Rich Trades, Scarce Capabilities:

In the last decade of the sixteenth century, the Dutch republic underwent a dramatic economic transformation that laid the foundation of the country’s Golden Age. At the heart of this process was the rise of the ‘rich trades’, the network by which Dutch shipping came to dominate the lucrative trade routes to the East Indies, the Americas and the Levant (Israel (1990)). The rise of the ‘rich trades’ provides me with an archetypal example of the economic process which I want to explore in what follows. Many of the themes which I develop below emerge clearly in the Dutch story: the steady displacement of an old and well established bulk-carrying trade in which the Dutch had so long excelled by this hugely more lucrative new activity; heavy fixed outlays in building up a network of supporting facilities; the growth and development of a series of domestic industries that could benefit from the export opportunities opened up by this new shipping activity; and, most importantly a huge rise in real wages in the Dutch Republic, relative to levels in neighbouring countries.