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Public Finance of the Dutch Republic in Comparative Perspective: The Viability of an Early Modern Federal State (1570s-1795)

Author(s):Fritschy, Wantje
Reviewer(s):Feenstra, Alberto

Published by EH.Net (September 2018)

Wantje Fritschy, Public Finance of the Dutch Republic in Comparative Perspective: The Viability of an Early Modern Federal State (1570s-1795). Leiden: Brill, 2017. xviii + 430 pp. $156 (hardback), ISBN: 978-90-04-34127-2.

Reviewed for EH.Net by Alberto Feenstra, Utrecht University.

 
Public Finance of the Dutch Republic in Comparative Perspective approaches the classic question of the riddle of the Dutch Republic from a fiscal and comparative perspective. The question is how the small and federal Dutch Republic maintained itself among larger centralized states. Fritschy argues that the key factor was the urban system, which she defines as a collective that abandoned urban autonomy. Although urbanization and collectivity have been addressed as explanations in other studies, her emphasis on the rendering of fiscal autonomy is novel. For instance, James Tracy (A Financial Revolution in the Habsburg Netherlands: Renten and Renteniers in the County of Holland, 1515-1565, University of California Press, 1985) emphasized the collective subscription to loans by Holland’s six major towns in his hallmark study about the financial revolution in sixteenth-century Holland. Fritschy rather focuses on the importance of collective taxation. The increase in levels of taxation in the late sixteenth century was so major that she labels this as a “tax revolution” in the provinces of Holland and Zeeland. This tax revolution formed a necessary condition for the subsequent “real financial revolution” that encompassed public borrowing.

After an introductory chapter, the book consists of two parts. The first deals with the Dutch Republic. Two-thirds of this part sets out the emergence of the Dutch Republic and its fiscal system until 1609; the third chapter summarizes the almost two centuries that followed. This part builds on detailed accounts that Fritschy and her team collected and constructed from provincial archival sources covering these centuries. Part 1 must consequently be read as a synthetizing of decades of data collection and publication. She goes one step further in Part 2 by adding a comparative perspective. Chapters 4, 5 and 6 in the second part, each provide a comparative case study (Venice, Britain and the Ottoman Empire). The selection of Venice and the Ottoman Empire is surprisingly refreshing; comparisons are usually made among Northern and Western Great European Powers, like France, Spain, Austria, Prussia and to a lesser extent Sweden and Russia. However, the selection of the cases may have benefited from somewhat more elaboration than she provides to the reader, especially with regard to the states she omits from her selection. Although the choices must have been made after careful consideration, they seem almost arbitrary

The substantiation of the book’s central argument has a major methodological drawback for the Dutch Republic itself: an imprecise account of the units of analysis. The book underplays the political power and importance of the provinces as the institutional layer that linked the federal state to the cities, the urban system, that is so crucial for its central claim. Considering that Fritschy wants to convince the reader of the viability of the Dutch federal structure from its urban system, she pays remarkably little attention to the interaction of the Republic’s constituent member provinces.

This manifests itself in various regards. First, to show how urban cooperation increased tax revenues she indicates the importance of intercity monitoring in public auctions of tax farms in other districts. Besides this specific example to demonstrate the mechanism of jealous intercity monitoring, there is hardly any direct source material offered to back-up the claim. Moreover, the mechanism described is at the provincial level in Holland, not the federal level.

Second, the lengthy description of the emergence of the fiscal system in the chapters 1 and 2 is largely confined to the province of Holland. In chapter 3, Fritschy hints that despite Holland’s large share in the Republic’s expenses the other provinces may have been overburdened instead. This casts doubt on her central claim — based on Holland — that the urban collective was so important for the Republic’s fiscal viability. Nowhere else in the Dutch Republic was the urban position as strong as in Holland, except for Zeeland. The curiosity raised by this statement about Holland’s under taxation is not really satisfied. The assessment of taxation schemes in the other provinces is less developed; the analysis generally focuses on divergent outcomes rather the dynamics that explain them. This is further obscured in charts that group the fiscal results of the provinces together in the seventeenth and eighteenth centuries. Nevertheless, the incorporation of fiscal data of other provinces is already a major improvement in the analyses of Dutch public finance.

Third, borrowing was a provincial affair. Except for Holland, although the main borrower, the references to borrowing of other provinces consist of scattered observations. With regard to the importance of markets for public debt, the reasoning seems somewhat inconsistent. At regular intervals throughout the main text, she observes creditors’ actions, their bargaining power and interactions with the state. When it comes to general conclusions about the quality of Dutch public credit, however, the state is depicted as near omnipotent in its relation with creditors. Whether the federal structure played a role is not considered. Based on Holland, she deems Dutch credit a safe haven (p. 374), but doubts this a page later (p. 375) when referring to others provinces. Given the importance attributed to creditworthiness in the literature about financial revolutions and economic growth, a more systematic discussion would have been interesting.

What makes the book worthwhile reading is the comparative perspective. Fritschy skillfully uses descriptive statistics to compare the Dutch Republic to these other states. She deploys them to identify specific dissimilarities in various outcomes in public revenue and expenditure. Whether this also corroborates her main explanations remains questionable. For instance, the dependencies of Venice and most of the regions under Ottoman rule were conquered territories. Whereas she acknowledges this involuntary junction for Venice, she does much less so for the Ottoman Empire. This differs markedly from the Dutch voluntary cooperation. This may imply that the voluntary character of the Dutch cooperation was more important than its urban character. It may have been useful to have added a comparison with the income from the so-called “Generality”-lands, conquered territories by the Dutch that were administered by the States-General. Arguably the best example of her use of comparative descriptive statistics is the comparison with Venice in which she estimates the relative weight in the pubic revenue of the cities of Amsterdam and Venice, as the economic centers in the respective states. Here Fritschy convincingly shows that Venice paid relatively more compared to its dependencies than Amsterdam compared to the rest of the Dutch Republic. She consequently demonstrates the value of comparative descriptive statistics in their own right, as opposed to more econometric statistics from which she refrains.

Overall, Public Finance offers insights into the relations between politics, public finance, economics and state formation. The conclusion and epilogue induce us to consider the complex interactions between sovereign polities within a federal state of the past when regarding federal cooperation today. One of the strengths that fostered the viability of the Dutch federal state was support for the high tax levels to sustain the struggle for independence. Sharing a common goal thus increased the fiscal capacity and helped to overcome internal differences.

 
Alberto Feenstra is a lecturer at Utrecht University. He completed a Ph.D. thesis about the political economy of markets for public debt within the Dutch Republic. His research interests include monetary and financial history and colonial history.

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Subject(s):Government, Law and Regulation, Public Finance
Geographic Area(s):Europe
Time Period(s):16th Century
17th Century
18th Century