Pioneers of Capitalism: The Netherlands 1000–1800
Maarten Prak and Jan Luiten van Zanden
(Princeton University Press, $50, 261 pages)
Economics historians Maarten Prak and Jan Luiten have written an excellent book on the development of capitalism that is steeped in history, economics, sociology, and theology. The authors show that free markets grew locally, where merchants were able to limit or escape from feudal systems, to evolve over centuries into a system where in the words of Prak and van Zanden, merchants “enjoyed a certain degree of freedom.” The merchants formed fraternal organizations to strengthen their mutual bonds because trust made exchange easier. They also developed a system of justice that “deviated from canonical law.” Order was not imposed from above, but grew organically and simultaneously, so did freedom; the Dutch typically enjoyed many liberties (from both the state and organized religion) much earlier than the citizens of other countries. Long before David Ricardo observed the economic principle of comparative advantage, the Dutch found it made more sense to buy grain from the Baltics and use their low, boggy land to raise livestock and produce higher value goods such as cheese. The authors note that because the people of the Netherlands were more reliant on trade than other Europeans, they were more resilient during the Black Death. Cities grew with labour specialization and Amsterdam became a center of commodity trading and finance as it shucked the Church’s opposition to charging interest for loans. By allowing the non-wealthy and women access to capital (through loans and the creation of stock markets), the Dutch economy had more inclusive growth than many of its neighbours. The Dutch became leaders in book-printing and church-building. Prak and van Zanden make it clear that economic, civil, and religious liberty were inextricably linked: “The tolerance of the Dutch (for which they would later become famous) that arose during this period had, therefore, also a materialistic basis: one had to respect the beliefs of merchants with whom one regularly did business.” Contrary to the belief that a strong state is necessary for the economic development of a people, the Dutch example illustrates that human flourishing can exist – perhaps can only exist – in the absence of big government.