Standing on the birthplace of modern capitalism
I’m standing right on the birthplace of modern capitalism and it would feel like a pilgrimage except instead of quiet and contemplation there is noise and bustle and traffic that never stops. Which is quite apt if you think about it – capitalism, after all, is a dynamic and exuberant system; not for capitalism the contemplative silences and quiet peregrinations (unless that’s what you want, in which case capitalism can do that for you too, no problem).
There is no monument or even a plaque that I am aware of to commemorate this birth. Every minute, hundreds of people, tourists and locals alike, walk past; trams, cars and the ubiquitous bikes weave their way past, and underneath my feet boats of all sorts, mostly carrying sight-seers on guided tours of the city’s canals, float past, like they have done for hundreds of years. None of the people around me are aware of the historical significance of the spot they are passing by, and very few would care if you took time to inform them, but that’s fine with capitalism too; you do your thing, whatever you’re doing, and my invisible hand will do mine. The though itself makes me snigger, however. A few metres away a small pop-up stand manned by three young African men is trying to interest thousands of people who walk past in the saving grace of Jesus Christ (Christianity as increasingly the developing world religion: an exhibit); I’m now imagining myself with my own pop-up stand trying to hand out leaflets to disinterested pedestrians, many of them in a hurry (years of election campaigning come in handy and make the vision all too real): “Excuse me sir and m’am, would you be interested to hear about the birth of capitalism? After all, you are now standing on the sacred ground. Yes, right here, this very spot.”
I’m on the New Bridge. Behind me, the Amsterdam Centraal train station, below me the Damrak canal, in front of me the heart of the historical Amsterdam. For centuries, this has been a hub of frenetic activity, as busy in its own way four hundred years ago as it is today. In fact, the train station has been built more than a century ago on top of what used to be the original port of Amsterdam. Where hundreds of masts swayed with the wind and tide while the hulls disgorged exotic cargoes from around the world that made Amsterdam for a brief shining moment the commercial capital of Europe, today hundreds of trains disgorge tens of thousands of people from around the world who come here to work, sightsee and have a hash cookie or two.
This is the story of the Dutch East India Company and the commercial revolution it has wrought. For centuries prior to its establishment in 1602, voyages of exploration and trade from the European ports have been financed either by individuals or several people – often the ship owner and a merchant or two – acting in partnership, putting in the initial capital and sharing the risk for the duration of the voyage only. With the ship returned to port, or lost, the partnership would be dissolved and new ones sought on a case by case basis. The Dutch East India Company, initially founded under the royal charter for the period of 21 years, changed all that. It issued shares, allowing people to invest in the company itself and the totality of its commercial activities rather than in a single specific voyage. Furthermore, the shares were not permanently assigned to particular individuals, as might have been the case under some older commercial structures; they could be transferred by their owners to others, as long as the transfer was registered in a book maintained by the Company, so the directors would know at any given time who was entitled to dividends from successful journeys to spice islands.
Which brings me back to the New Bridge I’m standing on at the moment. This is precisely the place where four hundred and thirteen years ago, in 1604, Amsterdamers keen to invest in this new venture but who missed out on the initial share issue, would come to see if any of the current shareholders were interested in selling, as would the shareholders interested in selling. As the Company got off to a very successful start, the number of interested buyers generally exceeded the number of interested sellers, but they would all come here, stand on the New Bridge in the open air, chat to each other, and make the transaction. Then they would hurry to one of the houses nearby to make the transfer official in the company share register. The Dutch East India Company is widely recognised by the historians as the first modern corporation – and the first transnational one to that – the first listed public company to offer shares to the public, and that makes the New Bridge the world’s first stock market, where people would come to trade not in tangibles brought in by the hundreds of ships from around the world, but in financial products; pieces of paper assigned a symbolic meaning and a promise of future riches.
As Russell Shorto writes in his excellent “Amsterdam: A History of the World’s Most Liberal City”:
“Nearly all variations of financial transfers we use today – call options, repos, futures contracts, short selling, naked short selling – were invented or pioneered in Amsterdam in the seventeenth century, as traders sought innovative ways to speculate on the underlying price of [Company] shares. We know from the existing books of Amsterdam notaries, for example, that futures trading on shares of stock – an agreement to buy at a set price on a future date – began with open-air meeting on the New Bridge in 1607.”
It is easy to pinpoint people’s, object’s and institution’s birthdays and birthplaces; to do so for an idea is more of a parlour game – there will be numerous contenders for that symbolic designation – but in my books (no pun intended), the New Bridge, the world’s first stock market for the world’s first corporation, has a pretty strong claim to being the birthplace of modern capitalism.
Those Dutch innovators four hundred years ago have laid the foundations for our modern world of unprecedented dynamism and prosperity. They would be somewhat shocked by the sight and the noise of today’s traffic over the New Bridge, but I think they would recognise it for the sign of their success and be proud of the world they helped to make.
I smile to myself, most likely the sole possessor of this little historical secret on the bridge that moment if not that day or even that week, and walk towards the Amsterdam city. I won’t need hash cookies; I’m joyful as it is. Thank you, capitalism.
(Amsterdam Centraal in the background; the New Bridge is neither pretty nor particularly historical by the standards of the postcard-pretty Amsterdam,but like capitalism itself it is utilitarian, useful and it does it job well)