The Financial Policy in the Dutch Republic in the 17th Century
(Summary) by Kazuha Okimoto
@The 17th century was said to be the Golden Age of the Dutch Republic. Dutch merchants dominated the Baltic trade and they also started commerce in Asia and America. A lot of products were gathered in Amsterdam, so the city was became the distribution center. Surprisingly, however, this prosperity was achieved at the very moment of the wars. Dutch economy was getting so powerful that England and France tried to drive out the Republic. As a result, the Dutch Republic had to raise the money to finance the navy fleet and army expenses in order to protect their territory and free trade, which needed a lot of money. Then, how did the Republic raise the money?
There were seven provinces in the Republic. Each province was a sovereign and they claimed particularism. It was not the central government but the provinces that had the right to tax. The cost of the central government was made up of contributions from the provinces. Furthermore, there was neither national nor local tax authority. The job of collecting taxes was committed to the private person. Like this, the financial organization of the Republic didnft seem effective at all. Then, how was the Republic able to collect enough money to cover the military cost?
I take an example of the province of Holland. Holland contributed about 60% of the national cost, so Holland had strong influence over the government.
First, excise tax. In Holland almost all of the daily products were taxed. This system was very efficient to collect money, but the defect was that it was a great burden for the poor people. To resolve this limit and collect more money, Holland government introduced one more policy: the loan.
The good point of the loan is strong possibility to prepare a great deal of money in a very short time, and this policy greatly succeeded in Holland. There are two factors which explain why people entrusted their money to the Holland government. One was that the government was a representative body. Its members were citizens, so people who lent money could influence the members of the government to pay off the debt. The other factor was that the members themselves also lent money to the Holland government. The members could receive damage as well as ordinary investors. These made the Holland government reliable, and a lot of capital came into Holland.
The Dutch Republic was able to raise enough money because of this efinancial revolution.f Although there were some weak points, financial policy of the Dutch Republic was very effective in spite of ineffective organization. In addition, the interest on Holland loan was continually dropping. Nevertheless more and more people bought the loan. Why? This is one of my present questions, so I will do research about them from now on.
Questions and Answers Session@is not available
The Financial Policy in the Dutch Republic in the 17th century is very important, I think. So I agree with her. It is said that financial loans are most important invention, because that is one of the factor to improve capitalism. I think it better to explain influence of the Loan system with numerical analysis. If she show the percentage of the income of this Loan, it will be persuasive.
by Sakamoto Yoko