|Author(s):||Tielhof, Milja van|
Published by EH.NET (August 2003)
Milja van Tielhof, The ‘Mother of All Trades': The Baltic Grain Trade in Amsterdam from the Late Sixteenth to the Early Nineteenth Century. Leiden: Brill Academic Publishers, 2002. xviii + 370 pp. EUR114 or US$143 (cloth), ISBN: 90-04-12546-9.
Reviewed for EH.NET by Regina Grafe, Department of Economic History, London School of Economics.
Milja van Tielhof’s book The ‘Mother of All Trades': The Baltic Grain Trade in Amsterdam from the Late 16th to the Early 19th Century does not waste much time in trying to justify the importance of its main object of study, the early modern Dutch trade in Baltic grain, known to Dutch contemporaries and historians alike as the moedernegotie. ‘Mother of all trades’ is a tall order of description but it was and is appropriate. Within the European sphere the spectacular expansion of the Dutch grain trade from the late fifteenth century onwards constituted the birth of a world where sea-borne trade in bulky low value goods began to change patterns of economic integration and productive specialization in profound ways — even if some historians have argued that the relative importance of this trade has been somewhat overstated (e.g. Israel 1990). The author, who works at the Vrije Universiteit Amsterdam, follows up her earlier book on the subject (De Hollandse graanhandel. Koren op de Amsterdamse molen, 1470-1570) in almost direct chronological order.
The book tries to do two things at once. First, it makes more recent research on this Dutch trade, including routes, networks, commercial strategies and shipping costs, accessible to those who have to rely on English texts. Anyone interested in understanding the changing nature of early modern European trade will be grateful to van Tielhof for this. Second, and more importantly, this book looks at what determined all important transaction costs in early modern trade. Estimating trading costs before the nineteenth century has proven elusive. This attempt to look at the overall costs of trade, including those resulting from information, agency, shipping, taxes and local port services, such as storage, weighing, commissions, is a brave undertaking. Ultimately, van Tielhof wants to know if transaction costs can explain Amsterdam’s rise and fall as the center of European grain trade.
The book is structured in nine chapters. Seven of them deal directly with a reassessment of the quantitative expansion and contraction of the Baltic grain trade (chapter two), the role of Amsterdam as an entrepot (chapter three) and various important factors that determined transaction costs in the trade (chapters four to eight). They are located in between two chapters that try to add more flesh to the story by illustrating the history of the Amsterdam grain trade through the history of two grain traders, one in the phase of greatest expansion of the trade in the late sixteenth and early seventeenth century (chapter one) and the other in its phase of decline in the early nineteenth century (chapter nine).
Though the addition of the biographical chapters looks attractive at first sight, it does not work very successfully. To be fair van Tielhof at no point claims that the two protagonists of chapters one and nine were fully representative of their peers. Indeed the author stresses that in many ways neither of them was. The size of Cornelis Pietersz Hooft’s (chapter one) business and his political career made him a man who shaped the emerging Dutch polity and economy much more than an average Dutch merchant could have achieved. By contrast, Willem De Clerq’s (chapter nine) reputation within the business community seems to have been derived more from his writings than his business activities, which were not particularly successful. The author’s health warnings against over-interpreting these two cases are therefore well taken; but this is, of course, exactly the problem. If the biographical information is largely instrumental in illustrating general trends by citing the specific, then they turn into an unwelcome distraction. This impression is reinforced by the author’s tendency to delve into detail and a surprising moral undertone in discussing Hooft’s business methods and views.
Most of the data for the survey over the phases of expansion and contraction of the grain trade come from the Sound Toll Tables for 1561-1657, which summarize data about any ships paying toll in the Danish Sound and were published by Bang and Korst in the first half of the twentieth century. They are complemented by an impressive amount of published and unpublished data derived from a variety of Dutch trade taxes. Four phases of trade are identified: a spectacular increase in the quantities of Baltic grain shipped through the Sound (1540-1650), a phase of contraction (1650-1760), a revival (1760-1800) and finally the period (1800-1860) when the Dutch had clearly lost their dominant market share in the grain trade. In an interesting discussion van Tielhof bases her periodization on both volume and volatility, but it is a shame that the data on volatility are hidden away in footnotes (11, 28, 58) and that the graphical analysis is divided into sub-periods, which makes it unnecessarily hard to follow van Tielhof’s argument.
The central chapters of the book are those that discuss various aspects of transactions costs in great detail. It is a major achievement of this book to actually give an overview of the various sources of transaction costs in this trade on their way from the Baltic to Amsterdam wholesalers. However, the main strength of the book, namely the very attempt to present van Tielhof’s own new research together with other recent Dutch historiography, becomes here its main weakness. While each of the chapters tackles an important aspect of transaction costs, the author tries at the same time to answer in passing some of the big discussions about the role of entrepots, commission trade or guild control in Amsterdam. The result is a loss of focus that distracts from the impressive amount of information on transaction costs that van Tielhof presents.
The discussion about Amsterdam as an entrepot (chapter 3) is a case in point. There is little doubt that Amsterdam was the most important grain market in Europe based more on its access to information and shipping services than on the actual storage of grain. This impression is reinforced by the degree of market integration between the main Baltic port of Gdansk and Amsterdam shown by the extraordinary correlation of prices between both markets, which according to van Tielhof was roughly stable over the period 1597-1808. It is underlined by the fact that the actual price differential remained ‘stable’ at 20 to 40 percent. Ironically, van Tielhof argues, however, that over time the influence of Baltic imports on the Amsterdam market decreased simply because the volumes shipped were less strongly correlated with prices. What van Tielhof seems to omit here is that volumes tell us little about integration. It is perfectly possible to argue based on these data that from as early as the seventeenth century onwards these particular two markets were so integrated that relatively minor price changes would induce corrective flows of goods and that overall transaction costs remained surprisingly stable notwithstanding Amsterdam’s success as an entrepot market.
Van Tielhof’s analysis of commercial policies concludes that “Dutch politics lowered transaction costs in long-distance trade by helping to reduce risk …, by increasing the mobility of capital … and by keeping taxes low” (p. 115). The organization of business in the grain trade was dominated by a large number of small trading houses rather than big companies and at no point monopolies applied. Though it is never made explicit, it seems clear that external economies of scale gained from a thick market gave more benefits for the grain traders than internal scale economies through vertical integration could have provided in this (monopolistic) competitive trade that featured an almost homogeneous good. Van Tielhof’s discussion of the way in which merchant networks helped to reduce transaction costs is surprising in that it makes no reference to the abundant literature on such networks. Initially, the author suggests that the only reason why Mennonites dominated the grain trade was their preference for ‘safe’ routes. As pacifists — the author argues — the Mennonites refused to arm their ships and were hence attracted to those trades where defense was unnecessary (p. 188). Only in passing in the conclusions does the author admit that common ethnicity or religion must have played a major role in keeping down costs from principal-agent problems.
One very enlightening new result is a series of freight rates for the sixteenth, seventeenth and first half of the eighteenth centuries. It shows the impressive fall of real freight rates over the sixteenth century, as nominal freight rates remained almost unchanged while grain prices tripled. By the late sixteenth century rates were already low and did not fall substantially thereafter. The sheer number of ships in the business kept return times and volatility of freight low. At the same time, risks associated with the season or war clearly drove up freight rates. Van Tielhof estimates that transport took up between 33 and 42% of the price margin. Given the resulting low net profit margins of around 10%, it is not surprising that Dutch grain merchants shunned relatively expensive insurance and continued to use their traditional risk-spreading techniques. Van Tielhof provides new information about interest and insurance rates that go a long way to explain why Dutch grain merchants liked their defense costs and collective action to be shouldered by the Admiralties rather than by the merchants for as long as possible. The final chapter concerns the costs of unloading and storing grain in Amsterdam. The author goes to great lengths to show that the guild organization of lightermen, grain carriers, grain measurers and turners did not impose restrictions on the trade, but responded relatively efficiently to changes in demand rebutting the idea that the organization of port services in Amsterdam accounted for its ultimate demise.
In the end the author seems to argue that scale goes a long way to explain Amsterdam grain merchants’ dominance in the Baltic trade for so long, while war interruptions, demand shifts and changing production patterns in the hinterland are blamed for the ultimate decline. Though van Tielhof does not say so, the book convinced this reader that in a market where scale is the single most important factor in determining transaction costs, the concept of a prime mover advantage gets an entirely new meaning. This result contradicts directly those who have argued that the ‘rich’ trades in high value goods rather than the bulk trade in grain were ultimately driving Dutch ascendancy to first European trading nation. This book is not an easy read — it is rich in detail and the author’s excursions are sometimes frustrating. Van Tielhof has also missed the opportunity to place the issues raised about the costs of shipping, risk, information and agency firmly within a comparative discussion. To the very end this reviewer was hoping to find that final section that would actually try to sum up (with all due caution) all those various bits of transaction costs that van Tielhof teased out of the data with such painstaking effort. It never came. Nevertheless for anyone hoping to advance his or her understanding of the role of transaction costs in early modern trade there is a lot to be learned from this book.
Reference: Israel, J. Dutch Primacy in World Trade, 1585-1740. New York: Oxford University Press, 1990.
Regina Grafe is lecturer at the London School of Economics and is currently working on a book on the impact of Spanish external trade on the domestic market in the seventeenth century.
|Subject(s):||Markets and Institutions|
|Time Period(s):||19th Century|