I have been thinking a lot about the success of the Dutch, who had few
resources vis-a-vis Diamond's article, in my new book about 17th C. &
early 18th C. economics.
Here is the opening sentence to give you a flavor of the book.
Here is a short section from the second chapter on the Dutch economy.
This chapter contains none of the crimes & scandals that occupy the rest
of the book:
Comments would be very much appreciated:
Despite the overwhelming importance of Holland as a model for the rest
of the world in the 17th century, continuing the story of economics by
turning to Holland might seem curious, if not jarring. After all, the
country produced virtually no economic thinking of importance at the
time. A few Dutch writers -- Bernard Mandeville, Jacob Vanderlint, and
Matthew Decker -- did make interesting contributions, but only after
they left Holland (Davids 2001, p. 250).
Some might think that the absence of economic thinking might be
surprising in light of the Dutch success, but this lack of interest in
questions of economics is quite understandable. Just as most people do
not give much thought to their spleen, unless it is malfunctioning,
people generally turn to thinking about economics only after economic
performance has become unsatisfactory. And, the Dutch economy in the
early 17th century certainly was performing magnificently -- at least
for the likely candidates to step forward as burgeoning economists.
After all, the Dutch managed to take a tiny, soggy piece of land and
turn it into the superpower of the day. An absence of natural wealth
pushed the Dutch to innovate. While the Dutch lacked natural resources,
they were blessed by an ideal location. First of all, the country had
access to the natural wealth of the sea.
Nature cooperated in the development of the Dutch fisheries, when a
mysterious shift in the Gulf Stream in the early fifteenth century
somehow moved the great herring schools from the Baltic down to a more
convenient location in the North Sea. The Dutch took good advantage of
this stroke of good fortune:
".. the Dutch were ready to exploit a new source of riches. New methods
of preserving, salting, and smoking were devised, and the catch was
exported to northern and southern Europe against return cargoes of corn,
timber, salt, and many other commodities. From the fisheries sprang
other secondary industries -- shipbuilding, barrel-making, net and sail
manufactures. And as fishing was a seasonal occupation, ships were
released for the carrying trade during the close season. [Wilson 1957,
p. 2]"
Charles Wilson, an impressive scholar of the Dutch economy, argued that
this mastery of the fishing industry and its associated businesses was
the foundation of the country's extraordinary economic success:
"the fisheries ... were universally described as "The Dutch Gold Mine."
A vast trading fleet, a powerful navy and colonial settlements
followed. [Wilson 1966, p. 3]"
"In addition, the Dutch sat strategically in an ideal place to operate
as a hub of international trade. As Wilson explained, Holland found
itself "lying midway between north and south Europe. The Dutch carriers
were indispensable while the rest of the world was still in the early
stages of commercial development" (Wilson 1966, p. 3)."
As noted in the last chapter, the Dutch shipbuilding industry adopted
the most modern technologies available at the time. Besides their
efficiency in holding construction costs down, the Dutch designed their
ships to save labor. Their ships could operate with only 18 sailors,
while other nations required 26 or 30. As a result, Dutch shipping
rates were far below anywhere else (Wilson 1966, pp. 5-6). Wilson observed:
"In every branch of world trade, Dutch shipping held the monopoly at the
beginning of the eighteenth century .... The only exceptions to this
rule were a few ships from Sweden, Denmark and the Hanse towns. [Wilson
1966, p. 6]"
This monopoly allowed the Dutch to profitably redirect much of the
world's trade through Holland. Goods still moved through Holland even
when the Dutch were neither the producer nor the intended consumer
(Wilson 1966, p. 20). This practice allowed the Dutch to develop an
extensive system of storage and warehousing.
Much to the chagrin of their rivals, the Dutch merchants "refashioned
Amsterdam from a regional seat of routine and prosaic bulk trades into
the fabulous emporium of the world" (de Vries and van der Woude 1997, p.
668). The English commonly complained about how the Dutch were able to
pile up much of the worlds' resources in their gigantic warehouses:
"The abundance of Corne groweth in the East Kingdoms: but the great
Store-houses for Grain, to serve Christendome, and the Heathen Countries
(in times of Dearth) are in the Low-Countries ..... [T]he great Vintage,
and Staple of Salt, is in the Low-Countries .... The exceeding Groves of
Wood are in the East-Kingdomes: But the huge Piles of Wainscot,
Clapboards, Fir-deale, Masts, and Timber are in the Low-Countries.
[Keymer 1650, p. 8]"
Even in agriculture, the Dutch led the world, coaxing maximum yields
from their soggy fields through pioneering improvements in crop rotation
and fertilization. Here again, resource poverty pushed the people to
innovate (Slicher van Bath 1963, p. 242; de Vries and van der Woude
1997, p. 232).
What is more, the Dutch seemed to put their success to good use rather
than squandering their wealth of ostentatious consumption. Daniel
Defoe, most famous as the author of ”Robinson Crusoe•, gave voice to the
British admiration of the Dutch model:
"'Tis generally said, the English get estates and the Dutch save them;
and this observation I have made between foreigners and Englishmen, that
where an Englishman earns 20 s. per week and but just lives, as they
call it, a Dutchman grows rich and leaves his children in a very good
condition. [Defoe 1704, p. 547]"
According to one distinguished economic historian, "Englishmen of the
17th C. were always discussing, with a mixture of admiration, envy and
hatred, the efficiency of Dutch agriculture, Dutch shipbuilding, Dutch
industry, commercial methods, and banking" (Clapham 1941, p. x).
Like Petty, virtually all of the major economists, until well into the
18th century, had some experience in Holland. Those who did not
actually spend time in Holland still paid close attention to the Dutch
success. In fact, economists commonly designed their policy proposals
with an eye to imitating the Dutch achievements.
In short, Holland was leading the way in making the transition from a
market economy to a market society in which "the matters they [the
merchants] valued most, whether material goods, social manners, cultural
symbols, or intellectual pursuits, also came to dominate the lives of
other people" (Cook 2007, p. 2).
--
Michael Perelman
Economics Department
California State University
Chico, CA
95929
530 898 5321
fax 530 898 5901
http://michaelperelman.wordpress.com
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