Joost Jonker

Completing a Financial Revolution: The Finance of the Dutch East India Trade and the Rise of the Amsterdam Capital Market, 1595–1612

The article analyzes the evolution of the Amsterdam capital market as a consequence of Dutch overseas expansion and the introduction of transferable VOC shares. Offering investors prospects of speculative gains without serious loss of liquidity, these instruments created a booming secondary market offering a wide range of allied credit techniques. By 1609 this market had become sufficiently strong to dictate terms for new public debt issues. These findings show that, contrary to commonly held notions about the emergence of secondary markets, private finance took precedence over public finance in the Dutch Republic.

A financial history of the Netherlands

This book brings together the results of fresh scholarly research to present a unique overview of the financial history of the Netherlands from the sixteenth century onwards. The Netherlands has always occupied a role in international finance way out of proportion with its geographical size. Since the eighteenth century, the country has been one of the largest exporters of capital in the world. In addition, several important financial innovations were pioneered in the Netherlands, such as a funded public debt, the famous Amsterdam Wisselbank, large public limited companies with transferable shares, and securitized international loans. The book shows the evolution of the Dutch financial system during nearly four and a half centuries, detailing the close interrelationship between currency policy, public finance, and banking.

Linking the Fortunes. Currency and Banking 1550-1800

Introduction In the course of the seventeenth century, Dutch finance became intricately connected to the world economic system. Its development was bolstered by favourable developments in international trade, which allowed the Dutch to exploit their geographic position and their harbours to the full, and by an economic boom which lasted long enough for considerable capital accumulation. The political and social structures were well suited to the preservation of wealth and allowed for high propensities to save. The accumulated funds in The Netherlands are estimated to have grown enormously since approximately 1500, even during the less favourable eighteenth century. Van Zanden calculated for Holland alone a rise in capital wealth from ten to twelve million guilders around 1500 to approximately 1,750 million guilders around 1790 (Van Zanden 1993, p. 23). In the beginning, the swell of capital was mainly diverted to domestic investments and trade. Increasingly, the Dutch funds came to be invested in public loans and foreign assets. The demand by public authorities, in particular for government loans, had increased considerably (cf. previous chapter). But during the eighteenth century, foreign governments came to attract Dutch capital too, specifically for the underwriting of warfare loans. As such, the Amsterdam capital market served to link varied networks of funds and fortunes, both of domestic and of foreign origin. The development was the more remarkable as the Dutch financial institutions did not excel in innovation. On the contrary, the establishment remained basically oriented towards the past. Several Italian cities and also the English state, in the meantime, moved ahead of the Dutch.

Direct finance in the Dutch Golden Age

This article analyses private credit operations in Amsterdam in the seventeenth century to explain the absence of deposit banks. The financial system was highly segmented and a combination of declining business margins and narrow interest rate spreads cut the scope for deposit taking. Moreover, merchants had easy access to credit in the form of short-term loans which could be easily rolled over, or replaced at will. This technique worked well because a market developed providing key functions to control risk and price loans accordingly.

An Admiralty for Asia: Business Organization and the Evolution of Corporate Governance in the Dutch Republic, 1590–1640

The Dutch East India Company (VOC) in 1602 showed many characteristics of modern corporations, including limited liability, freely transferable shares, and well-defined managerial functions. However, we challenge the notion of the VOC as the precursor of modern corporations to argue that the company was a hybrid, combining elements from traditional partnerships with a governance structure modeled on existing public-private partnerships. The company’s charter reflected this hybrid structure in the preeminent position given to the Estates General as the VOC’s main principal, to the detriment of shareholders’ interests. Protests by Isaac le Maire and Willem Usselinx about the board’s disregard for shareholders were rooted in a conviction that it ought to conform to traditional partnerships with their judicious balance between stakeholders’ interests. However, the perceived public interest of a strong military presence in Asia prevented shareholders’ protests from changing the corporate governance.

Dutch Corporate Finance, 1602-1850

Early Modern Dutch corporate finance had two notable features, a remarkable ease of raising large amounts of capital and a flexible legal framework. Having pioneered new corporate forms with two intercontinental trading companies, Dutch business adopted such forms on a wider scale only during the 18th century, when economic concentration and consolidation led to the appearance of business units large enough to need them. The financial intermediation and legal institutions available also facilitated early industrialization during the 19th century, up to and including the railways. The large export of capital throughout the period under consideration failed to harm economic development at any point or in any way.

Low Countries finance, 1348-1700

Public finance in the Low Countries, which played a central role in global financial innovation, evolved from the constant interactions between the cities and successive rulers that accompanied war and trade. Once the Dutch Revolt had split the Habsburg Low Countries into two, the Dutch Republic in the north adopted a high degree of fiscal centralization, which, boosted by economic growth, enabled the country to create high levels of tax revenue and public debt. In the southern Netherlands, however, the cities retained fiscal controls, and combined with sluggish growth, this kept tax revenue and debt low.

Money, Currency and Crisis : In Search of Trust, 2000 BC to AD 2000

Money is a core feature in all discussions of economic crisis, as is clear from the debates about the responses of the European Central Bank and the Federal Reserve Bank of the United States to the 2008 economic crisis. This volume explores the role of money in economic performance, and focuses on how monetary systems have affected economic crises for the last 4,000 years. Recent events have confirmed that money is only a useful tool in economic exchange if it is trusted, and this is a concept that this text explores in depth. The international panel of experts assembled here offers a long-range perspective, from ancient Assyria to modern societies in Europe, China and the US. This book will be of interest to students and researchers of economic history, and to anyone who seeks to understand the economic crises of recent decades, and place them in a wider historical context.

Public Functions, Private Markets: Credit Registration by Aldermen and Notaries in the Low Countries, 1500–1800

Gelderblom, Hup, and Jonker explore financial market development in preindustrial Europe by examining the financial functions performed by aldermen and notaries. Using a new dataset of 12,000 credit transactions registered by these public officials in six different cities in the Low Countries between 1500 and 1780, we analyze who used their services, for which purposes, and at what price. We find that notaries and aldermen were very active in registering debt contracts, but failed to obtain a commanding or even strong position as financial intermediaries in the way Parisian notaries did. As they registered only a small fraction of local credit transactions, notaries and aldermen in the Low Countries never possessed the information advantage of their French counterparts. Our findings highlight the degree to which subtle regulatory differences profoundly affected the dynamics of financial market evolution.

The Power of the Past: Inventing Traditions in Early Amsterdam Freemasonry

The Hobsbawm-Ranger framework of invented traditions is a suitable perspective from which to examine masonic traditions. Examples from early Dutch lodges show how they strove to gain primacy by anchoring their origins as far back in the past as reasonably possible. Though the formal establishment of a Dutch grand lodge in 1756 appeared to consolidate positions, the final act of this struggle for masonic pre-eminence played out as late as the 1930s.