1.10 The Netherlands

Trade Empires and Early Capitalism

The Dutch were at the forefront of these changes. During their rebellion against Spain in the late sixteenth century, the Dutch began to look to revenue generated from trade as an economic lifeline. They served both as the middlemen in European commerce, shipping and selling things like timber from Russia, textiles from England, and wine from Germany, and they also increasingly served as Europe’s bankers. The Dutch invented both formalized currency exchange and the stock market, both of which led to huge fortunes for Dutch merchants. A simple way to characterize the growth of Dutch commercial power was that the Netherlands replaced northern Italy as the heart of European trade itself after the Renaissance.

In 1602, Dutch merchants with the support of the state created the world’s first corporation: the Dutch East India Company (VOC in its Dutch acronym). It was created to serve as the republic’s official trading company, a company with a legal monopoly to trade with a certain region: India and Southeast Asia. The VOC proved phenomenally successful in pushing out other European merchants in the Indies, through a combination of brute force and the careful deployment of legal strategies. A common approach was to offer “protection” from the supposedly more rapacious European powers like Portugal in return for trade monopolies from spice-producing regions. In many cases, the VOC simply used the promise of protection as a smokescreen for seizing complete control of a given area (especially in Indonesia, which eventually became a Dutch colony), while in other areas local rulers remained in political control but lost power over their own spice production and trade. For the better part of the seventeenth century, the Dutch controlled an enormous amount of the hugely profitable trade in luxury goods and spices from the East Indies as a result.

VOC. "Old VOC stock certificate." September 27, 1606.
VOC. “Old VOC stock certificate.” September 27, 1606. Wikimedia. August 1, 2008.

The profits for Dutch merchants and investors were concomitantly high. As an example, above and beyond direct profits by individual members of the company, all stockholders in the VOC received dividends of 30% on their investments within the first ten years, in addition to a dramatic boost in value of the stocks themselves. The other states of Europe were both aghast at Dutch success and grudgingly admiring of it. In 1601, there were 100 more Dutch ships in the port of London at any given time than there were English ships, and by 1620 about half of all European merchant vessels were Dutch.

In 1652, the Dutch seized control of the Cape of Good Hope at the southern tip of Africa, allowing them to control shipping going around Africa en route to Asia, and they exerted additional military force in the Indies to force native merchants to trade only with them (among Europeans). Note here that the Dutch takeover of the Cape of Good Hope was the historical origin of the modern nation of South Africa – these were the first permanent European settlers. The Dutch were also the only European power allowed to keep a small trading colony in Japan, which was otherwise completely cut off to westerners after 1641 (thanks to a failed Portuguese-sponsored Christian uprising against the Japanese shogun).

The iconic moment in the history of the Dutch golden age of early capitalism was the tulip craze of the 1620s – 1630s. Tulips grow well in the Netherlands and had long been cultivated for European elites. A tulip fad among Dutch elites in the 1620s drove up the price of tulip bulbs dramatically. Soon, enterprising merchants started buying and selling bulbs with no intention of planting them or even selling them to someone who would – they simply traded the bulbs as a valuable commodity unto themselves.

In 1625, one bulb was sold for 5,000 guilders, about half the cost of a mansion in Amsterdam. It went up from there – the real height of the craze was the winter of 1636 – 1637, when individual bulbs sometimes changed hands ten times in a day for increasing profits. This was the equivalent of “flipping” bulbs; it had nothing to do with the actual tulips any longer. The element to emphasize is not just the seemingly irrational nature of the boom, but of the mindset: the Dutch moneyed classes were already embracing speculative market economies, in which the value of a given commodity has almost nothing to do with what it does, but instead from what people are willing to spend on it. In capitalist economies this phenomenon often leads to “bubbles” of rising values that then eventually collapse. In this case, the tulip craze did indeed come crashing down in the winter of 1637 – 1638, but in the meantime it presaged the emergence of commodity speculation for centuries to come.

The development of this early form of capitalism unquestionably originated in the Netherlands, but it spread from there. One by one, the other major states of Europe started to adopt Dutch methods of managing finances: sophisticated accounting, carefully organized tax policy, and an emphasis on hands-on knowledge of finances up to the highest levels of royal government. For example, Louis XIV insisted that his son study political economy and Colbert, Louis’ head of finance, wrote detailed instructions on how a king should oversee state finances. This was a significant change, since until the mid-seventeenth century at the earliest, to be a king was to refuse to dirty one’s hands with commerce. It was because of the incredible success of the Dutch that kings and nobles throughout Europe began to change their outlooks and values. Ultimately, at least among some kings and nobles in Western Europe, humanistic education and the traditional martial values of the nobility were combined with practical knowledge, or at least appreciation, of mercantile techniques.

Ultimately, the Dutch Golden Age was the seventeenth century. The other states of Europe began to focus their own efforts on trade, and when the Netherlands was dragged into the wars initiated by Louis XIV toward the end of the seventeenth century, it spelled the beginning of the end for their dominance (although not their prosperity – the Netherlands has remained a resolutely prosperous country ever since). During that period, however, the Dutch had created a global trade network, proved that commercial dominance would play a crucial factor in political power in the future, and overseen a cultural blossoming of art and architecture.


Rembrandt. "The Artist in his Studio." c. 1626 – 28
Rembrandt. “The Artist in his Studio.” c. 1626 – 28. Museum of Fine Arts. Wikimedia. July 27, 2017.



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PPSC HIS 1320: Western Civilization: 1650-Present by Wayne Artis, Sarah Clay, and Kim Fujikawa is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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