The expression Dutch courage denotes strength or confidence gained from drinking alcohol.

The earliest instance that I have found is from The Times (London) of Thursday 14^th December 1797, which published an account of the ninth day of the trial of Captain Williamson for cowardice and neglect of duty when he was in command of his Majesty’s ship Agincourt in the action of 11^th October with the Dutch fleet:

Sheerness, Wednesday, Dec. 13.
Mr. Coxe’s Examination continued […].

Q. (By Capt. Williamson) […] Do you recollect during the time we were firing, my saying to you that I was sorry to see a person a little intoxicated at such a time, but as we were fighting on the Dutch coast, I suppose he thought it necessary to lay in a stock of Dutch courage? A. I recollect the words Dutch courage, but nothing more.

The phrase Dutch courage alludes to the drinking habits ascribed to the Dutch. Edmund Waller (1606-87), English poet and politician, had mentioned those drinking habits when writing about the naval battle of Lowestoft, fought between the English and the Dutch in 1665, in Instructions to a Painter, for the Drawing of the Posture & Progress of His Ma^ties Forces at Sea, under the Command of His Highness Royal. Together with the Battel & Victory obtained over the Dutch, June 3. 1665 (London, 1666):

The Dutch their Wine, and all their Brandee lose,
Disarm’d of that, from which their Courage grows.

The phrase Dutch courage is one of several expressions in which the adjective Dutch is used derogatorily or derisively, largely because of the rivalry and enmity between the English and the Dutch in the 17^th and 18^th centuries—cf. origin of ‘double Dutch’ and ‘High Dutch’ (‘gibberish’), ‘Dutch uncle’ and footnote.

For example, the following is from Ζωοτομ́iα [= Zootomia], or, Observations of the present manners of the English: briefly anatomizing the living by the dead. With an usefull detection of the mountebanks of both sexes (London, 1654), by Richard Whitlock (born circa 1616), physician and fellow of All Souls, Oxford:

The contract of Soules and Mindes, by Friendship, is not, (like Dutch Bargains) made in Drink.

Likewise, the English author and magistrate Henry Fielding (1707-54) wrote the following in “a Description of a Battle of the amorous Kind”, in The History of Tom Jones, a Foundling (volume 3 – London, 1749):

A Parley now was set on Foot between the Parties; during which the artful Fair so slily and imperceptibly carried on her Attack, that she had almost subdued the Heart of our Heroe, before she again repaired to Acts of Hostility. To confess the Truth, I am afraid Mr. Jones maintained a Kind of Dutch Defence, and treacherously delivered up the Garrison without duly weighing his Allegiance to the fair Sophia. In short, no sooner had the amorous Parley ended, and the Lady had unmasked the Royal Battery, by carelessly letting her Handkerchief drop from her Neck, than the Heart of Mr. Jones was entirely taken, and the fair Conqueror enjoyed the usual Fruits of her Victory.

However, the facts proved the prejudices to be false, as is clear from the following paragraph from Drewry’s Derby Mercury (Derby, Derbyshire) of Thursday 6^th September 1781:

We are informed by Advices from Amsterdam, dated August 27, that M. Walter John Gerrard, Baron Bentincke, was buried with all the military Honours, at the New Church in the above City. A distinguishing mark of Heroism is this Officer, they add, should never be forgotten, and is as follows; “His Ship, which was the Baatvia of 54 Guns, was attacked at the same Time by two English Ships; this Hero received a mortal wound at the Beginning of the Action; the Captain, was second in command, continuing the Engagement with great Intrepidity, informed M. de Bentincke, that “he was apprehensive the superiority of the Enemy would oblige them to retreat;” but the brave Captain replied, “It was much better to run all Risques, than fly before the Enemy” The whole Ships Company had already anticipated this Answer by declaring, “that they would never consent to surrender, and had rather the Ship should go to the Bottom, than run away from the English.” This, and other Instances of Dutch Courage, afford a different Idea of the martial Spirit of that Nation, (which had so long been latent) than some persons entertained, and now give Reason to believe they will prove, when fully roused and prepared, not a despicable, but too formidable a Foe against us.

Note: However, in the noun Dutch treat (late 19^th century) and in phrase to go Dutch (early 20^th century), Dutch means German—read here. The term Dutch auction refers specifically to the Netherlands.