‘t Hart, Marjolein (2009) “Mutual Advantages: State Bankers as Brokers between the City of Amsterdam and the Dutch Republic”, in The Political Economy of the Dutch Republic, ed. Oscar Gelderblom, p.115-142.
The Dutch public credit in the early modern period enjoyed a uniquely high standing; but how did it work? (p.116). The sale of the securities to the public were in the hands of a district receiver who earned a brokerage of 0.5% (p.118). It took political and family connection to accede the position as well as a significant amount of wealth (p.120). “The personal wealth of this agent radiated from his office and thus supported the credit of the state”. Besides, the position could be quite rewarding financially.
Who was buying it?
Over the 17th century the profile of the subscribers evolved dramatically. The average investment in Amsterdam went from 2,300 guilders in 1628 to 4,000 in 1665 (p.123). The top purchasers tended to kinsmen of the receiver in the beginning of the period, significantly less so at the end (p.126). Late in the 17th century buyers represented more faithfully the oligarchic elite of Amsterdam, whereas earlier they had simply been a collection of successful merchants. (p.127). The pool of subscribers was also increasingly dominated by male investors indicating that, as opportunities shrank, “women had more difficulties gaining entry into the male-dominated networks” (p.130).
Further evidence of the importance of networks:
- members of the well-connected Remonstrant sect represented 10% of the subscribers (with a mean investment nearly 50% higher than the average; p.131),
- investors were commonly members of the art-loving and naturalia-collecting community.
Networks or no networks?
“Yet apart from these investors, many did not belong to [the receiver Johannes] Uijttenbogaert’s direct network at all. At least sever Dutch Reformed ministers bought an annuity from the receiver , although they were probably not regular contact for a Remonstrant. Members of competing political factions [i.e. orangists] were also found to be investors.”
Jews and Catholics can also be found in the list. Although no direct link seems to exist, a number of directors of the VOC and the WIC were among the subscribers.
“Even thought the creditors did not all belong to the receiver’s private networks, the sums provided by family members and Remonstrants were on average greater then the investments of other creditors. For those who had personal contacts with the receiver, this did enhance the creditworthiness of the loan contract (…; p.133). [Hence] reinforcing the mutual trust between the state and local level, thus enlarging the credit base of the Dutch Republic”.
Why would one buy it?
Life annuities were a risky business as one may die early and thus lose his capital. Not surprisingly 75% of the bonds were purchased in the name of children below the age of 16. As a result, some annuities drew returns for over 70 years. The government had to pay an average of 4.4% interest (higher than the 4% of the redeemable obligations, but it did not have to repay the principal; p.135).
After all, the Dutch public debt system does not appear so widely different from the French or the English one during the 17th century. At the end of the period, the debt was not marketed really much beyond a closely knitted group of financiers any more. However, in Holland, the base remained somewhat larger, the arrangements of the loans were publicly known, the loans were securely founded by taxes and remained in general voluntary and, as a result, interest rates were lower (p.137). The position of the financiers was also more secure as they were less likely to be expropriated and as a result they were seldom forced into bankruptcy (p.138). In Amsterdam the semi-private bank of the district receiver acted as an essential broker between the government and the wealth-owners. Critically, it established trust. Such system would not be reached before the end of the century in England and the mid-1700s in France (p.142).
Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).