Opper S. (1993): the incredible story of the fleeing Dutchmen

Oppers, Stefan E. (1993) The Interest Rate Effect of Dutch Money in Eighteen-Century Britain. The Journal of Economic History, 53/1: 25-43.

Dutch citizens invested heavily in Britain over the 18th century. Even though the English themselves regarded this phenomenon as a necessary evil, it greatly help the Crown to levy the necessary capital for its expenses over the century (p.28). In the 1740s Dutch financiers in London had become critical for the funding of the government’s deficit. To a large extent it can even be said that the Seven Years War was won thanks to foreign money.

Bochove C. van (2008) Outsourcing financial modernisation

Bochove, Christiaan van (2008) “Integration of Denmark-Norway in the Dutch capital market”, chapter 4 in The Economic Consequences of the Dutch. Economic integration around the North Sea, 1500-1800, Amsterdam: Aksant, 90-125.

The early modern markets for goods and labour were highly integrated. As the country’s Golden Age came to an end, by 1700, Dutch capital was increasingly finding investment opportunities abroad, chiefly in Great Britain but also in the Danish Kingdom (p.90). It had not always been the case. For instance around 1600, trade with Norway was conducted with cash rather than bills of exchange, a sure sign of poor integration. The concentration of trade in the hands of a local business elite (rather than scattered between small producers) made this modernization possible. By the mid century Norwegian merchants started drawing credit from Amsterdam (p.93).

Dorestad. A Medieval Metropolis

I’m just back from Leiden where Jaco Zuijderduijn took us (a group of recently-arrived PhD students) to visit the exhibition devoted to the archaeological findings from the medieval emporium of Dorestad held at the National Museum of Antiquities. The curator, Annemarieke Willemsen, was kind enough to introduce us to several of the pieces.

I must confess, the city was unknown to me. However it seems to have been an important port dedicated to the transit of goods from and to Scandinavia and the Rhine area. Like most of the commercial hubs of the time (i.e. the 8th and 9th centuries), it evolved into a significant consumption center of its own while at the same time not hosting any significant production (be it agricultural or industrial) with the exception of the minting of coins.

The city may have counted some 3,000 inhabitants and was dominated/protected by the lords of the neighbouring countryside. Numerous goods were traded in Dorestad: wood, wine, amber, Frankish blades, potteries, millstones, hunting dogs, slaves, etc. The city was finally destroyed by the viking raids in the 840s and by the collapse of the Carolingian empire at the same period which suddenly made impossible the type of long-distance trade the city was based upon.

Dorestad seems to have been the most important trading center of NW Europe at the time and was particularly remarkable by the 150m jetties the inhabitants had to build as the rivers tended to shift westward leaving un-navigable muddy terrains in its wake. Noticeably, the city was also constructed without any distinctive defensive feature indicating that it was highly reliant on peaceful conditions.

The exhibition was truly nice and there is a host of beautiful pieces but I must say I was a bit skeptical about the whole Dorestad being the key emporium in NW Europe theory. Indeed, all the artifacts presented come either from Germany or Scandinavia, but any important city at the time should have been flowed with goods from England, Russia, the Muslim World (in particular Spain), Italy and of course Northern France/Belgium where the emperor spent most of his time. I really do not see how such an important trading center could have arose just by connecting two rather small and peripherical markets (Germany and Scandinavia). But then again I am no specialist.

Fontaine L. (2008) When relief is worth more than a treasure

Fontaine, Laurence (2008) “Entre banque et assistance: la création des monts-de-piété”, chapter 6 in L’Economie morale. Pauvreté, crédit et confiance dans l’Europe préindustrielle. Paris : Gallimard, p.164-189.

The first Monti di Pietà (or mounts) were created in 15^th-century Italy by Recollet monks to shield the less-fortunate from the scourge of usury. It was not so much intended to pool the poor out of misery as to provide the struggling middle dwellers with a last safety net before falling into poverty (p.164). In the peninsula, the capital hoarded in the safes of the mounts was often diverted from its original aim to be loaned to the rich. It prevented the Italian mounts from becoming really successful. However their model spread over Europe.

McCant A. (1997) Moral capitalism: investments to feed orphans

McCants, Anne E.C. (1997) “The Rise and Decline of an Institutional Endowment, in Civic Charity in a Golden Age. Orphan Care in Early Modern Amsterdam, Urbana/Chicago: University of Illinois Press, 151-191.

Numerous elements point to the fact that Dutch charities were well-endowed in the early modern period (p.151). Nonetheless charities were expensive to run and part of the funds came from the beneficiaries themselves. For instance at the Amsterdam Municipal Orphanage, or Bugerweeshuis,

“the orphaned children of poor, but nonetheless, citizen, parents could not be denied entry on the basis of an inadequate inheritance to defray the cost of their support. But the orphaned children of prosperous citizens could also not expect to be cared for entirely at public expenses.”

Nonetheless the bulk of the institution’s resources came from its invested endowment (p.153).

McCants A. (2007) Poverty v. Modernity: 1/0

McCants, Anne E.C. (2007) “Inequality among the poor of eighteenth century Amsterdam”, Explorations in Economic History, 44/1: 1-21.

The Netherlands, and more precisely Holland, are often described as the first modern economy (p.2). Economic growth over the Golden Ages attracted numerous migrants from the rural areas of the country as well as from all over Northern Europe. Usually these new comers were extremely poor and as a result standards of living in 1800 seem to have been lower than in 1500. Dutch cities were thus characterized by a very high level of inequality (p.2).

Gelderblom O. & Jonker J. (2008) What really brought interests down

Gelderblom, Oscar & Joost Jonker (2009) “The Conditional Miracle. Institutional change, fiscal policy, bond markets and interest rates in Holland 1514-1713”, Utrecht University Working Papers.

This paper is available online (pdf).

Traditional explanation of the low issuing rate on public debt in the Dutch Republic emphasize the dramatic fall that occurred around 1600, but fail to explain why this level kept on falling from 1640 to 1725, until it had reached 2.5% (p.2).

Stabel P. and Haemers J. (2006) Financial revolution: the supply side story (… almost)

Stabel, Peter and Jelle Haemers (2006) “From Bruges to Antwerp. International commercial firms and government’s credit in the late 15th and early 16th century”, in Banca, Crédito y Captial. La Monarquía Hispánica y los antiguos Países Bajos (1505-1700), eds. Carmen Sanz Ayán and Bernardo J. García García, Madrid: Fundación Carlos de Amberes, p.20-38.

Introduction

The Financial Revolution – i. e. the gradual increase of government spending made possible by an increasing reliance on loans obtained from the capital markets – has essentially been studied from the side of the public demand. The ability of the markets to match this demand being regarded almost as a given. Meanwhile the impact the governments’ enormous financial needs may have had on private finance have hardly been addressed (p.22).

Nogal C. Á. (2006) Transferring Spanish cash to 17th-century Flanders

Nogal, Carlos Álvarez (2006) “La transferencia de dinero a Flandes en el siglo XVII” in Banca, Crédito y Captial. La Monarquía Hispánica y los antiguos Países Bajos (1505-1700), eds. Carmen Sanz Ayán and Bernardo J. García García, Madrid: Fundación Carlos de Amberes, 204-231.

Introduction

From 1567 to 1586, the Spanish Crown sent some 1.5m. ducats annually to Flanders; by 1608 this figure was reaching 3.5m. To do that, the king had to rely on Genoese intermediaries that could provide credit in Antwerp while being paid in Spain. But how exactly did the bankers manage to transfer that much money around war-torn Europe? (p.205) Financiers have often been accused to unduly charge the monarchy enormous fees for their service, but how much exactly did this service cost the bankers themselves?

‘t Hart M. (2009) Trust your friends, buy annuities

‘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.

Frehen R., Goetzmann W. and Rouwenhorst G. (2009) Why invest in the bubbles?

Frehen, Rik, William Goetzmann and Geert Rouwenhorst (2009) “New Evidence on the First Financial Bubbles”, Yale international Center for Finance, Working Paper 04, 24p.

This article is available online.

Why did investors decide to bet on the various companies that would form the three 1720 bubbles in France, England and the Netherlands? (p.1). How did these bubbles affect companies which unlike the Compagnie des Indes and the South Sea Company were neither involved in the Atlantic trade nor in public finance?

Flandreau M. et al. (2009) The question was not how to develop finance

Flandreau, Marc, Christophe Galimard, Clemens Jobst and Pilar Nogués-Marco (2009) “The bell-jar: commercial interest rates betwee two revolutions” in The Origin and Development of Financial Markets and Institutions. From the Seventeenth Century to the Present, eds. Jeremy Atack and Larry Neal, Cambridge: Cambridge University Press, 161-208.

An earlier version of this paper is available here.

For institutionalist economists as well as for contemporary commentators, the wealth of nations in 18th century Europe was rooted in their political system which influenced the level of interest rates and thus trade (p.165). The confidence investors had in the government’s credit was thus seen as critical (tellingly John Law’s primary aim was to bring interest rates down; p.166).