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The expression Dutch consolation means: consolation taken from the fact that a bad situation is not worse than it is.
This is one of several expressions in which the adjective Dutch is used derogatorily or derisively—cf., for example, the expressions Dutch nightingale and to take Dutch leave.
The expression Dutch consolation, which is chiefly found in glossarial contexts, occurs, for example, in the following from The Citizen (Gloucester, Gloucestershire, England) of Wednesday 6th March 1929 [page 6, column 5]—the reference is to the Dutch author Johanna van Ammers-Küller (1884-1966):
An amusing speech gently chiding England for adopting the word “Dutch” in a derogatory sense was made by Madame Van Ammers Kuller, of Amsterdam, author of “The Rebel Generation,” who was entertained by the P.E.N. Club at dinner at the Prince’s Restaurant, London. She said that she was sure that the wonderful collection of the work of the greatest painters at the exhibition of Dutch pictures must have shattered the conviction of so many Englishmen that the little country of Holland was only the dwelling-place of red-cheeked peasant boys in wide trousers who made love in front of a windmill to smiling peasant girls in white lace caps and wooden shoes, and with a bottle of gin in their left hand, and she was sure that many visitors to the exhibition who stood amazed at the noble beauty of the pictures must ask why that little word Dutch had such an unfavourable meaning in the English language.
“I will, although I think it a painful thing to do, quote some English expressions with the word Dutch, collected by my countrymen. There is to begin with ‘Dutch courage,’ being the courage stimulated by an abuse of alcohol.
A Dutch bargain is a transaction done by people who are drunk.
A Dutch concert is a concert where several different tunes are played at the same time.
A Dutch feast is a festival where the host precedes his guests in being tipsy.
A Dutch widow is, alas! a lady not to be named in decent company.
A Dutch defence, the worst of all, is a treacherous surrender.
A Dutch uncle is a man who knows how to scold in a hard and rough way.
A Dutch consolation, which means “Let us be glad that things are not even worse.”
These are, in chronological order, the earliest occurrences of the expression Dutch consolation that I have found:
1-: From a correspondence from Antwerp, Belgium, dated Friday 21st December 1832, published in The Times (London, England) of Monday 24th December 1832 [page 2, column 3]:
—Context: From Thursday 15th November to Sunday 23rd December 1832, French forces besieged Antwerp Citadel, held by a Dutch garrison commanded by David Chassé (1765-1849). The siege ended with the surrender of the Dutch garrison and the transfer of the citadel to the newly-formed Belgian state.
—Note: This correspondence refers to “the semi-official report of the siege, published in the Staats Courant Dutch paper of the 18th inst.” [i.e., of Tuesday 18th December 1832]; this report was attributed to David Chassé. The Lunette Saint-Laurent was a fortification near Antwerp:
The report contains a description of the taking of the Lunette St. Laurente [sic], which it concludes with the following remarkable passage […]:—[…] “It however is a consolation that this lunette is the first external work that has been taken by so powerful an enemy, after the trenches had been opened 16 days.” Dutch consolation, indeed! There was no other external work to be taken, and it was taken, as the French official report states, with 3 killed and 30 wounded. If such consolation be satisfactory, it is to be supposed that the Dutch King and people will not prove inconsolable when the citadel and General Chassé shall next week be taken also.
2-: From A Dictionary of Modern Slang, Cant, and Vulgar Words: Used at the Present Day in the Streets of London; the Universities of Oxford and Cambridge; the Houses of Parliament; the Dens of St. Giles; and the Palaces of St. James (London: John Camden Hotten, 1859) [page 35]:
DUTCH CONSOLATION, “thank God it is no worse.”
3-: From The Sailor’s Word-Book: An Alphabetical Digest of Nautical Terms (London: Blackie and Son, 1867), by the Royal-Navy officer William Henry Smyth (1788-1865) [page 269]:
DUTCH CONSOLATION. “Whatever ill befalls you, there’s somebody that’s worse;” or “It’s very unfortunate; but thank God it’s no worse.”
4-: From A Naval Encyclopædia: Comprising a Dictionary of Nautical Words and Phrases; Biographical Notices, and Records of Naval Officers (Philadelphia: L. R. Hamersly & Co., 1881) [page 233, column 1]:
DUTCH CONSOLATION. Negative consolation.
DUTCH COURAGE. The excitement inspired by drinking spirits; false energy.
5-: From Origin of Popular Phrases, by ‘Johannes Factotum’, published in the St. Louis Globe-Democrat (St. Louis, Missouri, USA) of Sunday 7th December 1884 [page 18, column 5]:
Dutch Consolation.—“Thank God it is no worse.” Where this saying came from it is difficult to tell. It belongs to the vocabulary of slang for which there seems to be no traceable origin. The following illustrates the kind of comfort to be derived from the “Dutch” system: “It might have been worse,” said a man whom the devil was carrying to hell. “How?” asked a neighbor. “Well, he’s carrying me—he might have made me carry him,” was the reply.
6-: From Some Slang Phrases, published in All the Year Round. A Weekly Journal. Conducted by Charles Dickens (London, England) of Saturday 9th June 1888 [page 542, column 2]:
The adjective “Dutch,” by what seems a somewhat curious caprice of popular taste, is used in a variety of common phrases, to denote something inferior, or to some extent contemptible. A “Dutch concert” is one wherein each man sings his own song, or each performer plays his own tune, at the same time that his comrades sing or play theirs. […] “Dutch courage,” perhaps, refers in part to the “Hollands” which so often inspired the pot-valour so characterised; but it is also, no doubt, like other of these phrases, a witness to the long-standing hatred and enmity between the English and the Dutch. […] Fielding, in “Tom Jones,” speaks of “Dutch defence,” in the sense of sham defence. “Dutch,” or “Double Dutch,” is often used as a synonym for gibberish, especially nowadays with reference to the prattle of young children. “Dutch feast” is a phrase now obsolete; it was formerly applied to an entertainment where the host got drunk before his guests. “Dutch auctions” are well known.
[…]
A writer in the “East Anglian” of 1869, in a list of sea words and phrases in use on the Suffolk coast, has the following: “There were the squires on the bench, but I took heart, and talked to ’em like a Dutch uncle.” The use of this not very intelligible phrase is by no means confined to the Suffolk coast. The expression often heard, “Thank Heaven it is no worse,” is sometimes called “Dutch consolation.”