CHAPTER 18 Low Countries Finance, 1348–1700 O. Gelderblom, J. Jonker Utrecht University, Utrecht, The Netherlands OUTLINE Introduction 175 Constrained by Local Particularism: The Austrian Netherlands 181 Common Origins 176 Conclusion 182 Going Separate Ways: The Dutch Revolt 177 Further Reading 183 Holland’s Exceptionalism 179 Entering a Vicious Debt Circle 180 INTRODUCTION Revolt sent the northern and southern part of the Netherlands on very different paths of economic and From the late Middle Ages onward, the Low Countries political development. The Spanish and subsequently played a central role in global conflicts and trade, and dis- Austrian Netherlands continued to be ruled by foreign played remarkable economic dynamism. Public financing monarchs who relied on deputies and a small Brussels challenges were at the center of financial innovation, and bureaucracy to govern the country. Working within those challenges reflected the influences of trade and war the narrow financial margins set by cities in Flanders on government fiscal affairs. and Brabant, which refused to relinquish their control During this period, commercial farming, trade, and over local taxation, this regime had to contend both with manufacturing grew rapidly in the coastal provinces of serious economic decline and repeated foreign inva- Flanders, Brabant, Holland, and, to a lesser extent, also sions. Simultaneously, the Dutch Republic, a federation in Friesland and Zeeland. The area remained politically of seven provinces, emerged as Europe’s leading econ- fragmented until the second quarter of the fifteenth cen- omy and a major player in the seventeenth-century tury when Philip the Good, Duke of Burgundy, brought power struggles, a position built on the economic growth Flanders, Brabant, Hainaut, Namur, Limburg, Holland, and fiscal muscle of the province of Holland. Zeeland, and Friesland under his rule. During his long The Habsburg Low Countries are of great interest for reign (1419–67), Philip made considerable headway in the light that they throw on a cornerstone of public fi- the legal and administrative centralization of his terri- nance history, that is to say, the importance of limited tories. After his death, this process stalled for several government for the growth of taxation, spending, and decades, before being pushed forward again by Charles borrowing. They show first of all how limited govern- V, who ruled the Netherlands from 1515 onward. By ment evolved over time from a long struggle between the mid-sixteenth century, he had brought almost the centralizing princes and autonomous cities over the con- entire area of what is now known as the Benelux under ditions for rendering local financial markets, local taxa- Habsburg rule, and had achieved a considerable degree tion, and local political decisions subservient to central of administrative, legal, and fiscal harmonization in the controls. Second, they demonstrate the importance of three leading provinces of Flanders, Brabant, and Holland. contingent factors in determining the direction into Copyright © 2012. Elsevier Science & Technology. All rights reserved. & Technology. © 2012. Elsevier Science Copyright The political unification of the Netherlands survived which limited government evolved. Once the Habsburg Charles’ reign only briefly. During the 1560s, the Dutch Low Countries had split into two, a combination of Handbook of Key Global Financial Markets, Institutions, and Infrastructure 175 # 2013 Elsevier Inc. All rights reserved. <i>Handbook ofhttp://dx.doi.org/10.1016/B978-0-12-397873-8.00007-4 Key Global Financial Markets, Institutions, and Infrastructure</i>, Elsevier Science & Technology, 2012. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/uunl/detail.action?docID=1068444. Created from uunl on 2019-11-01 06:02:29. 176 18. LOW COUNTRIES FINANCE, 1348–1700 economic growth and the joint resistance against Spain to a single administration for the entire Low Countries transformed limited government in the Dutch Republic failed, Philip did succeed in streamlining the political into a lever for an unprecedented rise in public spending process by forming an Estates General. Composed of and borrowing through the building of efficient fiscal in- delegates from the provincial estates, this body debated stitutions. Key to this process was the delegation of fiscal subsidies levied over all the Duke’s Low Countries pos- control from individual cities to the provincial Estates. sessions instead of over individual provinces. The first Holland pioneered this during the early phases of the session took place in 1464. During the brief reign of Revolt as a temporary expedient but, as the war with Charles the Bold (1467–77), the Estates General evolved Spain dragged on and the economy expanded, Holland’s toward a true parliament for the Low Countries, only to cities acquiesced in the delegation of taxation to the pro- return to a more passive, consultative role when the pro- vincial level. Conversely, in the Spanish Netherlands, vincial estates asserted their fiscal and political auton- Philip II restored the fiscal autonomy of the cities of Flan- omy under his daughter Mary of Burgundy and her ders and Brabant to break their resistance and then, in husband Maximilian of Austria. the seventeenth century, sluggish growth combined By tradition, fiscal burdens in the Low Countries were with repeated foreign incursions and mistrust between very unevenly distributed. The clergy and nobility were the cities and the sovereign to turn limited government largely exempt from taxation, and both the provinces into a constraint on public finance. and individual cities competed with each other to have their contributions reduced. Flanders and Brabant had more influence with the Brussels government and there- COMMON ORIGINS fore paid proportionally less tax per capita than Holland. The three main Flemish cities – Bruges, Ghent, and Like all European monarchs of their time, the rulers Ypres – strove to shield their citizens from central taxa- of the diverse lands that made up the medieval Low tion as their impositions on consumption and wealth Countries drew their revenues essentially from two were already considerable. Through their control of sources: their domains and subsidies granted by the Es- the provincial states, they succeeded in shifting almost tates, the political bodies representing their subjects in the entire burden of taxes onto the politically underrep- each of the lands. Around the middle of the fifteenth resented countryside and paid only 10% of their allotted century, these two sources were still about equally im- share in subsidies. The bargaining strength of those portant, but domain income gradually declined in rela- same cities rested on their ability to raise credit. Ghent tive importance to less than a fifth of total revenues by pioneered issuing life annuities and redeemable annu- the 1520s, and even that part was heavily mortgaged. ities as early as the thirteenth century, followed by As a result, successive sovereigns came to rely more cities in Brabant and Holland during the fourteenth cen- and more on subsidies. There existed two kinds: regular tury. As often as not, such loans were raised to finance ones and extraordinary wartime ones. The former re- urban expenditure on fortifications or other war costs, quired consent from the Estates, but this was more or less but they were also used to fund the extraordinary a formality as most provinces granted them for periods subsidies. of up to 10 years. To get extraordinary subsidies, how- That practice led the dukes, constrained by their own, ever, monarchs needed to negotiate terms and condi- fairly limited, borrowing capacity, asking and some- tions with the Estates. Specially appointed officials times forcing cities to raise loans for them, in anticipation raised the subsidies in the form of taxes once amounts of future subsidies, in return for privileges, or simply on had been agreed. In addition to regular and extraordi- collateral of ducal domains. In doing so, the princes nary subsidies, the Estates could grant sums of money undermined their own centralization policy in two ways. to mark occasions like a sovereign’s accession to the First, the amount of money spent locally rose to the det- throne. Though not set by negotiations, such special sub- riment of centrally available funds; second, in return for sidies also formed an integral part of the political process permissions to borrow, city councils and provincial Es- between rulers and subjects, incoming monarchs being tates obtained control over taxation and spending so as required to confirm established customs, rights, and to assure proper debt service. Cities like Bruges and privileges in return for them, or otherwise grant tax re- Ghent gained this right as early as the 1470s. By the bates. The inefficiency of recurrent lengthy negotiations 1520s, the four biggest and richest provinces – Flanders, with each individual province combined with financial Brabant, Holland, and Zeeland – possessed it as well. pressures to inspire efforts at fiscal coordination. During Such controls provided the basis for the emergence, dur- the 1420s and 1440s, Philip the Good concentrated the ing the first half of the sixteenth century, of local and pro- management of his Low Countries finances in three of- vincial administrations that rivaled the central one, Copyright © 2012. Elsevier Science & Technology. All rights reserved. & Technology. © 2012. Elsevier Science Copyright