------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (April 2010)

Oscar Gelderblom, editor, _The Political Economy of the Dutch
Republic_. Aldershot, UK: Ashgate, 2009.  xv + 329 pp. $125 (cloth),
ISBN: 978-0-7546-6159-7.

Reviewed for EH.NET by D’Maris Coffman, Centre for Financial History,
Cambridge University.


This long-awaited volume should be a starting point for anyone who
requires a grounding in the fiscal history of the Dutch Republic and
the so-called “Dutch model” of public finance as understood in the
Anglophone literature.  Yet despite the unassuming title, this
collection of essays should be seen as much more than just required
reading for fiscal historians of early modern Europe. Gelderblom’s
placement of political economy -- defined by Adam Smith as a “branch
of the science of a statesman or legislator ... [that] proposes to
enrich both the people and the sovereign” (p. 2) -- at the center of
the project offers a compelling example of a “new financial history”
that integrates studies of fiscal and monetary history with
contemporary economic thought, political culture, economic and social
realities, and great power relations. The result is that rare
collection of essays that delivers far more than it promises.

In keeping with most contemporary fiscal history, Gelderblom’s
introduction uses North and Weingast’s (1989) model for Britain as a
framework for considering the Dutch Republic’s fiscal and financial
innovations. Yet he emphasizes the need to consider continuities with
Burgundian-Habsburg practice, as well as the possibility that by the
eighteenth century even the most impressive “fiscal, financial and
economic reforms [were] simply not sufficient in competition with
larger powers” (p. 6). The chronological sweep of the work is as
impressive as its methodological reach.

In the opening essay, Erik S. Reinert offers an original and
refreshing discussion of contemporary economic thought, particularly
as it bore on the way in which foreign observers analyzed the
structural properties of the Dutch economy. Reinert’s observation that
the “context-specific” quality of “mercantilism has some clear
analytical advantages over neo-classical economics as a tool to
understand the rise and fall of the Dutch Republic” is appealing given
the failure of mainstream economics to anticipate, diagnose, much less
remedy, our own current financial and economic crisis (p. 19). The
mercantilists’ recognition (by no means uncontested) that “economic
wealth was not a zero-sum game” (which Reinert ascribes to Giovani
Botero) permitted a distinction between “feudal rents” and
“manufacturing rents,” “trading rents,” and “raw-material based rents”
(p. 24). Their analytical stance, recognizable in managerial economics
today, was to ask how particular nations might emulate their more
successful neighbors. Yet unlike Adam Smith, whose analysis of Dutch
decline floundered at the level of abstraction, these authors were
also concerned with “England’s success in ‘blowing the Dutch out of
the waters’” (p. 35). In some sense, the remainder of this collection
serves as an extended meditation on whether or not contemporaries had
it right.

James Tracy’s chapter, entitled “Holland’s New Fiscal Regime,” makes a
penetrating point about contingency. Despite Holland’s success in
developing funded long-term debt instruments in the middle of the
sixteenth century, the province was forced to devolve fiscal
responsibility onto the towns (whose burghers demanded that in return
for access to lucrative excise revenues) and even resort to short-term
borrowing to meet the demand for new military expenditure amidst the
Dutch Revolt. As with mid-seventeenth century England, knowledge of,
and success with, certain institutional practices was not sufficient
to ensure their survival. Rebuilding Holland’s credit, as Tracy
observes, was about more than sound institutions; it required the
cooperation of local elites.

Wantje Fritschy’s chapter on fiscal efficiency in Holland takes up the
story with the Union of Utrecht. This chapter, rich in empirical
detail, will be valuable to specialist audiences. For the general
reader, the most important conclusion is simply that those “stylized
facts” about the inefficiency of tax collection in the province do not
bear up under close scrutiny. Fritschy argues that elites were
convinced of “the utility of the public goods paid for by taxation”
(p. 82).  Jan de Vries’ essay on the municipal regulation of bread
prices continues in a similar vein the collection’s exploration of
institutional practices. The distinction between the fixed and
variable costs of bread production led to a “fully monetized
allocation of costs” (p. 90). Since consumers who could afford wheat
bread preferred it to rye, the authorities were able not only to
back-shift the economic incidence of the excise onto producers of
grain, but also to cross-subsidize the production of rye bread (p.
98-99). As a result, the Dutch Republic was the only fiscal regime in
Europe to tax successfully a product as necessary as bread, that
“staff of life” (p. 114).

Marjolein ‘t Hart turns her attention to the Dutch Republic’s
relations with its creditors, which she puts in a comparative
perspective with France and England. She finds that not only was the
market for public bonds robust, mature and transparent, but also, and
crucially, that there existed a high level of mutual trust between
state and local levels (p. 141). Specialists will delight in her
reconstruction of the family networks of the Amsterdam receivers,
their role as “semi-public banks” and the details of the various
annuities. The general reader, however, will be able to see why the
Dutch public loans enjoyed such a relatively low rate of interest.

Marteen Prak and Jan Luiten van Zanden’s intriguing essay on “tax
morale” and “citizenship” takes up the ideological basis for Dutch
taxation. For them, as for the others, the cardinal case was Holland.
While their focus on citizenship seems, at times, a bit strained, the
conclusion that compliance turned on both the quality of the public
goods delivered and the stakeholder interest in “community” is
entirely convincing. By contrast, Bas van Bavel’s discussion of rural
development and landowning patterns in Holland dates the structural
changes to the sixteenth century. Consolidations of tenancy and the
growth of burgher landownership encouraged capital investment in
infrastructure (via the water management boards) and the development
of rural capitalism (p. 193).  As Milja van Tielhof argues in the
succeeding essay, the financing of water management did not always
involve a proportional division of costs (p. 220). By the
eighteenth-century, the morgengeld system appeared to be collapsing
under its own weight.

Gelderblom’s essay on long-distance trade shifts attention away from
the internal dynamics of the Dutch economy to the international arena.
His tight comparison of the Dutch Republic and England (1550-1650) is
helpful. From a fiscal standpoint, the Dutch benefited from more
efficient species of indirection taxation, which funded the sale of
annuities and bonds on open markets. In this account, the trade in VOC
shares plays an important but secondary role. Yet for the author, the
story is largely one of changing factor costs and with them shifting
comparative advantages. Once England began to emulate the Dutch
Republic in earnest, the outcome could hardly be doubted.

Richard Yntema’s exploration of the interprovincial Dutch beer trade
turns on provincial trade policies. Although the Union of Utrecht
established free trade, by the 1620s and 1630s the principle had come
under pressure from powerful provincial brewing interests. The
resulting “tariff wars” had all but killed off interprovincial trade
in beer by the early eighteenth century (p. 288). For the general
reader, Yntema’s case study suggests an exception to the conventional
wisdom that the Dutch Republic enjoyed a well-integrated economy.

In the final essay, Thomas Poell recounts the last two decades of the
Dutch Republic. As elsewhere in Europe, Dutch revolutionaries found it
difficult to dismantle the corporate structure of the state (p. 319).
Poell’s narrative of the contest between unitarists and federalists
sheds considerable light on the challenges, as well as the nature of
local allegiances with the French.  In what seemed little more than a
throwaway remark at the very end, Poell compares the French failure in
the Netherlands with their failures in Switzerland and Northern Italy.
Yet in many ways, the similarities run deep.

The very institutional innovations, which coupled with the flexibility
of state practices and the ideological commitments of elites to their
local communities made it possible for the Dutch Republic to exploit
her comparative advantages so successfully in the sixteenth and
seventeenth centuries, in turn, made the Netherlands less competitive,
as greater powers came on stream in the late seventeenth and
eighteenth centuries. Institutional reforms may not have staved off
“Dutch decline.” Both the general reader and the specialist alike will
come away from this collection of essays with a much better
understanding of why.


D’Maris Coffman is the Mary Bateson Research Fellow at Newnham College
of Cambridge University. There she directs the Centre for Financial
History, which was founded in July 2009 with a generous grant from
Winton Charitable Trusts. At Cambridge, she supervises students in
economic and social history and lectures in financial history for the
MPhil course. Email: [log in to unmask]

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