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In the Previous piece In the series on monetary history, we described the use of money in the Middle Ages. We described how the banking system developed and how coins were minted again in Europe, including the first guilder in 1325. After the Middle Ages, a glorious time arose for the Netherlands when it comes to our prosperity, the Golden Age. But how did the provinces actually cooperate in their fight against the Spaniards? And how did the Netherlands pay for the expensive war against Spain and England?
Background
Around 1550, the area of the Netherlands consisted of several autonomous provinces. Holland and Zeeland were already highly developed areas at the time, especially compared to provinces such as Overijssel or Drenthe. The provinces were all under the authority of the Spaniards, but did not really form one country. People from Gelderland sometimes felt rivalry with people from Holland rather than considering them as fellow countrymen.
It was created Growing dissatisfaction about the Spanish regime. Thus, the Spaniards saw Catholicism as the only true faith. People who apostatized, the heretics, faced very severe punishments. This put the Spaniards at odds with the cities, which preferred to decide for themselves how to deal with the heretics.
The Spanish Empire around 1550 (Source; Wikipedia)
In addition, the Spaniards taxation in which there was fierce opposition. For example, there was a tax on land, but later also on beer, wine and wool. Cities and provinces wanted to set their own policies and not be constrained by increasing centralization. This discontent would lead to a revolt that eventually culminated in the Eighty Years' War.
Major differences
The interesting thing is that the Netherlands did not yet have a uniform tax system. Each province levied taxesher own way. In each province, the products that were taxed differed, but so did the corresponding rates. In Groningen, for example, hardly any tax was paid on alcohol in Friesland, but in Utrecht it was. Another example is the fire city tax, which was introduced early in Utrecht, but in itsDrenthe did not appear until much later.
The cities were also still very independent in that respect. Cities that had obtained city rights in the Middle Ages earned money by, for example, levying tolls. With the exception of import duties, everything was still very regionally arranged. In certain regions, mostly outside Holland, old privileges also applied to people of nobility, for example.
Financing wars
Ironically, the lack of sovereignty under Spanish rule caused the provinces to voluntarily put aside their own interests to stand together against the Spaniards. To this end, it was decided to share the costs of warfare according to the prosperity of each province. These contributions were referred to as quotas.
Holland, with the rich trading city of Amsterdam, contributed more than half to the coffers, while poor Drenthe only increased the annual budget by 1%, as can be read in the book A Financial History of The Netherlands. Each province contributed to the total budget, but the States General did not interfere with the question of how each province should obtain this money.
Most of the budget of the Netherlands was supplemented by the quota system. Income was also made from travel documents that had to be provided and there were only a few uniform taxes, such as excise duties on salt, soap and beer. Yet all this was very marginal. Convoys and licenses brought in more money. These were payments to give merchant ships protection or to obtain the right to trade with the enemy.
Tax lease
The provinces wanted to be sure of the amount of money that came in taxes. Therefore, part of the rights to collect tax was sold to the highest bidder. This is Tax Lease said. For example, there was no uncertainty for the province about the amount of tax that came in and no person had to be appointed by the province to collect that tax.
The tenant often bought a contract for six months to a year and could thus start collecting taxes in a particular region. The tenant hired staff for this purpose. The tenant made a profit if he had collected more money than he had paid to the county. In this way, there was also an incentive for the tenant to take good care of the process. However, the tenant also had to pay for the losses if he failed to collect enough tax.
As a result, the tax tenants tended to collect as much tax as possible. This sometimes led to great discontent among the population. Although there was no great unrest for a long time, it was during the so-called tenant soproer in 1748 wrong. The ever-increasing taxes demanded by the tenants, combined with economic decline, caused looting and destruction in Groningen, after which the revolt spread to Amsterdam, Leiden and Haarlem.
A depiction of the tenant farmer in 1748 (Source; Wikipedia)
Debt
A Financial History of the Netherlands also delves deeply into the debt that the Republic accrued. The wars waged by the Republic entailed enormous costs. About 90% of the Republic's annual costs were a direct result of warfare. In 1586 the costs were still 2.9 million guilders, but after each year of war these costs increased.
During the twelve-year truce, war expenses decreased, but when the war resumed, the annual costs rose to 22 million guilders. Due to the wars against the English, the costs skyrocketed. In 1672, the year of disaster, the expenses amounted to no less than 40 million guilders, a huge amount for that time.
The wars of the Republic were often fought at sea (Source; Muzeeum)
Although the costs rose considerably, the annual quotas remained mostly the same from 1616 until the end of the Republic. If the Republic spent more than it received in quotas, it had to borrow from the market. In the early days of the war, interest rates were still high. One of the ways in which the Dutch increased their credit rating was by confiscating property belonging to the Catholic Church.
It helped the Republic enormously that the financial centre of the world had moved from Antwerp to Amsterdam. This allowed the Republic to borrow at very low interest rates. In the early days of the war against Spain, interest rates were high, but the decline started fairly quickly. This was partly due to growing optimism about the course of the war and the enormous growth of trade by the Republic. Around 1650, interest rates fluctuated around 4% for a long time. Other countries viewed the Republic with skewed eyes; There, much less money could be borrowed and at much higher interest rates.
The development of the national debt from 1600 to the year 1796 (Source; A Financial History of the Netherlands).
The development of the interest rates at which the Republic could borrow from 1552 to 1796 (Source; A Financial History of the Netherlands).
It is striking that the interest rates kept decreasing as time went on, while the debt of the Republic kept increasing. There was a lot of confidence in the Republic in the Golden Age and there was a lot of capital available, which meant that the interest rates were much lower than in surrounding countries. It was not until the end of the Republic that interest rates rebounded when French troops entered the Republic.
It is very interesting to see how the Republic was able to hold out against the great Spain and the mighty England. Great figures such as Michiel de Ruyter gained great name recognition during this period. For a long time to come, the Netherlands would owe a great deal of wealth and prosperity to the heyday of the Republic. In the next section, we will discuss the use of money in the Republic in more detail.
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