It is now difficult for us to imagine that the Netherlands, historically, was a dominant power that once monopolized trade between the East and West across the Atlantic, and was a world power. When talking about this country now, those who are not familiar with it might only mention "windmills," while those who know a bit more might talk about the red-light district, the legalization of drugs, and other capitalist decadence, or their exaggerated sea barrier. However, it is hard to associate it with terms like "great power," "strongest navy," "world bank," and "Dutch East India Company." So today, let's talk about this former "superpower."

The Netherlands' Sea Barrier

The Rise of the Netherlands

In the previous article, "How Did the Sun Never Set on the Empire of Spain?" we mentioned that after the rise of Spain, it maintained a huge navy, but it didn't know how to build ships, so the ships were built in Britain and the Netherlands. Later on, the Dutch were almost invincible, with their shipyards highly mechanized, almost producing a ship a day. In addition, the manufacturing and operation of the ships were quite economical and cost-effective; Dutch ship owners could undercut their competitors to win business. The Spanish went to America to trade slaves and human gold and silver, not by themselves, but by hiring the Dutch, which is to say, from that time on, the Netherlands was a transportation company, running business for the Spanish. In fact, the Dutch were "sea coaches" much earlier than they were overlords. While being a coach, the Dutch also lent money at high interest rates when the Spanish were short of money, and the interest flowed back to their country to develop industry, and slowly the Dutch rose.

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To explore the secret of the Dutch's wealth, an important aspect is credit. Credit is particularly interesting; on the surface, everyone understands it, even the indigenous people of the Amazon jungle know that a warrior who keeps his word is trustworthy. However, when it becomes complex, the average person's brain is often not enough, such as the United States now printing money and then buying industrial products from China and Japan, while the Afghan government and the Argentine government cannot buy things with their own money. This is also credit, and there must be something behind it. In fact, the essence of our current currency is credit.

The indigenous warrior is trustworthy because he has been consistent and true to his word for a long time, while the United States' credit comes from its strength, saying that if it kills your family, it really does. The Dutch's credit comes from its long-tested behavior pattern - never defaulting. It's a bit like the family motto of the Lannisters in "A Song of Ice and Fire," pay your debts. This is a flag, and if it can be held up, it can gather a huge amount of resources for you to use.

With this premise, the Dutch made a systemic innovation, the Dutch East India Company, whose purpose was to engage in trade with the East, yes, the British also had one, and it was opened almost at the same time. There was also a West India Company, and the most impressive thing about the West India Company was that it bought a piece of land from the indigenous people and named it "New Amsterdam," which is now New York. There was also a piece of land named "New Netherland," which is now Manhattan.

By the way, the existence of this company is a mockery of Western economics, because economics says that capitalists will compete with each other, reduce prices, and ultimately benefit consumers. Dutch merchants were the first to find that the competition among their domestic merchants was too fierce, resulting in no one making money. Why bother? They simply united, and a dozen companies doing business in Asia simply merged to form an unprecedented monster. Because it can not only form its own mercenary army and launch colonial wars but also issue currency, establish colonies, and even sign political treaties with relevant countries, it is essentially a country within a country.It was precisely due to a robust credit system and behemoths like the Dutch East India Company that the 17th century was the Dutch century, with major trades being tea, spices, porcelain, and so on. At the peak of the mid-17th century, out of 20,000 ships in the world, the Dutch had a monopoly on 15,000 of them, much more impressive than the United States today.

The Decline of the Netherlands

When one reaches the peak, it's time to go downhill. Why did the once dominant Dutch East India Company go bankrupt? The main reason was competition from the British. The British were formidable, being ruthless to others and themselves, always following behind several big powers, fighting Spain, then Portugal, and finally picking on the Dutch. From 1652 to 1784, four Anglo-Dutch Wars broke out, with the British growing stronger in the wars, while the Dutch national strength was gradually consumed. Especially the fourth Anglo-Dutch War, the East India Company lost nearly 70% of its company assets, which was an important reason for the subsequent bankruptcy and liquidation.

After this war, the Netherlands completely lost the bargaining chips in the game with the British. The British could sink Dutch merchant ships without pressure and without fear of retaliation. Gradually, the Netherlands no longer had the excellent credit it once had. How can others believe in you when anyone can sink your merchant ships at will?

Conclusion

This is the mechanism of credit operation. Understanding this will make you understand what some scholars have mentioned in recent years as "trading with a sword." In the future, when our country goes overseas to conduct trade, it will definitely need military force to support credit. If anyone dares to provoke you, you will eliminate his entire family. In fact, if you have this determination and ability, you don't need to use this ability anymore. This is called credit. If one day you keep using this ability or threatening this and that, it is very likely that credit has already been an issue. You know who I'm talking about.