Where It All Goes Down
Venice, usually in the mean streets; Belmont, at Portia's pad
Venice is an exciting, cosmopolitan setting for the play because it's a hotspot for trade. While Jews had been legally banned from England since 1290, Venice had laws in place to protect non-Venetian traders who supported the city's economic well-being. When the Jewish moneylender Shylock seeks his bond, for example, Antonio admits:
The Duke cannot deny the course of law.
For the commodity that strangers have
With us in Venice, if it be denied,
Will much impeach the justice of his state;
Since that the trade and profit of the city
Consisteth of all nations (3.3.29-34)
In other words, the Duke can't make an exception for Antonio by denying Shylock his rights; it would have a negative affect on the city's livelihood.
Although people from all kinds of nationalities and religious backgrounds did business in Venice, Shakespeare's setting is chock-full of religious strife, especially between Christians and Jews. This culminates in a big legal showdown over whether or not Shylock should be able to collect his pound of flesh from Antonio. We should also point out that, although 16th century Venice was more tolerant of foreigners than Elizabethan England, Jews in Venice were confined to ghettos at the time Shakespeare wrote The Merchant of Venice. (Shakespeare, however, doesn't ever acknowledge this in the play.)
Belmont is presented as a contrast to the city. It's also a place of easy wealth, beauty, and peace, which makes it a great refuge from the cosmopolitan world of Venice. Actually, Belmont's a lot like the forest of Arden in As You Like It. We might even say that life in Belmont is a kind of fairy-tale version of real life. Real life is gritty, more like Venice. Hmm. Is this why everyone heads back to Belmont to chill at the end of the play? Check out "What's Up With the Ending?" for more on this.