Amsterdam Real Estate Properties
As with all markets, the golden age of Amsterdam in the 17th century drove real estate values up
dramatically when tiny Holland became an empire and Amsterdam grew into Europe's wealthiest city.
It was a period when Amsterdam properties were fed by a forest of masts grow in the harbor,
as ships returned from the East Indies laden with pepper and nutmeg, a sack of which could make a man wealthy for life. This was the
golden age of Amsterdam and real estate became
the most practical investment, being a required commodity of the masses to have a place to live and sleep. Thus,
real estate properties have and will always be the safest investment.
In itself, this 17th century real estate boom of Amsterdam
isn't exceptional. Other European cities have land registers that date to the Middle Ages as well. What makes the
real estate boom of Amsterdam
unique - and uniquely interesting to some economists who are studying today's global real estate boom
and wondering just how much the bubble that expanded for the decade of the mid ninties until the last year or two will hold is
based on many financial market factors.
Over the centuries Amsterdam has retained much of its wealth. Financial history of the Dutch Republic
describes the history of the interrelated development of financial institutions in the Dutch Republic.
The rapid economic development of the country after the Dutch Revolt in the years 1585 - 1620, described in Economic History of the Netherlands
(1500 - 1815), accompanied by an equally rapid accumulation of a large fund of savings, created the need to invest those savings profitably.
The Dutch financial sector, both in its public and private components, came to provide a wide range of modern investment products beside the
possibility of (re-)investment in trade and industry, and in infrastructure projects. Such products were the public bonds, floated by the
Dutch governments on a national, provincial, and municipal level; acceptance credit and commission trade; marine and other insurance products;
and shares of publicly-traded companies like the VOC, and their derivatives. Institutions like the Amsterdam stock exchange, the Bank of
Amsterdam, and the merchant bankers helped to mediate this investment. In the course of time the invested capital stock generated its
own income stream that (because of the high propensity to save of the Dutch capitalists) caused the capital stock to assume enormous
proportions. As by the end of the 17th century structural problems in the Dutch economy precluded profitable investment of this capital
in domestic Dutch sectors, the stream of investments was redirected more and more to foreign direct investment, both in sovereign debt
and foreign stocks, bonds and infrastructure. The Netherlands came to dominate the international capital market up to the crises of
the end of the 18th century that caused the demise of the Dutch Republic.
To fully understand the peculiarities of the history of the system of public finance, and that of the closely related system of private
(international) finance and banking of the Dutch Republic, one has to view it in the context of the general history of the Netherlands
and of its institutions, and of the general Economic History of the Netherlands (1500 - 1815). In contrast to that general history this
is a sectoral history, concerning the fiscal and financial sector.
It is important to realize that those general histories differ in an important way from those of centralized Western European monarchies,
like Spain, France, England, Denmark and Sweden in the early modern era. The Netherlands were highly decentralized from their origins
in the Habsburg Netherlands in the late 15th century, and (other than the monarchies just mentioned) successfully resisted attempts to
bring them together under the centralized authority of a modern state. Indeed, the Dutch Revolt that gave rise to the Republic of the
United Netherlands, effectively resulted from resistance against attempts by the representatives of king Philip II of Spain, the
Habsburg ruler of the country, to institute such a centralized state and a centralized system of public finance. Where in other
instances the modern fiscal system resulted from, and was made subservient to, the interests of a centralizing monarchical state,
in the Dutch instance the emerging fiscal system was the basis of, and was mobilized in the interests of the defense of, a stubbornly
decentralised political entity.
Ironically, the Habsburg rulers themselves pushed through the fiscal reforms that gave the rebellious provinces the wherewithal to
resist the power of the sovereign. Emperor Charles V needed to increase the borrowing capacity of his government to finance his
many military adventures. To that end it was necessary to put in place a number of fiscal reforms that would ensure that the
public debt could be adequately serviced (thereby increasing the creditworthiness of his government). In 1542 the president of
the Habsburg Council of State, Lodewijk van Schoor, proposed the levy of a number of taxes throughout the Habsburg Netherlands:
a Tenth Penny (10 percent tax) on the income from real property and private loans, and excise taxes on beer, wine, and woollen cloth.
These permanent taxes, collected by the individual provinces, would enable the provinces to pay enlarged subsidies to the central
government, and (by issuing bonds secured by the revenue of these taxes) finance extraordinary levies (beden in old Dutch)
in time of war. Other than expected, these reforms strengthened the position of the provinces, especially Holland, because as a
condition of agreeing to the reform the States of Holland demanded and got total control of the disbursement of the taxes.
Holland was now able to establish credit of its own, as the province was able to retire bond loans previously placed under
compulsion as enforced loans. By this it demonstrated to potential creditors it was worthy of trust. This brought a market
for voluntary credit into being that previously did not exist. This enabled Holland, and other provinces, to float bonds at a
reasonable interest rate in a large pool of voluntary investors.
The central government did not enjoy this good credit. On the contrary, its financing needs increased tremendously after the
accession of Philip II, and this led to the crisis that caused the Revolt. The new Regent Fernando Álvarez de Toledo, 3rd
Duke of Alba tried to institute new taxes to finance the cost of suppression of public disturbances after the Iconoclastic
Fury of 1566 without going through proper constitutional channels. This brought about a general revolt in the Netherlands,
particularly in the northern provinces. Those were able to withstand the onslaught of the royalist forces militarily, because
of the fiscal basis they had built in previous years.
Of course, they now withheld the subsidies to the central government their taxes were supposed to finance. That central
government was therefore forced to finance the war by transfers from other Habsburg lands, especially Spain itself. This
led to an enormous increase in the size of the Spanish public debt, which that country was ultimately unable to sustain,
and hence to the need to accept Dutch independence in 1648.
As explained in the general article on the economic history of the Netherlands, the political revolt soon engendered an
economic revolution also, partly related to political events (like the rise of the Dutch East India Company and its
West-Indies colleague), in other respects unrelated (like the revolutions in shipping, fisheries, and industry, that
seem to be more due to technological innovations). This economic revolution was partly the cause of, and partly helped
along further, by a number of fiscal and financial innovations that helped the Dutch economy make the transition to "modernity"
in the early 17th century.
As a side note: In many ways the developing economies
of the 21st century can be compared to the "golden age" of the 17th century. Brazil, home to
one of the greatest deposits of natural resources and commodities producers, may be the closest modern day comparison to Europe's golden age.
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