What were the sources of Dutch prosperity and why did the Netherlands decline in the 18th century?

Answer 1

Short answer: Trade made the Netherlands prosperous, war lead to a decline.

Long answer: The Dutch wealth of the golden age depended largely on trade with what is now Indonesia and to a lesser extend India, Sri Lanka and Pakistan, Japan, Persia, Thailand and Cambodja. Trade with the West Indies and Africa (more specifically: trading weapons and trinkets for slaves in Africa, mainly El Mina, who were sold in Curacao) contributed a lot too. Other major contributors were whaling and trade with the Baltic, and cloth production (Leiden famously).

During the 18th century, the balance of power shifted more in the favour of England. Tea was now one of the most important goods imported to Europe, instead of spices, and whereas the Dutch had a monopoly on some spices and were market leaders in most, but had very little access to tea production. Because of the English focus on India, they were able to trade this resource the most.

Slave trade was becoming less lucrative too, because of competition, and because many people were by now being born into slavery in the Americas. So demand declined while competition grew. Bad news for traders.

Sugar, which had for long been the most lucrative import from South America and the West-Indies, was now being produced so efficiently that prices dropped dramatically.

Whales were harder to find, and trade with the Baltic was becoming less essential because the goods traded the most, wood and grain, were either losing importance or being produced in bigger quantities in Western Europe than before. Wood was less important to ship building because as steam ships replaced sailing ships, there was less need for the tall straight pinewood used for masts. Later on, mainly in the 19th century, artificial fertilizers and the use of steam engines in the countryside improved the crop yield. But before that, cloth production in the Netherlands was outcompeted by English cloths, which were mechanically made. Although of lesser quality than hand-made Dutch cloths, they were preferred because they were so much cheaper.

So far for trade. This demonstrates the decline of Dutch wealth after the golden age. So, why did I say war in the short answer? Because it dealt the final blow. The fourth Anglo-Dutch war of 1780-1784 put to an end all Dutch aspirations of becoming a world power again. The navy on which trade depended for protection was annihilated, and English supremacy on the sea could no longer be doubted by the Dutch. Just a few decades later, Napoleon took power in the Netherlands, and to deny him the extra income from its colonies, the English took those. Indonesia was returned after Napoleon was defeated, but the trade offices the Dutch had held in India were not. Nor were the Cape Colony, Ceylon (Sri Lanka), and other minor possessions.