T H E U N P R E D I C T A B L E P A S T

DUTCH TIGER:THE BOOMING ECONOMY OFTHE DUTCH REPUBLIC (1579-1650)

Rovvena Hammal explains why the United Provincesenjoyed a *Golden Age* in the first half of theSeventeenth Century.

The Dutch Republic, or UnitedProvinces of the Netherlands, wasone of the economic giants of theearly modern period. Formed in 1579, by1650 the Republic was dominatingEuropean trade and had developed animpressive overseas empire, outshiningthat of the Portuguese and rivalling thatof the Spanish. Dutch merchants grewrich on the proceeds of trade and theprofits from home industries. Livingstandards rose across Dutch society,

despite the trends of inflation and fallingreal wages across Europe. Amsterdamthrived, becoming the centre of Euro-pean banking and trade.

The question of how the Repuhlic wasable to enjoy a strong economy is a fasci-nating one. In many ways, the odds werestacked against it. Newly formed, theRcpuhlic required a political system thatwould ensure stability and economicgrowth. In addition, its low-King geographywas a continual challenge, as was the reli-

Above: Spain's Duke of Alva executescounts Egmont and Horn in i 568. Againstthe odds, the United Provincessuccessfully seceded from Spanish control,becoming formally independent in 1648.

gious diversity of its inhabitants. To com-plicate matters, until 1648 the Republicwas engaged in a war of independenceagainst Spain, a state of affairs that woukinormally be expected to cripple a smallcountrys economy. That the Republic wasable to embark upon a 'Golden Age' in theseventeenth century, in spile u its prob-lems, is a testament to the commercialdrive of its society. This article will exam-ine the factors which contributed to theUnited Provinces'remarkable success.

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Political SystemAs a republic, the United Provinces waspraetically unique among the countriesof Europe, in an age when monarchywas the norm. The 'Golden Age' of theRepubhc was to prove, both to theDuich themselves and to observers, thatil republic could be an economic power.

The national assembly of the Repub-lic was the States General, based at theI iague and attended by delegates select-ed by the parliaments of each of theseven provinces. In stark contrast to therest ol' Europe, in the Dutch Republicthe nobility and land-owning aristocracywere relatively lacking in polilical inllu-ence. Instead, a burgher oligarchy domi-naied the Republic's affairs. This wasprimarily made up of members of therf};crii class, a group of wealthy mer-chants (or families whose wealth hadmercantile origins), distinguished bytheir right lo hold civic office.

Dutch |>oliticians were intricatelyassociated with trade and commerce,and they organised the Republic's affairswith these priorities in mind, drawing ontheir experience and expertise. As mem-bers of the merchant elite, they realisedtbe importance of a strong economy andpiiimoled trade and enterprise accord-ingly. There was also the opportunity forsuccessful merchants from 'new families'to join the regent class via invitation, sothere was a meritocratic dimension totbe Republic. This provided a freshsource of commercial acumen for tbe|K)lili(.iil s[)bLTe, and maintained tbelinks between government md business.

Society

Tbe [irocess of building up tbe economywas greatly belped by the highlyurhanised nature of society. Within theRepublic more people lived In townsthan in rural areas, anotber respect inwhich it differed from other countries inEurope. Dutch towns and cities provid-ed a plentiful source of buman capitalfor trade and industry, whether skilled orunskilled. The guild system was at thecentre of urban life, reinforcing theimportance of business, protecting guildmembers from competition, and provid-ing a limited degree of quality control.

Successful individuals had subtly dif-ferent priorities from tbeir counterparts

in other European states when it cami'to spending their accumulated wealth.The supremacy of the regent class,rather than a landed aristocracy, mean;tbat land and status were not inextrica-bly linked as they were elsewhere on thrcontinent. Ratber than locking tbci"profits into country estates and agricul-tural holdings, the Republic's upwardlvmobile citizens reinvested their capitalin new enterprises. Tbe economy bene-fited from this investment iti new busi-nesses and trading ventures, and in tb

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The Republic reaped the economicbenefits of being an open society. Mer-chants were able to live and trade inAmsterdam, regardless of their rehgion.Immigrants of all faiths were drawn tothe Republic,adding tbeir skillsto the pool. TheStates General'senergies weredirected towardspractical concerns,for instance itseconomy and tbe war with Spain, rathertban witb promoting religious strife. Anyattempt to impose Calvinism on tbeDutch would bave heen bighly problem-atic in any case; it is likely that less thana third of the population were orthodoxCalvinists. Protestants from diffrentsects were widespread, and large sec-tions of tbe population were Catbolic.especially in the eastern provinces. Reli-gion was a Pandora s box whicb was bestkept closed.

Geography

Tbe Duteb Republic was presented witha challenge in tbe form of its geography.A small country', its natural resourcesand raw materials were limited. In addi-tion, large areas of land were below sealevel and provinces were segmented byrivers, marsbes, and lakes. An Englishvisitor in 1652 described tbe Netber-lands tbus: ' ... a general sea land, tbegreat Bog of Europe ... Tbey live lowerthan the fishes, in tbe very lap of tbetloods, and encircled in their wateryarms.'

Yet the Dutcb found solutions totheir geographical difficulties. Tbeydeveloped and expanded tbe system ofdykes to prevent flooding. Increasinglysophisticated engineering allowed vastland reclamation projects to take placein tbe seaward provinces, particularly inHolland and Zeeland. From 1590 to1649, 200,000 acres were recovered.Rivers and lakes were put to good use astransport arteries; towns sbipped tbeirmanufactured goods to Amsterdam forexport ahroad, and used tbe waterwaysto access markets in Germany and tbesouthern Netherlands.

Scarcity of good land was responsiblefor tbe seamanship which defined tbeRepublic's conomie success. Without a

The Republicreaped the economicbenefits of being an

open society y y

plentiful supply of farmland tbe Dutcbbad bistorically turned tbeir attentionelsewbere, especially in tbe seaboardprovinces. Fishing, and particularly her-ring fisbing, was vital to the bealth of tbe

Duteh economy,witb approximate-ly a fifth of tbepopulation earn-ing a living fromfisbing in the latesixteenth century.As a result, the

Republic was amply stocked with exper-tise in sailing, ship building and naviga-tion. Mucb of tbe Repuhlic's success,not only in economic terms but also itseventual victory against the Spanish,would depend on its people's mastery oftbe sea. Tbis was recognised by tbeStates of Holland in 1596: In tbe com-mand of tbe sea and in tbe eonduet ofthe war on the water resides tbe entireprosperity of tbe people.'

A laek of raw materials translatedinto a bunger for trade, wbich comple-mented tbe main advantage of tbeRepuhlic's geograpby: its location. Witbeasy access to tbe Baltic states, lo Eng-land and countries on the western coastof Europe. Amsterdam was ideally situ-ated to become tbe centre of interna-tional trade.

In the commandof the sea and in theconduct of the war

on the water residesthe entire prosperity

of the people

Trade

As a nation well stocked with sailors andship-builders, the Republic was ahle totake advantage of the increasingly globalmaritime trade tbat cbaracterised tbesixteentb and seventeentb centuries.Dutcb sbips were built from importedtimber, using tecbnically advanced con-struction methods including tbe use ofcranes and wind-powered sawmills. As aresult, tbe Duteh eould huild ships forhalf the price of their international rivals.

New ship designs were tailored to com-mercial requirements: For example, tbeHuit could carry a large cargo witb asmall crew, producing lower overheadson each voyage.

The provinces whicb had joinedtogether in 1579 to form tbe DutcbRepublic had strong trading traditions.This was particularly the case in tbeBaltic Sea, where over half of all sbipspassing tbrougb the Sound in 1578 wereDutch. The Duich dominated theimport trade of grain und timber fromBaltie states sueb as Russia and Sweden.sbipping tbe raw materials back to tbeRepublic for export to other countries.Tbe Baltie trade was tbe foundation ofDutcb trading success: it provided tbeRepublic witb a source of raw materialsfor export and underpinned its tradewith Europe. It was a tried and testedsource of revenue. However, tbe Dutchceased to trade exclusively in low \alui'.bulky goods such as timber, hotb in ibeBaltic and elsewbere. Tbe 1 590s saw ibebeginning of a crucial pbase in tbe eco-nomic progress of ibe Republic: thedevelopment of tbe 'rieb trades'.

The 'rich trades' were expensive com-modities, affordable only to tbe bigherstrata of society. Such luxury items asspices, sugar, silks and dyes were bigblylucrative for the merchants wbo soldthem. Profit margins were much bighertban in the "bulk-carrying' trades of tim-ber and grain. In tbe final decade of tbesixleentb century tbe Dutcb Republicbecame the main centre for the exportof tbe 'rich trades' to northern Europe.Merchants hought up valuable goods inSpain and Portugal, which had beenimported from the two countries'colonies, and sold them on to the Balticstates and. increasingly, to Russia. How-ever, in 1598 a Spanish embargo olDuteh trade foreed tbe Repuhlic towiden its horizons. The embargo limitedthe ability of Dutch merchants to act astbe middlemen of European trade; theRepublic responded hy setting up itsown trading bases in tbe East and WestIndies.

Trading Companies"ibe East and West India Companieswere tbe vebicles by wbich tbe Republicextended its autbority overseas, allow ingthe Dutch to reap tbe economic benefits

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Above: A 1648 engraving of'The Lion ofHolland', illustrating the importance ofcivic and socially diverse contributions toDutch prosperity.

of trading directly with Asia, Africa and(he Americas. The high probability oflosing ships and crew on every voyagemeant ihat pri\ ate funding was unlikelyIII lempt any but the most intrepidin\estors. The problem was solved by theformation of a joint stock company in1602, tbe East India Company (alsokntiwn by its Dutch initials as ibe VOC),whicb was granted a monopoly betweenlilt' Cape of Good Hope and the Magel-hm Strait. Tbe company was a micro-cosm of the Repuhlic, with federatedchambers representing each of tbe sevenprovinces. Leading politicians and mem-bers of the regent class made up tbemajority of its shareholders, ensuring

tbat tbe VOC did not lack political sup-port.

The States General supplied tb,"VOC with troops and gave it the authori-ty to make treaties witb local rulers oibehalf of the Repuhlic. Collective actio'iand military backing allowed the Dutcmerchants to take action against the Poi-tugese, capturing the Spice Islandsfrom them in 1605 and increasing theirfootbolds around the Indian Ocean,establishing bases in Java. Ceylon, Indi;,Sumatra, Borneo, l-ormosa and soutiiAfrica. This aggressive strategy ensuredtbat tbt' Republic maintained a directsupply of tbe silks, muslins and spiceswbicb made up tbe 'rieb trades. TbeEast India Companys sbarcholders ben-efited from direct trade with Asia, receiv-ing average dividends of 35 per cent fortbe first iO years of tbe VOC's existence.

The West India Company, formed in1621 to exploit the commercial possibili-

ties of tbe Americas, was less successfulthan the VOC. Tbis was due in part toits lack ol clear direction, Wbereas tbeVOC bad doggedly pursued trade as ameans to profit, the West India Compa-ny divided its resources between tradeand piracy against Spanish ships, Priva-teering was supported by tbe StatesGeneral as it was boped tbat the Spanisbwar effort would be damaged by attackson Spanisb bullion sbips returning fromNortb America. However, successeswere irregular and tbe West India Com-pany's war fleets were expensive to main-tain. Prolits were consistenliv lower tbanthose of tbe VOC, althougb there werestill lucrative triumphs, as in 1628 wbenthe West India Company managed toca[ture the entire Spanish silver fleet,Tbe West India Company traded in fursfrom its bases around the ManhattanIsland confluence of rivers, and in sugarfrom its base in Brazil.

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Left: The bustlingDam Square inAmsterdam, paintedby Jacob van derUlf t inthe 1650s,when the Republicwas enjoyingunparaileledprosperity.

The Dutch were keen to establishtrading bases, but tbere was little desirefor sustained colonisation, a trend whichwould appear increasingly ominous ascolonisations by otber European powersgained momentum in the second half ofthe century. Tellingly, VOC dividendshad fallen to only ten per cent by 1650as a result of the cost of tbe militarypresence required to maintain posses-sion of its overseas territories. But thiswas a problem for the future. In 1650tbe Dutcb could fed justifiably proud oftheir vast trading empire, on wbicbmucb of their economic success wasfoLinded. Stretcbing across five conti-nenlni, tbe trading empire rivalled tboseof tbe Spanisb and tbe Englisb, Tbetrading companies bad provided tbeRepublic witb tbe goods to maintain itsposition as tbe entrept of Europe.

EnterpriseThe Dutch Republic did not simply actas a trading power and a vast emporiumfor tbe world's commodities. Rather, theDutcb added value lo imported goods,not simply shipping tbem on but devel-oping bigbly specialised industries torefine tbeir products. Wbale oil and

sugar refining flourisbcd in Rotterdam.Amsterdam became ibe European cen-tre of diamond cutting, retaining a repu-tation for excellent diamonds to this day.Interestingly, tbe city's success in tbisarea was a direct result of its religioustolerance, as tbe first diamond polishersto arrive in Amsterdam were Sepbardicjews fleeing per-secution inSpain. Portugaland tbe SouthernNetberlands.

Amsterdam'sposition as tbetrading bub ofEurope was tbebasis for its emer-gence as the cen-tre of Europeanfinance. TbeBank of Amster-dam was estab-lished in 1609and offered weaitby merchants a safebaven for tbeir capital. Tbe Dutcb prid-ed themselves on tbe reliability of theirbanking system, even going so far as toallow tbe Spanisb to transfer funds totbeir army in tbe Soutbern Netherlandsvia tbe banks of Amsterdam. Thisdependability brougbt rewards, as

T h e rarer bulbscost the equivalent

of many tens ofthousands of poundsin today's prices, but

when the marketcollapsed in 1637 they

became virtuallyworthless f f

weaitby investors from across Europecbose to deposit their savings in theRepuhlic s banks.

A plentiful supply of capital allowedtbe Republic to offer tbe lowest interestrates in Europe, This was particular!)'important for tbe government of botbtbe Republic and tbe provinces, wbich

borrowed fundsfrom tbe Rank ofAmsterdam atrates of less tbanfive per cent,Cbeap credit wasa great asset toibe Dutcb. facili-tating enterpriseand economicgrowth, and, cru-cially, contribut-ing to tbe Repub-lic's very survivalby belping tomeet the enor-

mous costs of tbe war against Spain,In 1611 a stock exchange was opened

in Amsterdam. Partly as a result of theshortage of land, tbose witb savings werekeen to invest tbem in shares, and tbeExchange flourished. However, tbeExcbange was not without its problems,as Dutcb investors developed a taste for

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speculation and were eager to deal in'futures'. It was this trend which led tothe great tulip mania of 1636-37. Rock-eting prices were fuelled hy the demandin Dutch society for high quality, unusu-al tulips, which were seen as a statussymhol, and hy the eagerness of ordinarypeople to profit from the hoom by usingtheir life savings to buy tulip biilhs. Therarer bulbs cost the equivalent of manytens of thousands of pounds in todaysprices, but when the market collapsed in1637 they became virtually worthless.However, the significance of the tulipcrash should not be overstated; in gener-al the Repuhlic experienced an econom-ic boom during the mid to late 1630s.

War

As one considers the economic suceess-t's of the Dutch Bepublic - its promi-nence as ti trading hub. its overseascolonies, and its flourishing home indus-tries - it is easy to overlook its greatestachievement: its very survival. From itsinception in 1579. the Republic faced abloody struggle fi)r survival againstEurope's premier military power. That aloose federation of waterloggedprovinces was able to defend itsellagainst the might of Spain is astonishing,Yft in 1648 the Peace of Munster finallyconfirmed the Republic's independenceIrom Spain. The 'Golden Age' of theDutch Repuhlic had hegun at the startof tbe seventeenth century, and had thuscoincided with much of the period dur-ing which the Repuhlic was at war.

Wis the war with Spain a hindranceor a help to the Republic's economy?Certainly most of the population wouldsurely have preferred to forego tbe rav-ages of war: the casualties, the damageinflicted hy armies on land and localpopulations, the destabilising influencesof fear and panic. There was also theeconomic burden of high taxation. Warexpenditure rose from 3.2 million Rorinsin 1591 to 18,8 million in 1640.

Yet there were redeeming features.The Republic's economy received aboost from refugees, who flooded intothe Repuhlic from the Southern Nether-lands, fleeing war and religious persecu-tion. Over 100,000 refugees entered theRepublic during the early years of thewar. making it one ol the biggest migra-tions in Western Europe during the early

modern period. Immigrants ranged fromsueeessful merehants to skilled crafts-men, artisans and unskilled labourers,most settling in the provinces of Hollanilor Zeeland.

Immigration brought a huge transfe'of skills and capital to Amsterdam, pri-marily from Antwerp, 'Here is Antwerpitself turned into Amsterdam.' wrote animmigrant in 1594. Prior to the DutchRevolt Antwerp had been the main trad-ing hub in northern Europe. By 1600Amsterdam had a population of100,000, and would continue to grow,whereas Antwerp had declined from100,000 to 50,000, The decline ofAntwerp could only benefit the Repub-lic, which had used its navy to cut offthe southern Netherlands'access to mar-itime trade routes and welcomedAntwerp's trading business and refugeesAlthough the war was a great burden forthe Republic, military action was inter-mittent and unequally distributed acros-;the United Provinces. There were lon^periods when the Republic was effec-tively at peace, interludes when Spainwas distracted by its military commit-ments elsewhere, notably during th;Twelve Years' Truce oi 1609-21. Spanishembargoes against Dutcb trade wer?similarly patcby; Pbilip Il's lifting of th :embargo during tbe 1590s alloweilDutcb merchants to dominate the *ric)itrades' by supplying nortbern Europ_'with the products of Spanisb and Poi-tuguese colonies.

The seven provinces of the Republicwere not affected equally by the wai:most fighting occurred in the eastwardprovinces, where up lo 20 per cent offarmland was devastated and, in someareas, population declined. MeanwhiL-Holland and Zeeland were able to enjo*'a relatively peaceful period of economicgrowth, acting as the engines of th_'Republics success. Despite the difficul-ties of the war, the Republic's coffersfilled with gold and silver while Spainfaced bankruptcy and was eventuallyforced to concede defeat. Tbe StatesGeneral bad prioritised tbe economvbefore all else, even allowing tbe Repub-lic's mercbants to supply Spain witngrain, despite tbe ongoing conflict.

Rowena Hammal is a member of the historydepartment at The Portsmouth GrammarSchool.

ConclusionTbe Dutcb Republic must be consid-ered one of tbe great economic successstories of the early modern period. TheRepublic benefited from its novel politi-cal system, its mercantile culture andnautical heritage, and its urbanised,open society. Wbere possible, the Dutchmaximised the economic potential ofeverything they undertook, moving intonew markets, developing home indus-tries and expanding their trading empireacross the globe. War was an expenseand a burden, but by building a strongeconomy the Republic was able todefeat the greatest military power inEurope. The United Provinces wereable to prosper, despite their differ-ences, because of a general consensusthat economic progress was the nation'sraison d'tre. In 1925, PresidentGoolidge claimed that 'the chief busi-ness of America is business'. The samecould equally have heen said of theDutch Republic.

Issues to Debate In what ways was the Dutch

economy successful in theperiod from 1579 to 1650?

How severe were the obstaclesin the United Provinces toeconomic growth?

Can any single factor beidentified as the mostimportant in the rise of theDutch economy?

H c a cl i n gC.R. Boxer. Tbe Dutch SeaborneEmpire /600-/S00 (Hutchinson,1965)

J.I. Israel, The Dutch Republic. Its Rise,Greatness, and Fall 477-1806(Oxford University Press, 1998) 'G. Parker, The Dutch Revok (PenguinBooks. 1990)S, Schama, Tlie Embarrassment ofRiches, An interpretation of DutchCulture in the Golden Agv (FontanaPress, 1991)M.Webei', The Protestant Ethic andthe Spirit of Capitalism (Routledge,2000

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