Economic History Of The Netherlands (1500–1815)
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The economic history of the Netherlands (1500–1815) covers the
Netherlands , Terminology of the Low Countries, informally Holland, is a country in Northwestern Europe, with Caribbean Netherlands, overseas territories in the Caribbean. It is the largest of the four constituent countries of the Kingdom of the Nether ...
as the
Habsburg Netherlands Habsburg Netherlands were the parts of the Low Countries that were ruled by sovereigns of the Holy Roman Empire's House of Habsburg. This rule began in 1482 and ended for the Northern Netherlands in 1581 and for the Southern Netherlands in 1797. ...
, through the era of 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 ...
, the
Batavian Republic The Batavian Republic (; ) was the Succession of states, successor state to the Dutch Republic, Republic of the Seven United Netherlands. It was proclaimed on 19 January 1795 after the Batavian Revolution and ended on 5 June 1806, with the acce ...
and the
Kingdom of Holland The Kingdom of Holland ( (contemporary), (modern); ) was the successor state of the Batavian Republic. It was created by Napoleon Bonaparte in March 1806 in order to strengthen control over the Netherlands by replacing the republican governmen ...
. After becoming de facto independent from the empire of
Philip II of Spain Philip II (21 May 152713 September 1598), sometimes known in Spain as Philip the Prudent (), was King of Spain from 1556, King of Portugal from 1580, and King of Naples and List of Sicilian monarchs, Sicily from 1554 until his death in 1598. He ...
around 1585 the country experienced almost a century of explosive economic growth. The young Republic become the dominant trade power by the mid-17th century, partly due to its shipbuilding. In 1670, the Dutch merchant marine totalled 568,000 tons of shipping—about half the European total. Pillars of this position were the dominance of the Amsterdam Entrepôt in European trade, and that of the Dutch East and West India Companies (VOC and WIC) in intercontinental trade. The Dutch society had possibly the highest standard of living in Europe (and probably in the world) by the middle of the 17th century. Affluence facilitated a
Golden Age The term Golden Age comes from Greek mythology, particularly the ''Works and Days'' of Hesiod, and is part of the description of temporal decline of the state of peoples through five Ages of Man, Ages, Gold being the first and the one during wh ...
in culture typified by the artist Rembrandt van Rijn (1606–1669). However, around 1670 a combination of politico-military upheavals (wars with France and England) and adverse economic developments (a break in the upward secular trend of price levels) brought the Dutch economic boom to an abrupt end. This caused a retrenchment of the Dutch economy in the period up to 1713, in which the industrial sector was partly dismantled and growth in trade leveled off. The economy struck out in new directions, including
whaling Whaling is the hunting of whales for their products such as meat and blubber, which can be turned into a type of oil that was important in the Industrial Revolution. Whaling was practiced as an organized industry as early as 875 AD. By the 16t ...
, colonial plantations in
Suriname Suriname, officially the Republic of Suriname, is a country in northern South America, also considered as part of the Caribbean and the West Indies. It is a developing country with a Human Development Index, high level of human development; i ...
, and new types of trade with Asia. However, these riskier ventures often failed to bring commensurate gains. The VOC embarked on a period of profitless growth. The financial strength proved more durable, enabling the Netherlands to play the role of a major power in the European conflicts around the turn of the 18th century by hiring mercenary armies and subsidizing its allies. These conflicts put an enormous strain on the resources of the Republic, however, and for that reason the Republic (like its opponent, the France of
Louis XIV LouisXIV (Louis-Dieudonné; 5 September 16381 September 1715), also known as Louis the Great () or the Sun King (), was King of France from 1643 until his death in 1715. His verified reign of 72 years and 110 days is the List of longest-reign ...
) was deeply in debt at the end of the
War of the Spanish Succession The War of the Spanish Succession was a European great power conflict fought between 1701 and 1714. The immediate cause was the death of the childless Charles II of Spain in November 1700, which led to a struggle for control of the Spanish E ...
. The regents of the Republic more or less abandoned its Great-Power pretensions after 1713, cutting down on its military preparedness in a vain attempt to pay down this overhang of public debt. That debt brought a significant ''rentier'' class into being that helped change the nature of the economy from one invested primarily in trade and industry into one in which a significant financial sector played a dominant role. By the end of the 18th century the Republic was the major market for
sovereign debt A country's gross government debt (also called public debt or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit occ ...
, and a major source of foreign direct investment. Wars with Great Britain and France at the end of the 18th century, and attendant political upheavals, caused a financial and economic crisis from which the economy was unable to recover. After the successors of the Republic (the Batavian Republic and the Kingdom of Holland) were forced to engage in policies of economic warfare against the French Empire, which proved disastrous for Dutch trade and industry; most of the gains of the previous two centuries were rapidly lost. The newly independent
Kingdom of the Netherlands The Kingdom of the Netherlands (, ;, , ), commonly known simply as the Netherlands, is a sovereign state consisting of a collection of constituent territories united under the monarch of the Netherlands, who functions as head of state. The re ...
was faced in 1815 with an economy that was largely deindustrialized and deurbanized, but still saddled with a crippling public debt, which it was forced to repudiate (the first time that the Dutch state defaulted since the dark pre-independence days of the Revolt).


Development

The
economic history Economic history is the study of history using methodological tools from economics or with a special attention to economic phenomena. Research is conducted using a combination of historical methods, statistical methods and the Applied economics ...
of the Netherlands may be written from different perspectives. The following section approaches it as a
developing economy A developing country is a sovereign state with a less-developed industrial base and a lower Human Development Index (HDI) relative to developed countries. However, this definition is not universally agreed upon. There is also no clear agreemen ...
, going through several stages, resembling a life-cycle. A sectoral approach may be found in other articles, such as Maritime history of the Netherlands,
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 ...
and
Dutch West India Company The Dutch West India Company () was a Dutch chartered company that was founded in 1621 and went defunct in 1792. Among its founders were Reynier Pauw, Willem Usselincx (1567–1647), and Jessé de Forest (1576–1624). On 3 June 1621, it was gra ...
for trade; the Greenland and Spitsbergen Fishery for whaling; and
Financial history of the Dutch Republic The financial history of the Dutch Republic involves the interrelated development of financial institutions in the Dutch Republic. The rapid economic development of the country after the Dutch Revolt in the years 1585–1620 accompanied by an ...
for banking and finance, plus sundry articles on the history of industries.


Pre-Revolt economy

The territory of the northern maritime provinces that would later constitute the Dutch Republic (previously disparate
fief A fief (; ) was a central element in medieval contracts based on feudal law. It consisted of a form of property holding or other rights granted by an overlord to a vassal, who held it in fealty or "in fee" in return for a form of feudal alle ...
s of the
Holy Roman Empire The Holy Roman Empire, also known as the Holy Roman Empire of the German Nation after 1512, was a polity in Central and Western Europe, usually headed by the Holy Roman Emperor. It developed in the Early Middle Ages, and lasted for a millennium ...
) were gathered together under the
suzerainty A suzerain (, from Old French "above" + "supreme, chief") is a person, state (polity)">state or polity who has supremacy and dominant influence over the foreign policy">polity.html" ;"title="state (polity)">state or polity">state (polity)">st ...
of the
Duchy of Burgundy The Duchy of Burgundy (; ; ) was a medieval and early modern feudal polity in north-western regions of historical Burgundy. It was a duchy, ruled by dukes of Burgundy. The Duchy belonged to the Kingdom of France, and was initially bordering th ...
in the late 15th century. In the late
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 ...
these territories already formed part of a premodern economic system with its own measure of integration, brought about by intensive trade relations. That economic system formed the matrix in which the later economic development took place. The territory that would become the
Southern Netherlands The Southern Netherlands, also called the Catholic Netherlands, were the parts of the Low Countries belonging to the Holy Roman Empire which were at first largely controlled by Habsburg Spain (Spanish Netherlands, 1556–1714) and later by the ...
held a central position in this trade network at the time, while the provinces formed a periphery.
Flanders Flanders ( or ; ) is the Dutch language, Dutch-speaking northern portion of Belgium and one of the communities, regions and language areas of Belgium. However, there are several overlapping definitions, including ones related to culture, la ...
and the
Duchy of Brabant The Duchy of Brabant, a Imperial State, state of the Holy Roman Empire, was established in 1183. It developed from the Landgraviate of Brabant of 1085–1183, and formed the heart of the historic Low Countries. The Duchy comprised part of the Bu ...
were further advanced industrially than Holland and Zeeland, and the metropolitan port city of
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 ...
held the position of main entrepôt in northwestern Europe, as the hub in a far-flung trade web that spanned the whole known world. The ports in the northern provinces had only a regional importance, though
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 already built up a preponderant position in the
Baltic Baltic may refer to: Peoples and languages *Baltic languages, a subfamily of Indo-European languages, including Lithuanian, Latvian and extinct Old Prussian *Balts (or Baltic peoples), ethnic groups speaking the Baltic languages and/or originatin ...
trade, after making inroads on the monopoly of the
Hanseatic League 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 ...
in the late 15th century. Although the northern provinces had an as yet subordinate position in the aggregate economy of the Habsburg Netherlands, let alone in the entire Habsburg empire, they possessed economic features that set them apart from the rest of Europe, and presented them with opportunities that did not exist elsewhere. Unlike other parts of Europe these lands had not been ravaged severely by the plague
pandemic A pandemic ( ) is an epidemic of an infectious disease that has a sudden increase in cases and spreads across a large region, for instance multiple continents or worldwide, affecting a substantial number of individuals. Widespread endemic (epi ...
of the 14th century, though like elsewhere that catastrophe contributed to scarcity of labor in the 15th century. The region also faced catastrophe of an ecological nature: the low-lying area was yet insufficiently protected against the sea and was repeatedly subjected to major flooding, of which the St. Elizabeth's flood (1421) was only an outstanding example. This resulted in a major permanent loss of arable land. In addition, the land in the maritime provinces consisted mostly of peat bogs, which form poor land for agriculture, and were at the time extensively exploited for the fuel peat. This resulted again in extensive permanent loss of arable land. Because of these losses many people were driven from the land and forced to seek employment in urban centers. This caused a degree of
urbanization Urbanization (or urbanisation in British English) is the population shift from Rural area, rural to urban areas, the corresponding decrease in the proportion of people living in rural areas, and the ways in which societies adapt to this change. ...
even larger than that in Flanders, but also a
labor supply In Mainstream economics, mainstream economic theories, the labour supply is the total hours (adjusted for intensity of effort) that workers wish to work at a given real wage rate. It is frequently represented graphically by a labour supply curve, ...
for non-agricultural purposes that was more
elastic Elastic is a word often used to describe or identify certain types of elastomer, Elastic (notion), elastic used in garments or stretch fabric, stretchable fabrics. Elastic may also refer to: Alternative name * Rubber band, ring-shaped band of rub ...
than elsewhere in Europe.De Vries and Van der Woude, p. 666 Although the immediate result of this elastic supply was downward pressure on wages, it also presented an opportunity for explosive growth when aggregate consumer demand in Europe finally rebounded from the long depression, caused by the population losses of the pandemic. Besides, there were alternative employment opportunities that did not exist elsewhere. Technological developments in fisheries (new methods of cleaning and preserving
herring Herring are various species of forage fish, belonging to the Order (biology), order Clupeiformes. Herring often move in large Shoaling and schooling, schools around fishing banks and near the coast, found particularly in shallow, temperate wate ...
developed in the maritime provinces around this time) caused a major change in the economics of fisheries. Similar developments in shipping technology led to an explosion in seagoing trade. Finally, the development of dikes and drainage techniques (
windmill A windmill is a machine operated by the force of wind acting on vanes or sails to mill grain (gristmills), pump water, generate electricity, or drive other machinery. Windmills were used throughout the high medieval and early modern period ...
s,
sluice A sluice ( ) is a water channel containing a sluice gate, a type of lock to manage the water flow and water level. There are various types of sluice gates, including flap sluice gates and fan gates. Different depths are calculated when design s ...
s) laid the base for new forms of agriculture (
dairy A dairy is a place where milk is stored and where butter, cheese, and other dairy products are made, or a place where those products are sold. It may be a room, a building, or a larger establishment. In the United States, the word may also des ...
farming) in the maritime provinces. These developments did not result directly in a major change in the economic structure of the Habsburg Netherlands. However, they provided a springboard for the developments that would follow the political upheaval that would become known as the
Dutch Revolt 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 government. The causes of the war included the Reformation, centralisation, exc ...
in the second part of the 16th century. This political development had a number of important economic consequences. First of all, it led to an economic rupture with the Habsburg Empire, seen as a loose economic entity. By the time the Revolt erupted the disadvantages of being part of this empire (heavy taxation to finance the military adventures of the Habsburg rulers) began to outweigh the advantages of belonging to its trade network. One of these advantages had been enjoying the services of the Antwerp entrepôt. In the economic and technological circumstances of the time such 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 ...
(or to use the Dutch term: ''stapelmarkt'') fulfilled important functions. The word has connotations of a duty-free port, but in an economic sense, a ''stapelmarkt'' was a place where commodities were temporarily physically stocked for future reexport. This was viable because of a legal monopoly for stockpiling a single commodity (wool), granted by a political ruler (like the staple ports designated by the kings of England in medieval times), but also more generally because of technical and economic reasons that still give certain advantages to a spoke-hub distribution paradigm. An important ancillary function of such a physical stock of commodities is that it makes it easier for merchants to even out supply fluctuations, and hence to control price gyrations in thin and volatile markets. Finally, where a physical market forms, market information can more easily be gathered. This was actually the most important economic function of a ''stapelmarkt'' in the primitive circumstances of the late 16th century. Antwerp-as-entrepôt was already in decline before the Revolt, and before the Fall of Antwerp that sealed its fate as a major commercial center. But its demise started a scramble of other ports that wanted to take over its essential economic function, and Amsterdam (and to a lesser extent other major Dutch ports like
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 ...
and
Enkhuizen Enkhuizen () is a municipality and a city in the Netherlands, in the province of North Holland and the region of West-Frisia. History Enkhuizen, like Hoorn and Amsterdam, was one of the harbour-towns of the VOC, from where overseas trade ...
) succeeded in doing so, though it was not a foregone conclusion that this prize would not go to London,
Bremen Bremen (Low German also: ''Breem'' or ''Bräm''), officially the City Municipality of Bremen (, ), is the capital of the States of Germany, German state of the Bremen (state), Free Hanseatic City of Bremen (), a two-city-state consisting of the c ...
or
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 ...
. However, the political circumstances of the Revolt probably helped the displaced
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 ...
merchants of Antwerp settle near their northern coreligionists, and bring their money with them. More important, however, must have been the advantages of Amsterdam, which already gave it a strong position in the Baltic trades: elastic supplies of shipping and labor, low
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 efficient markets.


The Golden Age

These developments set the stage for the era of explosive economic growth that is roughly coterminous with the period of social and cultural bloom that has been called the
Dutch Golden Age The Dutch Golden Age ( ) was a period in the history of the Netherlands which roughly lasted from 1588, when the Dutch Republic was established, to 1672, when the '' Rampjaar'' occurred. During this period, Dutch trade, scientific development ...
, and formed the material basis for that cultural era. During the numerous years of Dutch economic growth the average GDP per capita increased by 0.18 percent per annum; at about 1810 the growth rate was about 1 percent annually. Amsterdam became the hub of world trade, the center into which staples such as rye and luxuries flowed for sorting, processing, and distribution, and then were reexported around Europe and the world. In 1670, the Dutch merchant marine totalled 568,000 tons of shipping—about half the European total.


First stage: 1585–1622

A determining trait of the 1588885 through 1622 period was the rapid accumulation of trade capital. The
seed money Seed money, also known as seed funding or seed capital, is a form of securities offering in which an investor puts capital in a startup company in exchange for an equity stake or convertible note stake in the company. The term ''seed'' suggest ...
for this expansion was brought in by displaced Antwerp merchants and by other European merchants (for instance the
New Christian New Christian (; ; ; ; ; ) was a socio-religious designation and legal distinction referring to the population of former Jews, Jewish and Muslims, Muslim Conversion to Christianity, converts to Christianity in the Spanish Empire, Spanish and Po ...
s who were displaced from the Iberian lands by religious persecution) that were quickly attracted by the new opportunities in Amsterdam. These merchants often invested in high-risk ventures like pioneering expeditions to the
East Indies The East Indies (or simply the Indies) is a term used in historical narratives of the Age of Discovery. The ''Indies'' broadly referred to various lands in Eastern world, the East or the Eastern Hemisphere, particularly the islands and mainl ...
to engage in the
spice trade The spice trade involved historical civilizations in Asia, Northeast Africa and Europe. Spices, such as cinnamon, cassia, cardamom, ginger, pepper, nutmeg, star anise, clove, and turmeric, were known and used in antiquity and traded in t ...
. These ventures were soon consolidated in 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 ...
(VOC). There were similar ventures in different fields, however, like the trade in Russia and the
Levant The Levant ( ) is the subregion that borders the Eastern Mediterranean, Eastern Mediterranean sea to the west, and forms the core of West Asia and the political term, Middle East, ''Middle East''. In its narrowest sense, which is in use toda ...
. The profits of these ventures were ploughed back into financing new trade, which led to an exponential growth thereof.


Merchant capitalism

Dutch " merchant capitalism" was based on trading, shipping and finance rather than manufacturing or agriculture and marked the transition of the Dutch economy to a new stage. The accumulation of capital in the enormous amounts generated in this period caused demand for productive investment opportunities beside the immediate reinvestment in the own business. It also necessitated innovative institutional arrangements to bring demand and supply of investment funds together. From this period date the
Amsterdam Stock Exchange Euronext Amsterdam is a stock exchange based in Amsterdam, the Netherlands. Formerly known as the Amsterdam Stock Exchange (), it merged on 22 September 2000 with the Brussels Stock Exchange and the Paris Stock Exchange to form Euronext. The ...
and the Amsterdamsche Wisselbank. There were also innovations in
marine insurance Marine insurance covers the physical loss or damage of ships, cargo, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination. Cargo insurance a sub-branch of mari ...
and legal structuring of firms like the
joint stock company A joint-stock company (JSC) is a business entity in which shares of the company's capital stock, stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their share (finance), shares (certifi ...
. These innovations helped manage
risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environ ...
. For example, ships were financed by shares, with each of 16 merchants, say, holding a 1/16 share. This minimized risk and maximized opportunity for windfall gains.


Staple market

Even more important in this respect was the staple market (''stapelmarkt'') itself that helped to manage the risk of price fluctuations. Related instruments were the provision of
trade credit Trade credit is the loan extended by one trader to another when the goods and services are bought on credit. Trade credit facilitates the purchase of supplies without immediate payment. Trade credit is commonly used by business organizations as a ...
to suppliers in order to secure favored access to raw materials (Dutch merchants routinely bought up grain harvests in the Baltic area and grape harvests in France, important in the wine trade, before they were harvested) and the financing of commodity trade with bills of exchange, which helped bind customers to the merchant. The system was not just geared to reexport of commodities, but it also serviced a large domestic market, either as a final consumer, or as an intermediate user of
raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials/Intermediate goods that are feedstock for future finished ...
s and intermediate products for processing to finished products. The Republic was small, to be sure, but its urban population around 1650 was larger than that of the British Isles and Scandinavia combined. It was also larger than that of all German lands (admittedly devastated by the
Thirty Years' War The Thirty Years' War, fought primarily in Central Europe between 1618 and 1648, was one of the most destructive conflicts in History of Europe, European history. An estimated 4.5 to 8 million soldiers and civilians died from battle, famine ...
at the time). This closeness to a sizable domestic market helped the Amsterdam market perform its price-stabilizing function.


Technological innovations

The explosive growth in
capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form ...
directly led to an equally explosive growth in investment in fixed capital for industries related to trade. Technological innovations like 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 ...
(invented by Cornelis Corneliszoon), which significantly increased productivity in ship building, offered opportunities for profitable investment, as did the textile industries (mechanized
fulling Fulling, also known as tucking or walking ( Scots: ''waukin'', hence often spelt waulking in Scottish English), is a step in woollen clothmaking which involves the cleansing of woven cloth (particularly wool) to eliminate ( lanolin) oils, ...
, new
draperies Drapery is a general word referring to cloths or textiles (Old French , from Late Latin">-4; we might wonder whether there's a point at which it's appropriate to talk of the beginnings of French, that is, when it wa ... , from Late Latin ). It ma ...
) and other industries that made use of mechanization on the basis of wind power. This mechanization was based on yet another invention of Corneliszoon, for which he received a patent in 1597: a type of
crankshaft A crankshaft is a mechanical component used in a reciprocating engine, piston engine to convert the reciprocating motion into rotational motion. The crankshaft is a rotating Shaft (mechanical engineering), shaft containing one or more crankpins, ...
that converted the continuous rotational movement of the wind (windmill) or river (water wheel) into a reciprocating one.


=Shipbuilding

= The Dutch built the largest merchant fleet in the world. In the North Sea and Baltic there was little risk of piracy and trips shuttled between markets. In dangerous zones (where the risk of piracy or shipwreck was high) they traveled in convoys with a light guard. A major technological advance was the design of the Dutch merchant ship known as 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 ...
. Unlike rivals, it was not built for possible conversion in wartime to a warship, so it was cheaper to build and carried twice the cargo, and could be handled by a smaller crew. Construction by specialized shipyards using new tools made it half the cost of rival ships. The factors combined to sharply lower the cost of transportation for Dutch merchants, giving them a major competitive advantage. The ship building district of
Zaan The Zaan () is a small river in the province of North Holland in the northwestern Netherlands and the name of a district through which it runs. The river was originally a side arm of the IJ bay and travels 13.5 kilometers (8½ miles) through the m ...
, near Amsterdam, had around 900 windmills at the end of the 17th century. Other industries that saw significant growth were
papermaking Papermaking is the manufacture of paper and cardboard, which are used widely for printing, writing, and packaging, among many other purposes. Today almost all paper is Pulp and paper industry, made using industrial machinery, while handmade pape ...
,
sugar refining Sugar is the generic name for sweet-tasting, soluble carbohydrates, many of which are used in food. Simple sugars, also called monosaccharides, include glucose, fructose, and galactose. Compound sugars, also called disaccharides or do ...
, printing, the
linen Linen () is a textile made from the fibers of the flax plant. Linen is very strong and absorbent, and it dries faster than cotton. Because of these properties, linen is comfortable to wear in hot weather and is valued for use in garments. Lin ...
industry (with spin-offs in vegetable oils, like
flax Flax, also known as common flax or linseed, is a flowering plant, ''Linum usitatissimum'', in the family Linaceae. It is cultivated as a food and fiber crop in regions of the world with temperate climates. In 2022, France produced 75% of t ...
and
rape oil Rapeseed (''Brassica napus'' subsp. ''napus''), also known as rape and oilseed rape and canola, is a bright-yellow flowering member of the family Brassicaceae (mustard or cabbage family), cultivated mainly for its oil-rich seed, which naturall ...
), and industries that used the cheap peat fuel, like
brewing Brewing is the production of beer by steeping a starch source (commonly cereal grains, the most popular of which is barley) in water and #Fermenting, fermenting the resulting sweet liquid with Yeast#Beer, yeast. It may be done in a brewery ...
and
ceramic A ceramic is any of the various hard, brittle, heat-resistant, and corrosion-resistant materials made by shaping and then firing an inorganic, nonmetallic material, such as clay, at a high temperature. Common examples are earthenware, porcela ...
s (
brickworks A brickworks, also known as a brick factory, is a factory for the manufacturing of bricks, from clay or shale. Usually a brickworks is located on a clay bedrock (the most common material from which bricks are made), often with a clay pit, quar ...
,
pottery Pottery is the process and the products of forming vessels and other objects with clay and other raw materials, which are fired at high temperatures to give them a hard and durable form. The place where such wares are made by a ''potter'' is al ...
and clay-pipe making).


Textiles

The explosive growth of the textiles industries in several specialized Dutch cities, like
Enschede Enschede (; local ) is a list of cities in the Netherlands by province, city and municipalities of the Netherlands, municipality in the province of Overijssel and the Twente region of the eastern Netherlands. The east of the urban area reaches ...
(woollen cloth),
Haarlem Haarlem (; predecessor of ''Harlem'' in English language, English) is a List of cities in the Netherlands by province, city and Municipalities of the Netherlands, municipality in the Netherlands. It is the capital of the Provinces of the Nether ...
(
linen Linen () is a textile made from the fibers of the flax plant. Linen is very strong and absorbent, and it dries faster than cotton. Because of these properties, linen is comfortable to wear in hot weather and is valued for use in garments. Lin ...
), and Amsterdam (
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 ...
) was mainly caused by the influx of skilled workers and capital from the Southern Netherlands in the final decades of the 16th century, when Calvinist entrepreneurs and workers were forced to leave the Spanish-dominated areas. It was therefore not due to a specific technological development, but more to the fact that a whole industry migrated, lock, stock, and barrel, to the Northern Netherlands, thus reinvigorating the northern textile industry, that had been moribund before the Revolt.


Labor force

This rapid industrialization may be indirectly illustrated by the rapid growth of the nonagricultural labor force and the increase in real wages during the same time (which usually would have a negative correlation, instead of a positive one). In the half-century between 1570 and 1620 this labor supply increased 3 percent per annum, a truly phenomenal growth. Despite this, nominal wages were repeatedly increased, outstripping price increases. In consequence, real wages for unskilled laborers were 62 percent higher in 1615–1619 than in 1575–1579.


Fisheries

Another important growth sector were the fisheries, especially the herring fishery (also known as the "Great Fishery"), already important in pre-Revolt days, because of the Flemish invention of gibbing, which made better preservation possible, experienced a tremendous growth due to the development of a specialized ship type, the
Herring Buss A herring buss () was a type of seagoing fishing vessel, mostly used by Dutch and Flemish herring fishermen in the 15th through early 19th centuries. History The buss ship was already known around the time of the Crusades in the Mediterranean a ...
by the late 16th century. This was a veritable "factory ship" that enabled Dutch herring fishermen to follow the herring to the shoals of the
Dogger Bank Dogger Bank ( Dutch: ''Doggersbank'', German: ''Doggerbank'', Danish: ''Doggerbanke'') is a large sandbank in a shallow area of the North Sea about off the east coast of England. During the last ice age, the bank was part of a large landmass ...
and other places far from the Dutch shores, and stay away for months at a time. Actually, linked to the fishery itself was an important onshore processing industry that prepared the salted herring for export across Europe. It also attracted its own supporting industries, like salt refining and the salt trade;
fishing net A fishing net or fish net is a net (device), net used for fishing. Fishing nets work by serving as an improvised fish trap, and some are indeed rigged as traps (e.g. #Fyke nets, fyke nets). They are usually wide open when deployed (e.g. by cast ...
manufacture; and specialized shipbuilding. The fisheries were not particularly profitable in themselves (they were already a mature industry by 1600), but organizational innovations (
vertical integration In microeconomics, management and international political economy, vertical integration, also referred to as vertical consolidation, is an arrangement in which the supply chain of a company is integrated and owned by that company. Usually each ...
of production, processing, and trade) enabled an efficient
business model A business model describes how a Company, business organization creates, delivers, and captures value creation, value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-pub ...
, in which the traders used the revenues of fishing to buy up grain in Baltic ports during the winter months (when otherwise the fishing boats would have been idle), which they transported to Western Europe when the ice floes thawed in Spring. The revenues of this incidental trade were invested in unrefined salt or new boats. The industry was also supported by the Dutch government by market regulation (under the tutelage of an industry body, the Commissioners of the Great Fishery), and naval protection of the fishing fleet against
privateers A privateer is a private person or vessel which engages in commerce raiding under a commission of war. Since robbery under arms was a common aspect of seaborne trade, until the early 19th century all merchant ships carried arms. A sovereign o ...
and the
Royal Navy The Royal Navy (RN) is the naval warfare force of the United Kingdom. It is a component of His Majesty's Naval Service, and its officers hold their commissions from the King of the United Kingdom, King. Although warships were used by Kingdom ...
(because the English looked askance at Dutch fishing in waters they claimed). The combination of these factors secured a ''de facto'' monopoly for Dutch
soused herring Soused herring is raw herring soaked in a mild preserving liquid. It can be raw herring in a mild vinegar pickle or Dutch brined herring. As well as vinegar, the marinade might contain cider, wine or tea, sugar, herbs (usually bay leaf), s ...
in the two centuries between 1500 and 1700.


Art and tulips

During this period the flourishing of Dutch painters became emblematic of the Golden Age in Dutch culture. At the time, this was just an industry like many others, with offshoots like chemical pigment making. Its rise illustrates the general boom conditions in the country, like the
horticultural Horticulture (from ) is the art and science of growing fruits, vegetables, flowers, trees, shrubs and ornamental plants. Horticulture is commonly associated with the more professional and technical aspects of plant cultivation on a smaller and mo ...
developments that laid the basis for the sophisticated
tulip Tulips are spring-blooming perennial herbaceous bulbiferous geophytes in the ''Tulipa'' genus. Their flowers are usually large, showy, and brightly coloured, generally red, orange, pink, yellow, or white. They often have a different colour ...
farming sector (which had its own speculative bubble, known as the
tulip mania Tulip mania () was a period during the Dutch Golden Age when contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. The major acceleration started in 1634 and then dramatically co ...
). By 1636, the tulip bulb became the fourth leading export product of the Netherlands – after gin, herring and cheese. The price of tulips skyrocketed because of speculation in tulip futures among people who never saw the bulbs. Many men made and lost fortunes overnight, to the consternation of Calvinists who abhorred this artificial frenzy that denied the virtues of moderation, discretion and genuine work.


Wars with Spain and England

The phenomenal growth in trade slowed somewhat in the years after the recommencement of 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 ...
with Spain in 1621 (the end of the
Twelve Years' Truce The Twelve Years' Truce was a ceasefire during the Eighty Years' War between Habsburg Spain, Spain and the Dutch Republic, agreed in Antwerp on 9 April 1609 and ended on 9 April 1621. While European powers like Kingdom of France, France began tre ...
). That recommencement offered the possibility of extending trade to the Western Hemisphere (indeed, the
Dutch West India Company The Dutch West India Company () was a Dutch chartered company that was founded in 1621 and went defunct in 1792. Among its founders were Reynier Pauw, Willem Usselincx (1567–1647), and Jessé de Forest (1576–1624). On 3 June 1621, it was gra ...
was founded in 1621), but elsewhere the Dutch were increasingly pushing up against European rivals in a struggle for market share. The competitive advantages of the more efficient Dutch shippers invited protectionist countermeasures, like 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 ...
in the mid-17th century, the French tariff system, instituted under
Jean-Baptiste Colbert Jean-Baptiste Colbert (; 29 August 1619 – 6 September 1683) was a French statesman who served as First Minister of State from 1661 until his death in 1683 under the rule of King Louis XIV. His lasting impact on the organization of the countr ...
, and similar protectionist measures instituted by Sweden at the same time. These protectionist measures caused a number of
trade war A trade war is an economic conflict often resulting from extreme protectionism, in which states raise or implement tariffs or other trade barriers against each other as part of their commercial policies, in response to similar measures imposed ...
s and military conflicts, like the Anglo-Dutch Wars of the 17th century, the Dutch-Swedish War, and the
Franco-Dutch War The Franco-Dutch War, 1672 to 1678, was primarily fought by Kingdom of France, France and the Dutch Republic, with both sides backed at different times by a variety of allies. Related conflicts include the 1672 to 1674 Third Anglo-Dutch War and ...
(though the latter had a more general politico-military character, like the later conflicts between the Republic and France; these wars had an important economic component too, though). The result of worsening trade prospects between 1621 and 1663 was declining profitability, leading to reorientation of investment flows during this period. There was now much more investment in infrastructure, like the ''trekvaarten'', an extensive system of
canal Canals or artificial waterways are waterways or engineered channels built for drainage management (e.g. flood control and irrigation) or for conveyancing water transport vehicles (e.g. water taxi). They carry free, calm surface ...
s that formed the basis of a
public transportation Public transport (also known as public transit, mass transit, or simply transit) are forms of transport available to the general public. It typically uses a fixed schedule, route and charges a fixed fare. There is no rigid definition of whi ...
system, based on '' trekschuiten'' or horse-drawn boats. This was also a period of major
land reclamation Land reclamation, often known as reclamation, and also known as land fill (not to be confused with a waste landfill), is the process of creating new Terrestrial ecoregion, land from oceans, list of seas, seas, Stream bed, riverbeds or lake ...
projects, the ''droogmakerijen'' of inland lakes like
Beemster Beemster () is a former Municipalities of the Netherlands, municipality in the Netherlands, in the province of North Holland. The Beemster is the first polder in the Netherlands land reclamation, reclaimed from a lake, the water extracted by windmi ...
and
Schermer Schermer () is a former municipality in the Netherlands, in the province of North Holland. The name comes from "''skir mere''", which means "bright lake". Since 2015 it has been a part of the municipality of Alkmaar. The municipality of Schermer ...
that were drained by windmills and converted to
polder A polder () is a low-lying tract of land that forms an artificial hydrology, hydrological entity, enclosed by embankments known as levee, dikes. The three types of polder are: # Land reclamation, Land reclaimed from a body of water, such as a ...
s. In this way appreciable areas of fertile arable land were gained, reversing the trend of the 15th and 16th centuries. Finally, there was a tremendous boom in real estate investment, ranging from the extensions of cities like Amsterdam (where the famous canal belts were built) to harbor improvements and fortifications. The total urban population was nearly doubled in the century after 1580, necessitating a commensurate boom in urban construction, which by 1640 assumed the proportions of a speculative "bubble". During the Thirty Years' War the Republic also played the role of the world's "arsenal." It had an extensive arms trade, using both the products of a sophisticated domestic arms industry (gun assembly and gun foundries), and foreign industries (the iron guns produced in the
Wealden iron industry The Wealden iron industry was located in the Weald of south-eastern England. It was formerly an important industry, producing a large proportion of the wrought iron, bar iron made in England in the 16th century and most British cannon until abou ...
were extensively traded by the Dutch in the 1620s). This trade also occasioned an episode in the industrial development of early-modern Sweden, where arms merchants like Louis de Geer and the Trip brothers invested in iron mines and iron works, an early example of
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 ...
.


Zenith in 1650s

By the 1650s, when this boom period reached its zenith, the economy of the Republic achieved a classic harmony between its trading, industrial, agricultural, and fishing sectors, their interrelations cemented by productivity-enhancing investments. The gains in output had increased tremendously over the course of a century: the carrying capacity of the ocean-going fleet had increased by 1 percent annually; agricultural output per laborer had increased by 80 percent since 1500 (thanks to the pursuit of
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 ...
via agricultural specialization). The overall productivity of labor was reflected in the wage level, which was the highest in Europe at the time. Although it is difficult to quantify concepts such as
Gross domestic product Gross domestic product (GDP) is a monetary measure of the total market value of all the final goods and services produced and rendered in a specific time period by a country or countries. GDP is often used to measure the economic performanc ...
and per-capita GDP in an age when reliable economic statistics were not gathered, De Vries and Van der Woude have nevertheless ventured to make a number of informed estimates, justified in their view, by the "modern" character of the Dutch economy in this period. They arrive at a size of the economy around 1660 that was approximately 45 percent of that of Britain (with two-and-a-half times the Dutch population). This works out at a per capita income that is 30 to 40 percent higher than that of Great Britain (admittedly still a premodern economy at the time).


Retrenchment

This favorable economic constellation came to a rather abrupt end around 1670 as a consequence of two mutually reinforcing
economic trend Economic trend may refer to: *all the economic indicators that are the subject of economic forecasting **see also: econometrics *general trends in the economy, see: economic history Economic history is the study of history using methodologica ...
s. The first was the rather abrupt closure of major European markets, especially France, for political reasons, as indicated in the previous section. This put an end to the heretofore secular increase in trade volumes for the Dutch economy. The effect of this stall probably would not have been as serious, but at approximately the same time the secular trend of the price level had reversed from
inflation In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...
to
deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% and becomes negative. While inflation reduces the value of currency over time, deflation increases i ...
. The whole of the 16th century, and the first half of the 17th century, had seen a rising price level. This now suddenly came to an end, to be replaced by deflationary tendencies that would last into the 1740s. Because of the tendency of nominal wages to be sticky downward, the already high level of real wages in the maritime provinces continued to rise, even though the business cycle went downward. This of course reinforced the trade depression in the short run, but in the longer run it caused a structural realignment of the Dutch economy. The reaction of Dutch industry and agriculture was a defensive realignment in three directions. First, there was a shift in the product mix to higher value products (for instance more luxury textile products, livestock fattening instead of dairy farming). This was of necessity a self-limiting solution, as it made exporting even more difficult, so this response led to a further contraction of the sectors in question. The second response was investment in labor-saving means of production. However, this required a level of technological innovation that apparently was no longer attainable. (In this respect it is remarkable that the number of patents granted in the Netherlands was remarkably lower in this period than in the first half of the 17th century.) Besides, this type of reorientation in investment was undercut by a third response:
outsourcing Outsourcing is a business practice in which companies use external providers to carry out business processes that would otherwise be handled internally. Outsourcing sometimes involves transferring employees and assets from one firm to another ...
of industrial production to areas with a lower wage level, like the Generality Lands, which solved the high-wage problem in a different way, but also contributed to deindustrialization in the maritime provinces. The consequences of foreign protectionism were not all negative, however. Protectionist retaliation on the part of the Dutch government made all kinds of import-substitution industrialization possible, in for instance the production of sail cloth and the paper industry. The main defensive response of the Dutch economy was in capital investment. The enormous capital stock amassed during the Golden Age was redirected away from investment in commerce, agricultural land (where rents went down appreciably in a short period of time), and real estate (house rents also sharply declined), and instead in the direction of other, rather high-risk investments. One of these was the whaling industry in which the ''
Noordsche Compagnie The Noordsche Compagnie () was a Dutch cartel in the whaling trade, founded by several cities in the Netherlands in 1614 and operating until 1642. Soon after its founding, it became entangled in territorial conflicts with England, Denmark-Norwa ...
'' had held a Dutch monopoly in the first half of the century. After its charter expired other companies entered this market, leading to an expansion of the Dutch whaling fleet from about 75 ships to 200 ships after 1660. The results were disappointing, however, due to
overfishing Overfishing is the removal of a species of fish (i.e. fishing) from a body of water at a rate greater than that the species can replenish its population naturally (i.e. the overexploitation of the fishery's existing Fish stocks, fish stock), resu ...
, a high
price elasticity of demand A good's price elasticity of demand (E_d, PED) is a measure of how sensitive the quantity demanded is to its price. When the price rises, quantity demanded falls for almost any good ( law of demand), but it falls more for some than for others. Th ...
due to substitutability of vegetable oils for whale oil, and the competition of foreign whalers. Another important venue for investment after 1674 (when the second West India Company was launched, after the bankruptcy of its predecessor) was the triangular
slave trade Slave trade may refer to: * History of slavery - overview of slavery It may also refer to slave trades in specific countries, areas: * Al-Andalus slave trade * Atlantic slave trade ** Brazilian slave trade ** Bristol slave trade ** Danish sl ...
and
sugar Sugar is the generic name for sweet-tasting, soluble carbohydrates, many of which are used in food. Simple sugars, also called monosaccharides, include glucose Glucose is a sugar with the Chemical formula#Molecular formula, molecul ...
trade, based on the plantations in recently acquired
Suriname Suriname, officially the Republic of Suriname, is a country in northern South America, also considered as part of the Caribbean and the West Indies. It is a developing country with a Human Development Index, high level of human development; i ...
and
Demerara Demerara (; , ) is a historical region in the Guianas, on the north coast of South America, now part of the country of Guyana. It was a colony of the Dutch West India Company between 1745 and 1792 and a colony of the Dutch state from 1792 unti ...
(exchanged for
New Amsterdam New Amsterdam (, ) was a 17th-century Dutch Empire, Dutch settlement established at the southern tip of Manhattan Island that served as the seat of the colonial government in New Netherland. The initial trading ''Factory (trading post), fac ...
at the
Treaty of Breda (1667) The Peace of Breda, or Treaty of Breda was signed in the Dutch city of Breda, on 31 July 1667. It consisted of three separate treaties between England and each of its opponents in the Second Anglo-Dutch War: the Dutch Republic, France, and Denma ...
). This also gave a new impulse to the sugar refineries, which had been in a slump in 1680. This was one of the few boom sectors of the economy in this era: the slave population in Surinam quadrupled between 1682 and 1713, and the volume of sugar shipments rose from 3 to 15 million pounds per annum. This was in a period when the Dutch planters, unlike their English and French competitors, did not receive
mercantilist Mercantilism is a nationalist economic policy that is designed to maximize the exports and minimize the imports of an economy. It seeks to maximize the accumulation of resources within the country and use those resources for one-sided trade. ...
protection. Finally, a major target for investment was 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 ...
(VOC). The VOC encountered a rough patch around 1670, after a very profitable period up to that time. The causes were a
price war A price war is a form of market competition in which companies within an industry engage in aggressive pricing activity "characterized by the repeated cutting of prices below those of competitors". This leads to a cycle, where each competitor att ...
for market share with the
English East India Company The East India Company (EIC) was an English, and later British, joint-stock company that was founded in 1600 and dissolved in 1874. It was formed to trade in the Indian Ocean region, initially with the East Indies (South Asia and Southeast A ...
after the
Third Anglo-Dutch War The Third Anglo-Dutch War, began on 27 March 1672, and concluded on 19 February 1674. A naval conflict between the Dutch Republic and England, in alliance with France, it is considered a related conflict of the wider 1672 to 1678 Franco-Dutch W ...
, and an
embargo Economic sanctions or embargoes are commercial and financial penalties applied by states or institutions against states, groups, or individuals. Economic sanctions are a form of coercion that attempts to get an actor to change its behavior throu ...
on the export of precious metals (especially silver) by the Japanese
Shogunate , officially , was the title of the military rulers of Japan during most of the period spanning from 1185 to 1868. Nominally appointed by the Emperor, shoguns were usually the de facto rulers of the country, except during parts of the Kamak ...
, which ended the profitable intra-Asiatic trade the company had conducted up to that time (this business of trade within the East-Asian market had financed the spice trade of the company up to that time, and obviated the need to export European silver and gold to pay for Asian commodities it imported in Europe). The VOC now opted for a policy of great expansion of its business, by branching out to Asian bulk products, like textiles,
coffee Coffee is a beverage brewed from roasted, ground coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content, but decaffeinated coffee is also commercially a ...
,
tea Tea is an aromatic beverage prepared by pouring hot or boiling water over cured or fresh leaves of '' Camellia sinensis'', an evergreen shrub native to East Asia which probably originated in the borderlands of south-western China and nor ...
and
porcelain Porcelain (), also called china, is a ceramic material made by heating Industrial mineral, raw materials, generally including kaolinite, in a kiln to temperatures between . The greater strength and translucence of porcelain, relative to oth ...
. Other than the pepper and spices it had a near-
monopoly A monopoly (from Greek language, 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 (economics), competition to produce ...
on, these were high-volume low-profit commodities. The size of the company doubled in this period (making it the largest publicly traded company in the world at the time), but this was "profitless" growth that did not really solve the company's problems. This lack of profitability characterised all three investment activities just mentioned. The final reaction of the Dutch economic elite (which doubled as the political elite in this oligarchical Republic) to these economic challenges lay in the political sphere. After the end of the Franco-Dutch War (which, like the previous wars was mostly financed by floating bonds, instead of higher taxation) the
public debt A country's gross government debt (also called public debt or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit occu ...
had risen to an alarming size. The
Regents In a monarchy, a regent () is a person appointed to govern a state because the actual monarch is a minor, absent, incapacitated or unable to discharge their powers and duties, or the throne is vacant and a new monarch has not yet been dete ...
at first tried to retire a significant part of this debt, and were successful in the years leading up to the end of the 1680s. The ensuing
Nine Years' War The Nine Years' War was a European great power conflict from 1688 to 1697 between Kingdom of France, France and the Grand Alliance (League of Augsburg), Grand Alliance. Although largely concentrated in Europe, fighting spread to colonial poss ...
and
War of the Spanish Succession The War of the Spanish Succession was a European great power conflict fought between 1701 and 1714. The immediate cause was the death of the childless Charles II of Spain in November 1700, which led to a struggle for control of the Spanish E ...
had for the Dutch also an economic aspect, as they were trying to revert French protectionist measures, which threatened to close the French and Spanish metropolitan and colonial markets to them (both the Treaty of Ryswick and the
Treaty of Utrecht The Peace of Utrecht was a series of peace treaty, peace treaties signed by the belligerents in the War of the Spanish Succession, in the Dutch city of Utrecht between April 1713 and February 1715. The war involved three contenders for the vac ...
contained provisions abrogating the draconian French
tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...
list of 1667). The main effect of these wars, however, was that the Dutch public debt increased with 200 million guilders between 1688 and 1713. In view of the meagre results of the 1713 peace treaty (most advantages of the war that the Republic had helped to win went to Great Britain, thanks to the separate peace that country had concluded previously with France) the gamble had not paid off.


Periwig era: the eighteenth-century economy

Although after the Peace of 1713 the Anglo-Dutch alliance of 1689 formally remained in place. With the Republic a guarantor of the Protestant succession in Great Britain, it was obliged to send troops to England during the
1715 Events For dates within Great Britain and the British Empire, as well as in the Russian Empire, the "old style" Julian calendar was used in 1715, and can be converted to the "new style" Gregorian calendar (adopted in the British Empire in ...
and 1745 uprisings of the Jacobite pretenders). Otherwise and in practice, the Republic embarked on a policy of neutrality during most of the 18th century. This placed Dutch shipping in an enviable protected position during the many wars of that century, provided the British
Admiralty court Admiralty courts, also known as maritime courts, are courts exercising jurisdiction over all admiralty law, maritime contracts, torts, injuries, and offenses. United Kingdom England and Wales Scotland The Scottish court's earliest records, ...
was prepared to recognize the Dutch claim of "free ships make free goods"; this enabled the Republic to provide efficient shipping services with its still very large fleet to all European countries. But it eroded the power of the ''stapelmarkt'', as did the emergence of competitors like London and the German North Sea ports
Bremen Bremen (Low German also: ''Breem'' or ''Bräm''), officially the City Municipality of Bremen (, ), is the capital of the States of Germany, German state of the Bremen (state), Free Hanseatic City of Bremen (), a two-city-state consisting of the c ...
and
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 ...
. This weakening of the province of Holland as a trade hub in its turn contributed to a disarticulation of the Dutch economic sectors trade, industry, banking and insurance, that had been highly integrated in the Golden Age. Each of those sectors embarked on its own growth path in the 18th-century Dutch economy. As far as industry and agriculture were concerned, the trends that were set in motion in the transitional period after 1670 continued unabated. The Dutch economy remained a high-real-wage and high-tax economy, which discouraged investment in labor-intensive pursuits. This caused a decline of labor-intensive industries, like the textile industry, and of capital-goods industries like shipbuilding (both suffering from a lack of innovation also, which made it even more difficult to conquer foreign markets). That decline was only partially compensated by the growth of industries requiring proximity to ports, or large inputs of skilled labor (which was still in abundant supply) and fixed capital. The agricultural sector, faced with the same pressures, specialized in two directions: less labor-intensive livestock raising on the one hand, and very labor-intensive industrial crop production on the other. Trade shifted from the intra-European "mother trade" serving the Baltic and the Mediterranean to intercontinental trade (colonial wares) and distribution to the German hinterland (which was now a rising market again, after finally recovering from the ravages of the Thirty Years' War). Trade changed in other respects also: shipping became more of a service industry, offering shipping services to merchants of other countries. Trade-related financial services shifted from direct financing to acceptance credit. The herring fisheries were severely damaged by French privateers during the War of the Spanish Succession. This caused a collapse of the industry in the first decade of the 18th century, from which the industry did not recover. The size of the Enkhuizen fleet halved compared to the previous century. A second sharp contraction of the herring fleet occurred in the years 1756–61. This was due to an equally sharp reduction in revenue in these years. Meanwhile, foreign competitors profited from easier access to the fishing grounds (Scandinavians), lower wages (Scots), or protection (English). They also were not bound to the Dutch regulations that aimed to guarantee the quality of the Dutch product. This challenge induced the industry to go "up market" by improving quality further, thus being able to charge premium prices. A distinctive trait of the Dutch economy emerging in the 18th century was the fiscal-financial complex. The historically large public debt, resulting from the Republic's participation in the European wars around the turn of the 18th century, was held by a small percentage of the Dutch population (there was hardly any
external debt A country's gross external debt (or foreign debt) is the liabilities that are owed to nonresidents by residents. The debtors can be government, governments, corporation, corporations or citizens. External debt may be denominated in domestic or f ...
). This implied that the Dutch fiscal system now became yoked to the service of this debt in a way that served the interests of this small '' rentier'' class. No less than 70 percent of the annual revenue of the province of Holland (the main debtor) had to be dedicated to debt service. These revenues consisted mainly of regressive
indirect taxes An indirect tax (such as a sales tax, per unit tax, value-added tax (VAT), excise tax, consumption tax, or tariff) is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indirect tax as a part of ma ...
with the perverse effect that income was transferred from the poorer classes to the richer to the amount of 14 million guilders a year (approximately 7 percent of the
Gross National Product The gross national income (GNI), previously known as gross national product (GNP), is the total amount of factor incomes earned by the residents of a country. It is equal to gross domestic product (GDP), plus factor incomes received from n ...
at the time). This debt burden rested preponderantly on the tax payers from Holland, as the finances of the provinces were separated in the
confederal A confederation (also known as a confederacy or league) is a political union of sovereign states united for purposes of common action. Usually created by a treaty, confederations of states tend to be established for dealing with critical issu ...
system of the Republic, and this unequal debt burden militated against other provinces agreeing to fiscal reform. Fiscal reform was also opposed by the ''rentiers'' that had a vested interest in retaining their interest income, but not in paying (direct) income taxes to pay for the debt service. Meanwhile, this ''rentier''-class remained very frugal and saved most of its income, thereby amassing more capital that needed to be reinvested. As productive investments within the Republic were scarce (as explained above), they rationally looked for investment opportunities abroad. Ironically, such opportunities were often found in Great Britain, both in infrastructure developments, and in the British public debt that seemed as safe as the Dutch one (as these investors were very risk-averse). But other foreign governments were also able to tap the Dutch market for savings by floating
sovereign debt A country's gross government debt (also called public debt or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit occ ...
bonds with the assistance of Amsterdam
merchant bank A merchant bank is historically a bank dealing in commercial loans and investment. In modern British usage, it is the same as an investment bank. Merchant banks were the first modern banks and evolved from medieval merchants who traded in comm ...
s that required hefty fees for their services (as the young American Republic discovered after
John Adams John Adams (October 30, 1735 – July 4, 1826) was a Founding Fathers of the United States, Founding Father and the second president of the United States from 1797 to 1801. Before Presidency of John Adams, his presidency, he was a leader of ...
successfully negotiated loans during the
American Revolutionary War The American Revolutionary War (April 19, 1775 – September 3, 1783), also known as the Revolutionary War or American War of Independence, was the armed conflict that comprised the final eight years of the broader American Revolution, in which Am ...
). Amsterdam in this way became the 18th-century hub of
international finance International finance (also referred to as international monetary economics or international macroeconomics) is the branch of monetary economics, monetary and macroeconomics, macroeconomic interrelations between two or more countries. Internation ...
, in tandem with London. The Amsterdam and London stock exchanges were closely aligned and quoted each other's stocks and bonds (Britain often used the Dutch financial institutions to pay subsidies to its allies and to settle its exchange bills in the Russian trade). The Dutch balance of payments was in surplus most of the time, because a small deficit on the current account (because the propensity to import was high as a consequence of the skewed income distribution), was more than compensated by "invisibles", like the income from shipping services, and the revenues from foreign investment. The latter amounted to 15 million guilders annually by 1770, and twice that by 1790. The consequence was a preview of the " Dutch disease" of the 20th century, where a strong guilder (also caused by a structural balance-of-payments surplus) discouraged exports, as it did in the 18th century. Although compared to the boom years of the Golden Age the 18th-century Dutch economy looked less attractive (which earned this epoch the disdainful epithet " periwig era" in the Dutch Orangist historiography of the 19th century), it still had its strengths. The "decline" of the economy as a whole was more relative, compared to its competitors, than absolute. The disappearance of whole industries, though regrettable, was no more than a consequence of secular
economic trend Economic trend may refer to: *all the economic indicators that are the subject of economic forecasting **see also: econometrics *general trends in the economy, see: economic history Economic history is the study of history using methodologica ...
s, like the comparable industrial realignments of the 20th century (ironically, in both cases the textile industry was involved). One could even say that by the shift from industry to "service" sectors, the structure of the Dutch economy became even more "modern" (Indeed, one may see an analogy with the changes in the mature British economy a century later). However, the degree of foreign direct investment by the Dutch at the end of the 18th century was even greater than that of the British at the beginning of the 20th century: more than twice GNP versus 1.5 times GNP. Another measure of the performance of the Dutch economy during the 18th century is the estimate that De Vries and Van der Woude have made of the per capita GDP of the Dutch economy in 1742 (for which year tax records provide a basis for estimation and extrapolation). They arrive at an estimated GNP of between 265 and 280 million guilders, or 135–142
guilders Guilder is the English translation of the Dutch and German ''gulden'', originally shortened from Middle High German ''guldin pfenninc'' (" gold penny"). This was the term that became current in the southern and western parts of the Holy Rom ...
per capita. This was at the end of a long period of secular decline after the economic zenith of 1650. The next decades saw some economic resurgence. In the decade 1800–1810 (again a period of economic decline) the national income of the (slightly contracted) population can be estimated at 307 million guilders, or 162 guilders per capita. To put all of this in perspective: in 1740 the GNP of Great Britain was about £80 million, or 120 guilders per capita (and therefore about 20 percent lower than the Dutch per capita income). After this the British per capita income started on a rapid increase, due to the Industrial Revolution. It therefore eventually overtook the Dutch per capita income, but probably only around 1800. One could even say that in the years before 1780 the prospects of the economy were improving: because of the economic growth in the German hinterland there were possibilities of growth in distributional trade in colonial commodities, and industrial products (Dutch or other European). Such possibilities were indeed realized in the 20th century, when the Netherlands again became a major distributional hub. The agricultural sector still enjoyed high productivity, whereas the nearby British markets for dairy products and produce offered opportunities for increased exports (which were indeed soon realized). Only, the high-cost structure of the labor market, high taxes, structural overvaluation of the guilder, all militated against most forms of industrial production, let alone export industries. Without the necessary reforms to remedy these problems the Netherlands were unlikely to participate in the industrial renaissance that Great Britain, and later other neighboring countries, started to experience in the latter part of the 18th century.


Final crisis

After 1780, a new conjuncture of internal and external conditions conspired to drive the economy and political structure of the Republic to crisis. The Fourth Anglo-Dutch War ended the cloak of neutrality that had protected Dutch shipping for most of the century, obviating during that period the need for naval protection that was now lacking due to many years of neglect of the navy. Trade came temporarily to a standstill, because the British blockade could not be broken, despite the relative success of the Dutch navy in the
Battle of Dogger Bank (1781) The Battle of Dogger Bank was a naval battle that took place on 5 August 1781 during the Fourth Anglo-Dutch War, contemporaneously related to the American Revolutionary War, in the North Sea. It was a bloody encounter between a British s ...
. The trade of the VOC was devastated, even apart from the loss of some of its colonies. It experienced a
liquidity crisis In financial economics, a liquidity crisis is an acute shortage of ''liquidity''. Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrow ...
, which exposed its inherent
insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet i ...
. The company was too important to let it fail (also because of the importance of its outstanding debt in the Dutch financial system), so that it was kept afloat for more than a decade by emergency aid from the
States of Holland The States of Holland and West Frisia () were the representation of the two Estates (''standen'') to the court of the Count of Holland. After the United Provinces were formed — and there no longer was a count, but only his "lieutenant" (the stad ...
, before it was finally nationalized in 1796. Attempts at political reform (and attendant reform of the derelict system of public finance) by the
Patriots A patriot is a person with the quality of patriotism. Patriot(s) or The Patriot(s) may also refer to: Political and military groups United States * Patriot (American Revolution), those who supported the cause of independence in the American R ...
were thwarted by the suppression of their revolt by the Prussian intervention in the quarrel with
Stadtholder In the Low Countries, a stadtholder ( ) was a steward, first appointed as a medieval official and ultimately functioning as a national leader. The ''stadtholder'' was the replacement of the duke or count of a province during the Burgundian and ...
William V William V may refer to: * William V, Duke of Aquitaine (969–1030) * William V of Montpellier (1075–1121) * William V, Marquess of Montferrat (1191) * William V, Count of Nevers (before 11751181) * William V, Duke of Jülich (1299–1361) * Will ...
in 1787. This meant that no further attempts at reform were made until the overthrow of the old Republic and its replacement by the Batavian Republic in 1795. That
puppet state A puppet state, puppet régime, puppet government or dummy government is a State (polity), state that is ''de jure'' independent but ''de facto'' completely dependent upon an outside Power (international relations), power and subject to its ord ...
of the French Republic was unable to get the freedom of movement from its "sister republic", that would have been necessary to bring about effective reforms, even though the Patriots now had the chance to force them through. An enormous new tax burden to finance transfer payments to France (a war indemnity of 100 million guilders and annual maintenance costs of 12 million guilders of an army of occupation), amounting to 230 million guilders total, broke the back of the fiscal system. Eventually, the public debt was forced into default (though only when the Netherlands were annexed to imperial France in 1810). More importantly, the Dutch trading system was remorselessly ground away between a British blockade and the French enforced boycott of British goods in the Continental System. This was not compensated by adequate access to the French market, because even when the Netherlands were incorporated in the French empire the old protectionist barriers remained in place. For a while, the Dutch were therefore unable to trade legally anywhere (which left smuggling as the only alternative). In the period of the annexation, 1810–1813, the ports were bereft of shipping and the remnants of industry collapsed. These external factors were reinforced by internal ones. The necessary reforms of the Dutch system of public finance (as embodied in the Tax Reform Plan of Isaac Jan Alexander Gogel) were blocked for a long time by federalist opposition, and only enacted in the final year of the Republic, just before its transformation to the Kingdom of Holland in 1806. By then it was too little too late. It is therefore fitting to see the year 1815, in which the
United Kingdom of the Netherlands The United Kingdom of the Netherlands is the unofficial name given to the Kingdom of the Netherlands as it existed from 1815 to 1839. The United Netherlands was created in the aftermath of the Napoleonic Wars through the fusion of territories t ...
embodied a newly independent political incorporation of the original Habsburg Netherlands, as the end of an economic era also. The hoped for economic resurgence of the Netherlands (other than that of the Southern Netherlands with which it was now temporarily reunited) would, however, not really take flight before the structural problems of the old economy were finally laid to rest around 1850 with the final liquidation of the public debt of the old Republic. This explains at least partly why the Dutch economy was so tardy in implementing the steam-power based industrial revolution of the 19th century.De Vries and Van der Woude, p. 687


References


Further reading

* de Vries, Johan. "Benelux, 1920–1970", in C. M. Cipolla, ed. ''The Fontana Economic History of Europe: Contemporary Economics Part One'' (1976) pp. 1–71 * Dhondt, Jan, and Marinette Bruwier in Carlo Cipolla, ''The Emergence of Industrial Societies-1'' (Fontana, 1970) pp. 329–55 * Houtte, J. A. Van. "Economic Development of Belgium and the Netherlands from the Beginning of the Modern Era", ''Journal of European Economic History''(1972), 1:100–20 * Israel, Jonathan I. (1995), ''The Dutch Republic: Its Rise, Greatness and Fall, 1477–1806'', Oxford University Press, hardback, paperback
online edition
* Mokyr, Joel. "The Industrial Revolution in the Low Countries in the First Half of the Nineteenth Century: A Comparative Case Study", ''Journal of Economic History'' (1974) 34#2 pp. 365–9
in JSTOR
* Mokyr, J. ''Industrialization in the Low Countries, 1795–1850'' (New Haven, 1976). * Parthesius, Robert. (2010) ''Dutch Ships in Tropical Waters: The Development of the Dutch East India Company (VOC) Shipping Network in Asia, 1595–1660'' (Amsterdam University Press, 2010). 217 pp. * Schama, S. (1977), ''Patriots and Liberators. Revolution in the Netherlands 1780–1813'', New York, Vintage books, * Schama, S. '' The Embarrassment of Riches: An Interpretation of Dutch Culture in the Golden Age'' (1997) * Vries, J. de, and Woude, A. van der. (1997), ''The First Modern Economy. Success, Failure, and Perseverance of the Dutch Economy, 1500–1815'', Cambridge University Press, **Riel, Arthur van. "Review: Rethinking the Economic History of the Dutch Republic: The Rise and Decline of Economic Modernity Before the Advent of Industrialized Growth Nederland 1500–1815..." ''Journal of Economic History'' (1996) 56#1 pp. 223–2
in JSTOR
review


External links


Baltic Trade

Expenditure of the United Provinces, 1586–1648

Customs revenue from the admiralties of Amsterdam and Rotterdam, 1587–1715

Provincial finances in the days of the Republic of the United Netherlands
{{DEFAULTSORT:Economic History Of The Netherlands (1500-1815) Economic history of the Dutch Republic
Netherlands , Terminology of the Low Countries, informally Holland, is a country in Northwestern Europe, with Caribbean Netherlands, overseas territories in the Caribbean. It is the largest of the four constituent countries of the Kingdom of the Nether ...