Dutch East India Company

From Wikipedia, the free encyclopedia

Flag of the Dutch East Indies Company (Amsterdam insignia).

A bond issued by the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins.

The Dutch East India Company (Vereenigde Oost-Indische Compagnie or VOC in Dutch, literally "United East Indian Company") was a trading company, which was established in 1602, when the States-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia. It was the first multinational corporation in the world and the first company to issue stock.[1] It was also arguably, the world's first megacorporation, possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies.[2]

The Dutch East India Company remained an important trading concern for almost two centuries, paying an 18% annual dividend for almost 200 years. In its declining years in the late 18th century it was referred to as Vergaan Onder Corruptie which translates as 'Perished By Corruption'. The VOC became bankrupt and was formally dissolved in 1800,[3] its possessions and the debt being taken over by the government of the Dutch Batavian Republic. The VOC's territories became the Dutch East Indies and were expanded over the course of the 19th century to include the whole of the Indonesian archipelago, and in the twentieth century would form Indonesia.

History

Background

VOC headquarters in Amsterdam

During the 16th century the spice trade was dominated by the Portuguese who used Lisbon as a staple port. Before the Dutch Revolt Antwerp had played an important role as a distribution center in northern Europe, but after 1591 the Portuguese used an international syndicate of the German Fuggers and Welsers, and Spanish and Italian firms that used Hamburg as its northern staple, to distribute their goods, thereby cutting out Dutch merchants. At the same time, the Portuguese trade system was so inefficient that it was unable to supply growing demand, in particular the demand for pepper. The demand for spices was relatively inelastic, and the lagging supply of pepper therefore caused a sharp rise in pepper prices at the time.

Likewise, as Portugal had been "united" with the Spanish crown, with which the Dutch Republic was at war, in 1580, the Portuguese Empire became an appropriate target for military incursions. These three factors formed motive for Dutch merchants to enter the intercontinental spice trade themselves at this time. Finally, a number of Dutchmen like Jan Huyghen van Linschoten and Cornelis de Houtman obtained first hand knowledge of the "secret" Portuguese trade routes and practices, thereby providing opportunity.[4] The stage was thus set for Houtman's first voyage to Banten, the chief port of Java, and back (1595–97), which generated a modest profit.[5]

In 1596, a group of Dutch merchants decided to try again to circumvent the Portuguese monopoly. In 1596, a four-ship expedition led by Cornelis de Houtman was the first Dutch contact with Indonesia.[6] The expedition reached Banten, the main pepper port of West Java, where they clashed with both the Portuguese and indigenous Indonesians. Houtman's expedition then sailed east along the north coast of Java, losing twelve crew to a Javanese attack at Sidayu and killing a local ruler in Madura. Half the crew were lost before the expedition made it back to the Netherlands the following year, but with enough spices to make a considerable profit.[7]

In 1598, an increasing number of new fleets were sent out by competing merchant groups from around the Netherlands. Some fleets were lost, but most were successful, with some voyages producing high profits. In March 1599, a fleet of twenty-two ships under Jacob van Neck of five different companies was the first Dutch fleet to reach the ‘Spice Islands’ of Maluku. The ships returned to Europe in 1599 and 1600 and, although eight ships were lost, the expedition made a 400 percent profit.[7] In 1600, the Dutch joined forces with the local Hituese (near Ambon) in an anti-Portuguese alliance, in return for which the Dutch were given the sole right to purchase spices from Hitu.[8] Dutch control of Ambon was achieved in alliance with Hitu when in February 1605, they prepared to attack a Portuguese fort in Ambon but the Portuguese surrendered. In 1613, the Dutch expelled the Portuguese from their Solor fort, but a subsequent Portuguese attack led to a second change of hands; following this second reoccupation, the Dutch once again captured Solor, in 1636.[8]

Formation

At the time, it was customary for a company to be set up only for the duration of a single voyage, and to be liquidated right after the return of the fleet. Investment in these expeditions was a very high-risk venture, not only because of the usual dangers of piracy, disease and shipwreck, but also because the interplay of inelastic demand and relatively elastic supply[9] of spices could make prices tumble at just the wrong moment, thereby ruining prospects of profitability. To manage such risk the forming of a cartel to control supply would seem logical. This first occurred to the English, who bundled their forces into a monopoly enterprise, the East India Company in 1600, thereby threatening their Dutch competitors with ruin. In 1602, the Dutch government followed suit, sponsoring the creation of a single "United East Indies Company" that was also granted a monopoly over the Asian trade. The charter of the new company empowered it to build forts, maintain armies, and conclude treaties with Asian rulers. It provided for a venture that would continue for 21 years, with a financial accounting only at the end of each decade.[10]

Dutch Batavia in the 17th Century, built in what is now North Jakarta

In 1603, the first permanent Dutch trading post in Indonesia was established in Banten, West Java and in 1611, another was established at Jayakarta (later 'Batavia' and then 'Jakarta').[11] In 1610, the VOC established the post of Governor General to enable firmer control of their affairs in Asia. To advise and control the risk of despotic Governors General, a Council of the Indies (Raad van Indië) was created. The Governor General effectively became the main administrator of the VOC's activities in Asia, although the Heeren XVII continued to officially have overall control.[8]

VOC headquarters were in Ambon for the tenures of the first three Governors General (1610-1619), but it was not a satisfactory location. Although it was at the centre of the spice production areas, it was far from the Asian trade routes and other VOC areas of activity ranging from Africa to Japan. A location in the west of the archipelago was thus sought; the Straits of Malacca were strategic, but had become dangerous following the Portuguese conquest and the first permanent VOC settlement in Banten was controlled by a powerful local ruler and subject to stiff competition from Chinese and English traders.[8]

In 1604, a second British East India Company voyage commanded by Sir Henry Middleton reached the islands of Ternate, Tidore, Ambon and Banda; in Banda, they encountered severe VOC hostility, which saw the beginning of Anglo-Dutch competition for access to spices.[11] From 1611 to 1617, the English established trading posts at Sukadana (southwest Kalimantan), Makassar, Jayakarta and Jepara in Java, and Aceh, Pariaman and Jambi in Sumatra which threatened Dutch ambitions for a monopoly on East Indies trade.[11] Diplomatic agreements in Europe in 1620 ushered in a period of cooperation between the Dutch and the English over the spice trade.[11] This ended with a notorious, but disputed incident, known as the 'Amboyna massacre', where ten Englishmen were arrested, tried and beheaded for conspiracy against the Dutch government.[12] Although this caused outrage in Europe and a diplomatic crisis, the English quietly withdrew from most of their Indonesian activities (except trading in Bantam) and focused on other Asian interests.

Growth

In 1619, Jan Pieterszoon Coen was appointed Governor-General of the VOC. He was a man of extraordinary vision, far beyond that of the cautious directors at home. He saw the possibility of the VOC becoming an Asian power, both political and economic. He was not afraid to use brute force to put the VOC on a firm footing. On 30 May 1619, Coen, backed by a force of nineteen ships, stormed Jayakarta driving out the Banten forces, and from the ashes, established Batavia as the VOC headquarters. To establish a monopoly for the clove trade, in the 1620s almost the entire native population of the Banda Islands, the source of nutmeg was deported, driven away, starved to death, or killed in an attempt to replace them with Dutch plantations, operated with slave labour. He hoped to settle large numbers of Dutch colonists in the East Indies, but this part of his policies never materialized, because the Heren XVII were wary at the time of large, open-ended financial commitments.[13]

Another of Coen's ventures was more successful. A major problem in the European trade with Asia at the time was that the Europeans could offer few goods that Asian consumers wanted, except silver and gold. European traders therefore had to pay for spices with precious specie, and this was in short supply in Europe, except for Spain and Portugal. The Dutch and English had to obtain it by creating a trade surplus with other European countries. Coen discovered the obvious solution for the problem: to start an intra-Asiatic trade system, whose profits could be used to finance the spice trade with Europe. In the long run this obviated the need for exports of precious metals from Europe, though at first it required the formation of a large trading-capital fund in the Indies. The VOC reinvested a large share of its profits to this end in the period up to 1630.[14] The VOC traded throughout Asia. Ships coming into Batavia from the Netherlands carried supplies for VOC settlements in Asia. Silver and copper from Japan were used to trade with India and China for silk, cotton, porcelain, and textiles. These products were either traded within Asia for the coveted spices or brought back to Europe. The VOC was also instrumental in introducing European ideas and technology to Asia. The Company supported Christian missionaries and traded modern technology with China and Japan. A more peaceful VOC trade post on Dejima, an artificial island off the coast of Nagasaki, was for more than two hundred years the only place where Europeans were permitted to trade with Japan.[15]