4.1.4 History of trade and business

As the Netherlands borders the North Sea, is criss-crossed by rivers and inland waterways and is centrally located in Europe, it is perhaps hardly surprising that its inhabitants became cargo shippers, merchants and international traders. By the 13^th century feudalism was on the wane, central government was weak and city merchants were assuming the role of leaders. Free trade with surrounding countries was the basis of their wealth and power.

In the 15^th and 16^th centuries the grain trade with the Baltic countries (particularly the Hansa cities) and the Mediterranean flourished. Amsterdam was the staple market for gram, herring, salt, hides, timber, wool, silk and French wine. The Dutch even managed to buy gram from France and sell it back to other French merchants. Around 1500 the cities of the province of Holland were leaders in European shipping.1 Trade was able to grow disproportionately fast because the Netherlands did not have a feudal nobility dependent on agriculture. In the rest of Europe the problems of feudalism and mercantilism combined to impede economie development.2

Traders are pragmatic and take quick decisions. They deal with foreigners and learn to be adaptable, but are less interested in long-term broad strategies. They swallow their pride if this enables them to conclude an advantageous deal.

The Dutch are proud of their "finest hour", the Golden Age in the 17^th century. The foundations for their political and military success, for their wealthy cities, their excellent shipping, innovative banking and insurance, their universities and their culture, including the exceptional prominence of Dutch painters, were laid in the 15^th and 16^th centuries.

Religious peace was achieved in the early 17^th century without civil war, after the country had won independence from Spain in the Eighty Years' War. Their feudal neighbours — the German states, the Spanish and the French — protected their trade and industry with mercantile measures. The Dutch flourished by free trade, like their English neighbours across the North Sea, their only real competitors. Trade wars, restricted to encounters at sea with the English, did not seriously interrupt Dutch progress and prosperity. An enlightened oligarchy of homines novi, city merchants versed in matters of state as well as in trade and shipping, made this progress possible. They encouraged a degree of free speech and tolerated foreigners settling in the maritime provinces, mainly foreigners with drive, know-how and money. Although the family names of these ruling merchant clans, called "regenten" (regents) are now only rarely found among today's elite, their spirit lives on and many homines novi of the last 50 years — successful bankers, government ministers, mayors, university leaders and directors of large enterprises — have adopted the traditions of their "regent" predecessors.3

In the 17^th and 18^th centuries Dutch foreign policy steered a course designed to ensure that the Republic had at least two good friends among England, France and the eastern neighbours at any time. The German states did not pose a real threat, but both England and France were watching the rise of the Dutch Republic with envy. Initially, they had both helped the Dutch in their struggle for independence from Spain. In the wake of the rise of the Dutch Republic came commercial rivalry with England, culminating in three sea wars between their navies in the 17^th century. Then in 1672, het Rampjaar (Year of Disaster), the Dutch Republic was invaded by the armies of Louis XIV, in connivance with his cousin, King Charles II of England. The sea saved the Low Countries. The Dutch fleet, led by Admiral De Ruyter, was victorious.4 The city fathers of the western provinces decided to inundate the border area of Holland, and a few feet of water formed an impregnable barrier for the French armies.

The necessity to manoeuvre between such powerful kingdoms confined the Dutch the virtue of flexibility, which the Dutch had already acquired from their experiences in trade. The presence of so many foreigners and refugees on Dutch territory also made the Dutch tolerant and open-minded. "Polderen" was the state of mind.5

Between 1672 and 1720 government debt increased from 130 to over 300 million florins.6 The Netherlands could not afford any wars and had no urge to fight. Until 1672 the rich merchant families had invested in ships and commerce. Now, these investments slowed down. Trade stagnated as England made every effort to replace the Dutch as cargo shippers and colonisers and gradually overtook Amsterdam as the main staple market for foreign goods. The French protected themselves through their mercantilism. The volume of trade passing through Dutch pons from 1670 to 1780 remained nominally the same, but the Dutch market share declined from 40% to 12%.7 Wages of city workers increased and caused a drastic decrease in manufacturing.8 The Netherlands no longer developed new technologies9 and played little if any role in the first wave of the Industrial Revolution in the 1770s. Nonetheless, up to the 1780s Amsterdam was still the world's largest financial centre.10 Henri Hope, who came from England to the Netherlands in 1762 with his three brothers, founded Hope & Co. They and other Amsterdam bankers financed Sweden, Poland and Spain. The first loans to the newly independent United States of America came from Amsterdam bankers.11 The English considered the aid the Dutch gave to the rebels in America a casus belli and declared war on the Dutch Republic. This time the English managed to cut the sea lanes to the Dutch East and West Indies, thereby dealing a disastrous blow to the Dutch economy. The resulting decline in trade and shipbuilding was aggravated by the events of 1780-1787: the era of "revolutionary" movements within the Dutch Republic. The adherents of the House of Orange, from which the hereditary stadtholders (equivalent to presidents of the Republic) were drawn, championed sharp and sometimes armed conflict with the "Patriots", who believed in the French ideal of a stronger political say for the middle classes.12 These French ideals at first seemed to match the tolerant and conciliatory traditions of the Dutch, but this time they did not lead to typical Dutch compromises and conciliation, but to polarisation and an invasion by the array of the King of Prussia, at the invitation of his brother-in-law, the last Dutch stadtholder Willem V, to restore order in the Dutch Republic.

The Netherlands was ripe for an even more disastrous invasion and occupation. Ten years later, the revolutionary armies of the French Republic occupied the whole of the Netherlands. This time the Dutch relied in vain on their natural bulwark, water. The rivers and waterways, guarding the access to the western provinces were frozen solid. The French array was able to walk over the ice. The invasion swept away the old order. In 1800 the VOC went bankrupt and was dissolved.13

After the Napoleonic Wars ended in 1813, the conference held by the victorious powers in Vienna agreed that the Austrian Netherlands (present-day Belgium) should be apportioned to the Netherlands in order to create a strong country to the north of France. These united Netherlands were to be a buffer state.14 The Dutch East Indies, which had been occupied by the English in 1811, were restored to the Netherlands in 1816.15 That colony was to play a vital role in the recovery of the Dutch economy.16 It was in Vienna too that the English achieved their wish to see a strong government established in the country of their neighbours across the North Sea. As they reasoned, a king vested with "un-Dutch" powers was what those headstrong, independently-minded Dutch needed. The ideal candidate was at hand, right there in London and an Anglophile to boot, namely the son of the last stadtholder, Willem V, who had fled to London when the French occupied the Netherlands.

This Prince of Orange, confirrned as King Willem I, had witnessed at first hand the English success in manufacturing, trade and banking during the First Industrial Revolution since the 1770s. When he returned home he found a country that was run down17 and burdened with huge debts18 and countrymen who had lost their traditional spirit of enterprise and adopted the habits of rentiers, retired to their country estates and became gentlemen of leisure.19

Willem I wanted to be a "merchant king" and dreamt of a new VOC. He promoted the creation of a new company, in 1824, called the Nederlandsche Handel-Maatschappij (Netherlands Trading Company).20 The shares were to be underwritten by public subscription. The public subscribed for 70 million guilders, while only 20 million had been expected. The king decided that a subscription of 37 million guilders would be sufficient and took four million for his own account. He appointed the president, the secretary and three executive board members. Five supervisory directors, who were to represent the shareholders, were appointed to supervise the executives. In their future role they would also nominate the five executive board members. It is worthwhile noting that the practice of a supervisory board was continued. The five executives and the supervisory directors usually met together, rather in the manner of today 's combined meetings of management and supervisory directors.21 This company was, at the time, the only publicly owned Dutch corporation. The Netherlands continued to be orientated towards agriculture, brewing, domestic manufacturing, small-scale trade and home crafts.22

Since the early 1600s there had been a "Beurs" or Exchange in Amsterdam, opposite the Town Hall, around which the lives of Amsterdam "regents" revolved. Commodities, shares and bonds and every form of negotiable paper had been traded there. Now, in 1876, an official Securities Exchange was founded in Amsterdam, trading mainly in foreign paper.23 At that time the Netherlands was a capital-exporting country. Marten Mees was an exception.24

King Willem I abdicated in 1840. His son Willem II reigned only until 1849 and was succeeded by Willem III. By then the position of prime minister had gained in importance. Johan Rudolf Thorbecke, a liberal and prime minister in various instances from 1849 to 1872,25 was one of the most important statesman the Netherlands produced. He came from a business family, had been to universities in other countries and was a follower of Adam Smith. As such he believed in promoting free enterprise, i.e. enterprise free from government interference.26

The Technical University of Delft was founded in 1843.27 In 1858 Charles Stork was producing steam engines. He was financially assisted by Marten Mees. Capital was available. There was a lot of old money in the Netherlands. In the first half of the 19^th century rich Dutchmen tended to invest in landed estates or foreign government bonds. There were others, however, who believed in promoting local industry. Samuel Sarphati founded the Association for Pharmaceutical Development, the Amsterdam Garbage Collection Service, the Amstel Hotel and an industrial bank in Amsterdam. The textile manufacturers of Twente, in the north-east of the country, established the Twentsche Bank. Marten Mees was involved in founding the Rotterdam Bank and the Amsterdam Bank, forerunners of AMRO, and later the National Postbank, a savings bank. He was a member of the supervisory board of each of those new institutions, which grew quickly and formed the basis for the large Dutch banks of the 20^th century.28

Although most people both here and abroad think of the Golden Age of the 17^th century as the start of Holland's prosperity and industry,29 it should be noted that the present-day economy is in fact based on the spirit of enterprise that started in the 1870s, although the elements of trade and water have always remained influentia1.30 By 1880 Dutch industry had made huge leaps forward.31

The period from 1870 to 1900 produced strong industrial growth based on innovations in chemistry, power generation and machine building. Generally, this period has been called the Second Industrial Revolution, although in fact it was the first for the Netherlands. It set the stage for what the Netherlands would become in the 20^th century.32 There was substantial investment in larger companies that combined production, distribution and transport management.33 For instance, the families of Van den Bergh and Jurgens initially manufactured margarine34 and later merged with the British company Lever Brothers to form Unilever. As noted above, Royal Dutch Petroleum was founded in 1890. It grew because of high demand for its products in the European market and became an integrated company, with oil fields, refineries and tankers as well as its own distribution network. Although small in comparison with Standard Oil, it protected itself by means of defence mechanisms and by its own mergers and acquisitions.35 Like Van den Bergh and Jurgens, Philips36 too benefited from the abolition of the Patent Act in 1869. By the time a new patent law was introduced in 1912, these companies had taken full advantage of the free-for-a11.37

Farmers established cooperatives for milk and butter factories and cooperative banks for farming loans, the forerunners of Rabo Bank.38 Networks of crosssupervisory directorships developed.39 Debating societies flourished. However, these societies started later and finished earlier than their British counterparts. Membership of Dutch debating societies was limited to the elite, whereas British societies had much broader membership.40

In the 1920s the chemical industry evolved still further, helped by the opening of new coal41 and salt mines Salt and chemical products were largely developed by Koninklijke Zout and AKU (Algemene Kunstzijde Unie), which later merged to form AKZO. Unilever, Gist Brocades and DSM expanded. Long-distance communication with ships and aircraft had become important. Fokker built some of the world's first aircraft, which helped the Dutch to create one of the first international airlines, KLM.42

A typical feature of Dutch society has always been soevereiniteit in eigen kring (sovereignty of one's own group or milieu), which is itself closely related to the division of society along ideological and denominational lines. Over the centuries many different national groups (e.g. French Hugenots, Germans and Portuguese Jews) and Christian denominations lived almost parallel lives, with their own schools, churches, clubs, political parties and customs. Traditionally these milieux are described as zuilen (pillars). Hence the concept of verzuiling (literally, pillarisation). All were lelt by the authorities to run their own affairs. This tendency grew stronger in the 19^th century and continued until after the Second World War. Over time society divided into different pillars along denominational and ideological lines, for example Protestant, Catholic, socialist and liberal.43 Together they engaged in consultation with the aim of reaching consensus.44 In typical Dutch fashion, pillarisation did not lead to factionalism. As a matter of necessity in such a tightly knit society, the different pillars continued to cooperate with each other in order to achieve consensus on practical matters at regular intervals. Dutch governments since 1848 have usually been coalitions between parties representing the various pillars.

The 1960s brought sweeping social change internationally, but especially in the Netherlands. Dutch society secularised rapidly as Dutch Catholics distanced themselves from Rome45 and many Protestants simply forgot about the church altogether.46 The Netherlands led the way in such fields as overseas aid, euthanasia, abortion, drugs, peace, equal income, architecture and art.47 With the decline of the denominational parties ideology lost its dominant influence.48

Pillarisation and the existence of a large number of political parties are typical of the Netherlands. They are the product of the country's history and of the attitudes of the inhabitants of its polders and small semi-independent cities49 who managed to work together on practical issues. Pillarisation itself is not noticeable in the composition of Dutch boardrooms whose members tend to be drawn from a commercial elite. For foreigners the existence of all these different divisions in society is sometimes confusing, but in the comparatively small world of the Netherlands everyone seems to know everyone else, where they come from and to what pillar or milieu they belong. This is usually not discussed openly, but simply taken as read. The tendency to focus on practical issues has remained a typical feature of Dutch corporate culture.

Until the 1960s most companies and their managers and board members tended to have strong local roots in cities such as Amsterdam, Rotterdam, Eindhoven and Maastricht. Another example is the textile industry of Twente and its technical university. In 1964, the Rotterdam Bank and the Amsterdam Bank merged to form AMRO Bank. In the same year the Nederlandsche Handel-Maatschappij and the Twentsche Bank merged to form Algemene Bank Nederland (ABN). Gradually, the city elites lost their local base. Although corporate boards had always included homines novi, a new national elite now started to evolve and the distinctions between the corporate world and the civil service began to blur.50 Many mergers were a consequence of the formation of the European Union and led to the creation of large national champions. Around 1990, there was a new wave of large mergers. ABN and AMRO amalgamated to form ABN AMRO, and the Postbank, Nederlandse Middenstands Bank and Nationale Nederlanden merged to form ING. Although these large banks achieved improved bank ratings, they had already run into problems before the 2008 credit crisis.

In the same period the Netherlands benefited from the institutionalised "polder model" applied in the Social and Economie Council (Sociaal Economische Raad/SER), which is the forum in which representatives of the employers and employees and government and independent members meet to discuss and usually resolve sensitive issues such as salary levels. The SER is an important institution that represents the spirit of compromise and consensus in economie matters that constitutes the modern-day polder model.

Even today the Dutch are primarily a trading nation. The Netherlands is still a major distributor and is the world's fourth largest exporter after China, the US and Japan. It is also the largest European importer of Chinese products. The transit trade accounts for a substantial part of its imports and exports.