Capitalism’s Dutch dynamic
- February 3, 2023
- Samuel Gregg
This economic history of the Low Countries handles an epoch-shaping phenomenon in deft and informative style.
Pioneers of Capitalism: The Netherlands 1000-1800 by Maarten Prak and Jan Luiten van Zanden, Princeton University Press, p261, $30.95/£35.00
The very word ‘capitalism’ instantly divides people. For many, it is the economic system that has delivered millions from poverty and disease. Others, ranging from Marxists to radical environmentalists, insist that capitalism is responsible for untold misery and oppression. Ergo, it’s not surprising that much ink continues to be spilt on the topic of what brought these economic arrangements into being. The explanations range from the dialectics of history to Protestantism, the Scientific Revolution, or the triumph of bourgeois virtues.
The problem with most such analyses is that they usually try to identify one key factor as decisive for shaping the habits, intense competition, property and legal arrangements, incentive structures, and concentrations of surplus capital that define capitalism. I have long been sceptical of monocausal accounts for anything, and that is especially true for economic history. Such portrayals tend to unduly underplay or ignore the sheer complexity of economic life, whether of the ancient, medieval or modern variety.
Another difficulty with these studies is that they often underestimate the sheer variety of cultural conditions in which capitalist economies emerge. The nineteenth century Anglo-American capitalism that flourished in North America and much of the British Empire, for instance, differed in important ways from the Rhenish capitalism that appeared during the same time period in the Rhineland, then part of the Kingdom of Prussia before its immersion into Imperial Germany after 1871.
These and similar problems are refreshingly absent from Maarten Prak and Jan Luiten van Zanden’s Pioneers of Capitalism: The Netherlands 1000-1800. By ‘pioneers’, the authors mean several things. One is the fact that particular economic developments occurred in the Low Countries before other places. The word also points, however, to the role of human agency and free choice in shaping events. This is not a book marked by a deterministic approach to history.
Yet the span of time covered — 800 years — also shows us that there was no one thing that suddenly set in motion the emergence of capitalism in a region that itself underwent many numerous political, economic, legal and social changes that were beyond the control of any one individual or group. It also permits Prak and van Zanden to engage in a sophisticated analysis of long periods of history, combined with attention to datasets, ideas and documentation, to explain how a conglomerate of ideas, habits and institutions affected each other, often in unintended ways, to produce the type of economic arrangements that are very familiar to us today. This is how economic history should be done.
On one level, Pioneers of Capitalism is an empirical work insofar as it seeks to identify the elements that, over time, led to the Netherlands possessing Europe’s most dynamic and advanced economy by the early seventeenth century. Prak and van Zanden begin by identifying what they think are key measures of development (population growth, estimates of GDP per capita, consumption of printed books per annum, and so on) before turning to the feudal period in the Low Countries and the gradual emergence of liberty within that particular religious, political and legal culture.
Far from being a story of people liberating themselves from clerical darkness, Prak and van Zanden stress the ways in which the Catholic Church civilised people in this region during the Middle Ages. Among the civilising factors promoted by the church were the maintenance of a uniformity of values and norms of justice across borders; the promotion of urban development through building churches, hospitals and other massive constructions; the insistence that Christians could not enslave one another; and the restricting of the power of civil officials. The latter was especially important, for once it was agreed that there were limits to state power over the church, there was little to stop other organisations from claiming similar liberties.
Prak and van Zanden also note that monasteries became places in which surplus capital was accumulated, Roman law underwent a revival as part of an effort to determine who owned what, and skills in accounting and general literacy were cultivated. This has spill-over effects into the non-ecclesiastical world, especially among merchants for whom ‘writing and numeracy were indispensable skills’.
But above all—and this theme pervades the book—the lands that would become the Netherlands were permeated by a robust civil society that both enveloped feudalism and yet also stood apart from it. This dynamic was especially important in facilitating the growth of institutions from the bottom-up rather than the top-down in the Low Countries (today’s Netherlands, Belgium and Luxembourg).
What we call ‘feudal society’, Prak and van Zanden argue, was increasingly one in which feudal and free institutions existed side by side by the high Middle Ages. This, they maintain, was ‘something specific to the Netherlands’. The freer institutions that prevailed in what is now the Netherlands, with their emphasis on liberty, cross-fertilised with those more feudalised institutions that characterised today’s Belgium and Luxembourg, and that tended to stress the obligations which people owed to each other. Freedom and responsibility thus flourished together and gradually reinforced each other.
By the late Middle Ages, according to Prak and van Zanden, today’s Holland had effectively embraced recognisably capitalist economic settings. Commercialisation and an exceptionally high degree of urbanisation helped spur strong GDP growth. Events also intervened. Late-medieval societies reacted in different ways, for instance, to the Black Death, and a notable decline in arable land in this period.
In the case of the Netherlands, they coped with these changes because, rather than withdrawing into small-scale production in the quest for self-sufficiency, ‘the Dutch apparently dared to put their fate in the hands of the market’. In short, capitalism did not emerge ‘through an orgy of violence, as Marx maintained, a forceful expropriation of the means of production by the newly emerging capitalist class’. Yes, there was a great deal of violence in the late Middle Ages, but not of the type that Marx had in mind.
This brings us to the role played by the Dutch Revolt in the Netherlands’ ongoing transformation into a capitalist powerhouse. Obviously, religion played a role in this conflict, but for Prak and van Zanden the deeper conflict was between ‘the absolute power claimed by monarchs like Philip II’ and ‘the economic and political interests of an urban community such as Amsterdam’. The Catholic-Protestant clash, they indicate, was not the main game in terms of understanding economic development.
More important was the fact that in the lead-up to, and aftermath of, war with the Spanish Empire, the Dutch managed to create ‘a federal state that was big enough to make an impact on the international stage’. But that same state which could wage war for decades against two European superpowers in succession (Spain and then France) was not dominated by any one town. Economic competition continued to exist ‘between towns, and between towns and countryside’. Local government also embodied political decentralisation, while a vital civil society buttressed and modulated the workings of the economy and the demands of politics. The Dutch thus emerged from war with ‘A state . . . where capitalism could flourish’.
The story becomes even more complicated as Prak and van Zanden work their way through the history and data of the next 200 years, up until 1800. Entrepreneurship and what we would call high-quality human capital, they observe, assumed greater importance in driving economic growth. But perhaps one of the most fascinating features of Pioneers of Capitalism is the contrast that it draws between capitalism ‘at home’, and the other type of Dutch capitalism which developed abroad under the auspices of outfits such as the Dutch East India Company, the VOC (Vereenigde Oostindische Compagnie).
The VOC was one of the world’s first business corporations as we would understand that today. It also reflected many of the governance and investment structures that had become part of Dutch capitalism. To that extent, the VOC represented an elaboration upon and extension of existing Dutch economic practices and institutions.
There were, however, significant differences between capitalism in the Netherlands and the capitalism practised by the VOC in places like the Dutch East Indies. For one thing, the VOC enjoyed a monopoly of Dutch trade in the East. That meant mercantilism, and mercantilism always means far less competition. Second, the VOC adapted itself to the widespread practice of slavery throughout the region. There is, Prak and van Zanden state, ‘no evidence of opposition to this trend’. Figures such as ‘The pastor and church council, prominent participants in civil society in the Netherlands’ were muzzled in places like Batavia. What one consequently saw in much of Batavia and Java were the economics of extraction, with the VOC’s income being based heavily on taxation and the buying and selling of what amounted to ‘feudal rights’ rather than economic growth per se.
These stark differences between ‘good’ Dutch capitalism at home and ‘ugly’ Dutch capitalism abroad illustrate the power of culture—understood as the integration of values, ideas, expectations and institutions—in shaping economic life. But they also underscore the veracity of one of Prak and van Zanden’s most important conclusions: that ‘Historical “reality” is always more obdurate than the theories and models developed by social scientists would suggest.’
The development of theories about economic development – analytical lenses that help to separate the wheat from the chaff – are important in getting to the truth of things. But we also need to know the limits of such tools. Taken too far, they risk generating explanations that downplay human agency, and encouraging tendencies to deal with inconvenient facts that don’t fit the theory, by simply ignoring stubborn data at odds with the preferred narrative or undeclared ideological construct.
The great success of Prak and van Zanden’s book is that it shows how to explore something as complicated as the rise of capitalism and develop genuine insights into this epoch-shaping phenomenon, while avoiding the traps into which people, ranging from Marx to Max Weber, fell in their analyses of capitalism. To that extent, they have provided a path forward for studying economic history that takes complexity seriously without letting it prevent us from getting to the important truths of economic history. One can only hope that more social and economic historians follow Prak and van Zanden’s path in the future.