The World Economy by the OECD Development Centre

The Netherlands from 1600 to the 1820s

From 1400 to 1700, Dutch per capita income growth was the fastest in Europe, and from 1600 to the 1820s its level was the highest. Before 1600 this performance was due to seizure of opportunities for trade in Northern Europe, and success in transforming agriculture by hydraulic engineering. Thereafter prosperity was augmented by its role in world trade.

The Dutch Republic became independent in 1579 by breaking away from a larger “Netherlands” ruled by Spain28. The struggle to achieve and maintain independence lasted for nearly 80 years. The Dutch defeated a Spanish empire which included Castile, Aragon, Portugal (from 1580 to 1640), Naples, Sicily, the Duchy of Milan, Franche Comté, Mexico, Peru, the Philippines, West Indies, Tunis, Flanders, Brabant, Luxembourg, Lille, Artois and Hainault.

It is useful to consider the economic and political context from which the Netherlands economy emerged. From the twelfth century onwards, Flanders and Brabant were the most prosperous part of Northern Europe. The leading cities of Flanders (Bruges, Ghent and Ypres) were the major centre of the European woollen textile industry, making very high quality draperies, tapestries and furnishing materials, which were sold all over Europe. The raw materials were to a substantial extent supplied by imports — wool from England and alum (a cleansing agent indispensable in the cloth industry) which Genoese traders brought from Chios. Woad and other dyestuffs, fuller’s earth and other items were mainly local products. In the middle of the fourteenth century (see Postan, 1987, p. 180), English wool exports were running at nearly 7 000 tons a year, most going to Flanders via the English port of Calais. By the middle of the fifteenth, English wool exports had dropped by four fifths and the wool imports of Flanders came from Spain, being shipped from Bilbao and other Spanish Atlantic ports. England had become an exporter rather than an importer of woollen textiles, but a substantial part of its cloth exports were undyed and sent to Flanders for finishing. McNeill (1974) pp. 53–4 indicates the magnitude of the massive Genoese alum shipments to Flanders between the mid–fourteenth to mid– sixteenth century: “Having captured Chios in 1346, they used the island as an entrepôt, collecting the yield of all the mines of Asia Minor there. This assured a constant supply of adequate quantities of alum to fill the holds of vast specialised ships — some twenty such vessels, of a size greater than any wooden ship attained before or afterward, plied regularly between Chios and Bruges, winter and summer, stopping en route only at Cadiz to take on water and other supplies.” Postan suggests that the annual production of Flemish woollen cloth in the fourteenth and fifteenth centuries was more than 150 000 pieces of 28 yards (25.8 metres) in length. In addition Flanders produced linens for export, using local supplies of flax.

Flanders was heavily urbanised and much of its food was imported. There were substantial imports of grain (wheat and barley from France and England, rye from the Baltic), fish from the Baltic and Holland, and wine from France. Postan suggests that wine exports from Bordeaux were running at 25 million gallons a year at the beginning of the fourteenth century. A large proportion of this went to England, some to the Baltic, and a substantial amount to Flanders and Brabant.

By the mid–fourteenth century, the cities of Brabant (Antwerp, Leuven and Brussels) gained an economic edge on Flanders, due to the silting up of water routes to Bruges, the greater enterprise of Antwerp and British competition with the Flemish woollen industry. In Flanders, output, marketing and production practices tended to be heavily regulated by guilds. Foreign trade was conducted through periodic fairs or “staple” arrangements which confined international transactions to particular towns and gave privileged access to the consortium of German merchants in the Hanseatic League. Antwerp had a magnificent harbour at the mouth of the Scheldt, and a more commercial, less regulatory approach. It was the major North European centre for international banking, and loans to foreign rulers, e.g. Henry VIII of England. The Antwerp bourse provided a model for the London Exchange.

Both Flanders and Brabant conducted a substantial amount of international business in their high value exports by land, but for heavy imported goods, sea transport was very much cheaper. A large part of these imports came by sea and river in ships and boats from Holland, Zeeland and the Northern Provinces.

The seven Northern Provinces which united to create the Dutch Republic (Holland, Zeeland, Utrecht, Gelderland, Overijssel, Friesland and Groningen successively in 1579–80) were very different from Flanders and Brabant29. They occupied a flat amphibious terrain where the relationship between land and water was very close. There were major natural waterways. The Rhine provided transport deep into Germany, to Cologne and Frankfurt–am–Main. Its delta was full of islands and natural harbours. The Ijssel led into the Zuider Zee, the Ems provided an excellent route to the North German coast. In such a setting, the leading industries were fisheries, sea and river transportation and shipbuilding. Agriculture was also deeply marked by the possibilities for hydraulic management and irrigation.

In the fourteenth century, the merchant marine of the Northern Provinces had established a major position in the North Sea and Baltic, carrying rye and timber from East Germany and Poland which was shipped via Danzig; furs, wax, honey, pitch, tar and timber from Russia via Narva and Riga; copper, iron ore, weapons and salt herring from Sweden; salted cod and timber from Bergen in Norway. In return they carried re–exports of English woollen textiles, salt (for preserving fish and meat) and re– exports of wine from France. Apart from these merchanting activities, they acted as carriers, e.g. between Danzig and Riga, when opportunities arose.

Shipping and trade in the Baltic had previously been monopolised by a consortium of German merchants (the Hanseatic League) with headquarters in Lübeck, and commercial bases in London, Bruges, etc. Hanseatic trade from the Baltic had relied to a large extent on the short land route from Lübeck to Hamburg. The Dutch pioneered the sea route through the Danish sound, which though longer, was cheaper. In 1437–41 the Hanseatic League engaged in hostilities to try to drive Dutch ships from the Baltic, but, with support from Danzig, the Dutch kept the right to trade. This trade was well documented, because Denmark, whose territory then included Southern Sweden, controlled the entry to the Baltic and levied tolls. In 1500, 300–400 Dutch ships a year entered the Baltic, and by the 1560s, more than 1 300. Grain shipments amounted to about 100 000 tons a year in the latter period.

The Dutch ships involved in this trade operated from the coasts of Zeeland, Holland and Friesland. Dordrecht was the major port for traffic on the Rhine with Germany and with Liège via the Meuse. Middelburg (on the island of Walcheren), opposite the mouth of the Scheldt, imported English woollen cloth, French wine, grains and salt, and in the sixteenth century, spices and sugar from Portugal. The Dutch trading fleet was by far the biggest in Europe. By the 1560s, on the eve of independence, the province of Holland alone had 1 800 seagoing ships (Israel, 1995, p. 117). The carrying capacity of Dutch merchant shipping in 1570 was about the same as the combined fleets of France, Germany and England (see Table 2–15). Per head of population, Dutch shipping capacity was 25 times as big as in these three northern countries.

Herring fisheries were an important part of Dutch shipping activity. The herring were sold fresh or lightly salted near to the ports or were processed and barrelled for international trade. Before 1400, herring shoals best suited for salting were off the Swedish coast, but in the fifteenth century, they migrated into the North Sea, so the bulk of the catch was taken by Dutch ships. A technological breakthrough increased productivity substantially. Dutch shipyards developed a new type of factory ship (a herring “buss”), with nets, rigging and processing facilities which permitted crews of 18 to 30 men to gut, clean, salt and barrel the herring whilst at sea. Vessels of this type could make three trips a year of five to eight weeks during the open season from June to December. By the 1560s there were 400 Dutch vessels of this type operating from the province of Holland, with ownership concentrated on urban investors. At this time, the Dutch were exporting herring to the Baltic rather than importing (see de Vries and van der Woude, 1997, pp. 243–54). In the seventeenth century, Dutch ships embarked on whale fishing off Spitzbergen in the Arctic.

Water control played a major role in Dutch agricultural development. Marshes, bogs, low–lying land subject to frequent flooding were not attractive in their natural state. Agricultural settlers in the Middle Ages occupied mounds and turned them into polders by building dykes to keep off flood waters. In time, skills in hydraulic management improved, and large areas of new land were reclaimed. By the beginning of the sixteenth century, water management and engineering was entrusted to professionals responsible for development and maintenance. Farming communities raised taxes and provided funds for the waterboards. Windmills were used as a source of power for pumps which controlled water flow in canals. As de Vries (1974) p. 27 noted: “Much of fourteenth century Holland was, in effect, a new country. Only in east–Elbian Germany can one find reclamation being carried out in so systematic a manner and over such large tracts.

This conquest of nature had important social implications. Only a small part of the Dutch population was constrained by feudal restrictions. Peasants were freer than anywhere else in Europe. Some were landowners, many more paid money rents or worked for wages. The reliance on water control generated solidaristic attitudes which are still observable in Dutch society.

Dutch agriculture developed a high degree of specialisation. Much of the grain supply came from imports, and domestic production concentrated heavily on meat, milk, butter and cheese. Two features were more developed than elsewhere in Europe: a) stall feeding of cattle through the winter months, and b) large production of vegetables. Over time there was an increased emphasis on industrial crops — hops for the beer industry, flax, hemp and madder for textiles, and later, tobacco and tulip bulbs. There was a gradual transformation of agriculture into horticulture.

In large areas of the Northern Netherlands there were layers of peat several metres deep which were a potential source of cheap energy for many purposes. After 1600, about 275 000 hectares of these peat–bogs were stripped. Engineering skills in land reclamation, drainage, and pumping were easily transferable to peat extraction. In the Groningen area, urban investors set up companies to exploit this resource on a large scale on confiscated monastic lands.

Transport of peat, hay, wheat, cattle, timber, building materials and other heavy freight became a good deal cheaper in the middle of the seventeenth century, because of the creation of a network of canals equipped with tow–paths. Drawn by horses, canal barges carried freight, mail and passengers on regular schedules, at seven kilometres an hour, day and night, at frequent intervals between virtually all areas of the country. “In the 1660s, nearly 300 000 passengers travelled annually on the Amsterdam– Haarlem route, 140 000 glided between Haarlem and Leiden, and some 200 000 between Leiden and the joint destinations of the Hague and Delft” (de Vries and van der Woude, 1997, p. 187). No other country had such a cheap and dense transport network. Road freight carried by carts was slower and much more expensive. As Sir William Temple (1693), p. 152 put it: “one Horse shall draw in a Boat more than fifty can by Cart — And by this easie way of Travelling, an industrious Man loses no time from his Business, for he Writes, or eats, or Sleeps, while he goes.”

The biggest industries in the Dutch provinces at the time of independence were shipbuilding, sailcloth, fishing nets, ropes, barrels and associated items, salt refining, breweries, brickworks and timber for buildings, and a substantial woollen and linen textile industry.

The circumstances under which the partition of the Netherlands occurred had an enormous positive impact on the economic potential of the new republic. They were also detrimental to the economic interests of Portugal, Spain and the Spanish Netherlands.

The struggle against the Spanish regime had involved repression and resistance in the Southern Netherlands as well as the North. The inquisition started in 1523 with the burning of two dissident clergy at the stake in Brussels. In the next 50 years more than 2 000 had met the same fate and a large proportion were from the South. The Count of Egmont, the governor of Flanders, a catholic who had been a distinguished general in the Spanish armies, was executed in 1567 because he had protested against Spanish fiscal demands and curtailment of previous political rights of the Southern nobility. Malines (Mechelen) was sacked by Spanish troops and part of its population massacred in 1572. Antwerp suffered deaths and serious property damage from the depredations of riotous Spanish soldiers in 1576. Its losses were even greater during the Spanish siege in 1583–85.

As a result, there was large scale migration from Flanders and Brabant to the new republic. Between 1583 and 1589 the population of Antwerp fell from 84 000 to 42 000. In Bruges and Ghent the exodus of refugees reached the same proportions. In Mechelen, the population fell by two thirds. In the Republic, the population of Middelburg trebled, in Leiden it doubled, 30 000 came to Amsterdam (see Israel, 1995, pp. 307–12). Altogether, the influx was about 150 000, more than 10 per cent of the population of the South, and a bigger proportionate addition to the North. As the North had huge imports of grain and fish which no longer went to the South, there was no problem feeding the new population. The northern confiscation of monastic properties helped in accommodating the influx.

The refugees included a large proportion of the merchant class and bankers of the Southern Netherlands (though some of the latter went to Germany). They brought capital, skills and international contacts. Virtually all of the Jewish population moved to the North. Migration of skilled workers strengthened the textile industry of Leiden. Immigrants also brought skills for other industries including printing, publishing and sugar refining. Before the partition, the only university had been in Leuven (founded 1425). This was one of the largest and most distinguished in Europe, but its freedom was curtailed by the inquisition. The university of Leiden was founded in the North in 1575 followed by Franeker (1585), Harderwijk (1600), Groningen (1614) and Utrecht (1634). Leiden was the biggest with a full range of faculties and offered a humanist education in the tradition of Erasmus. It soon began to attract a large international student body from Germany, Britain and Scandinavia, as well as the refugees from the South.

The political change opened possibilities for a worldwide expansion in Dutch shipping activity to the detriment of Portugal and Spain. In the 1590s, trade with Asia was inaugurated with trial voyages around the Cape into the Indian Ocean to the spice islands, and West via the Magellan Straits to Japan. Barents, 1596–7, made an unsuccessful attempt at a Northeastern passage via Archangel and Novaya Zemlaya. Hudson discovered New York in 1609 whilst seeking a Northwest passage. Within 30 years the Dutch displaced the Portuguese as the dominant European traders with Asia. They seized Portuguese bases in West Africa, acquiring a substantial share of the trade in gold and slaves. They attacked the Spanish empire in the Americas, occupying Northeast Brazil and its profitable sugar industry from 1630 to 1654 (at that time Portugal was ruled by Spain), then moved their base to the Caribbean (Curaçao and Surinam). There was also significant pirate activity. The greatest coup was Piet Heijn’s capture of the whole Spanish silver fleet off Cuba in 1628.

From 1585 to 1795, for reasons of military and naval security and commercial advantage, the Dutch successfully blockaded the mouth of the Scheldt, consolidated the ruin of Antwerp, and imposed a very serious constraint on the economic progress of the Spanish Netherlands. In the course of the seventeenth century, Spanish military potential weakened enormously, but the Dutch had no interest in conquering the Southern Netherlands, which was a useful buffer against French territorial ambitions.

Throughout the seventeenth and for most of the eighteenth century, British economists recognised the superiority of Dutch performance and policy. William Petty’s pioneering work on Political Arithmetick, written in 1676 and published in 1690 was perhaps the most astute assessment. He demonstrated that a “small country and few people may be equivalent in wealth and strength to a far greater people and territory.” He provided a foretaste of the type of reasoning used later by Adam Smith and Douglass North when he compared the performance of France and Holland. The population of France was more than ten times that of the United Provinces, but he estimated the Dutch merchant fleet to be nine times as big as the French, its foreign trade four times as big, its interest rate about half the French level, its foreign assets large, those of France negligible. The Dutch economy was highly specialised, importing a large part of its food, hiring mercenaries to fight its wars, and concentrating its labour force in high productivity sectors. Its flat terrain permitted substantial use of wind power. High density of urban settlement, good ports and internal waterways reduced transport and infastructure costs, cheapened government services and reduced the need for inventories. Dutch institutions favoured economic growth. Religious tolerance encouraged skilled immigration. Property rights were clear and transfers facilitated by maintenance of cadastral registers. An efficient legal system and sound banking favoured economic enterprise. Taxes were high but levied on expenditure rather than income. This encouraged savings, frugality and hard work. Thus the Dutch were a model of economic efficiency with obvious lessons for British policy.

In a similar vein, Gregory King (1696) made a comparative assessment of the resource mobilisation of England, France and the Netherlands in fighting the war of the League of Augsburg. For the nine year conflict, William III, the Dutch stadholder who had become King of England, organised a coalition of the United Kingdom, Netherlands, the German protestant states, Spain and Savoy against France, which had challenged the legitimacy of his succession to the English throne and annoyed its neighbours by trying to expand its frontiers. King estimated French and English per capita fiscal revenues in 1695 to be similar, but in the Netherlands the level was more than two and a half times as large.

The cost of maintaining Dutch independence was high, involving the creation of a chain of fortresses in the South and on the East (where the country was vulnerable from attack via catholic states in Germany — particularly the bishopric of Munster). Its army and naval expenditures were costly. It had to build up an armaments industry. It was involved in a series of wars in which England and France became the main enemies in the seventeenth and eighteenth centuries. Towards the end of the seventeenth century Dutch economic expansion faltered. The Netherlands became the victim rather than the beneficiary of the beggar–your–neighbour policies of the merchant capitalist era. British and French shipping, trade and industry grew much faster than those of the Netherlands. Both countries adopted protectionist policies which damaged Dutch interests. The most important were the British Navigation Acts and similar French provisions. From 1651 onwards Dutch shipping and Dutch ship exports had restricted access to the ports of the United Kingdom and were barred from trade with English and French colonies. When these countries waged war with the Netherlands they did so with the concentrated energy of modern nation states — very different from the way Spain had dissipated its energy.

The main reason for loss of dynamism in the eighteenth century was the destruction of monopolistic trading privileges in conflicts with France and the United Kingdom, which pushed the Dutch to the sidelines.

Population growth slackened as the economy ceased to attract migrants. There was stagnation in the industrialised western Netherlands and substantial growth in the agricultural province of Overijssel. Agricultural output increased, with a fall in imports and a growth in agricultural exports. There was a decline in production and exports of textiles (particularly the Leiden woollen industry), fisheries and shipbuilding. The volume of foreign trade dropped 20 per cent from 1720 to 1820. During this period UK exports rose more than sevenfold in volume, and French by two and threequarters.

Dutch service industries continued to play an important part in the economy, and there was a large increase in overseas investment. In 1790 total foreign investment probably amounted to 800 million guilders at a time when national income was around 440 million. If the rate of return on foreign investment was around 4 per cent, then foreign income would have been around 30 million guilders, giving a national income about 8 per cent higher than domestic product. The combination of rising rentier incomes, together with pauperism and unemployment in the old industrial areas, increased inequality.

Dutch Economic Activity Outside Europe

a) Africa

Dutch objectives in Africa were to get access to the gold of the Guinea coast, enter the slave trade to the Americas, and acquire a base for ventures in Asia.

They succeeded in capturing Elmina in 1637 and several other Portuguese bases in West Africa for trade in gold and slaves. For a time they captured a foothold in Angola (the main slave base for the Portuguese) but failed to keep it. They also failed to take Mozambique (in East Africa). They established a new base at the Cape in South Africa, introducing European settlers to provide a staging and supply post for their voyages to Asia.

The major economic gain came from participation in the slave trade. Slaves were shipped to Northeastern Brazil and to Surinam for Dutch sugar plantations, and to Curaçao for sale to British and French sugar planters. However, the Dutch role in the trade was a good deal smaller than that of Portugal, England and France (see Table 2–5).

b) Americas

In the Americas, the first major venture was the capture of the sugar producing region of Northeast Brazil (around Recife) from 1630 to 1654. Sugar was transported to the Netherlands where there were 40 refineries by 1650.

The venture in Brazil had substantial military and naval support but the sugar plantations were run by private enterprise. Most were owned by sephardic jews from Amsterdam, many of Portuguese origin. During the period when Portugal was governed by Spain, the Dutch were reasonably well received in Brazil, but after Portugal regained its independence, they were expelled. Many plantation owners then moved to the Caribbean where they introduced the same production techniques and marketing patterns. Their arrival transformed the economy of Barbados which the British had occupied in 1627 and grew tobacco with white settlers. Within a short time the island had 30 000 slaves and was totally devoted to sugar (see Eltis, 1995, for a proxy assessment of the GDP of Barbados in 1644–1701). Emigrant plantation owners from Brazil had a similar impact in Guadeloupe and Martinique which had been French since 1635 (see Verlinden, 1972, p. 642–4). By the 1660s and 1670s, the British and French had driven out the Dutch, who moved their sugar activities to Surinam.

In the early seventeenth century, sugar production in the Americas had been concentrated on Brazil. But from mid–century, Brazilian production stagnated and a hugely expanded market was dominated by France and Britain. Dutch production in Surinam was on a much smaller scale (see Table 2–4).

Another Dutch venture in the Americas was the inadvertent discovery of a magnificent harbour and huge river by Henry Hudson. He was on a Dutch East India Company mission to try to discover a Northwest passage to Asia in 1609 and hopelessly off course. In 1614 the New Netherlands Company was founded to settle a colony with its capital at New Amsterdam in 1623. In 1664 it was taken over by the British, and in 1674 formally ceded (as New York) in exchange for a free hand for Dutch sugar interests in Surinam (de Vries and van de Woude, 1997, pp. 397 and 467).

c) Asia

The most successful area of Dutch involvement outside Europe was in Asia.

The Dutch were extremely well informed about Asian trading prospects, for many had worked on Portuguese ships. One of them, Jan Huygen van Linschoten, produced two travel journals in 1595 and 1596 with detailed maps, information on markets, winds and potential routes. In 1602, under official pressure, all Dutch merchants in this trade were compelled to join the United East India Company (VOC) which was given monopoly trading rights and authority to establish military outposts and negotiate with foreign rulers. The Company owned and built all its own ships. The comparative volume of Dutch trading activity in Asia can be seen in Table 2–6. In the seventeenth century they sent out nearly five times as many ships as the Portuguese, and in the eighteenth, 15 times as many. The average size of their ships was smaller than the Portuguese who were then using huge carracks of 1 000 tons, against 600 tons for the average Dutch ship. The English East India Company (EIC) was a more important competitor than the Portuguese. They entered the Asian trade at the same time as the Dutch. Their main bases were at two towns they created in India (Madras 1639, and Calcutta in the 1690s) and Bombay which was a wedding gift from Portugal to Charles II in 1661. EIC operations in the seventeenth century were about half the size of those of the VOC, and about two thirds in the eighteenth. The French entered the Asian trade with the Compagnie des Indes Orientales which Colbert created in 1664. They established a base at Pondicherry (on the Coromandel coast) in 1673. By the eighteenth century, a new French company, created in 1719, had become a very significant presence. Later participants were Danish and Swedish companies, and from 1715–32, the Ostend company operating from the new port which the Austrian administration had created in the Southern Netherlands.

The total volume of European shipping in Asia in the eighteenth century was about nine times as big as it had been in the sixteenth, but the scope for traditional exports of pepper and spices was limited. This meant that the Dutch, who were more heavily involved in this trade than the English and French and other newcomers, had to be careful to control supply in order to maintain prices. The opportunities for new exports to Europe — a wide variety of cotton textiles, coffee and tea — were much more promising and their share of the trade rose rapidly, for all of the participants in the market (see Table 2–20).

The initial thrust of the VOC was to bypass the Portuguese, using a new route via the Cape and sailing direct to Indonesia. This brought them directly to the Moluccan islands where the most valuable spices (cloves, nutmeg and mace) could be found. They were also able to get pepper in Indonesia, rather than India. The indigenous rulers in the Indonesian islands were much weaker than those in India, Persia, China and Japan, and more susceptible to Dutch pressure to enforce monopoly rights and low prices. The VOC established its headquarters in 1621 on the Javanese coast at Batavia (present– day Jakarta). They drove the Portuguese out of Ternate in 1603, and destroyed their base at Malacca in 1641. They also expelled the muslim merchants who had previously traded on the Javanese coast.

The population of the spice islands revolted in 1621. They were all killed or deported and replaced by Dutch planters working with slave labour.

In order to help finance its Indonesian operations, the VOC established a base at Masulipatnam on the East (Coromandel) coast of India. Here it obtained the agreement of the King of Golconda, who granted preferential trading conditions. The company’s main interest was in cotton textiles, in particular painted chintz, which were in demand in Indonesia. Later the VOC moved further down the coast and shifted their base to Negapatam in 1690 where textiles were cheaper.

In 1617, the VOC obtained permission from the Moghul empire to establish a base in Surat in Gujarat in Northwest India, dislodging Portuguese operations in this area. Here they could exchange pepper and spices for coarse cotton textiles for use as a barter item in the African slave trade.

Later in the seventeenth century, the VOC tried to drive the Portuguese from their bases in Goa and Ceylon. It blockaded but did not capture Goa, but took Jaffna in Ceylon, replaced the Portuguese in the cinnamon trade and as rulers of the island. Portuguese trading on the Malabar coast was harassed, but that area did not have substantial commercial interest for the Dutch.

There was an early move to establish trading links with China and Japan which had been so lucrative for Portugal. Unlike the Portuguese, The Dutch felt no vocation for religious evangelism, and were the only Europeans allowed to trade in Japan between 1639 and 1853. From 1641 they were confined to a very small island (Deshima) in the harbour of Nagasaki. The profitability of this trade faded after a few decades because of a Japanese ban on export of precious metals and Japanese insistence on fixing the prices at which the Dutch could sell their goods. In this trade there was no question of Dutch exploitation. In fact they were used as a conduit by Japanese eager to know about Western technology (see Appendix B).

The VOC did not succeed in dislodging the Portuguese from Macao. In the 1620s they got a base in the Pescadores and from 1624 were allowed to shift to Taiwan. In 1662 they were forced to leave and never acquired another Chinese base. From the 1640s to 1660s the Ming dynasty was in a state of collapse. The great porcelain and pottery town of Ching–te–Chen was devastated and Chinese porcelain exports were interrupted until the 1680s. This encouraged the Dutch to develop their own pottery industry in Delft to produce cheap copies of Chinese blue–and–white ware. At the same time, the Japanese developed their own pottery and porcelain industry to substitute for Chinese imports, and the Dutch also copied Japanese copies of Chinese pottery. European production of porcelain in Sèvres and Meissen started later.

The VOC operated from the 1630s in Bengal because of its rich variety of high quality textiles (cotton and silk). Here they stepped in the shoes of the Portuguese who had been expelled from Hugli by the Moghul authorities in 1632.

At first the VOC concentrated on exporting Bengali raw silk and mixed cotton–silk textiles to Japan, and opium to Indonesia. In exchange they sold Japanese copper, silver and gold in Bengal. The Japanese market declined considerably after 1680, but European demand for Bengali textiles rose very rapidly. Between 1680 and 1740, textiles from Bengal were the largest component of VOC exports to the Netherlands (see Prakash, 1998, pp. 198 and 218). Fine cottons, muslins, silks and mixed piece goods appealed to new European tastes and rising incomes, though it was more difficult to know what the market might be for these fashion items than for raw silk or opium.

Bengali textiles were also of major interest to the British and French companies from the last quarter of the seventeenth century, and their textile exports were even bigger than those of the Dutch. However, both the French (1686) and the British (1700) forbade import of printed and painted cottons in order to protect their domestic textile producers. Both countries continued to import these goods for re–export (though a large part of these were smuggled back into England). The Dutch did not protect their own textile industry, and ended up marketing a large part of French and somewhat less of the British re–exports of Indian textiles within Europe (see Table 2–19). The British greatly increased imports of white bleached cloth from Bengal for processing in England (see Rothermund, 1999).

Towards the second half of the seventeenth century, European demand for coffee grew very fast. The first London café was opened in 1652. The beverage became popular in France in the 1660s and in the Netherlands in the 1670s. The VOC began buying coffee in Mokka in Yemen at the beginning of the eighteenth century, rising from 300 tons in 1711 to 875 tons in 1720. Shrubs were taken for planting in Java and by the late 1720s, Javanese production was about 2 000 tons a year. The VOC imposed cultivation quotas on petty Javanese rulers who compelled their subjects to raise coffee. From the 1730s there was competition from Surinam where output and exports rose much faster (see Bulbeck and Associates, 1998).

A few years later there was a great surge in European demand for tea, particularly in England and the Netherlands. The Chinese had opened Canton to foreign traders in 1685. British tea imports rose from about 100 kilos in 1669 to 28 000 tons in 1760 (see Chaudhuri, 1978, p. 539). The Dutch bought most of their tea from Chinese junks trading to Batavia, though there was a direct shipment from Canton to Amsterdam in 1729. The English company were able to finance their tea purchases in Canton by selling Bengali opium and raw cotton, but the Dutch were obliged to pay in bullion (see Glamann, 1981, pp. 212–43).

The new European taste for coffee and tea was complementary to the rise of sugar consumption. Growth of these items displaced a significant part of demand for beer and gin, both in England and the Netherlands.

In the second half of the eighteenth century, the VOC ceased to be a profitable organisation. It collapsed in bankruptcy in 1795, after several decades of distributing dividends bigger than its profits.

One of the causes was the disintegration of the Moghul Empire in India and the British takeover of the governance of Bengal in 1757. After that, discrimination against Dutch operations weakened the VOC considerably. Anglo–Dutch hostilities in 1781–84 (when the two countries took opposite sides in the American War of Independence) had serious repercussions in Asia. The outbreak of the Napoleonic wars led to a complete British takeover of Dutch interests in India, Malacca, Ceylon, South Africa and temporarily in Indonesia. It also ended any significant French connection with India.

Contributory factors to the profit decline were the very high overheads for the company in hiring military and naval personnel to run what had become a territorial empire in Java and Ceylon. The officers of the VOC were not well paid and conducted an increasingly large private trade in the company’s ships. There was also a good deal of corruption in the administration of Java and Ceylon, which benefited the servants but not the shareholders of the company. Given the changing commodity structure of trade and the locus of operations, Batavia was no longer an ideal headquarters.

After 1815, Indonesia became a colony of the new Dutch kingdom. There was intensive development of tropical crop production for export. During the wartime period of British rule, there had been a policy of westernisation of the administration, property rights and land taxation. The Diponegoro revolt of 1825–30 ended this approach. Thereafter the Dutch stuck consistently to a policy of dual administration, retaining traditional rulers, law and custom as a major instrument of their rule. They also kept their trading monopoly, as most of the profits would have gone to powerful British and American traders under an open–trade regime.

In the 1830s the so–called “Cultivation System” was introduced. The Netherlands exercised its claims on indigenous income by increasing its demand for tribute — forced deliveries of crops or labour services in lieu of land taxation. From 1816 to 1914 movement and residence of the indigenous and Chinese populations were controlled by a system of pass–laws designed to maintain labour discipline and enforce ethnic apartheid.

From the 1830s, the Dutch were remarkably successful in raising the income flow from Indonesia. In the 1830–70 period, half of it went directly to the Dutch government as fiscal tribute from the cultivation system. In addition there was monopoly income from transport of export crops by the NHM shipping company owned by the Dutch King, and income from sales of monopoly franchises to dealers in opium. The government dominated production of sugar and coffee, but most of the tobacco crop was in private hands. Favoured individuals were subsidised to create sugar processing factories. There were ample opportunities for corruption in the Dutch administration, amongst the 76 local Regents and heads of the 34 000 villages of Java. In 1844 Indonesia was allocated a fictitious debt of 236 million guilders to cover the costs of liquidating the VOC’s debts and those incurred in suppressing the 1825–30 revolt.

Export prices for sugar and coffee rose after the abolition of the African slave trade in the 1830s. This ruined competitors in the Caribbean and raised costs in Brazil.

From 1848, when the Netherlands acquired a more democratic political system, there was growing criticism of exploitative practices and bureaucratic cronyism in Indonesia. These pressures, plus the opening of the Suez Canal and the development of steam shipping, led the Dutch authorities to open the colony to private enterprise and investment. By the 1890s the government share of exports had dropped to zero.

Table 2–21a provides a crude measure of the burden of colonial rule and the colonialist gain for the Netherlands for the period 1700 to 1930. The volume of exports grew very much faster after the demise of the VOC, and became a much greater share of Indonesian GDP. The proportionate gains to the Netherlands also rose greatly. Table 2–21b provides similar estimates for India, where the colonial burden and gain were relatively much smaller.

Table 2–21c provides a crude estimate of population and income levels by ethnic group in Indonesia from 1700 to 1929.