The Debt We Owe the Dutch.

[FlyingDutchman]

The origin of the recession:

http://www.newsweek.com/id/194580

"White-skinned people with blue eyes" aren't just responsible for the current crisis; the blue-eyed palefaces are responsible for saddling the world with a financial system that has a built-in tendency to crash. The modern financial system grows out of a series of innovations in the 17th-century Netherlands. From the Netherlands, what the English called "Dutch finance" traveled over the English Channel, as the English borrowed Dutch ideas to build a stock market, promote global trade and establish the Bank of England, going on to build a maritime empire of commerce and sea power that dominated the globe until World War II. Dutch finance became "Anglo-Saxon capitalism," but otherwise went on as before. When the British system fell apart, the center of world finance crossed the water again, and New York and Washington replaced London and Amsterdam as the centers of global politics and finance.

This financial and political framework is the operating system on which the world runs: the Dutch introduced version 1.0 in about 1620; the British introduced 2.0 in about 1700; the Americans upgraded to version 3.0 in 1945, and it works pretty well—most of the time. The 400 years of liberal global capitalism have seen an extraordinary explosion in knowledge and human affluence. Not everybody shares in these benefits, and there are environmental and social costs to the rapid progress. Still, not many of us would like to turn the clock back to 1610.

But the system has bugs. Ever since the great Dutch tulip bubble of 1637, the economic system has been prey to roller-coaster-style booms and busts. From the South Sea bubble of 1720 to the subprime-loan bubble of our own time, the financial system leads people into irrational behavior and fever dreams of wealth and of eternally rising prices for stocks, houses—and tulips. These episodes never end well, and as time passes and the financial system grows more complex, more global and more interdependent, the cost of these periodic crashes gets worse. Today's is one of the worst; millions of people are losing their jobs, and millions of families once on the edge of prosperity are falling back into poverty—not just in America and Europe but in China, India, Africa.

At moments like this, even "Anglo-Saxons" have doubts about the system, but much of the world doesn't like Anglo-Saxon capitalism even when it works. Liberal capitalism may have created mass affluence in the Netherlands and America, but things don't look as good in Brazil—or in Haiti. In countries like France, the system has made the country prosperous, but the anarchy and inequality of Anglo-Saxon-style capitalism have irritated the French since the Scotsman John Law gave them their first financial bubble, in 1720 (the Mississippi bubble). In Latin America, the right denounced liberal capitalism for centuries as a plot against the Roman Catholic Church; the left denounces it as a plot against the poor.

Liberal capitalism is risky, unequal and destabilizing. Worse, over time, the countries that embrace it tend to grow powerful and rich. Those nations that embrace the chilly logic and brave the rough seas of capitalist development end up developing and exploiting new technologies, creating new industries and gaining more power. Societies that respond with more reserve don't prosper as much in the good times and often pay a higher price when things go wrong. Just ask the Argentines. Or the Russians.

Brazil is better off for the change. Although the current crisis is beginning to bite, Brazil has overcome the stagnation and corruption that halted growth after the first oil shocks and the Third World debt crisis, and is now one of a handful of countries with the power to shape the new century. And this hasn't just been the story in Brazil; more and more "developing" countries are turning into the pacesetters of liberal global capitalism. The global crisis emerged from a system built, with all its many flaws, by blue-eyed palefaces. But if countries like Brazil can stick with their own versions of Dutch finance, the future of the system will increasingly be shaped by people who look more like Lula—and the palefaces are going to have to run hard to keep up.

Mead, the author of “God and Gold: Britain, America and the Making of the Modern World,” is a senior fellow at the Council on Foreign Relations.

[BellygirlUK]

Well I'm still in a mood after seeing the stern of the flagship of the 14th century British navy fleet on the wall in the Rijksmuseum in Amsterdam! :P So I don't know about being deferent to the Dutch, FD! [chuckles]

But, yes, it's interesting how much of an effect the Netherlands has had on the world... how important a nation it was and is! Funny that Brazil has appeared as a Dutch-model financial follower now too!

I'm not sure I like Mead's style of writing but he raises some interesting points. Ta for that, chook! xx

[Albonubes]

They say the current recession is the worst crisis since the early 1930s. I don't believe that. I'm old enough to remember 1970s stagflation and the Reagan-era correction when I was a child. Things are not as bad now as they were then. I lived a whole two years on lentils, eggs, and government cheese.

[ogie]

how is it the fault of the dutch that we took their system, which in reality we took from england and they let it grow unregulated in an american society that is obsessed with wealth and powered by greed? Somehow i feel that this article is fodder for the anti universal health care crowd....i can hear them now "the dutch fiance system didn't work, that means universal health care won't work"

can't we all just focus on the good things the dutch gave us? Wooden shoes, tulips and great cheeses?

[FlyingDutchman]

Originally Posted by ogie

can't we all just focus on the good things the dutch gave us? Wooden shoes, tulips and great cheeses?

Thank you.

AND, raw herring, the MOST progressive country in the world, Jenever (Dutch gin) and lots more things we invented.