The merits of a financial revolution: public finance, 1550–1700

Abstract

Introduction In the early modern era, the system of public finance of the northern Netherlands constituted a most singular type among its neighbouring countries. This tiny nation, without large resources of its own, was extremely successful in raising sizable quantities of funds for public purposes, in particular for warfare. Various larger monarchies experienced enormous difficulties in making both ends meet. Powerful princes went bankrupt, but not this conglomeration of sovereign provinces. Distinguished ambassadors of foreign authorities reported home on how the Dutch managed their astonishingly high levels of public debt. Within this state, the commercial and financial strength of the province of Holland constituted the major backbone. In the course of the sixteenth century, Holland had developed a system of provincial public finance which enabled the ascent of a secured public debt against relatively low rates of interest. This so-called ‘financial revolution’ (Tracy 1985a, p. 3; Dickson 1967) acted as a most welcome safety-valve for unforeseen and exorbitant military expenses. The reverse side of the coin was an enormous incidence of taxation. Loans, after all, had to be serviced by duties that had to be paid by the populace. In 1595, a young English traveller by the name of Fynes Moryson noted the paradox of this burden: The Tributes, Taxes, and Customes, of all kinds imposed by mutuall consent – so great is the love of liberty or freedome – are very burthensome, and they willingly beare them, though for much lesse exactions imposed by the King of Spaine … they had the boldnesse to make warre against a Prince of such great power. (Quoted by Jacobsen Jensen 1918, p. 267)

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