Small Firms, Politics, and Credit in the Netherlands: 1900-1980

Small and medium-sized enterprises (SMEs) are a driving force for growth, innovation and job creation, nonetheless smaller companies fail more regularly and often have a hard time obtaining (bank) financing. Because of the economic importance of SMEs, governments are actively trying to support smaller businesses by removing obstacles to their survival and growth. In practice, this means adapting regulations and government policies to the needs of SMEs and improving their access to finance. These interventions do not take place always or everywhere, but depend heavily on the interaction between the government, political interest groups, and financial markets. This dissertation examines the history of government interventions in the Dutch financial system between 1900 and 1980. Throughout this period, the Dutch government, under pressure from small business interest groups, began to play an increasing role in lending to SMEs. I argue that over time, small businesses worked with the government to make changes in the financial system to better meet the credit needs of SMEs. In doing so, the interaction between small businesses, the Dutch government, and the financial system was particularly important in bringing about these changes. These interventions have helped Dutch SMEs, especially during moments of crisis. The second chapter, “SMEs in an Era of Change: Overview of SMEs in the Netherlands, 1895-2000” provides a contextual set-up to the thesis. It aims to provide an overview of the economic changes that the Dutch economy experienced in the twentieth century. The third chapter, “Getting a Foot in the Door: Small Firm Credit and Interest Group Politics in the Netherlands, 1900-1927” explores the link between the history of small firm associations and the development of Dutch financial infrastructure geared toward small firms. The fourth chapter, “The Role of Banks, Notaries and Private Lenders in the Dutch Credit System in the Early 20th Century” is written jointly with Oscar Gelderblom, Joost Jonker, and Amaury de Vicq. This chapter investigates what financial services people made use of in the Netherlands in 1921. The fifth chapter, “Solving the Perennial Small Firm Funding Problem: The Case of the Netherlands, 1900-1940” builds on the “lending channel” perspective pioneered by Taketa and Udell to investigate responses to changes in the provision of small firm credit. The sixth chapter, “Lending and Coaching: Public Loan Guarantee Funds in the Netherlands, 1934-1978” shows that credit can be effectively provided to small firms at low costs and low risks through the combination of public loan guarantees and intense monitoring. The seventh chapter brings together the conclusions reached in the previous chapters. It briefly reflects on research avenues that were taken but proved unfruitful, several possibilities for further research, and policy implications that can be drawn from this research