The Dutch Economy in the Golden Age (16^th – 17^th Centuries)

Donald J. Harreld, Brigham Young University

In just over one hundred years, the provinces of the Northern Netherlands went from relative obscurity as the poor cousins of the industrious and heavily urbanized Southern Netherlands provinces of Flanders and Brabant to the pinnacle of European commercial success. Taking advantage of a favorable agricultural base, the Dutch achieved success in the fishing industry and the Baltic and North Sea carrying trade during the fifteenth and sixteenth centuries before establishing a far-flung maritime empire in the seventeenth century.

The Economy of the Netherlands up to the Sixteenth Century

In many respects the seventeenth-century Dutch Republic inherited the economic successes of the Burgundian and Habsburg Netherlands. For centuries, Flanders and to a lesser extent Brabant had been at the forefront of the medieval European economy. An indigenous cloth industry was present throughout all areas of Europe in the early medieval period, but Flanders was the first to develop the industry with great intensity. A tradition of cloth manufacture in the Low Countries existed from antiquity when the Celts and then the Franks continued an active textile industry learned from the Romans.

As demand grew early textile production moved from its rural origins to the cities and had become, by the twelfth century, an essentially urban industry. Native wool could not keep up with demand, and the Flemings imported English wool in great quantities. The resulting high quality product was much in demand all over Europe, from Novgorod to the Mediterranean. Brabant also rose to an important position in textile industry, but only about a century after Flanders. By the thirteenth century the number of people engaged in some aspect of the textile industry in the Southern Netherlands had become more than the total engaged in all other crafts. It is possible that this emphasis on cloth manufacture was the reason that the Flemish towns ignored the emerging maritime shipping industry which was eventually dominated by others, first the German Hanseatic League, and later Holland and Zeeland.

By the end of the fifteenth century Antwerp in Brabant had become the commercial capital of the Low Countries as foreign merchants went to the city in great numbers in search of the high-value products offered at the city's fairs. But the traditional cloths manufactured in Flanders had lost their allure for most European markets, particularly as the English began exporting high quality cloths rather than the raw materials the Flemish textile industry depended on. Many textile producers turned to the lighter weight and cheaper "new draperies." Despite protectionist measures instituted in the mid-fifteenth century, English cloth found an outlet in Antwerp 's burgeoning markets. By the early years of the sixteenth century the Portuguese began using Antwerp as an outlet for their Asian pepper and spice imports, and the Germans continued to bring their metal products (copper and silver) there. For almost a hundred years Antwerp remained the commercial capital of northern Europe, until the religious and political events of the 1560s and 1570s intervened and the Dutch Revolt against Spanish rule toppled the commercial dominance of Antwerp and the southern provinces. Within just a few years of the Fall of Antwerp (1585), scores of merchants and mostly Calvinist craftsmen fled the south for the relative security of the Northern Netherlands.

The exodus from the south certainly added to the already growing population of the north. However, much like Flanders and Brabant, the northern provinces of Holland and Zeeland were already populous and heavily urbanized. The population of these maritime provinces had been steadily growing throughout the sixteenth century, perhaps tripling between the first years of the sixteenth century to about 1650. The inland provinces grew much more slowly during the same period. Not until the eighteenth century, when the Netherlands as a whole faced declining fortunes would the inland provinces begin to match the growth of the coastal core of the country.

Dutch Agriculture

During the fifteenth century, and most of the sixteenth century, the Northern Netherlands provinces were predominantly rural compared to the urbanized southern provinces. Agriculture and fishing formed the basis for the Dutch economy in the fifteenth and sixteenth centuries. One of the characteristics of Dutch agriculture during this period was its emphasis on intensive animal husbandry. Dutch cattle were exceptionally well cared for and dairy produce formed a significant segment of the agricultural sector. During the seventeenth century, as the Dutch urban population saw dramatic growth many farmers also turned to market gardening to supply the cities with vegetables.

Some of the impetus for animal production came from the trade in slaughter cattle from Denmark and Northern Germany. Holland was an ideal area for cattle feeding and fattening before eventual slaughter and export to the cities of the Southern provinces. The trade in slaughter cattle expanded from about 1500 to 1660, but protectionist measures on the part of Dutch authorities who wanted to encourage the fattening of home-bred cattle ensured a contraction of the international cattle trade between 1660 and 1750.

Although agriculture made up the largest segment of the Dutch economy, cereal production in the Netherlands could not keep up with demand particularly by the seventeenth century as migration from the southern provinces contributed to population increases. The provinces of the Low Countries traditionally had depended on imported grain from the south (France and the Walloon provinces) and when crop failures interrupted the flow of grain from the south, the Dutch began to import grain from the Baltic. Baltic grain imports experienced sustained growth from about the middle of the sixteenth century to roughly 1650 when depression and stagnation characterized the grain trade into the eighteenth century.

Indeed, the Baltic grain trade (see below), a major source of employment for the Dutch, not only in maritime transport but in handling and storage as well, was characterized as the "mother trade." In her recent book on the Baltic grain trade, Mijla van Tielhof defined "mother trade" as the oldest and most substantial trade with respect to ships, sailors and commodities for the Northern provinces. Over the long term, the Baltic grain trade gave rise to shipping and trade on other routes as well as to manufacturing industries.

Dutch Fishing

Along with agriculture, the Dutch fishing industry formed part of the economic base of the northern Netherlands. Like the Baltic grain trade, it also contributed to the rise of Dutch the shipping industry.

The backbone of the fishing industry was the North Sea herring fishery, which was quite advanced and included a form of "factory" ship called the herring bus. The herring bus was developed in the fifteenth century in order to allow the herring catch to be processed with salt at sea. This permitted the herring ship to remain at sea longer and increased the range of the herring fishery. Herring was an important export product for the Netherlands particularly to inland areas, but also to the Baltic offsetting Baltic grain imports.

The herring fishery reached its zenith in the first half of the seventeenth century. Estimates put the size of the herring fleet at roughly 500 busses and the catch at about 20,000 to 25,000 lasts (roughly 33,000 metric tons) on average each year in the first decades of the seventeenth century. The herring catch as well as the number of busses began to decline in the second half of the seventeenth century, collapsing by about the mid-eighteenth century when the catch amounted to only about 6000 lasts. This decline was likely due to competition resulting from a reinvigoration of the Baltic fishing industry that succeeded in driving prices down, as well as competition within the North Sea by the Scottish fishing industry.

The Dutch Textile Industry

The heartland for textile manufacturing had been Flanders and Brabant until the onset of the Dutch Revolt around 1568. Years of warfare continued to devastate the already beaten down Flemish cloth industry. Even the cloth producing towns of the Northern Netherlands that had been focusing on producing the "new draperies" saw their output decline as a result of wartime interruptions. But textiles remained the most important industry for the Dutch Economy.

Despite the blow it suffered during the Dutch revolt, Leiden's textile industry, for instance, rebounded in the early seventeenth century – thanks to the influx of textile workers from the Southern Netherlands who emigrated there in the face of religious persecution. But by the 1630s Leiden had abandoned the heavy traditional wool cloths in favor of a lighter traditional woolen (laken) as well as a variety of other textiles such as says, fustians, and camlets. Total textile production increased from 50,000 or 60,000 pieces per year in the first few years of the seventeenth century to as much as 130,000 pieces per year during the 1660s. Leiden's wool cloth industry probably reached peak production by 1670. The city's textile industry was successful because it found export markets for its inexpensive cloths in the Mediterranean, much to the detriment of Italian cloth producers.

Next to Lyons, Leiden may have been Europe's largest industrial city at end of seventeenth century. Production was carried out through the "putting out" system, whereby weavers with their own looms and often with other dependent weavers working for them, obtained imported raw materials from merchants who paid the weavers by the piece for their work (the merchant retained ownership of the raw materials throughout the process). By the end of the seventeenth century foreign competition threatened the Dutch textile industry. Production in many of the new draperies (says, for example) decreased considerably throughout the eighteenth century; profits suffered as prices declined in all but the most expensive textiles. This left the production of traditional woolens to drive what was left of Leiden's textile industry in the eighteenth century.

Although Leiden certainly led the Netherlands in the production of wool cloth, it was not the only textile producing city in the United Provinces. Amsterdam, Utrecht, Delft and Haarlem, among others, had vibrant textile industries. Haarlem, for example, was home to an important linen industry during the first half of the seventeenth century. Like Leiden's cloth industry, Haarlem's linen industry benefited from experienced linen weavers who migrated from the Southern Netherlands during the Dutch Revolt. Haarlem's hold on linen production, however, was due more to its success in linen bleaching and finishing. Not only was locally produced linen finished in Haarlem, but linen merchants from other areas of Europe sent their products to Haarlem for bleaching and finishing. As linen production moved to more rural areas as producers sought to decrease costs in the second half of the seventeenth century, Haarlem's industry went into decline.

Other Dutch Industries

Industries also developed as a result of overseas colonial trade, in particular Amsterdam's sugar refining industry. During the sixteenth century, Antwerp had been Europe's most important sugar refining city, a title it inherited from Venice once the Atlantic sugar islands began to surpass Mediterranean sugar production. Once Antwerp fell to Spanish troops during the Revolt, however, Amsterdam replaced it as Europe's dominant sugar refiner. The number of sugar refineries in Amsterdam increased from about 3 around 1605 to about 50 by 1662, thanks in no small part to Portuguese investment. Dutch merchants purchased huge amounts of sugar from both the French and the English islands in the West Indies, along with a great deal of tobacco. Tobacco processing became an important Amsterdam industry in the seventeenth century employing large numbers of workers and leading to attempts to develop domestic tobacco cultivation.

With the exception of some of the "colonial" industries (sugar, for instance), Dutch industry experienced a period of stagnation after the 1660s and eventual decline beginning around the turn of the eighteenth century. It would seem that as far as industrial production is concerned, the Dutch Golden Age lasted from the 1580s until about 1670. This period was followed by roughly one hundred years of declining industrial production. De Vries and van der Woude concluded that Dutch industry experienced explosive growth after 1580s because of the migration of skilled labor and merchant capital from the southern Netherlands at roughly the time Antwerp fell to the Spanish and because of the relative advantage continued warfare in the south gave to the Northern Provinces. After the 1660s most Dutch industries experienced either steady or steep decline as many Dutch industries moved from the cities into the countryside, while some (particularly the colonial industries) remained successful well into the eighteenth century.

Dutch Shipping and Overseas Commerce

Dutch shipping began to emerge as a significant sector during the fifteenth century. Probably stemming from the inaction on the part of merchants from the Southern Netherlands to participate in seaborne transport, the towns of Zeeland and Holland began to serve the shipping needs of the commercial towns of Flanders and Brabant (particularly Antwerp ). The Dutch, who were already active in the North Sea as a result of the herring fishery, began to compete with the German Hanseatic League for Baltic markets by exporting their herring catches, salt, wine, and cloth in exchange for Baltic grain.

The Grain Trade

Baltic grain played an essential role for the rapidly expanding markets in western and southern Europe. By the beginning of the sixteenth century the urban populations had increased in the Low Countries fueling the market for imported grain. Grain and other Baltic products such as tar, hemp, flax, and wood were not only destined for the Low Countries, but also England and for Spain and Portugal via Amsterdam, the port that had succeeded in surpassing Lübeck and other Hanseatic towns as the primary transshipment point for Baltic goods. The grain trade sparked the development of a variety of industries. In addition to the shipbuilding industry, which was an obvious outgrowth of overseas trade relationships, the Dutch manufactured floor tiles, roof tiles, and bricks for export to the Baltic; the grain ships carried them as ballast on return voyages to the Baltic.

The importance of the Baltic markets to Amsterdam, and to Dutch commerce in general can be illustrated by recalling that when the Danish closed the Sound to Dutch ships in 1542, the Dutch faced financial ruin. But by the mid-sixteenth century, the Dutch had developed such a strong presence in the Baltic that they were able to exact transit rights from Denmark (Peace of Speyer, 1544) allowing them freer access to the Baltic via Danish waters. Despite the upheaval caused by the Dutch and the commercial crisis that hit Antwerp in the last quarter of the sixteenth century, the Baltic grain trade remained robust until the last years of the seventeenth century. That the Dutch referred to the Baltic trade as their "mother trade" is not surprising given the importance Baltic markets continued to hold for Dutch commerce throughout the Golden Age. Unfortunately for Dutch commerce, Europe 's population began to decline somewhat at the close of the seventeenth century and remained depressed for several decades. Increased grain production in Western Europe and the availability of non-Baltic substitutes (American and Italian rice, for example) further decreased demand for Baltic grain resulting in a downturn in Amsterdam 's grain market.

Expansion into African, American and Asian Markets – "World Primacy"

Building on the early successes of their Baltic trade, Dutch shippers expanded their sphere of influence east into Russia and south into the Mediterranean and the Levantine markets. By the turn of the seventeenth century, Dutch merchants had their eyes on the American and Asian markets that were dominated by Iberian merchants. The ability of Dutch shippers to effectively compete with entrenched merchants, like the Hanseatic League in the Baltic, or the Portuguese in Asia stemmed from their cost cutting strategies (what de Vries and van der Woude call "cost advantages and institutional efficiencies," p. 374). Not encumbered by the costs and protective restrictions of most merchant groups of the sixteenth century, the Dutch trimmed their costs enough to undercut the competition, and eventually establish what Jonathan Israel has called "world primacy."

Before Dutch shippers could even attempt to break in to the Asian markets they needed to first expand their presence in the Atlantic. This was left mostly to the émigré merchants from Antwerp, who had relocated to Zeeland following the Revolt. These merchants set up the so-called Guinea trade with West Africa, and initiated Dutch involvement in the Western Hemisphere. Dutch merchants involved in the Guinea trade ignored the slave trade that was firmly in the hands of the Portuguese in favor of the rich trade in gold, ivory, and sugar from São Tomé. Trade with West Africa grew slowly, but competition was stiff. By 1599, the various Guinea companies had agreed to the formation of a cartel to regulate trade. Continued competition from a slew of new companies, however, insured that the cartel would be only partially effective until the organization of the Dutch West India Company in 1621 that also held monopoly rights in the West Africa trade.

The Dutch at first focused their trade with the Americas on the Caribbean. By the mid-1590s only a few Dutch ships each year were making the voyage across the Atlantic. When the Spanish instituted an embargo against the Dutch in 1598, shortages in products traditionally obtained in Iberia (like salt) became common. Dutch shippers seized the chance to find new sources for products that had been supplied by the Spanish and soon fleets of Dutch ships sailed to the Americas. The Spanish and Portuguese had a much larger presence in the Americas than the Dutch could mount, despite the large number vessels they sent to the area. Dutch strategy was to avoid Iberian strongholds while penetrating markets where the products they desired could be found. For the most part, this strategy meant focusing on Venezuela, Guyana, and Brazil. Indeed, by the turn of the seventeenth century, the Dutch had established forts on the coasts of Guyana and Brazil.

While competition between rival companies from the towns of Zeeland marked Dutch trade with the Americas in the first years of the seventeenth century, by the time the West India Company finally received its charter in 1621 troubles with Spain once again threatened to disrupt trade. Funding for the new joint-stock company came slowly, and oddly enough came mostly from inland towns like Leiden rather than coastal towns. The West India Company was hit with setbacks in the Americas from the very start. The Portuguese began to drive the Dutch out of Brazil in 1624 and by 1625 the Dutch were loosing their position in the Caribbean as well. Dutch shippers in the Americas soon found raiding (directed at the Spanish and Portuguese) to be their most profitable activity until the Company was able to establish forts in Brazil again in the 1630s and begin sugar cultivation. Sugar remained the most lucrative activity for the Dutch in Brazil, and once the revolt of Portuguese Catholic planters against the Dutch plantation owners broke out the late 1640s, the fortunes of the Dutch declined steadily.

The Dutch faced the prospect of stiff Portuguese competition in Asia as well. But, breaking into the lucrative Asian markets was not just a simple matter of undercutting less efficient Portuguese shippers. The Portuguese closely guarded the route around Africa. Not until roughly one hundred years after the first Portuguese voyage to Asia were the Dutch in a position to mount their own expedition. Thanks to the travelogue of Jan Huyghen van Linschoten, which was published in 1596, the Dutch gained the information they needed to make the voyage. Linschoten had been in the service of the Bishop of Goa, and kept excellent records of the voyage and his observations in Asia.

The United East India Company (VOC)

The first few Dutch voyages to Asia were not particularly successful. These early enterprises managed to make only enough to cover the costs of the voyage, but by 1600 dozens of Dutch merchant ships made the trip. This intense competition among various Dutch merchants had a destabilizing effect on prices driving the government to insist on consolidation in order to avoid commercial ruin. The United East India Company (usually referred to by its Dutch initials, VOC) received a charter from the States General in 1602 conferring upon it monopoly trading rights in Asia. This joint stock company attracted roughly 6.5 million florins in initial capitalization from over 1,800 investors, most of whom were merchants. Management of the company was vested in 17 directors (Heren XVII) chosen from among the largest shareholders.

In practice, the VOC became virtually a "country" unto itself outside of Europe, particularly after about 1620 when the company's governor-general in Asia, Jan Pieterszoon Coen, founded Batavia (the company factory) on Java. While Coen and later governors-general set about expanding the territorial and political reach of the VOC in Asia, the Heren XVII were most concerned about profits, which they repeatedly reinvested in the company much to the chagrin of investors. In Asia, the strategy of the VOC was to insert itself into the intra-Asian trade (much like the Portuguese had done in the sixteenth century) in order to amass enough capital to pay for the spices shipped back to the Netherlands. This often meant displacing the Portuguese by waging war in Asia, while trying to maintain peaceful relations within Europe.

Over the long term, the VOC was very profitable during the seventeenth century despite the company's reluctance to pay cash dividends in first few decades (the company paid dividends in kind until about 1644). As the English and French began to institute mercantilist strategies (for instance, the Navigation Acts of 1551 and 1660 in England, and import restrictions and high tariffs in the case of France ) Dutch dominance in foreign trade came under attack. Rather than experience a decline like domestic industry did at the end of the seventeenth century, the Dutch Asia trade continued to ship goods at steady volumes well into the eighteenth century. Dutch dominance, however, was met with stiff competition by rival India companies as the Asia trade grew. As the eighteenth century wore on, the VOC's share of the Asia trade declined significantly compared to its rivals, the most important of which was the English East India Company.

Dutch Finance

The last sector that we need to highlight is finance, perhaps the most important sector for the development of the early modern Dutch economy. The most visible manifestation of Dutch capitalism was the exchange bank founded in Amsterdam in 1609; only two years after the city council approved the construction of a bourse (additional exchange banks were founded in other Dutch commercial cities). The activities of the bank were limited to exchange and deposit banking. A lending bank, founded in Amsterdam in 1614, rounded out the financial services in the commercial capital of the Netherlands.

The ability to manage the wealth generated by trade and industry (accumulated capital) in new ways was one of the hallmarks of the economy during the Golden Age. As early as the fourteenth century, Italian merchants had been experimenting with ways to decrease the use of cash in long-distance trade. The resulting instrument was the bill of exchange developed as a way to for a seller to extend credit to a buyer. The bill of exchange required the debtor to pay the debt at a specified place and time. But the creditor rarely held on to the bill of exchange until maturity preferring to sell it or otherwise use it to pay off debts. These bills of exchange were not routinely used in commerce in the Low Countries until the sixteenth century when Antwerp was still the dominant commercial city in the region. In Antwerp the bill of exchange could be assigned to another, and eventually became a negotiable instrument with the practice of discounting the bill.

The idea of the flexibility of bills of exchange moved to the Northern Netherlands with the large numbers of Antwerp merchants who brought with them their commercial practices. In an effort to standardize the practices surrounding bills of exchange, the Amsterdam government restricted payment of bills of exchange to the new exchange bank. The bank was wildly popular with merchants; deposits increasing from just less than one million guilders in 1611 to over sixteen million by 1700. Amsterdam 's exchange bank flourished because of its ability to handle deposits and transfers, and to settle international debts.

By the second half of the seventeenth century many wealthy merchant families had turned away from foreign trade and began engaging in speculative activities on a much larger scale. They traded in commodity values (futures), shares in joint-stock companies, and dabbled in insurance and currency exchanges to name only a few of the most important ventures.

Conclusion

Building on its fifteenth- and sixteenth-century successes in agricultural productivity, and in North Sea and Baltic shipping, the Northern Netherlands inherited the economic legacy of the southern provinces as the Revolt tore the Low Countries apart. The Dutch Golden Age lasted from roughly 1580, when the Dutch proved themselves successful in their fight with the Spanish, to about 1670, when the Republic's economy experienced a down-turn. Economic growth was very fast during until about 1620 when it slowed, but continued to grow steadily until the end of the Golden Age. The last decades of the seventeenth century were marked by declining production and loss of market dominance overseas.

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