THE JOURNAL OF ECONOMIC HISTORY VOLUME 71 MARCH 2011 NUMBER 1 Public Finance and Economic Growth: The Case of Holland in the Seventeenth Century OSCAR GELDERBLOM AND JOOST JONKER The debate over the institutions that link economic growth to public finance tends to disregard the need for savings to finance growing public debt. In seventeenth-century Holland the structure, size, and issuing rates of the debt were determined by investors’ preferences, wealth accumulation, and changing private investment opportunities. The growth of savings enabled the creation of a huge debt largely with short-term bills. Issuing rates dropped because savings outstripped private investment alternatives. In Holland, and probably elsewhere as well, credible commitment and efficient fiscal institutions were necessary, but not sufficient to create liquid secondary markets and low costs of capital. he main reason for studying early modern public finance lies Tin its presumed function as foundation for modern economic growth. Proposed first by Peter Dickson in 1967, this idea emphasizes the importance of the switch from haphazard and expensive short-term borrowing by monarchs to a consolidated long-term debt under parliamentary control, more secure, traded on liquid secondary markets, and thus cheaper.1 Following Dickson, Douglass C. North and Barry R. Weingast wrote a celebrated article highlighting the institutional The Journal of Economic History, Vol. 71, No. 1 (March 2011). © The Economic History Association. All rights reserved. doi:10.1017/S0022050711000015. Oscar Gelderblom and Joost Jonker are Associate Professors, Department of History, Utrecht University, Drift 10, Utrecht 3512 BS, The Netherlands. E-mails:
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