The Dutch Republic remained neutral during the Seven Years’ War, allowing it to avoid the enormous debts that weakened powers such as France after the conflict. Dutch merchants continued trading across Europe and the Atlantic, including with the American colonies during the American Revolutionary War. While the state remained neutral, Dutch traders were supplying goods and war materials to the revolutionaries, which increased tensions between the two powers. When the Dutch joined the League of Armed Neutrality in 1780, Britain declared war in what became the Fourth Anglo-Dutch War. Although the conflict damaged Dutch shipping and colonial trade, Amsterdam remained one of Europe’s major commercial and financial centres.
In The Wealth of Nations, Adam Smith discusses Amsterdam as an example of how stable banking supports trade. He explains that by the early 1600s the city’s coins had become unreliable because many were clipped, worn down, or mixed with foreign currency. To solve this problem, the Bank of Amsterdam was founded in 1609. Merchants could deposit coins or precious metals there and receive secure “bank money” recorded in the bank’s accounts. Because this bank money was trusted to match the proper silver standard, it became more reliable than ordinary coins in circulation. Smith argues that this stability helped Amsterdam become one of Europe’s great trading hubs and shows how confidence in banks and the circulation of capital could strengthen commerce and economic growth (WN IV.iii.b.15–17).
Image: A view of the Admiralty at Amsterdam, of the store houses, wharfes and docks belonging to it and to the East India Company, courtesy of Emmett Collection, NYPL