Lessons from Amsterdam and London: A Tale of Two Cities

With the rise of mercantilism, economic development took a new turn in the Middle Ages. Nations increased their wealth through taxes, and consumption and took measures to attract business to their territories. This competitive drive for commerce continues to shape economies today. As Mark Twain said, 'History doesn't repeat itself, but it often rhymes.' By examining Amsterdam and London during the Middle Ages, we can find interesting insights into attracting trade and commerce in our respective regions.

Amsterdam and London were prominent business centres with strategically located seaports, but Amsterdam was moving way past London in trade. In the early 17th century, Amsterdam's port was the busiest European port. By the mid-17th century, Amsterdam accounted for 40% of European shipping trade. The Amsterdam Stock Exchange was established in 1602, and the Bank of Amsterdam was founded in 1609 while the Bank of England was established only in 1694 and the London Stock Exchange in 1801. What were the reasons that traders preferred Amsterdam over London? 

A counterintuitive learning is the absence of strong political authority in the Netherlands. Britain was ruled by a powerful King and despite the efforts of the emerging parliament, it was difficult to check the regal authority. The King could come up with new ideas to change the course of policies and there was no effective feedback mechanism. Courts were also not free from interference and could not go beyond the regal will. The Netherlands was ruled by city councils where no one could interfere with the power of courts. The decrees of these courts were sanguine and strictly enforced. These city councils also had representatives of the trading community and this helped in making rules that helped in ease of doing business.

Both the cities had codified laws but there was more clarity in the Dutch system and the common law system followed in Britain worked on precedents. It was difficult for traders, who were often from different countries, to understand which precedent would become applicable in their case. Another major initiative was the importance given to commercial disputes by the Dutch legal system. There was more certainty in Amsterdam to get issues resolved compared to the city of London. 

Another major aspect that helped trade in the Netherlands was tolerance of different religions, cultures and communities. The King of Britain was also head of the Protestant Church and vocally so in the struggle for power with Catholics; this did not give comfort to the other communities. On the other side, Amsterdam became a refuge for Jews fleeing persecution from Spain and Portugal, as well as French Huguenots. This influx of skilled immigrants contributed to the economic and cultural vitality.

If we move continents, Bengal also used to be an important trading region and in the same period, colonial powers like the British India Company were trying to set foot in the Indian subcontinent. Jagat Seth was one of the most influential banker traders of the region, traders like Jagat Seth were often asked to fund wars and Kings and Nawabs of the period paid an interest on this loan.

With the rising chaos in the Indian subcontinent, rulers started becoming extortive and during one such incident, the Nawab of Bengal Siraj ud Daulah imprisoned Jagath Seth. This enraged the trading community and the rest of history with Jagat Seth funding the conspiracy against the Nawabs that led to the rise of East India Company. For a long period, wealthy merchants supported British rule in India owing to their certainty of policies and enforcement of rule of law.

Businesses seek certainty, facilitation and non-interference, it was true in the Middle Ages, and it is so now. They thrive in political orders that grant long-term stability in policies. They also seek a say in framing business policies, and robust independent courts to settle disputes. They need an inclusive society where all can participate in worldly matters. As we climb ladders of development in human evolution, trade and commerce have been a later entrant. There are many lessons for societies to learn to let businesses thrive. 

What other historical comparisons can teach us about modern economic development?

#EconomicDevelopment #TradeHistory #Amsterdam #London #Mercantilism #BusinessInsights #TradeCommerce #EconomicHistory #PoliticalEconomy #InclusiveSociety #BusinessEnvironment #HistoricalComparisons #FinancialHistory #MiddleAges #CulturalDiversity #BusinessStability #LearningFromHistory