Take a walk around Amsterdam's historic centre. What do you see? Canals, coffee shops, and stalls selling tulip bulbs are some of the typical features promoted to visitors. Beneath this veneer, however, is a rather startling history of financial innovation whose consequences are felt globally.
To get closer to this legacy, I took a walking tour of Amsterdam's financial history, along with other people who had attended the MoneyLab conference. Run by payments expert Simon Lelieveldt, this two-hour tour takes in the Goliaths and oddities of the city's past and present.
The bull at the Amsterdam stock exchange. Photo by Erin B. Taylor.
The stock exchange, national bank, short-lived Mint, a 400-year-old pawn shop, and a former tulip market are just some of the visible remnants of a tiny country's extraordinary achievements. They're not at all difficult to spot–but first you have to know that they; re there. This is the advantage of the walking tour: it directs your focus beyond the typical tourist attractions to another layer of the city.
Beginning in the sixteenth century, the Netherlands managed to situate itself as an economic powerhouse. With its ocean access, Amsterdam was well-situated to become a trading port, but it faced with severe competition from port cities nearby. Amsterdam gained the upper hand by inventing financial tools that blew their competitors out of the water.
The Netherlands's first significant financial innovation was the structure of the Dutch East India Company, created in 1602. This was the first company in the world to issue stock, allowing it to raise far more capital than its competitors and grow much faster than had previously been possible. Amsterdam also became a major centre for the trade of grain, tax revenues benefiting the development of the city and its markets.
These advantages cemented the Netherlands's status as a powerhouse port and fueled the development of other financial innovations over the next few centuries. As Simon commented, these early experiments turned Amsterdam into a "money laboratory" whose inventions quickly spread across Europe.
Interestingly, given their touristic appeal, the first stop on the walking tour was the city's extensive canals. Not just pretty features for tourists to photograph, they were central to the economy of old Amsterdam, as they were used to move goods to warehouses and private dwellings.
There is just one house in the city that has direct access to three canals, and it was owned by a wealthy cashier who was in the highest tax bracked that existed. In the Netherlands, declaring taxes worked on an honour system. Individuals had incentives to be honest, because it gained them status, helping them to make more money.
- Amsterdam's oldest surviving pawn shop was founded by the municipality in 1614. Photo by Erin B. Taylor.
Amsterdam's innovations weren't restricted to high finance. One of my favourite stops on the tour was the Stadsbank van Lening pawn shop, founded in 1614. Many people were illiterate, so its entrance is decorated with a relief depicting what the shop was for. Goods flow down tubes, people stand at a shop counter, and coins flow out the bottom. The sign says something like, "To help out the people in need we have placed a lending bank where you can bring your goods and get money in return."
This pawn shop was set up as a municipal alternative to private pawn shops. Amsterdam was the first city to take the pawn business into their own hands, charging 12-20 percent rather than the 30-80 percent charged by private operators. Profit, rather than flowing into private hands, goes to the city to help the needy. The shop still operates today.
High finance and ordinary people often proved inseparable. During the Dutch War of Independence, an orphan saved the exchange building from being destroyed by the Spanish when he spotted an enemy boat in the canal that runs directly underneath the building. To reward him, the heads of the exchange asked him what he would like. He requested the right to play his drums in the exchange building. To this day, Dutch children play drums one day per year to commemorate this event.
Another surprise on the tour was central role played by a single wealthy woman in the adoption of a central currency. Amsterdam's traders, merchants, and cashiers were fiercely independent and managed to smoothly operate a financial system that incorporated diverse currencies, stocks, and credit systems. Before the Dutch Central Bank (now 200 years old) gained dominance, the Netherlands had fourteen separate mints, each located in a different province. Conversion between them took place in the city hall.
When the government decided to create a central bank issuing one single currency, uptake was slow. Used to the old system, people did not see how a centralized system would benefit them, and few people bought shares. This all changed when the wealthy widow Borski bought half of all the shares.
This proved to be the turning point for the bank, allowing it to gain monopoly over the issuance of currency. Two hundred years later, her portrait hangs in the foyer of the Dutch Central Bank in honour of her contribution.
This is just a taste of what we saw and learned on Simon's walking tour of Amsterdam's financial history. On each and every stop, what fascinated me most was just how much finance–something we think about as being largely invisible–has left its mark on the city's landscape.
The legacy of this financial history is not just a monetary wealth, or even a wealth of financial innovation: it is also a material wealth that is built into the city's architecture in aesthetically beautiful ways.