Historic Amsterdam financial centre revisited

NRC International, 31 December 2009 13:25, by Karel Berkhout

A new exhibition at Amsterdam’s City Archives chronicles its tumultuous history as one of the world's main financial centres.

A handwritten document banning the sale of stock not yet in one’s possession is currently on display at the Amsterdam City Archives. The document dates back to 1610, a mere decade after the first share of stock ever was issued in Amsterdam. But almost four hundred years on, the order is still surprisingly relevant. "It is basically a ban on short-selling," said Erik Schmitz one of the exhibition's creators who works at the archives. A similar ban was introduced in the US, Britain, Germany and the Netherlands last year to help bring stability to the turbulent financial markets.

The document is just one of the many surprises the Kapitaal Amsterdam exhibition has in store for visitors. The show tries to tell the story of Amsterdam’s rich history as a financial centre.

After the founding of its Exchange Bank in 1609, Amsterdam quickly became the world’s No. 1 financial hub. Today, exactly four centuries later, the credit crunch and failed mergers are wreaking havoc throughout the Dutch financial sector. But that sector knew many highlights in between: the Louisiana Purchase for instance. In 1803, the French emperor Napoleon sold a swath of land on the North American continent covering more than two million square kilometres to the young United States republic. "A momentous occasion in American history but relatively unknown over here," Schmitz said. "Even though investors from Amsterdam played a crucial part in the purchase." Half of capital required by the Americans was raised by a stock emission in Amsterdam.

A few years later, Amsterdam hit rock bottom during the French occupation, when even a single ship failed to enter its port. "Amsterdam did not begin to recover until 1876 when the North Sea Channel was opened," Schmitz said, referring to a direct waterway connecting the Dutch capital to the sea.

In the 50-odd years in between, king William I tried to boost the economy by founding the Netherlands Trade Company (Nederlandsche Handel-Maatschappij, NHM). A company to which the Dutch bank ABN Amro can trace its roots. The building currently housing the city archives was once home to the NHM’s headquarters, making it a fitting decor for the current exhibition.

Walls in the main exhibition room bear panoramic pictures of Amsterdam, with tiny gold bars marking the financial institutions of the city: from the glass and steel housing of the Dutch Central Bank, one of the first national banks in Europe, to the stately building that was once home to the Amsterdam Bank, another one of ABN Amro’s predecessors. "A topography of money," Schmitz called it.

One of the exhibitions main pieces is a recently discovered invoice sent by Michael Spinoza in 1654, billed to the Exchange Bank. The invoice, which specifies an amount of 15,000 guilders, casts a new light on the inheritance left by Michael to his son, the renowned philosopher Baruch Spinoza. Remarkable, considering the fact that Baruch was ousted from the Jewish community over a conflict involving his father’s bankrupt estate.

A modern bank in historic times

The Amsterdam Exchange Bank was founded early in the 17th century by the city government at the request of local businessmen. Account holders kept their florins and doubloons to the bank which recorded their outstanding credit in a single currency, the guilder. The bank also kept track of transfers between merchant’s accounts. "No longer did the merchants need to walk the streets with huge sums of money," Schmitz said.

The Exchange Bank soon began offering additional, more contemporary, services. Clients were able to cash promissory notes – promises of future payment – issued by third parties at the bank. The bank also issued bank seals: bits of paper bearing the bank’s seal and the account holder’s signature, a copy of which was kept by the bank. "This allowed for easy identification of clients by bank tellers," Schmitz said. "It was an ATM-card of sorts."

The Exchange Bank leant huge sums of money to the Dutch East India Company (VOC). The VOC – the first company ever to issue stock, a bit of historic trivia that will ring familiar to those that have seen the movie Ocean’s Twelve, in which robbers try to steal this stock certificate - was a privately run colonial corporation which mostly generated revenue through the sale of products from the East Indies. The VOC repaid these loans to the Exchange Bank after its ships, laden with cargo from the East, returned to Amsterdam. The Fourth Anglo-Dutch (1780-1784) war marked the end for the VOC, which took the Exchange Bank down with it. The VOC thus played a part in both the bank’s rise and fall, and was essential to the blossoming of capitalism in the centuries between.

Capitalism created plenty of bubbles in the stock market early on. For instance, early in the 18th century wealthy Dutchmen bought shares in the French Mississippi Company, a vehicle for investing in the US. In 1720 this so called "Mississippi Bubble", burst, causing investors to lose all their money. Their anger has been preserved for future generations on porcelain plates they had made in China, which leave little to the imagination. "Shit stocks and trade in hot air," one of them reads.

Shareholders did not always express themselves so ineloquently. In 1609, shortly after the VOC had been founded, the rich merchant Isaac Lemaire wrote a letter to the Dutch government complaining the VOC did so little to exploit its monopoly on foreign trade. "He was looking to found a French VOC, but you could also see it as an early form of shareholder activism," Schmitz said.

'Kapitaal Amsterdam' can be seen at the Amsterdam City Archives, Vijezelgracht 32 in Amsterdam. Open till February 28 from 10 am to 5 pm from Tuesday through Friday and 11 am to 5 pm on weekends.

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