Chapter 13 - Benchmarking Success: The Dutch Republic (1500–1750) as Seen by Contemporary European Economists

Summary

This chapter looks at the Dutch Republic from the vantage point of the economists of the period. These pre-Smithian economists are normally grouped together in the history of economic thought under the decidedly derogatory label of ‘mercantilists’. Under its standard Whig conception, any idea in the history of economic thought – as identified almost a century ago by English historical economist Ashley – instead of being judged by its relevance in a given context, is either hailed as a surprising early anticipation of a healthy neoclassical economic principle or as an example of hopelessly ill-conceived theories (Ashley 1920: II, 381).

I would argue that as a tool in order to understand the rise and fall of the Dutch Republic, mercantilism had some clear analytical advantages over neoclassical economics. Not only was the mercantilist or pre-Ricardian economists’ toolbox much larger than today’s, the pre-Ricardian system already included a large number of economic factors which the profession presently attempts to re-introduce to mainstream economics. Examples of what gradually was left out of economics starting with Adam Smith are innovations – part of English economics from Francis Bacon (1561–1626) until and including James Steuart's important work (1767) – technology, increasing returns, institutions, geography, synergies, path dependency, that economic activities are qualitatively different as carriers of economic growth, the idea that economic policy should be context-specific, and the whole fundamental question of why economic development is by nature so uneven. With the English classical economists economic theory gradually lost its previous understanding of the vicissitudes of technology and production, and came to concentrate upon trade and prices. The contemporary mercantilists are therefore likely to provide a much richer analysis of the Dutch Republic than what is found in the works of the later classical economists.

Mercantilism can productively be seen both as state- and nation-building (Schmoller 1897/1976) and as a strategy of industrial import substitution (Perrotta 1993), which at the time was seen as two sides of the same coin.1 To the laggard countries of Europe, the Dutch Republic provided important inspiration on both these accounts. That inspiration did not come from Dutch policies, but by asking what policies would have to be created in order to achieve the same results as those observed in the Dutch productive system, but under very different circumstances and conditions; in very different contexts.