Economic History of The Netherlands

Economic History Of The Netherlands

The economic history of the Netherlands (1500–1815) is the history of an economy that de Vries calls the first "modern" economy It covers The Netherlands as the Habsburg Netherlands, through the era of the Dutch Republic, the Batavian Republic and the Kingdom of Holland.

After becoming de facto independent from the empire of Philip II of Spain around 1585 the country experienced almost a century of explosive economic growth. A technological revolution in shipbuilding led to a competitive advantage in shipping that helped the young Republic become the dominant trade power by the mid-17th century. In 1670 the Dutch merchant marine totalled 568,000 tons of shipping—about half the European total. Pillars of this position were the dominance of the Amsterdam Entrepôt in European trade, and that of the Dutch East and West India Companies (VOC and WIC) in intercontinental trade. Beside trade, an early "industrial revolution" (powered by wind, water and peat), land reclamation from the sea, and agricultural revolution, helped the Dutch economy achieve the highest standard of living in Europe (and probably the world) by the middle of the 17th century. Affluence facilitated a Golden Age in culture typified by the great artist Rembrandt van Rijn (1606–1669).

However, around 1670 a combination of politico-military upheavals (wars with France and England) and adverse economic developments (a break in the upward "secular trend" of price levels) brought the Dutch economic boom to an abrupt end. This caused a retrenchment of the Dutch economy in the period up to 1713, in which the industrial sector was partly dismantled, and growth in trade leveled off. The economy struck out in new directions, including colonial plantations in Suriname, whaling, and new types of trade with Asia). However, these riskier ventures often failed to bring commensurate gains. The VOC embarked on a period of "profitless growth." The financial strength proved more durable, enabling the Netherlands play the role of a major power in the European conflicts around the turn of the 18th century, by hiring mercenary armies "off the shelf" and subsidizing its allies.

These conflicts put an enormous strain on the resources of the Republic, however, and for that reason the Republic (like its opponent, the France of Louis XIV) was deeply in debt at the end of the War of the Spanish Succession. The regents of the Republic more or less abandoned its Great-Power pretensions after 1713, cutting down on its military preparedness in a vain attempt to pay down this overhang of public debt. That debt brought a significant rentier class into being that helped change the nature of the economy from one invested primarily in trade and industry, into one in which a significant financial sector played a dominant role. By the end of the 18th century the Republic was the major market for sovereign debt, and a major source of foreign direct investment.

Wars with Great Britain and France at the end of the 18th century, and attendant political upheavals, caused a financial and economic crisis from which the economy was unable to recover. After the successors of the Republic (the Batavian Republic and the Kingdom of Holland) were forced to enforce the policies of economic warfare of the French Empire, which were disastrous for Dutch trade and industry, most of the gains of the previous two centuries were rapidly lost. The newly independent Kingdom of the Netherlands was faced in 1815 with an economy that was largely deindustrialized and deurbanized, but still saddled with a crippling public debt, which it was forced to repudiate (the first time that the Dutch state defaulted since the dark pre-independence days of the Revolt).