Venture Shares of the Dutch East India Company（三）.pptVIP

Themes to Remember Financial innovation and economic growth go together – in the LONG RUN! In the short run, financial crises are the rule So, it’s important to respond correctly That means meshing: relationship finance by banks transparent finance through markets regulation by government That’s VERY HARD, even with examples of success to follow The Dutch Bell Jar Dutch city-states cooperate to amplify Italian city-state innovations Capital market in city debt, then VOC equity shares Giro bank created, given monopoly for all wholesale merchant payments Mints unified mid-17th century Wissel-bank deposits become pure “inside money” The Dutch Bell Jar Although these new innovations have a large impact, there is no financial revolution: Due to political fragmentation, there is no system of national debt; instead individual provinces and cities have their own debt. There is no secondary market for this debt, due to the non-liquid nature of the way the debt is issued (annuities). There is no centralised system of taxation There is an absence/lack of banknotes Venture Shares of the VOC What was the innovation? Why in the Netherlands? How did the Dutch do it? What were the effects? How did Britain improve on it? What Was the Innovation? The many shares in Dutch expeditions to the East Indies organized in six separate cities were consolidated into one joint-stock company in 1602. By 1610 it became clear that the original capital would not be paid back, and no dividend had been paid. So arose an active secondary market in the original shares, supported eventually by an active pay-out of dividends. Why in the Netherlands? Netherlands in the midst of their 80 Years War against Spain, which had control of Portugal and its trade. Blocked from trade with Mediterranean Europe, Dutch sought to exploit possibilities in both East West Indies. Small scale of merchants and competing port cities forced cooperative behavior to be effective, especially in East Indies. How did th