The Origin of Investment Trusts in The Netherlands 1919-1939. A step towards a more coordinated economy?

Abstract

Present day’s analyses of financial crisis and economic stagnation often refer to the 1930s, when the capitalist world was hit by depression. During that period the world was confronted with decreasing global trade, economic imbalances and political turmoil eventually leading to the catastrophe of WW2. This warrants thorough analysis of what happened and why, in order to draw lessons for policies today. This thesis examines change of the capitalist economy in The Netherlands during the interwar years. Economic depression and unemployment led to unprecedented state interventions, particularly in the labour markets by undertaking large public works. The government also imposed trade restrictions and tariffs and abandoned the gold standard. These measures could be characterized as a transfer of a liberal economy towards a coordinated economy. However, developments in the financial sector and how firms were financed remain under researched. This thesis contributes to this field of research by investigating the numerous Dutch investment trusts that were created following US and UK examples. Their contribution to financing the economy may in financial terms have been modest, but their nature and the motives of creation by their sponsors were paradoxically very liberal. Rethinking the period, research into the Dutch investment trusts leads to the conclusion that the overall economy became only partially coordinated. Well embedded, classical liberal traditions had survived under conservative cabinets and would further erode only after WW2.