Calculated Choices: The Emergence of Different Financial Systems in the Low Countries, 1500–1800

How the sixteenth-century Habsburg Netherlands split into two countries with fundamentally different financial systems

During the Dutch war of independence (1568–1648), the Low Countries broke apart into two separate countries, which were to become the Netherlands and Belgium. In Calculated Choices, Oscar Gelderblom and Joost Jonker show how, following that split, the north developed a market-oriented financial system, whereas the southern Netherlands became bank-oriented. The book examines how and why this happened, investigating the intermediaries that firms, households, and governments in the north and the south used to organize payments, loans, and investments.

After describing the two countries’ broadly similar financial institutions created under Burgundian and Habsburg rule, Gelderblom and Jonker argue that the two financial systems diverged as a consequence of choices made by their respective governments during—and mostly because of—the war. They explore the consequences and the persistence of this divergence: financial intermediaries in both countries developed profitable business models, the northern one based on commissions charged over particular services, the southern one on revenues from interest-rate spreads and long-term investments. Finally, the authors demonstrate that both systems provided adequate responses to the finance demand from their respective economies.