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The expanding merchant class saw
large potential profits in the spice
trade with Asia and, as in other
maritime cultures such as Spain
and Portugal, navigators sought new
sea routes to the east. The Dutch
traveled all over the globe and set
up colonies, including one in North
America: New Amsterdam, which
they officially settled in 1624 and
was renamed New York when the
British took over. In 1596, the Dutch
explorer Willem Barentsz tried to
find a northern passage to Asia and
in the process discovered Svalbard
(Spitsbergen), which later became
a destination for Dutch whalers.
Most importantly for their
prosperity, from 1595 the Dutch
began to make regular journeys
to Southeast Asia to trade in spices,
particularly pepper, nutmeg, cloves,
and cinnamon. They established
colonies in the region and founded
the city of Batavia, later renamed
Jakarta. With this permanent base,the Dutch had the ability to trade
long-term, producing a massive
boost to their economy.A need for investment
While the wealth generated by
exploration and trade was injected
back into the Dutch economy, at
the same time investment was
required to cover the considerable
costs of overseas expeditions. A
trading voyage to Asia in the 17th
century was a very risky venture—
the potential profits were high, but
storms at sea, pirates, warfare, or
an accident could lead to the loss
of a ship, crew, or cargo and wipe
out all the profits. It therefore made
sense for many people to invest in
each voyage and spread the risk,
rather than one entity shouldering
all the costs and responsibilities.
Private trading companies were set
up, each investing a small amount
in a larger whole, and all being
well they would then receive a
commensurate share of the profits.Birth of the Exchange
In 1602, these trading companies
merged to form the Dutch East
India Company, and shares in theTHE OPENING OF THE AMSTERDAM STOCK EXCHANGE
Batavia was the headquarters of
the Dutch East India Company in Asia.
The port city was founded by the Dutch
in 1619, after razing the existing city
of Jayakarta to the ground.enterprise were allocated at the
new Stock Exchange in Amsterdam.
It was established at the outset that
the owners could buy and sell these
shares, and very quickly other
companies were listing their own
shares on the Stock Exchange in
order to raise money. The ease of
buying and selling shares meant
that the Stock Exchange became
very busy indeed, fueling the
growth of capitalism in this part
of Europe; increased investment
resulted in more industry, which
then led to further investment and
the generation of greater wealth.A history of trading
The Amsterdam Stock Exchange
did not develop in a vacuum.
Buying and selling securities—
tradable financial assets such as
shares—already had a long history
in Europe. By the 14th century,
possibly earlier, merchants in rich
Italian trading cities, such as
Venice and Genoa, had traded in
securities. However, the prevailing
conditions in the Netherlands in
the 17th century meant that the
market was especially buoyant.
Since the 16th century, there hadIf one were to lead a
stranger through the streets
of Amsterdam and ask
him where he was,
he would answer
“among speculators.”
Joseph Peso de la Vega
Confusion of Confusions (1688)US_180-183_Amsterdam_Stock_Exchange.indd 182 16/02/2016 16:38
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been a strong financial market in
Amsterdam, where there was a
tradition of trading in commodities
and speculation in everything from
whale oil to tulips. The idea of
buying and selling shares therefore
appealed in this entrepreneurial
society, especially as there was
a good prospect of healthy profits
from the Asian trade. In addition,
the unique way in which the
exchange traded—opening for
limited hours only—encouraged
rapid buying and selling and
produced a very fluid market.Boosts to the economy
The opening of the Amsterdam
Stock Exchange was followed in
1609 by the foundation of the Bank
of Amsterdam—the forerunner of
modern national banks. The bank
provided a secure place to keep
money and bullion, and it assured
that local currency kept its value.
It thus helped to make the Dutch
Republic more financially secure,
underpinning the vigorous and
often risky trading activity that
went on in this burgeoning market.
In 1623, the market had a further
boost when the Dutch East India
Company negotiated a new charter,
paying investors a regular dividend
and permitting those who wanted
to leave the company to sell their
shares on the Stock Exchange. This
action further increased trade on
the Stock Market, which was also
pioneering other lucrative activities
such as futures trading.
The insurance business was
also thriving in Amsterdam during
this time—particularly marine
insurance, which had been created
in the 16th century to protect ship
owners and investors against the
risks of long-distance voyages.
When the Stock Exchange opened,
a special area was set aside for the
buying and selling of insurance.A flourishing culture
The very buoyant financial activity
prevalent in Amsterdam in the 17th
century encouraged the expanding
middle classes to buy consumer
goods, including fine furniture and
oil paintings, further fueling the
economy of this already successful
region. A particularly strong art
market developed, allowing major
painters—such as Vermeer and
Rembrandt, as well as numerous
lesser followers—to flourish. Many
artists were specialists, satisfying
a growing demand for portraits,
landscapes, seascapes, and stillTHE EARLY MODERN ERA
lifes, although great artists like
Rembrandt excelled in all genres
and art forms, including painting,
drawing, and printmaking.
The increasing wealth also led
to the expansion of towns, with
new town halls, warehouses, and
merchants’ homes springing up.
Numerous brick houses, owned by
the middle classes, survive in cities
such as Amsterdam and Delft,
many of them set on the banks of
the canals that were built during
this period—a time of economic
boom that combined elegance and
artistic flair with success in trade. ■The Amsterdam Stock Exchange is
formed to allow shares in the East India
Company to be traded.Dutch explorers discover new sea routes
and the Dutch merchant fleet expands.Trading voyages to the spice-producing countries
of Asia yield high profits but pose a high risk.The Dutch East India Company is set up to share
the financial risk of voyages between multiple investors.Rapid buying and selling creates a fluid financial market,
encouraging speculators to take more risk.US_180-183_Amsterdam_Stock_Exchange.indd 183 15/02/2016 16:42