The most important innovation lay in energy supply. Up to the sixteenth century the craftsman was his own source of energy. A cabinet-maker had to saw his own planks and the ‘engine’ of the crane was the man on the treadmill. Horses also supplied energy, for example for tow barges or a horse mills. (The horses in the carousel at a fair are a reminder of this.) At the end of the sixteenth century the resourceful Hollanders realized that there was also a source of energy that did not need to be fed: the wind. Wind was used to drive paper mills, sawing mills and oil mills. This was no longer craft, this was industry. The Zaan region close to Amsterdam was the world’s first industrial area.
Furthermore, Amsterdam was the center of the financial world and it did everything in its power to promote the banking industry. The city permitted the use of letters of credit, accepted the existence of payment by credit transfer or giro (payments from one bank account to another, instigated by the payer) and set up the municipal bank where every foreign coin could be exchanged. Merchants who were about to start out on a hazardous journey, took wagers with others on the success of the undertaking and, in this way, the insurance industry came into existence.
Most spectacular of all was the rise of the trade in stocks and shares. In this Golden Age people speculated on the stock market: the expectation of a good dividend drove up the prices of the shares and vice versa. Not everyone understood this. Some foreigners were amazed when they were given a portfolio with shares, as a present from a generous Amsterdam businessman, not knowing that such papers were more valuable than many other gifts. Anyone who was not familiar with the stock market could always invest in tulip bulbs on which people could make incredible profits, or dreadful losses.
The world’s largest enterprise (twenty-thousand employees!) was the Verenigde Oost-Indische Compagnie (Dutch East India Company) which had been set up by Van Oldenbarnevelt in 1602 for the purpose of trade with the East Indies. The organizational chart of the VOC closely resembles that of the Republic. Here, too, a balance had been struck between decentralized and centralized administration, making constant consultations necessary.
There were different regional chambers represented on the administrative council, the ‘Lords Seventeen’. The distribution of votes illustrates the economic balance of power: eight of the directors came from Amsterdam, two from West-Friesland, one each from Rotterdam and Delft. There were only five votes that did not go to Holland and of these five, four were for Zeeland while the last vote rotated among the other provinces. The directors had to go home frequently for consultations, which perhaps did not further the effectiveness of the decision making, but which was ideal for creating consensus. The capital was administered jointly and there were regular share issues. The VOC shares were very popular: even domestic servants bought them.
Amsterdam’s economic power is apparent from the fact that in some parts of the world the guilder was the only coin accepted. That the grain farmers in Brandenburg and Prussia made this demand is understandable as two-thirds of their turnover was in the hands of the province of Holland. But the English also had to buy guilders because their Asian trading partners demanded to be paid in that currency alone.
Trade interests determined the foreign policy that Amsterdam often imposed on the Estates of Holland and the States-General. The merchants of Amsterdam were against war because that was bad for trade. Thus, in the second quarter of the seventeenth century, they insisted on termination of the war with Spain. Since Spain was also war-weary, they agreed to a peace treaty at the big European peace conference in Westphalia in 1648. The Eighty Years War was over. Shortly afterwards, Stadtholder William II, who had wanted to continue the war in order to free the south, died. Now there was nobody to resist the utilitarian pacifism of Holland, which was to be defended for the next two decades by Johan de Witt, chairman of the Estates of Holland, who had taken office in 1653.
It goes without saying that the objections Amsterdam had to violence vanished into thin air when commercial interests were at stake. De Witt had sixty warships built, enabling the Republic to promote the balance of power everywhere, peace being very favorable for trade.
An illustration of this is the war which broke out in 1655 when Sweden demanded the control over the Sont, the strait through which Holland imported its grain. The Amsterdam envoy angrily told the Swedish king that the keys of the Sont were kept in Amsterdam and subsequently advanced money from his own pocket to the Danes to equip a fleet to fight their aggressive neighbor. When that did not result quickly enough in the re-opening of the strait, Admiral Michiel de Ruyter on behalf of the States-General intervened in the Baltic Sea region and finally, in 1660, Johan de Witt forced the Scandinavian states to sign a peace agreement. The Republic had succeeded in keeping the balance of power between two rival states, thus ensuring the security of its own grain trade.
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