| Capital markets exist to accumulate and distribute savings. When they emerge, economies will prosper. Governments and businessmen can step up their investments, while capitalists have more opportunities to make money with their money. The emergence of capital markets is not self-evident, however. Borrowers must be able to find savers willing to loan them money, while lenders have to be assured that debts will be repaid. Hence, sophisticated capital markets will only be found in economies with efficient intermediation, secure property rights, and related high levels of trust. Between 1500 and 1800 the Dutch Republic was one of the first economies in Europe to boast large-scale public and private capital markets. Besides cities and provinces, private individuals borrowed impressive amounts of money at gradually declining interest rates. Using a large number of previously ignored local sources the project reconstructs and explains the precocious growth of financial markets in the Dutch Republic between 1500 and 1800. To further detail the contribution private capital markets made to the growth of the Dutch economy the project also includes a case study on the finance of Dutch shipping. The project, which will result in a monograph on the evolution of financial markets in the Dutch Republic (1500-1800), suggests a reinterpretation of the role of the government in the growth of financial markets in early modern Europe. Not the often commended commitment of the central government to repayment of its debts, but rather attempts of local and central authorities to establish clear contracting rules, in combination with efforts of local officials to bring savers and borrowers together and register their financial contracts, created the trust necessary for private capital markets to emerge in the United Provinces. This reinterpretation adds to our understanding of the growth and development of pre-industrial economies. |
