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The Amsterdam Entrepôt is the shorthand term that English-language economic
historiographers Historiography is the study of the methods used by historians in developing history as an academic discipline. By extension, the term "historiography" is any body of historical work on a particular subject. The historiography of a specific to ...
use to refer to the trade system that helped the
Dutch Republic The United Provinces of the Netherlands, commonly referred to in historiography as the Dutch Republic, was a confederation that existed from 1579 until the Batavian Revolution in 1795. It was a predecessor state of the present-day Netherlands ...
achieve primacy in world trade during the 17th century. The Dutch prefer the term , which has less currency in the English language.


The entrepôt system

In the
Middle Ages In the history of Europe, the Middle Ages or medieval period lasted approximately from the 5th to the late 15th centuries, similarly to the post-classical period of global history. It began with the fall of the Western Roman Empire and ...
, local rulers sometimes gave the right to establish staple ports to certain cities.
Amsterdam Amsterdam ( , ; ; ) is the capital of the Netherlands, capital and Municipalities of the Netherlands, largest city of the Kingdom of the Netherlands. It has a population of 933,680 in June 2024 within the city proper, 1,457,018 in the City Re ...
had never received such formal rights (unlike e.g., 
Dordrecht Dordrecht (), historically known in English as Dordt (still colloquially used in Dutch, ) or Dort, is a List of cities in the Netherlands by province, city and List of municipalities of the Netherlands, municipality in the Western Netherlands, lo ...
and
Veere Veere (; ) is a municipality with a population of 22,000 and a town with a population of 1,500 in the southwestern Netherlands, in the region of Walcheren in the province of Zeeland. History The name ''Veere'' means "ferry": Wolfert Van Bors ...
), but in practice, the city established a staple-market economy in the 15th and 16th centuries. This economy was not limited to a single commodity, though at first Baltic grain dominated it. It came into being because the economic and technological conditions of the time required a trade-network, based on what is known in economic terms as an
entrepôt An entrepôt ( ; ) or transshipment port is a port, city, or trading post where merchandise may be imported, stored, or traded, usually to be exported again. Such cities often sprang up and such ports and trading posts often developed into comm ...
, a central point (for a given geographic area) where goods are brought together and physically traded, before they are re-exported to their final destinations. This need followed from the fact that, in those days, transportation of goods was slow, expensive, irregular, and prone to disruption; and that supply and demand for goods fluctuated wildly and unpredictably. The risks entailed by these circumstances put a premium on the creation of such a fixed base, where commodities could be stockpiled prior to marketing and final
distribution Distribution may refer to: Mathematics *Distribution (mathematics), generalized functions used to formulate solutions of partial differential equations *Probability distribution, the probability of a particular value or value range of a varia ...
. Furthermore, concentrating storage, transport, and insurance facilities in one place helped reduce
transaction cost In economics, a transaction cost is a cost incurred when making an economic trade when participating in a market. The idea that transactions form the basis of economic thinking was introduced by the institutional economist John R. Commons in 1 ...
s and keep long-term prices more stable than they otherwise would have been. The entrepôt functioned thus as a central reservoir of commodities, a regulating mechanism smoothing out fluctuations in supply and demand over time and minimizing the effects of interruptions and bottlenecks. The entrepôt performed an additional function, a derivative of its primary market-function: the physical proximity of merchants promoted the exchange of information about market forces, prices, and developments in the factors underlying supply and demand. This not only lowered the cost of information-gathering but even led to decreasing marginal information costs. Other things being equal, this
externality In economics, an externality is an Indirect costs, indirect cost (external cost) or indirect benefit (external benefit) to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be conside ...
would lower the total marginal cost of goods trading through the entrepôt. It is a well-known economic fact that in circumstances of decreasing marginal costs,
economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of Productivity, output produced per unit of cost (production cost). A decrease in ...
occur, which can give an advantage to early entrants that permits them to outgrow their competitors, sometimes even leading to a
natural monopoly A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming adv ...
. This may explain why in the field of entrepôts certain markets (
Antwerp Antwerp (; ; ) is a City status in Belgium, city and a Municipalities of Belgium, municipality in the Flemish Region of Belgium. It is the capital and largest city of Antwerp Province, and the third-largest city in Belgium by area at , after ...
, Amsterdam) gained a dominant position for some time, while others (
London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...
,
Hamburg Hamburg (, ; ), officially the Free and Hanseatic City of Hamburg,. is the List of cities in Germany by population, second-largest city in Germany after Berlin and List of cities in the European Union by population within city limits, 7th-lar ...
) were left behind and only came into their own when the special circumstances favoring the others came to an end. In the case of Amsterdam, those circumstances changed when the technological possibilities of direct trade improved, obviating the intermediating function of the entrepôt.


Historical evolution of the system

The mechanism underlying the entrepôt trading-system does not explain the peculiar success of the Dutch Republic and Amsterdam in particular. Other merchant cities might have gained this prize and as a matter of fact, Antwerp for a time did. But the Antwerp entrepôt was destroyed with the Fall of Antwerp (1584–1585) and the subsequent expulsion of its
Calvinist Reformed Christianity, also called Calvinism, is a major branch of Protestantism that began during the 16th-century Protestant Reformation. In the modern day, it is largely represented by the Continental Reformed Protestantism, Continenta ...
inhabitants (half of the city population), followed by the centuries-long blockade of the
Scheldt The Scheldt ( ; ; ) is a river that flows through northern France, western Belgium, and the southwestern part of Netherlands, the Netherlands, with its mouth at the North Sea. Its name is derived from an adjective corresponding to Old Englis ...
trade. To explain the Dutch success we have to take account of a number of factors that in isolation still do not explain the Dutch primacy in world trade, but whose interplay may go far in doing that. The Dutch had gained an important role in the Baltic trade (grain especially) in the 15th and 16th century because of the nature of commodities exchanged (herring for grain, a low-value, high-volume bulk trade) and the dominance of the Dutch in the herring fisheries. These factors became dominant in this trade because Dutch shippers experienced a structural fall in shipping costs due to revolutionary innovations in shipbuilding (the wind-driven
sawmill A sawmill (saw mill, saw-mill) or lumber mill is a facility where logging, logs are cut into lumber. Modern sawmills use a motorized saw to cut logs lengthwise to make long pieces, and crosswise to length depending on standard or custom sizes ...
) — which brought down construction costs — and in ship-design (the
Fluyt A fluyt (archaic Dutch language, Dutch: ''fluijt'' "flute"; ) is a Dutch type of sailing ship, sailing vessel originally designed by the shipwrights of Hoorn as a dedicated ship transport, cargo vessel. Originating in the Dutch Republic in the 16 ...
ship that required smaller crews) at the turn of the 17th century. This so improved their competitive position that they soon dominated the European bulk trades, not only the Baltic trade, but also the salt trade of the
Iberian Peninsula The Iberian Peninsula ( ), also known as Iberia, is a peninsula in south-western Europe. Mostly separated from the rest of the European landmass by the Pyrenees, it includes the territories of peninsular Spain and Continental Portugal, comprisin ...
. High profitability of the bulk trade resulted in the possibility of large savings, and the reservoir of savings looking for profitable investment eventually resulted in a lowering of
interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...
s as a primary effect, and of the development of sophisticated financial markets as a secondary effect. Such financial markets also profited from the phenomenon of decreasing marginal information cost; this soon helped make Amsterdam an important financial center also. The physical proximity of a strong financial sector partially explains why after 1590 Amsterdam also became a center for the low-volume, high-value "rich trades" (i.e., commodities like
spices In the culinary arts, a spice is any seed, fruit, root, Bark (botany), bark, or other plant substance in a form primarily used for flavoring or coloring food. Spices are distinguished from herbs, which are the leaves, flowers, or stems of pl ...
,
silk Silk is a natural fiber, natural protein fiber, some forms of which can be weaving, woven into textiles. The protein fiber of silk is composed mainly of fibroin and is most commonly produced by certain insect larvae to form cocoon (silk), c ...
, and high-quality
textiles Textile is an Hyponymy and hypernymy, umbrella term that includes various Fiber, fiber-based materials, including fibers, yarns, Staple (textiles)#Filament fiber, filaments, Thread (yarn), threads, and different types of #Fabric, fabric. ...
). In such trades the Dutch low shipping rates did not necessarily provide a competitive advantage. What did attract the specialists in this type of trade (apart from the favorable financing possibilities) was the influx of
skilled worker A skilled worker is any worker who has special skill, training, or knowledge which they can then apply to their work. A skilled worker may have learned their skills through work experience, on-the-job training, an apprenticeship program or f ...
s and entrepreneurs from the southern Netherlands in the 1580s that helped transfer the sophisticated Flemish textile industry to the Republic. This gave her an industrial base for her export trade. The "rich trades" were also stimulated by government intervention, as they were by nature (because of the price-inelasticity of their demand) prone to large price fluctuations (as a little over-supply would bring about a large fall in prices). The readiness of the Dutch government to regulate markets and to provide legal
monopolies A monopoly (from Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic competition to produce a particular thing, a lack of viable sub ...
to chartered companies like the
Dutch East India Company The United East India Company ( ; VOC ), commonly known as the Dutch East India Company, was a chartered company, chartered trading company and one of the first joint-stock companies in the world. Established on 20 March 1602 by the States Ge ...
helped to lessen the risk of investment in such enterprises. All these factors conspired to concentrate trade at entrepôts (in view of their trade advantages as described above) and in particular at the Amsterdam entrepôt (once Antwerp had been eliminated as a competitor) because of the time-window (1590-1620) in which they came to exert their influence. The rise of the Amsterdam entrepôt was therefore to some extent also a matter of being in the right place at the right time. But once the entrepôt had been established, its growth-promoting peculiarities helped Amsterdam (and the port cities in the maritime zone of the Netherlands, interlinked to Amsterdam by the area's
inland waterway A waterway is any navigable body of water. Broad distinctions are useful to avoid ambiguity, and disambiguation will be of varying importance depending on the nuance of the equivalent word in other ways. A first distinction is necessary bet ...
s) achieve its position of economic preeminence. Eventually this preeminence would be undermined by technological and economic changes that would eliminate the advantages of the entrepôt and promote
disintermediation Disintermediation is the removal of intermediary, intermediaries in economics from a supply chain, or "cutting out the middlemen" in connection with a transaction or a series of transactions. Instead of going through traditional distribution cha ...
. However, these developments were not to occur until the 18th century. During the 17th century, the need for intermediation in commodities and financial markets still reigned supreme. The Amsterdam entrepôt provided great advantages to European consumers and producers (inherent in its operation) and to the merchants that used it. But there also were losers in the process. Competitors, like the
Hanseatic The Hanseatic League was a Middle Ages, medieval commercial and defensive network of merchant guilds and market towns in Central Europe, Central and Northern Europe, Northern Europe. Growing from a few Northern Germany, North German towns in the ...
and English merchants, lost appreciable
market share Market share is the percentage of the total revenue or sales in a Market (economics), market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those ...
and hence income, especially after the trade embargoes imposed by Spain on Dutch commerce during the
Eighty Years' War The Eighty Years' War or Dutch Revolt (; 1566/1568–1648) was an armed conflict in the Habsburg Netherlands between disparate groups of rebels and the Spanish Empire, Spanish government. The Origins of the Eighty Years' War, causes of the w ...
had been lifted. The resurgence of Dutch trade on Spain and Portugal and other Mediterranean countries after 1647 overwhelmed the Republic's competitors. To remedy this situation, first England and later France took to coercion in the form of economic and military warfare. The English
Navigation Acts The Navigation Acts, or more broadly the Acts of Trade and Navigation, were a series of English laws that developed, promoted, and regulated English ships, shipping, trade, and commerce with other countries and with its own colonies. The laws al ...
of 1651 and 1660-1663 restricted free trade in an attempt to divert trade to a putative London entrepôt. However, as the Acts only regulated English and colonial trade (and imperfectly so) and England only managed to dominate a few commodities markets for which it formed the main customer, these attempts were never successful. England would only achieve primacy in world trade after other factors had undermined the Dutch entrepôt. French protectionism was eventually more successful, because the French and Dutch economies were complementary, rather than competitive like the Dutch and English economies. Restricting trade between France and the Republic therefore resulted in the roll-back of the specialization that
Comparative advantage Comparative advantage in an economic model is the advantage over others in producing a particular Goods (economics), good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior t ...
had engendered in both economies (though at great cost to the French consumer also) and helped throttle the once-flourishing Dutch industries. In the 17th century, the economic elite of Amsterdam moved with William of Orange to England, where they helped to restart the English international trade, leaving behind in Amsterdam the more religious, and less competitive, burghers. During the 18th century this combination of adverse economic and technological developments (promoting
disintermediation Disintermediation is the removal of intermediary, intermediaries in economics from a supply chain, or "cutting out the middlemen" in connection with a transaction or a series of transactions. Instead of going through traditional distribution cha ...
) and foreign protectionism led to a relative decline of Dutch preeminence in world trade and of the Amsterdam entrepôt. It also led to a fundamental restructuring of the Dutch economy, with a large degree of
deindustrialization Deindustrialization is a process of social and economic change caused by the removal or reduction of industrial capacity or activity in a country or region, especially of heavy industry or manufacturing industry. There are different interpr ...
and a shift to service industries, like merchant banking, and
foreign direct investment A foreign direct investment (FDI) is an ownership stake in a company, made by a foreign investor, company, or government from another country. More specifically, it describes a controlling ownership an asset in one country by an entity based i ...
in emerging economies, like the Great Britain of the
Industrial Revolution The Industrial Revolution, sometimes divided into the First Industrial Revolution and Second Industrial Revolution, was a transitional period of the global economy toward more widespread, efficient and stable manufacturing processes, succee ...
.De Vries and Van der Woude, pp. 141-147, 681-683 By that time there was no longer a role for entrepôts in world trade—except
Rotterdam Rotterdam ( , ; ; ) is the second-largest List of cities in the Netherlands by province, city in the Netherlands after the national capital of Amsterdam. It is in the Provinces of the Netherlands, province of South Holland, part of the North S ...
, New York,
Singapore Singapore, officially the Republic of Singapore, is an island country and city-state in Southeast Asia. The country's territory comprises one main island, 63 satellite islands and islets, and one outlying islet. It is about one degree ...
, and Hong Kong.


Notes


Sources

* (1989), ''Dutch Primacy in World Trade 1585-1740'', Clarendon Press Oxford, * (1997), "England's Mercantilist Response to Dutch World Trade Primacy, 1647-74," in: ''Conflicts of Empires. Spain, the Low Countries and the struggle for world supremacy 1585-1713''. Hambledon Press, , pp. 305–318 * (1995) ''The world economy and national finance in historical perspective''. University of Michigan Press, , * (2006) ''The Rise of the Amsterdam Market and Information Exchange''. Aldershot, Hants * (1997), ''The First Modern Economy. Success, Failure, and Perseverance of the Dutch Economy, 1500-1815'', Cambridge University Press, {{DEFAULTSORT:Amsterdam Entrepot Economies by former country Economic history of the Dutch Republic