Dutch East India Company was a Dutch corporation that dealt with exploration, trade, and colonization during the period of the 17th and 18th centuries. It was initially created as a chartered business in 1602 during the period when the Dutch people had dominated and monopolized the spice trade around the globe. The company is regarded to have been the first multinational firm due to its successful establishment of centers of operation in different states across the world.
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The company was viewed as very powerful in the aspect that it was able to wage wars, negotiate treaties, prosecute convicted criminals, and/or establish stable colonies. However, the company collapsed at the beginning of the 19th century mainly due to issues of bankruptcy while the Dutch Batavian Republic government, as it was then called, acquired its assets. After its acquisition, territories belonging to the Dutch East India were expanded during the nineteenth century to form the Republic of Indonesia. Therefore, as the paper confirms, the Dutch East India Company grew into a large colonial power in its time, even though it was built upon being a chartered company under the support of the Dutch government.
History Dutch East India Company became a Colonial Power from a Chartered Company
Creation of the Chartered Company
During the sixteenth century, the growth of the spice trade was skyrocketing with its growth spreading across Europe. Yet, the Portuguese people were the dominant drivers of the trade. However, during the final part of the sixteenth century, the Portuguese began to face unprecedented trouble in their supply chain that failed to meet the demand for spices in Spain. The backdrop, together with the alliance between the Portuguese and Spanish, aggravated the Dutch to penetrate the business of spices since the Dutch democracy was already fighting with Spain.
After sending numerous trading vessels to the Spice Islands, now Indonesia, in 1598, the Dutch government was involved in sponsoring the formation of the United West Indies Company in 1602. This move was mainly motivated by the need to stabilize the profits accrued by the government from the spice trade and desire to monopolize the entire trade through a monopoly charter that provided a foundation for the company to become the first and greatest multinational corporation in the world.
Growth from Chartered Company to a Colonial Power
The year that followed its formation, the company established its first permanent trading post in its Banten colony, West Java, Indonesia. This accomplishment was later followed by a series of new settlements set up mostly during the early period of the 17th century with its main headquarters located in the Ambon colony, Indonesia. However, for six years, starting from 1611, the corporation encountered relentless opposition in the spice production mainly from the then English East India Corporation. This situation forced the two companies to form a partnership that lasted until 1623 when the East India Company moved its trading posts to other parts of Asia after the Amboyna massacre.
Also, during the same period, the Dutch East India Company was involved in further colonization of other islands in Indonesia such as the Malay Peninsula, Java, the Spice Islands, Borneo, Sumatra, and India. Due to its military and technological capabilities, the company was able to win sovereign rights of its colonized states. The company’s solid colonial rule in Indonesia and other colonial states was cemented by the establishments of Dutch nutmeg and clove plantations mainly grown for export across the Asian region. During the same period, the Dutch East India business, just like most European firms, relied on the available natural resources to purchase spices.
However, to acquire precious metals, the corporation was required to produce an excess in its dealing with the rest of European nations. This move would inspire the company’s Governor-General, Jan Pieterszoon Coen, to coin a plan for creating a trading network within the Asian region to use the proceeds to finance the spice trade in Europe. This situation motivated the expansion of its colonial power to most of the Asian states to attain the status of a solid monopoly in the spice trade.
By the mid-seventeenth century, the company had replaced almost all of the local Asian trading settlements with its fortified settlements. Cape Town was also found during this part of the century. It was selected as an essential stage for the long voyage spanning from Europe to Asia. In the later period of the century, the company had dominated and monopolized the spice trade. By the mid-eighteenth century, the company had employed over 25,000 people. It was operational in 10 Asian states that it had colonized.
Initially, vessels made long trips to and from Asian territories. However, the company later established a trading network that was composed of two layers. The regional network was mainly serviced by smaller vessels that used a variety of ports located throughout the region, including in Persia, Malacca, Siam, Bengal, Formosa, and Malabar. Such vast expansion and growth made the company the richest in the globe, thus providing it with enough resources to set up stabilized colonies around the globe.
The colonial rule by the Dutch West India Company was not without challenges. In 1606, the Spanish and Portuguese exerted offensive military attacks against the company’s troops in its colonial trading posts. These attacks led to the loss of many Dutch vessels and the disablement of most of its naval troops. The attacks also led to the negotiation talks between the Dutch East India Company and Spain. The strategy resulted in the signing of a treaty referred to as the Twelve Years’ Truce. The pact provided the Dutch Company with the freedom of implementing its plans of establishing new trading and colonial posts across the Asian regions provided they (posts) were unoccupied by the Portuguese and the Spanish (Sluiter, 1942).
Factors that led to the Transformation of the Company from a Chartered Business to a Colonial Power
The Dutch Government was the majority stakeholder. Thus, it was the main sponsor for the establishment of the Dutch East India Company back in 1602. The government also provided bonds and soft loans to the company to run its operations on a global scale as a way of facilitating its growth, both as an economic and colonial power (Harris, 2009). Another financial benefit derived from close government relations was a limited liability.
Before, the growth of state-backed corporations, most businesses imposed unlimited liability on investors. This case implied that the investors would face imprisonment or bankruptcy once the company failed to pay its debt. Therefore, unlimited liability provided by the Dutch government allowed the company to thrive through attracting more investors who pumped in their cash to facilitate the growth of the company to a colonial power (Thomson, 2001).
The company was heavily involved with British politicians who also enjoyed proceeds from the business. Moreover, the company was able to obtain the support of the court and the treasury by providing gifts and bribery. Abroad, the company managed to get the support of external leadership through the provision of bribery or military forces. Therefore, the successful rise of the company to become a colonial power was greatly enabled by its ability to recognize the significance of embracing leaders in its areas of interest through providing them with financial gifts. This mechanism was successful because most governments during this period lacked enough resources to sustain their states.
For instance, by obtaining support from the Indian rulers, the company was able to negotiate a memorandum that acknowledged it as the supreme authority while the Indian rulers were under its leadership (Nierstrasz, 2012).
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The Dutch East India Company as the first multinational corporation possessed a great capability and ingenuity in terms of administrative adaptability. This strength allowed the company to grow into a powerful colonial power for nearly two centuries since its inception in the 1600s to its collapse in 1789. Its administrative adaptability was enhanced by its military, technological, and trading capabilities that allowed it to exercise dominance, both as an international corporation and a colonial power. The company’s administration was able to set up trading posts across the Asian region. Such posts acted as colonies in these areas. Moreover, the company’s administrators established settlement firms of nutmeg and clove in colonies such as Indonesia to facilitate its trading activities (Gerstell, 2010).
The company was also structured such that its administrative bridges were both spatial and temporary arrangements. Its temporal administrative structure consisted mainly of power segments that had been formed by the United Dutch Nations back in the 1570s. Moreover, in these temporal structures, governance of the larger United Dutch Nations framework was strongly linked to political positions, hence allowing easy administrative adaption.
Regarding the special administrative organization, the Dutch regions were connected to the imperial nodes located in the East. This link helped to compliment the temporal administrative bond. The complimentary affiliation between temporary and spatial administrative bonds aided in fostering a highly adaptable core administrative network, thus enabling the company to set up stable colonies that survived for decades (Gerstell, 2010).
Establishment of Strong Political and Economic Partnerships
The Dutch East India Company was able to successfully establish strong partnerships in the regions where it had an interest in trade and/or control. However, the company’s main and most important partnership that spearheaded its growth from a chartered corporation to a colonial power was that between it and the powerful Dutch government. The Dutch government allowed the private company to conduct its merchant activities in a manner that was similar to an independent state.
Such freedom facilitated the company to form a global monopoly in the spice trade while at the same time establishing stable colonial states through a globalization strategy. In fact, according to some historians, the autonomy enjoyed by the Dutch East India Company enabled it to grow to a point of having more political and economic power compared to the Dutch government (Gelderblom & Jonker, 2004).
Besides short-term partnerships as seen during the pursuit of the Asian trade, the Dutch East India Company also established long-term partnerships with other large companies such as English companies. Through such partnerships, the company was able to secure capital for ten years for use in facilitating the setting up of colonies in the Asian region. As the trade in West Africa grew, the company was able to negotiate large partnerships that enabled it to run more vessels.
By 1565, the company controlled a fleet of 700 vessels, most of which were owned by partnering companies. In return, the company sold shares to these companies, a common practice in Holland’s economic sector. Such vessels facilitated the diversified movement of the Dutch East India Company to vast regions, thus enabling it to establish stable colonies and/or expand its trade (Gelderblom & Jonker, 2004).
Powerful Military and Technological Advantage
After its grant of the monopoly charter, the Dutch East India Company was reported to have been used by the Dutch government as support during the war with Iberia. By using its military muscle, the company was able to win sovereign rights on islands such as Sumatra, Java, the Spice Islands, Borneo, Malay Peninsula, and India. The Dutch East India Company also possessed superior vessels that ranged from seven hundred to one thousand.
It was equipped for both war and trading activities. According to Sluiter (1942), the company represented a form of naval power in the East that could easily face off and defeat the forces of Manila, the Spanish, and Portuguese combined. As a result, the military officials were forced to pave way for the Dutch intruders into their colonial states. Therefore, military and technological command accorded the Dutch East India Company the ability to negotiate for power through treaties such as the Twelve Years’ Truce that entitled the company to pursue a policy aimed at establishing colonies in areas that were unoccupied by either the Portuguese or the Spanish.
The Dutch East India Company experienced immense growth since its inception due to support by the Dutch government that provided sponsorship and a charter to the business, thus enabling it to rise to become an economic and colonial power. The establishment of the company was both politically and economically motivated. Regarding politics, the creation of the company was motivated by the unification between Spain and Portugal.
During this time, Spain was a political enemy of the Dutch. Hence, the partnership between Portugal and Spain was not well received by the Dutch government since it was seen as a move against the Dutch. Economically, the Dutch saw the collapse of Portuguese dominance in the spice trade as an opportunity to penetrate the market. After the award of a monopoly charter, the company expanded to the Asian market. To facilitate this growth, the company established a series of colonial settlements in the Asian region. Among its colonies were India, Java, Spice Islands, Sumatra, and the Malay Peninsula where it had won full sovereign rights.
However, its main headquarters remained in Ambon, its first colony. Several factors facilitated the company’s growth from a chartered corporation to colonial power. The factors included support by governments, administrative adaptability, and the establishment of strong economic and political partnerships with government and large companies, and the possession of powerful military and technological advantage that enabled the company to conquer states and uncooperative rulers. It established stable colonies that lasted for almost two decades.
Gelderblom, O., & Jonker, J. (2004). Completing a financial revolution: The finance of the Dutch East India trade and the rise of the Amsterdam capital market, 1595–1612. The journal of economic history, 64(03), 641-672.
Gerstell, D. (2010). Administrative adaptability: The Dutch East India Company and its rise to power. Web.
Harris, R. (2009). Law, finance and the first corporations. Abingdon: Routledge-Cavendish.
Nierstrasz, C. (2012). In the Shadow of the Company: The Dutch East India Company and its’ servants in the period of it’s decline 1740-1796 (TANAP monographs on the history of Asian-European interaction). Leiden: Brill.
Sluiter, E. (1942). Dutch Maritime Power and the Colonial Status Quo, 1585-1641. Pacific Historical Review, 11(1), 29-41.
Thomson, J. (2001). Mercenaries, pirates, and sovereigns. Princeton: Princeton University Press.