When it comes to war, beer beats silver and gold

Tue Apr 10, 2012 11:35pm IST

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(Reuters) - The Dutch drank their way to victory and independence from Spain in 1648 through the taxes they paid on beer, according to a report in the April issue of the Journal of American Association of Wine Economists.

Economists Koen Deconinck of the University of Leuven and Johann Swinnen of Stanford University wrote that taxes on beer "played a crucial role in financing the revolt ... (and) were the single largest revenue source" for the outnumbered and outgunned Dutch, who were facing "the mightiest empire on earth."

Since beer was safer to drink than water, cheaper to buy than wine, and not as easily spoiled as milk, it was the drink of choice for many Dutchmen.

In his book, "Beer in the Middle Ages and the Renaissance," Robert Unger estimated that by the year 1600 per capita consumption of beer in Holland ranged from 400 liters to 600 liters (106 gallons-159 gallons).

As the Dutch revolt dragged on for 80 years, taxes on beer were increased until they became Holland's largest source of income. The levies were collected through a method "resembling the VAT system in use in many European countries ... (and it) allowed them to outlast the Spanish," Deconinck and Swinnen said.

At their peak, they estimated, war costs represented 11 percent of Dutch gross domestic product.

The Congressional Research Service estimated that at its peak, the Iraq war represented 1 percent of U.S. GDP.

Spain, financing its war with Holland largely with taxes on gold and silver mined at colonies in the New World, spent roughly 6 percent of its GDP, Deconinck estimated.

Unable to pay its troops for months at a time and facing almost annual mutinies, Spain signed the Treaty of Munster in 1648, officially recognizing the Dutch Republic and ceding the land north of Flanders to the rebels. The Dutch were also allowed to keep their overseas possessions and their monopoly over the East Indies trade, which they acquired during the revolt.

The treaty set the boundaries that still divide Belgium from the Netherlands.

The full report is available at: here

(Reporting By Leslie Gevirtz; Editing by Steve Orlofsky)

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