Florentine Histories (see pp. 117-122), but not Hume's analysis. Stasavage treats Machiavelli's account (it's in Book 8, chapter 6 of the Florentine History) as a rival to his own. Stasavage interprets Machiavelli as claiming that with the establishment of the Casa di San Giorgio a governance problem was solved, by insulating financial management from political turmoil, and therefore interest rates dropped. But Stasavage notes that interest rates dropped much further and more durably only after the Andrea Doria Republic was establishment (that is, Genoa became a permanent oligarchic polity).
While I wouldn't say that Stasavage is unfair to Machiavelli (who is really not interested in interest rates), he kind of misses Machiavelli's point. Hume's analysis is much closer to the mark: "And so little dependance has this affair on the humours and education of particular men, that one part of the same republic may be wisely conducted, and another weakly, by the very same men, merely on account of the difference of the forms and institutions, by which these parts are regulated." Hume then gives Casa di San Giorgio and Genoa as an example, and then cites and quotes Machiavelli in Italian as his source. That is, Hume treats the example as an exemplar of the significance of institutional design and the role of incentives in them (in part to rule out competing explanations of differences in political governance). In this way Hume already anticipates part of Stasavage's own instititutional insights.
As an aside, Machiavelli's own methodological conclusion of Casa di San Giorgio case is to treat it as "A truly rare example, and one never found by the philosophers in all their imagined or dreamed of republics, to see in the same circle, among the same citizens, liberty and tyranny, the civil and the corrupt life, justice and license." That is, rather than opting for the method of thought experiments (and ideal theory), philosophers should use actual history and what we would call 'empirical social science' as the evidential input for their theorizing because (a particular) philosophical imagination tends to be more impoverished than reality. (This too inspired Hume and, earlier, Spinoza (recall).)
Even so, the passage I quoted from Stasavage above calls attention to a remarkable fact that once variable interest dependent not just on taxing power but also on underlying economic conditions was introduced, state creditors are turned from citizens into something more akin to shareholders of a corporation. When these shareholders are also the ruling elite they run, as Stasavage shows repeatedly, the corporation for their own economic interests by, for example, pushing the tax burden on (regressive) excise taxes (which hit the consumption of the working poor especially hard). In Stasavage's account this is also a source of political instability because it generates popular revolts.
The idea of equity in a state is a significant one if we peek ahead at the history of imperialism. We tend to forget that the great Dutch and British colonial enterprises were originally built around corporations (state granted monopolies with trading privileges), their East India [and West India] Companies, who treated the people and land they acquired as property of the corporation to be used for trade and production. Shares of these corporations were listed and trade-able, paying out dividends. In the Dutch case, there was, in fact, great overlap between the political elite and merchants/shareholders who ran the trading companies. (I am less familiar with the British case.) This is what led Adam Smith to claim that "The Government of an exclusive company of merchants is, perhaps the worst of all governments for any country whatever." In context he is talking of the Danish control of St. Thomas and Santa Cruz, but from larger context it's clear he is describing all colonial Corporations. But since Smith was intimately familiar with Hume's economic writings (and well read in Machiavelli), and since he emphasizes 'any country whatever' it is not impossible that he is also thinking of (Genoa's) merchant olicharchy.
I close with two observation. There is sometimes a tacit tendency to think that the increasing focus on economic parameters in analysis of politics is a consequence of the dominance of economic theory. This is often accompanied by the thought that economics is the only or the major ruling value. Often the thought is followed by a lament of the loss of influence of other values (solidarity, community, etc.). And, indeed, if we look at the passage quoted from Machiavelli we see how list of values ("liberty and tyranny, the civil and the corrupt life, justice and license") that do not enter into technocratic policy science (with possible exception of justice). So, my first observation is that the recent U.S. Presidential election reminds us of the robustness of Machiavelli's list. Second, that indeed sometimes practice precedes theory/thought greatly. The Genoese invented oligarchic, state capitalism long before it was exported as imperialism outside of Europe and theory caught up with the possibility.
*My one criticism would be that it does not really employ economic theory or modeling. This matters because the books treats reduced cost of borrowing, low interest, as evidence and a proxy for successful monitoring (reduced risk/more trust, etc.) and thus a willingness to lend. But (i) low interest rates can also signal an economic depression and lack of (alternative) profitable opportunities. This is, in fact, compatible with the evidence that Stasavage offers because he notes the phenomenon of economic stagnation that often accompanies merchant oligarchies over time (see p. 165); (II) Stasavage is silent on the significance of the discovery and conquest of the Americas (after 1500), which expanded the money greatly for a great period of time (that is, this is a factor that is not explored in his regressions). But this matters because (a) it coincides with territorial states being able to establish credit (so one may wonder if easier credit more generally didn't help them overcome some of the monitoring problems); (b) Stasavage notes that alongside the secular decline in interest rates there was a long-term secular decline in land-rents (which is also a proxy for interest rates) [see pp. 40-1 for useful graphs], this secular decline precedes the discover of America, to be sure, but it is likely that it was aided along by the increased money supply. My criticism in this paragraph does not undermine Stasave's findings when it comes to relative performance of cities and states and what kinds of ruling elites and representative institutions may be necessary for the establishment of state credit.