Lessons from the Past for the Financial System of the Future
Lodewijk Petram, author of the book 'The World's First Stock Exchange', discussed the rise of the Amsterdam stock exchange in the 17th century in the ninth Hazelhoff Guest Lecture.
- Lodewijk Petram
- 30 April 2015
Amsterdam stock exchange
The author of The world’s first Stock Exchange discussed the rise of the Amsterdam stock exchange in the seventeenth century. Dr. Petram explained that the Dutch East India Company (Vereenigde Oostindische Compagnie, hereafter: VOC) was unable to repay its investors due to financial hardship in the first years after its establishment. Subsequently, it was decided to defer payments, because the VOC was seen as a project for prestige and its failure would have implications for the Republic’s reputation.
The postponement of payment also left investors unable to dispose of their deposited funds. In order to cash their claims on the VOC, investors traded their stocks among each other on the Nieuwe Brug in the centre of Amsterdam. Later on the trade was moved to the Beurs van Berlage in Amsterdam, which is still home to the Amsterdam stock exchange. This succession of coincidences led to the origination of the world’s first stock exchange, which dr. Petram said almost of equal complexity to our current stock markets.
The role of banks in the Dutch financial system was very limited at the beginning of the 20th century. Credit was obtained via the prolongatiemarkt. This market provided short-term credit against collateral in the form of securities listed at the stock exchange. Due to the outbreak of World War I, the stock exchange was closed in order to prevent a collapse of the stock market. This also led the prolongation market to run dry, thus making it almost impossible to obtain credit. Banks fulfilled this need for credit and have strengthened their positions ever since. Despite the banking crisis in the 1920s, which scourged the entire economy, banks were able to further establish their positions in the Dutch financial system throughout the 20th century.
Concurrence of coincidences
Petram concluded that the position of important actors in the Dutch financial system was not formed in a rational and well-thought manner, but was primarily a reaction to arbitrary incidents in the economy. Petram argued that the financial crisis cannot be overcome if the current financial system is maintained and that new possibilities have to be studied. In this context Petram argued, inter alia that multinationals like Google and Amazon could be successful insurers since those companies have a host of information at their disposal to base insurances on.
Lodewijk Petram is economist en historian. In 2011 he successfully defended his thesis on the development of the world’s first stock exchange in seventeenth-century Amsterdam. He rewrote his dissertation into a book available to the public, which was well received by the media, awarded the D.J. Veegensprijs 2012 and nominated for the Libris History Price 2012. The book was translated into English, Greek, Chinese and Korean. Petram currently works as an independent historian and writer on his new book Anatomie van een bankencrisis. Released in the fall of 2015, this book discusses the previous Dutch banking crisis (1921-1924), when numerous banks failed and the largest Dutch bank had to be saved by the government.
Hazelhoff van Huet Thesis Price
This Hazelhoff Guest Lecture gained an extra festive character as the Hazelhoff van Huet thesis price was awarded to the best thesis in the area of banking and securities law. Dorine Verhey, Eelco Ras and Sander Schüller were this year’s finalists. Dorine Verhey was honoured to receive this price for her thesis on the liability of credit rating agencies.
Hazelhoff Centre for Financial Law
The previous Hazelhoff Guest Lectures were delivered by Jan Kees de Jager, Nout Wellink, the curators of the DSB Bank, Ben Knüppe and Rutger Schimmelpenninck,Global Head Collateral Management at ING Bank Jacques Sevat, ABN AMRO's Chief Economist, Han de Jong, Don Scott de Amicis, former Vice President and General Counsel of the Overseas Private Investment Corporation (OPIC), Joanne Kellerman, member of the management board of DNB and Rutsel Martha, former minister of Justice of the Dutch Antilles and General Counsel of Interpol in Lyon. The Hazelhoff Guest Lectures are organised by the Hazelhoff Centre for Financial Law. The Hazelhoff Centre is also responsible for the master programme in financial law. The Hazelhoff Centre, part of Leiden Law School, is involved in teaching and research in the area of financial law in the broad sense.