Published by EH.NET (January 2007)

Cl? Lesger, The Rise of the Amsterdam Market and Information Exchange: Merchants, Commercial Expansion and Change in the Spatial Economy of the Low Countries, c. 1550-1630. Burlington, VT: Ashgate, 2006. xii + 326 pp. $100 (cloth), ISBN: 0-7546-5220-3.

Reviewed for EH.NET by Larry Neal, Department of Economics, London School of Economics.

Cl? Lesger, Senior Lecturer in Economic and Social History at the University of Amsterdam, provides quantitative evidence guided by economic theory to show that what really mattered at the end of the sixteenth century for Amsterdam’s rise to economic preeminence in Europe in the seventeenth and eighteenth centuries was its institutions, not its geography. The impetus for its rise was not inherent in its institutions, however, but came from the external shock of the failure of the revolt against Spanish rule in the southern Netherlands combined with the failure of the Spanish to reestablish control over the northern Low Countries. Geography played a role in determining those military outcomes, but not, Lesger argues, in determining the resulting changes in the patterns of trade.

This argument, familiar to readers of Jonathan Israel’s voluminous writings on the Dutch Republic, nevertheless runs counter to a tendency among historians to see very long-lived movements in historical developments that persist despite occasional shocks. Lesger notes that this has led historians, led by Fernand Braudel and others including some contemporary Dutch historians, to trace Amsterdam’s rise to preeminence to its geography and especially the attempts of its citizens to alter and control that geography. Not so, argues Lesger. The older historical literature was correct when it attributed Amsterdam’s rise to closing Antwerp’s access to the Scheldt. This destroyed Antwerp’s role as the major gateway for transportation networks throughout the Low Countries and forced its merchant community to disperse.

Amsterdam’s elite welcomed the new merchants because they saw no conflict between the trades of the Antwerp merchants who dealt in luxury goods, sugar, spices, and naval stores from distant lands and the trades of the Amsterdam merchants who dealt more with transshipping these goods on to its regional hinterland, northern Germany and the Baltic. Very quickly during the 1590s, the new merchants and their information networks combined with the older merchants and their continued trade networks to make Amsterdam the next global entrep?t, replacing Antwerp through the eighteenth century.

The entire region of the Low Countries comprising modern Belgium, the Netherlands, and Luxembourg was a well-integrated economic unit by the middle of the sixteenth century. Using the concept of a network of transportation gateways, Lesger shows that each city had a geographically determined hinterland and its niche for trade in specific commodities with the outer world. Prior to the revolt of the Netherlands against Philip II, Antwerp was the primary gateway through which the other cities in the Low Countries participated in the long-distance trades, the so-called “rich trades” in textiles, spices, porcelain, and luxury goods in general. Amsterdam was a major regional gateway, but focused on South Holland as its hinterland while re-exporting a wide variety of products to the Baltic and northern Germany, with emphasis on low value, bulky commodities. Overall, it accounted for only 6% of total exports, compared to Antwerp’s 75%.

After the Revolt disrupted trade patterns, especially for Antwerp, Lesger argues that there was little change in the gateway role of Amsterdam. Figures on both exports and imports for 1580 and 1584 show that Amsterdam was still oriented in its trade toward northern and eastern Europe. Starting in the 1590s, however, Amsterdam’s trade began a vertiginous rise that continued up to 1630. Lesger argues that rise had to be the consequences of the Revolt. To explain this sudden and dramatic break with geographically determined trade patterns, Lesger examines the role of the wealthy merchants displaced from Antwerp who increasingly fled to Amsterdam. Examining the records of the Wisselbank by various groups of depositors, he shows that the new merchants led the explosion of trade activity from Amsterdam, especially to Russia through the port of Archangel. Both the new merchants and various groups of North Hollanders led the way to the Indies, both East and West.

Part II turns to explore the institutional determinants in Amsterdam that enabled the influx of foreign merchants to occur so quickly with such dramatic results, and then to be sustained for the next century and a half. The answer, he argues, came from the ability of the incumbent Amsterdam elite to extract rents from the increased trading activity by maintaining political control while levying low indirect taxes on a rapidly increasing base of trade that did not conflict with Amsterdam’s traditional trade flows as a regional hub, and indeed helped to expand those trade flows as well.

The rising importance of Amsterdam’s traditional transit trade with the lower Rhine leads Lesger to see most of it increased trade with the wider world as really transit trade as well. In fact, he argues, Amsterdam displayed in the early seventeenth century all the features that modern trade analysts associate with transit trade. For a trade center to maintain its role in transit trade it must provide cost advantages to suppliers and customers in the services it provides in the form of finance, information, and price discovery, as well as in the physical facilities it maintains for transshipment. Ultimately then, the secret of Amsterdam’s success as the preeminent entrep?t for Europe’s long-distance trade lay not in its port and warehousing facilities for transshipments, but rather in its information processing facilities.

Overall, Lesger’s valuable quantitative study amplifies the importance of the service sector, which played a very modern role in establishing and then maintaining Amsterdam’s preeminence. Finally, this reviewer was very pleased to see the emphasis on external and irreversible shocks for explaining Amsterdam’s rise. A similar story, of course, helps explain its eventual demise in the nineteenth century and its replacement by London.

Larry Neal is Professor Emeritus at the University of Illinois, a Research Associate with the NBER and Visiting Professor at the London School of Economics.