Dutch East India Company

• 1. Introduction

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  The Dutch East India Company, known by its initials VOC, sent about one million seamen and craftsmen out of Holland between 1602 and 1795. Only 340,000 of them returned. The historian J.L. van Zanden wrote that the company "consumed" approximately 4,000 people per year. Shipwrecks took some. Scurvy and dysentery took others, and so did clashes with rival trading companies and pirates.

  Those odds make the company's appeal hard to explain. Yet it kept finding recruits, and it kept finding investors too. For almost two hundred years it paid annual dividends that averaged about 18% of its capital.

  This documentary asks how a trading firm from a small republic came to hold the powers of a state. It asks how that firm arranged its money, ships and shareholders in ways that still look modern. And it asks why a company that dominated Asian trade ended in bankruptcy, and why people still argue about what it left behind.

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• 2. Spices and Rivals

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  In 1595, an expedition of four Dutch ships reached Banten, the main pepper port of West Java. The crew soon clashed with Portuguese and with Javanese. Sailing east along Java's north coast, the expedition lost twelve crew members to an attack at Sidayu and killed a local ruler in Madura. Half the crew were dead by the time the ships returned to the Netherlands in 1596. They still carried enough spices to turn a considerable profit.

  Before the Dutch Revolt began in 1566/68, the Brabant city of Antwerp had served as a distribution centre for northern Europe. After 1591, the Portuguese sent their goods through an international syndicate instead. It included the German Fugger and Welser families, along with Spanish and Italian firms, and it operated out of Hamburg. Dutch merchants were cut out of the trade.

  In 1580, the Portuguese crown had been joined to the Spanish crown in what is known as the Iberian Union. The Dutch Republic was at war with Spain, so the Portuguese Empire became a fair target. Merchants and explorers such as Jan Huyghen van Linschoten and Cornelis de Houtman had also learned the "secret" Portuguese routes and practices firsthand. Portugal's system had a weakness as well. It could not raise supply fast enough to meet growing demand, especially for pepper. Demand for spices barely shifts with price, so every lag in supply sent pepper prices sharply upward.

  From 1598, competing merchant groups across the Netherlands sent out more and more fleets. Some were lost, but most succeeded, and a few voyages made large profits. That year, a fleet of eight ships under Jacob van Neck became the first Dutch fleet to reach the Spice Islands of Maluku, also called the Moluccas. By going straight there, it cut out the Javanese middlemen. The ships came home in 1599 and 1600, and the expedition made a 400% profit.

  In 1600, the Dutch allied with the Muslim Hituese on Ambon Island against the Portuguese. In return, they received the sole right to buy spices from Hitu. When the Portuguese surrendered their fort on Ambon, the alliance controlled the island. The fort at Solor changed hands repeatedly. The Dutch expelled the Portuguese in 1613, lost it to a counterattack, and captured it again in 1636. East of Solor, on the island of Timor, the advance stopped. A powerful, autonomous group of Portuguese Eurasians called the Topasses held the sandalwood trade and resisted throughout the 17th and 18th centuries.

  Meanwhile, in 1600, the English had done something the Dutch merchants could not ignore. They bundled their resources into a single monopoly enterprise, the English East India Company. That threatened their Dutch competitors with ruin.

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• 3. A Corporation Before Its Time

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  On the 20th of March 1602, the States General of the Netherlands merged the existing Dutch companies into one and gave it a 21-year monopoly on trade in Asia. Until then, it had been customary to fund a company for a single voyage and liquidate it when the fleet came home. Each voyage was a gamble on piracy, disease and shipwreck. It was also a gamble on spice prices, which could collapse.

  The new company began with a capital of 6,440,200 guilders. Its charter empowered it to build forts, maintain armies and conclude treaties with Asian rulers. It could also wage war, imprison and execute convicts, strike its own coins and found colonies. The venture was to run for 21 years, with a financial accounting only at the end of each decade. Because it traded across many colonies and countries, the VOC is sometimes called the world's first multinational corporation.

  The minimum investment was 3,000 guilders, a sum within reach of many merchants. Among the 1,143 people who subscribed, 39 were Germans and 301 came from the Southern Netherlands, then under Habsburg rule. Isaac le Maire was the largest subscriber, with 85,000 guilders.

  Shares could be bought and sold in open-air secondary markets, and one of these grew into the Amsterdam Stock Exchange. The capital stayed fixed for the life of the company. An investor who wanted out had to sell to somebody else. In 1688, the Sephardi Jew Joseph de la Vega wrote a dialogue, Confusion of Confusions, that analysed how this exchange worked.

  There were two kinds of shareholder. The participanten were non-managing members, while 76 bewindhebbers, later reduced to 60, acted as managing directors. The innovation was that the bewindhebbers, who normally carried unlimited liability, now risked only the capital they had paid in. That made the VOC a limited liability company.

  Six chambers in port cities did the practical work: Amsterdam, Delft, Rotterdam, Enkhuizen, Middelburg and Hoorn. They built their own ships and warehouses and traded the merchandise. Delegates from the chambers sat together as the Heeren XVII, the Lords Seventeen. Amsterdam sent eight, Zeeland four, and each smaller chamber one. The seventeenth seat went alternately to Middelburg-Zeeland or rotated among the five small chambers. Amsterdam was one seat short of a majority, yet it held the decisive voice. The Zeelanders had misgivings from the start, and in practice Amsterdam stipulated what happened.

  The Lords Seventeen met for six years in Amsterdam, then for two years in Middelburg-Zeeland. They sent each ship's master off with detailed instructions on the route, prevailing winds, currents, shoals and landmarks. The company even produced its own charts.

  Isaac le Maire soon learned that a large stake did not bring greater voting power. He had undertaken 14 expeditions on his own account instead of the company's. In 1605, the other governors ousted him on charges of embezzlement and made him sign an agreement not to compete with the VOC. He kept his shares, and on the 24th of January 1609 he filed a petition against the company. It is celebrated as the first recorded expression of shareholder activism. Le Maire charged that the directors sought to "retain another's money for longer or use it ways other than the latter wishes". He asked for the company to be liquidated, as standard business practice allowed. He is also known as history's first recorded short seller.

  In 1622 came what is described as history's first recorded shareholder revolt. Investors complained that the account books had been "smeared with bacon" so that they might be "eaten by dogs." They distributed pamphlets about management self-enrichment and secrecy. Their demand was a "reeckeninge", a proper financial audit.

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• 4. The Asian Web

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  The VOC's 4,785 ships brought home more than 2.5 million tonnes of Asian trade goods and slaves between 1602 and 1796. The rest of Europe combined sent 882,412 people over the longer span from 1500 to 1795, fewer than the VOC alone. The English East India Company, its nearest competitor, ran 2,690 ships and carried one-fifth the tonnage.

  On the 30th of May 1619, Jan Pieterszoon Coen, backed by nineteen ships, stormed Jayakarta and drove out the forces of Banten. From the ashes he built Batavia, which became the VOC headquarters and is now Jakarta. The post of governor-general had been created in 1610, with a Council of the Indies to guard against despotic holders of the office. The first three governors-general, serving from 1610 to 1619, had worked from Ambon. It sat at the centre of spice production but far from Asian trade routes and from VOC activity stretching from Africa to India to Japan. The Straits of Malacca had turned dangerous after the Portuguese conquest. The first permanent VOC settlement in Banten was controlled by a powerful local ruler and faced stiff competition from Chinese and English traders.

  Coen saw the possibility of the VOC becoming an Asian power, both political and economic. He hoped to settle large numbers of Dutch colonists in the East Indies. That policy never materialised, mainly because very few Dutch were willing to emigrate to Asia.

  Another of his ventures worked better. Europeans had little to offer Asian consumers except silver and gold, and those metals were scarce in Europe outside Spain and Portugal. Coen's answer was an intra-Asiatic trade system, whose profits could pay for the spice trade with Europe. At first it required a large trading-capital fund in the Indies, and the VOC reinvested much of its profit to build one until 1630. Silver and copper from Japan bought silk, cotton, porcelain and textiles from Mughal India and Qing China. These goods were traded within Asia for the coveted spices or brought back to Europe, and Bengal was the main source of benefit.

  For a time in the 17th century, the company controlled the trade in nutmeg, mace and cloves. It sold them across European kingdoms and in Emperor Akbar the Great's Mughal Empire at 14 to 17 times the price it paid in Indonesia.

  In 1604, a second English East India Company voyage under Sir Henry Middleton reached Ternate, Tidore, Ambon and Banda. At Banda it met severe VOC hostility. From 1611 to 1617, the English set up trading posts at Sukadana, Makassar, Jayakarta and Jepara, and at Aceh, Pariaman and Jambi. Then diplomatic agreements in Europe in 1620 opened a period of collaboration. It ended with the notorious Amboyna massacre in 1623. On Ambon, VOC officials arrested, tortured and executed ten English East India Company employees, along with Japanese and Portuguese auxiliaries, for an alleged conspiracy. Europe was outraged, and a diplomatic crisis followed. The English quietly withdrew from most of their Indonesian activities, except trading in Banten.

  In 1640, the VOC took the port of Galle in Ceylon from the Portuguese and broke their monopoly of the cinnamon trade. In 1658, Gerard Pietersz Hulft laid siege to Colombo, which fell with the help of King Rajasinghe II of Kandy. By 1659 the Portuguese were expelled from the coastal regions, and the VOC held the cinnamon monopoly. To keep the Portuguese or the English from ever returning, it conquered the entire Malabar Coast and almost entirely drove the Portuguese from India's west coast. In 1663, it signed the Painan Treaty with local lords in revolt against the Aceh Sultanate. The treaty let the VOC build a trading post and eventually monopolise trade there, especially in gold.

  On Dejima, an artificial island off the coast of Nagasaki, the VOC ran a more peaceful trade post. For more than two hundred years it was the only place where Europeans were permitted to trade with Japan. The company also supported Christian missionaries and traded modern technology with China and Japan.

  Force fared worse against some Asian powers. When the VOC tried to compel Ming dynasty China to open to Dutch trade, the Chinese won a war over the Penghu islands from 1623 to 1624. The company had to abandon Penghu for Taiwan. The Chinese defeated it again at the Battle of Liaoluo Bay in 1633. In 1643, the Vietnamese Nguyen lords beat the VOC in a battle during the Trịnh-Nguyễn War and blew up a Dutch ship. The Cambodians defeated the company on the Mekong River in the Cambodian-Dutch War of 1643-1644.

  By 1669, the VOC was the richest private company the world had ever seen. It had over 150 merchant ships, 40 warships, 50,000 employees and a private army of 10,000 soldiers. It paid a dividend of 40% on the original investment.

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• 5. Profitless Growth

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  In 1661, the Ming general Koxinga led a fleet against the Dutch on Taiwan. After his loyalists defeated Dutch reinforcements from Java in 1662, the Dutch commander Frederick Coyett surrendered the island. The loss, together with turmoil in China as the Qing dynasty replaced the Ming, ended the silk trade after 1666. The VOC substituted silk from Mughal Bengal. But the Japanese shogunate enacted measures to limit exports of silver and gold, which worsened the terms of trade. By 1685, Japan no longer anchored the company's intra-Asiatic trade.

  Around 1670, a second blow came from the Third Anglo-Dutch War, which temporarily cut VOC trade with Europe. Pepper prices spiked, and from 1672 the English East India Company moved into the pepper market aggressively. The VOC's usual policy was to slightly oversupply pepper, keeping prices too low to tempt interlopers. A fierce price war followed as the English company flooded the market with supplies from India. The VOC had far larger financial resources and could wait it out. By 1683 the English company was close to bankruptcy. Its share price had fallen from 600 to 250, and its president Josiah Child was temporarily forced from office.

  Still, the writing was on the wall. The French and Danish East India Companies were making inroads on the Dutch system. By a treaty of 1684 with the Sultan, the VOC closed the flourishing open pepper emporium of Bantam. On the Coromandel Coast it moved its chief stronghold from Pulicat to Nagapattinam, to secure the pepper monopoly against the French and Danes. But the traditional commodities mattered less each year. The military outlays needed to protect the monopoly outran the profits of a shrinking trade.

  In 1710, the Zamorin of Calicut was forced to sign a treaty promising to trade only with the VOC and expel other European traders. In 1715, with English encouragement, he renounced it. A Dutch army suppressed the insurrection for a time, yet the Zamorin kept trading with the English and French, and their traffic rose appreciably. In 1721, the VOC decided that dominating the Malabar pepper and spice trade was no longer worth the trouble. It scaled down its military presence and in effect yielded the area to English influence.

  The early 1680s brought a quieter shift. The company reluctantly followed its European competitors into tea, coffee, cotton, textiles and sugar. These goods earned lower margins, so they needed larger volumes to produce the same revenue. The temporary collapse of the English company around 1683 offered the opening. Two structural changes lay behind the move. European tastes for Asian textiles, coffee and tea changed revolutionarily around the turn of the 18th century, and a new era of abundant capital at low interest rates began. Between the 1680s and 1720s, the company expanded its fleet and roughly doubled in size.

  The tonnage of returning ships rose by 125% in that period, but revenue from goods sold in Europe rose by only 78%. The company now sold into markets with elastic demand, where it competed on equal terms with other suppliers. The business information systems of the time made this hard for managers to see. Its directors were by then almost all recruited from the political regent class, which had long since lost its close ties to merchant circles.

  Much of the company's cost was fixed, because it covered military establishments and the maintenance of the fleet. Larger ships carried the growing volume of goods, but labour productivity did not rise enough to produce economies of scale. Overhead grew in step with trade volume, so falling margins fed straight into falling returns. One analysis calls the era of expansion "profitless growth". From 1630 to 1670, the so-called Golden Age, long-term average annual profit was 2.1 million guilders, just under half of it paid out as dividends. In the Expansion Age of 1680-1730, it was 2.0 million guilders, with three-quarters paid out. Profit fell from 18% of revenues to 10%, and the annual return on invested capital fell from about 6% to 3.4%.

  Investors, though, saw little to worry about. The share price hovered around 400 from the mid-1680s, with a hiccup around the Glorious Revolution in 1688. It reached an all-time high of about 642 in the 1720s. Shares then yielded 3.5%, only slightly less than Dutch government bonds.

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• 6. Decline and Dissolution

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  After 1730, the VOC's fortunes turned downward, and historians point to five factors behind the decay of the next fifty years. The first was a steady erosion of intra-Asiatic trade, driven by political and economic shifts the company could do little about. These squeezed it out of Persia, Suratte, the Malabar Coast and Bengal. It was left with the belt it physically controlled, running from Ceylon through the Indonesian archipelago.

  The second was the way the company was organised around Batavia. Centralising everything on one hub had helped it gather market information early on. In the 18th century, shipping everything to that point first became a handicap. The tea trade felt it most, because competitors such as the English company and the Ostend Company shipped directly from China to Europe.

  The third was what contemporaries called venality, meaning corruption and neglect of duty. It seems to have plagued the VOC on a larger scale than its competitors. Salaries were low, and private-account trading was officially forbidden, yet it spread through the 18th century. From about the 1790s, the Dutch phrase vergaan onder corruptie, "perished under corruption", also abbreviated VOC, came to sum up the company's future. The fourth, a burden shared with other companies, was sickness among employees, which weakened many of the survivors.

  The fifth was the dividend policy. Between 1700 and 1740, the company retired 5.4 million guilders of long-term debt, so it stood on a secure footing. After 1730, profits plummeted while the bewindhebbers cut dividends only slightly. Dividends exceeded earnings in every decade but one, 1760-1770. To pay them, the Asian capital stock was drawn down by 4 million guilders between 1730 and 1780. Liquid capital in Europe fell by 20 million guilders over the same years. The directors turned to short-term anticipatory loans, backed by the expected revenues of homebound fleets.

  In the 1741 Battle of Colachel, warriors of Travancore under Raja Marthanda Varma defeated the Dutch and captured Captain Eustachius De Lannoy. Marthanda Varma spared his life on condition that he join his army and train his soldiers on modern lines. This defeat in the Travancore-Dutch War is considered the earliest example of an organised Asian power overcoming European military technology and tactics. It signalled the decline of Dutch power in India.

  Even in 1780, the VOC remained an enormous operation. Its capital in the Republic, made up of ships and goods in inventory, totalled 28 million guilders. Its capital in Asia, the liquid trading fund and goods on their way to Europe, totalled 46 million. Net of debt, the total stood at 62 million. Reform might still have worked. Then the Fourth Anglo-Dutch War broke out in 1780. British attacks cut the fleet by half and badly weakened the company in Asia. The VOC suffered damages of up to 43 million guilders, and loans to keep it running reduced its net assets to zero.

  The Fourth Anglo-Dutch War ended in 1783, and the financial troubles only worsened. The provincial States of Holland and Zeeland tried reorganisation in vain. In 1796, the board of directors was sacked, and management passed to a Committee for Affairs relating to East India Trade and Possessions. The French Revolutionary Wars sealed the outcome. The Dutch Republic fell in 1795 and was replaced by the Batavian Republic, which put the Dutch and the British at war. British attacks on VOC shipping and colonies caused further losses. The charter was renewed several times, then allowed to expire on the 31st of December 1799. The company was nationalised, and its possessions and debt passed to the government of the Batavian Republic.

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• 7. The Cost of Monopoly

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  A document addressed to "Your Honours" put the company's reasoning bluntly. "Your Honours know by experience that trade in Asia must be driven and maintained under the protection and favour of Your Honours' own weapons, and that the weapons must be paid for by the profits from the trade; so that we cannot carry on trade without war nor war without trade."

  As the only buyer of spices, the VOC forced down the prices it paid producers in the Spice Islands, and the local economy was destroyed. The Dutch conquest of the Banda Islands ran from 1609 to 1621, after the islands resisted the nutmeg monopoly. Punitive expeditions nearly destroyed Bandanese society. When the Dutch invaded the main island, Lontor, in 1621, 2,800 Bandanese were killed, mostly from famine, and 1,700 were enslaved. The islands had held an estimated 15,000 people before the conquest. The exact figure is uncertain, but around 14,000 are thought to have been killed, enslaved or driven away. About 1,000 remained, spread through the nutmeg groves as forced labourers. In the 1620s, Dutch plantations were meant to replace the people who were driven away or killed, and they grew nutmeg for export. By 1681 the native population was still about 1,000. The company imported 200 slaves a year to hold the enslaved population at 4,000.

  The methods used to hold the Maluku monopoly included extortion and violent suppression of the native population, including mass murder. VOC representatives sometimes burned spice trees to force growers onto other crops, which artificially cut the supply of nutmeg and cloves. In 1636, VOC forces mounted a punitive expedition against Lamey Island off Taiwan after shipwreck incidents. Most inhabitants were killed or deported, and the island was effectively depopulated.

  From 1720, sugar from Indonesia lost ground to cheap sugar from Brazil, and European markets became saturated. Dozens of Chinese sugar traders in Batavia went bankrupt. Mass unemployment followed, and gangs of unemployed labourers formed. The Dutch government in Batavia did not respond adequately. In 1740, rumours that the gangs would be deported from the Batavia area set off rioting. The military searched Chinese homes for weapons. When one house burnt down by accident, soldiers and impoverished citizens began slaughtering and pillaging the Chinese community. Scholarly estimates of the dead range from about 5,000 to over 10,000. For the first time in its history, the company's board began an official investigation into the colonial government.

  In 1652, Jan van Riebeeck established a resupply outpost at the Cape of Storms, the southwestern tip of Africa. It served company ships travelling to and from East Asia, and the cape was later renamed the Cape of Good Hope in honour of the outpost's presence. Non-company ships could use the station but were charged exorbitantly. The outpost later became the Cape Colony as more Dutch and other Europeans settled. Within two months of its founding, Van Riebeeck concluded that slave labour would be needed for the hardest and dirtiest work. The VOC already had long experience of slavery in the East Indies.

  Enslaving the local Khoikhoi was considered and rejected as both costly and dangerous. Most Khoikhoi had chosen not to work for the Dutch because of low wages and harsh conditions. The European population stayed under 200 for the settlement's first five years, while neighbours numbered more than 20,000. The Dutch also feared that enslaved Khoikhoi could escape into the local community. Attempts to obtain men from the Dutch East Indies and from Mauritius between 1652 and 1657 failed. In 1658, the VOC landed two shiploads of slaves at the Cape. One held more than 200 people from Dahomey, later Benin. The other held almost 200 people, mostly children, captured from a Portuguese slaver off the coast of Angola.

  These were the only slaves ever brought to the Cape from West Africa, apart from a few individuals. After that, slaves arrived regularly through company-sponsored slaving voyages and the return fleets. Until Britain passed the Slave Trade Act 1807, all those imported came from East Africa, Mozambique, Madagascar, and South and Southeast Asia. Large numbers came from Ceylon and the Indonesian archipelago, and prisoners from elsewhere in the VOC's empire were enslaved too. The slave population grew from zero in 1652 to about 1,000 by 1700 and to 16,839 by 1795. It was overwhelmingly male, so it depended on constant new imports, and it outnumbered the European settlers until the first quarter of the 19th century.

  In 1659, a Khoikhoi named Doman, who had worked as a translator for the Dutch and had even travelled to Java, led an armed attempt to expel them from the Cape peninsula. It failed, and warfare dragged on until an inconclusive peace a year later. War broke out again in 1673 and continued until 1677. Superior European weapons and Dutch manipulation of divisions among the local people destroyed Khoikhoi resistance. Khoikhoi society in the western Cape disintegrated. Some people found work as shepherds on European farms, and others moved away. The final blow came in 1713, when a Dutch ship brought smallpox, which was unknown locally. The disease killed 90% of the remaining Khoikhoi population.

  The approximately 3,000 Europeans and slaves at the Cape in 1700 had grown, by the end of the century, to nearly 20,000 Europeans and approximately 25,000 slaves.

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• 8. Legacy and Archive

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  In 2006, Dutch Prime Minister Jan Pieter Balkenende praised the pioneering entrepreneurial spirit and work ethic of the Dutch Golden Age and coined the term "VOC mentality", in Dutch VOC-mentaliteit. For Balkenende, the VOC stood for business acumen, entrepreneurship, an adventurous spirit and decisiveness. A wave of criticism followed, because such a romantic view ignores the associations with colonialism, exploitation and violence. Balkenende later stressed that it had not been his intention to refer to that at all. Even so, the VOC mentality has been considered a key feature of Dutch cultural policy for many years.

  Critics also name the company's overly bureaucratic structure and its environmental destruction, including deforestation. Marsely L. Kahoe, writing in The Journal of Historians of Netherlandish Art, challenged a flattering picture of Batavia. Batavia had a strict social hierarchy. Kahoe wrote: "it is misleading to understand Batavia, as some scholars have, as representing a pragmatic and egalitarian order that was later corrupted by the colonial situation. In fact, the social stratification and segregation of Batavia derived in certain ways directly from its Dutch plan."

  At its height, the VOC had 25,000 employees working in Asia and 11,000 more on their way. Although it was a Dutch company, its workforce included many Germans and people from other countries. It also drew extensively on local Asian labour markets. Asian or Eurasian workers served as sailors, soldiers, writers, carpenters, smiths and unskilled labourers. Many employees intermixed with the indigenous peoples and expanded the population of Indos.

  The company's full Dutch name was Vereenigde Nederlandsche Geoctroyeerde Oostindische Compagnie, literally the United Dutch Chartered East India Company. Its monogram was a large V with an O on the left and a C on the right half. It may have been the first globally recognised corporate logo. It appeared on flags, cannons and coins, with the first letter of the hometown of the operating chamber placed on top. The design is praised for its simplicity, symmetry and timelessness. Since the late 20th century, an Australian vintner has used the logo, having re-registered the company's name for the purpose. English speakers say Dutch East India Company to tell it apart from the British, Danish, French, Portuguese and Swedish East India companies. Nicknames included Jan Company and Jan Compagnie.

  The company's trading posts and colonies filled warehouses with spices, coffee, tea, textiles, porcelain and silk. They also produced shiploads of documents about political, economic, cultural, religious and social conditions across an enormous area. Twenty-five million pages of VOC records survive, held in Jakarta; Colombo, Sri Lanka; Chennai, India; Cape Town, South Africa; and The Hague, the Netherlands. In 2003, UNESCO added the collection to its Memory of the World international register.

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