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The Dutch East India Company

The Dutch East India Company - An Early Global Corporation

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The Dutch East India Company
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The Dutch East India Company, called the Verenigde Oostindische Compagnie or VOC in Dutch, was a company whose main purpose was trade, exploration and colonization throughout the 17th and 18th centuries. It was created in 1602 and lasted until 1800. It is considered to be one of the first and most successful international corporations. At its height the Dutch East India Company established headquarters in many different countries, had a monopoly over the spice trade and it had semi-governmental powers in that it was able to begin wars, prosecute convicts, negotiate treaties and establish colonies.

History and Growth of the Dutch East India Company

During the 16th century the spice trade was growing throughout Europe but it was mostly dominated by the Portuguese. However, by the late 1500s the Portuguese began to have trouble supplying enough spices to meet demand and prices rose. This, combined with the fact that Portugal united with Spain in 1580 motivated the Dutch to enter the spice trade because the Dutch Republic was at war with Spain at that time.

By 1598 the Dutch were sending out numerous trading ships and in March 1599 Jacob van Neck's fleet became the first to reach the Spice Islands (the Moluccas of Indonesia). In 1602 the Dutch government sponsored the creation of the United East Indies Company (known later as the Dutch East India Company) in an effort to stabilize profits in the Dutch spice trade and form a monopoly. At the time of its founding the Dutch East India Company was given the power to build forts, keep armies and make treaties. The charter was to last 21 years.

The first permanent Dutch trading post was established in 1603 in Banten, West Java, Indonesia. Today this area is Batavia, Indonesia. Following this initial settlement, the Dutch East India Company set up several more settlements throughout the early 1600s. Its early headquarters was in Ambon, Indonesia 1610-1619.

From 1611 to 1617 the Dutch East India Company had severe competition in the spice trade from the English East India Company. In 1620 the two companies began a partnership that lasted until 1623 when the Amboyna massacre caused the English East India Company to move their trading posts from Indonesia to other areas in Asia.

Throughout the 1620s the Dutch East India Company further colonized Indonesia's islands and the presence of Dutch plantations growing cloves and nutmeg for export grew across the region. At this time the Dutch East India Company, like other European trading companies, used gold and silver to buy spices. To obtain the metals, the company had to create a trade surplus with other European countries. To get around only getting gold and silver from other European countries, the Governor-General of the Dutch East India Company, Jan Pieterszoon Coen, came up with a plan to create a trading system within Asia and those profits could finance the European spice trade.

Eventually the Dutch East India Company was trading throughout Asia. In 1640 the company expanded its reach to Ceylon. This area was previously dominated by the Portuguese and by 1659 the Dutch East India Company occupied nearly the entire Sri Lankan coast.

In 1652 the Dutch East India Company also established an outpost at the Cape of Good Hope in southern Africa to provide supplies to ships sailing to eastern Asia. Later this outpost became a colony called the Cape Colony. As the Dutch East India Company continued to expand, trading posts were established in places that include Persia, Bengal, Malacca, Siam, Formosa (Taiwan) and Malabar to name a few. According to Wikipedia, by 1669 the Dutch East India Company was the richest company in the world.

Decline of the Dutch East India Company

Despite its achievements in the mid-1600s by 1670 the economic success and growth of the Dutch East India Company began to decline, starting with a decrease in trading with Japan and the loss of the silk trade with China after 1666. In 1672 the Third Anglo-Dutch War disrupted trade with Europe and in the 1680s, other European trading companies began to grow and increase the pressure on the Dutch East India Company. Furthermore, European demand for Asian spices and other goods began to change around the middle of the 18th century.

Around the turn of the 18th century the Dutch East India Company had a short resurgence in power but in 1780 another war broke out with England and the company began to have serious financial troubles. During this time the company survived because of support from the Dutch government (Towards a New Age of Partnership).

Despite its problems the charter of the Dutch East India Company was renewed by the Dutch government until the end of 1798. Later it was again renewed until December 31, 1800. At this time though the powers of the company were greatly reduced and the company began to let go of employees and dismantle headquarters. Gradually it also lost its colonies and eventually the Dutch East India Company disappeared. (Towards a New Age of Partnership)

Organization of the Dutch East India Company

In its heyday the Dutch East India Company had a complex organizational structure. It consisted of two types of shareholders. The two were known as the participanten and the bewindhebbers. The participanten were non-managing partners, while the bewindhebbers were managing partners. These shareholders were important to the success of the Dutch East India Company because their liability in the company consisted only of what was paid into it. In addition to its shareholders the Dutch East India Company's organization also consisted of six chambers in the cities of Amsterdam, Delft, Rotterdam, Enkhuizen, Middleburg and Hoorn. Each of the chambers had delegates that were chosen from the bewindhebbers and the chambers raised the beginning funds for the company.

Importance of the Dutch East India Company Today

The organization of the Dutch East India Company is important because it had a complex business model that has extended into businesses today. For example its shareholders and their liability made the Dutch East India Company an early form of a limited-liability company. In addition the company was also highly organized for the time and it was one of the first companies to establish a monopoly over the spice trade and it was the world's first multinational corporation.

The Dutch East India Company was also important in that it was active in bringing European ideas and technology to Asia. It also expanded European exploration and opened up new areas to colonization and trade.

To learn more about the Dutch East India Company and to see a video lecture view, The Dutch East Indies Company - The First 100 Years from the United Kingdom's Gresham College. Also visit Towards a New Age of Partnership for various articles and historical records.

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