The History Behind The Rise and Fall of the Dutch East India Company

Discover the Dutch East India Company's rise from local trading to global domination in this story of the world's richest company.

Nov 16, 2022 - 07:26
Apr 24, 2023 - 13:36
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The History Behind The Rise and Fall of the Dutch East India Company

Key Takeaways:

  • The Dutch declared independence from Spain in 1568 and relied heavily on sea merchants for trade.
  • The Dutch primarily acted as intermediaries in the spice trade until Portugal merged with Spain in 1580, leaving the Dutch to trade independently.
  • The Dutch formed the United East India Company (VOC) in 1602, which became a publicly traded company and monopolized the spice trade, leading to immense wealth and the growth of the Dutch colonial empire.
  • The VOC established headquarters in Batavia and expanded operations across the world.
  • The VOC eventually dissolved in 1799 due to financial troubles and scandals.

According to a report by Netherlands Insider, as of 2020, the Netherlands holds the ninth position in the list of wealthiest countries in the world. Its GDP per capita is recorded at 52,304 USD, surpassing its neighboring countries. Despite its small land area of 41,543 sq. km, the Netherlands was once a dominant global power due to factors such as its numerous swamps. The Dutch East India Company played a significant role in this period of Dutch power and prosperity. The company, also known as the United East India Company or VOC, has received numerous accolades, including being recognized as the Memory of the World by the United Nations in 2003. The VOC holds the distinction of being the first publicly traded and multinational company in the world.

The Dutch East India Company, also known as VOC, was once valued at 78 million Dutch guilders, which, when converted to today's currency, is equivalent to 7.9 trillion USD. This staggering valuation highlights the immense wealth and power held by the company, surpassing the total value of the 20 wealthiest companies in the world today. This article delves into the fascinating history behind the creation of the VOC and explores how and why it was able to exert its dominance over the world for nearly two centuries.

The History of Dutch East India Company

In 1568, Spain ruled over the Netherlands. However, due to issues such as religious discrimination, cultural differences, and excessive taxation, the Netherlands declared its independence from Spain, leading to the start of the "80 Years War." As with any war, it came at a great cost. The Netherlands, being a lowland coastal region, relied heavily on its fishermen and sea merchants to bear the majority of the financial burden

Historically, the Portuguese were the first Europeans to engage in the lucrative spice trade with the Indian subcontinent. The Dutch, on the other hand, primarily operated as intermediaries and distributors in this trade.

Wait! Let’s take a breath.

Have you ever wondered why people from Spain are known as Spanish, people from France are known as French, and people from Britain are known as British, but people from the Netherlands are referred to as Dutch instead of Netherish or Netherlandish?

Let’s know the answer first.

If there is something unexpected or peculiar on a map or elsewhere, it is likely the result of British involvement. This appears to hold true in the case of the Netherlands and the Dutch. The Dutch language and German language both originate from the Germanic language family. Interestingly, Germans refer to their country as "Deutschland." Due to the similarities between the two languages, the British referred to the inhabitants of the region as "Dutch," which is derived from the German term "Deutschland."

From the very beginning, the British often referred to both the Dutch people living in the Netherlands and Germany as "Dutch." However, as time passed, the German nation developed a unique identity that distinguished them from the Dutch. Meanwhile, the people of the Netherlands continued to be known as Dutch.

Well, let’s not go to the off-topic.

I was discussing about the Dutch who are working as distributors. the Portuguese were the first to trade in spices and fabrics from the Indian subcontinent and surrounding regions, which were then purchased by the Dutch from Lisbon and distributed throughout Europe. This process played a vital role in the functioning of the Dutch economy.

But in 1580, after a Personal Union, the Portuguese Crown merged with the Spanish Crown, and the Dutch business in Lisbon was closed. The Portuguese joined the Spanish in their war, and the Dutch were left with no choice but to trade independently in the Indian subcontinent and other Spice islands. The Dutch Republic saw this as not only a trade opportunity but also as a tactic to occupy the Spanish and Portuguese Oversea Territories.

Meanwhile, in 1584, the Spanish, the main adversary of the Dutch, were involved in a war with the British. During this time, many Dutch merchants, including Jan Huyghen van Linschoten and Cornelis de Houtman, discovered the Portuguese's secret route to the spice trade.

In 1595, the first Dutch fleet sailed to the Indian subcontinent led by Fedrick de Houtman. They arrived at Banten and Bali Island in Indonesia, where they clashed with the Portuguese, causing some damage in Banten, but managed to obtain enough pepper and other spices from Bali to cover the cost of their journey. Following this successful venture, many Dutch merchants continued to operate in the region. However, most of these merchants had to finance their own expeditions, leading to intense competition among them.

Formation of United East India Company or VOC

The Dutch Republic formed the United East India Company, also known as VOC, in 1602 with the aim of eliminating competition and maximizing profits. The company brought together numerous separate Dutch merchants and companies to run their expeditions together, with the exclusive right to trade on this route. VOC was also permitted to build forts, recruit their own army, and even enter into agreements with local rulers to further their business interests.

After a few years the VOC eventually recognized that in order to expand their presence in these new territories and maintain a constant flow of expeditions, they would require a significant amount of capital. In response, they established a trading house in Amsterdam and offered paper shares of the company to all Dutch citizens. Although this concept may be familiar to us now through the Stock Market, it was a revolutionary idea at the time.

 This is how VOC became one of the earliest examples of a publicly traded company in the world, paving the way for the development of modern stock markets.

Many affluent individuals from the Netherlands and various parts of Europe purchased shares in the company. For a long time, Europeans were aware that merchants reaped substantial profits from the spice trade in the East Indies. However, only a few had the opportunity to participate in this lucrative enterprise. VOC provided them with the opportunity to partake in these profits without undertaking the journey. With this considerable capital, VOC became more influential and started to annex Portuguese territories in other areas of the East, such as the Indian subcontinent.

The VOC established its headquarters in Jakarta, which was then known as Batavia. From here, they controlled the spice trade in the entire region, but they didn't limit themselves to spices. They began trading in other goods such as cloth from the Indian subcontinent, silver from Japan, and silk from China, all of which were in short supply in Europe. By monopolizing these trades, the VOC became incredibly wealthy, and their workforce grew to around 70,000 employees. Such a large number of employees was unheard of at that time, and it's still impressive even by today's standards. It was unbelievable at that time.

As a result, their investors continued to grow and at the same time the Netherlands became richer. This led to the creation of the Dutch colonial empire in 1648, after winning the 80-year war with Spain. The VOC also expanded their operations across the world, sending out numerous expeditions. During one such expedition, the company officers discovered a new continent, which they named after two provinces of the Netherlands: New Holland and New Zealand. Although New Holland was later renamed Australia, the name New Zealand remains unchanged to this day.

Dark Side of Dutch East India Company

The VOC's success story is often viewed as one of the greatest achievements in the history of commerce. However, like many organizations of the era, it had a significant dark side.

I said at the beginning that the Dutch Republic gave VOC a monopoly for 21 years, which was later extended further. However, VOC's operations had a dark side, which is often overlooked. In addition to the spice trade, the company was allowed to engage in slave trading and colonization. According to some sources, VOC was involved in the sale of over 50,000 Africans as slaves or taken as laborers to work in various Dutch colonies worldwide.

Apart from this, there are numerous examples of exploitation in the colonies & mistreatment of their own employees in various ways. One of the most notorious incidents was the Batavia massacre of 1740, where the company’s troops killed about 10,000 ethnic Chinese. It was also quite common at that time for them to use torture as a means of demonstrating their power in any area. However, no persecution can last forever, and no ruler can oppress people indefinitely.

End of  Dutch East India company or VOC 

Following 1750, the British East India Company emerged as a new colonial power and its influence continued to expand in the Indian subcontinent. The Dutch frequently engaged in wars with the British to increase their influence in these regions, and the VOC was supported with considerable funds from the Dutch Republic. However, in the "Fourth Anglo-Dutch War" of 1780, the VOC suffered a crushing defeat at the hands of the East India Company.

This defeat proved disastrous for the VOC and the Netherlands, causing a major economic crisis. This led to widespread loss of faith in William 5th, who was the head of the Dutch Republic at that time. The French Revolution of 1789 also had a significant impact on the situation.

In the year 1795, the Batavian Revolution resulted in the overthrow of the Dutch stadtholder, William. Soon after, the French took direct control of the Netherlands, leading to political instability in the region. In the midst of this chaos, the United East India Company announced bankruptcy in 1799, marking the end of the journey of the world's richest company.

Even though the primary headquarters of the Dutch VOC company was situated in present-day Indonesia, their impact was much more significant in the Indian subcontinent and specifically in Bengal during that period.

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Sakib I am Sajedul Islam Sakib from Bangladesh. Currently, I am a student at AIUB studying computer science but I also like reading and learning new things, especially about Blogging and Education.