Dutch East India Company

While Dutch profits soared, the local economy of the Spice Islands was destroyed, because as a monopoly buyer, the VOC forced the prices paid to the local producers in the Spice Islands down to low levels. With a capital of 6,440,200 guilders (equivalent to €265 million in 2024), the new company's charter empowered it to build forts, maintain armies, and conclude treaties with Asian rulers. It provided for a venture that continued for 21 years, with a financial accounting only at the end of each decade.

In February 1603, the company seized the Santa Catarina, a 1,500-tonnes Portuguese merchant carrack, off the coast of the Malay Peninsula. That same year, a joint Dutch-English force captured another Portuguese carrack off Macau. The proceeds from the sale of the cargo of the two vessels was equivalent to more than 50% of the VOC's original subscription capital.

In 1603, the first permanent Dutch trading post in Indonesia was established in Banten, West Java. In 1611, another was established at Jayakarta (later "Batavia" and then "Jakarta"). In 1610, the VOC established the post of governor-general to more firmly control 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. The Heeren XVII, a body of 17 shareholders representing different chambers, continued to officially have overall control.

The VOC headquarters were located in Ambon during 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 India to Japan. A location in the west of the archipelago was thus sought. The Straits of Malacca were strategic but became 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.

In 1604, a second English 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, sparking Anglo-Dutch competition for access to spices. 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.

In 1620, diplomatic agreements in Europe ushered in a period of collaboration between the Dutch and English spice trades. This ended with the notorious Amboyna massacre, where ten Englishmen were arrested, tried and beheaded for conspiracy against the Dutch government. Although this caused outrage in Europe and a diplomatic crisis, the English quietly withdrew from most of their Indonesian activities, except trading in Banten, and focused on other Asian interests.

Growth

In 1619, Jan Pieterszoon Coen was appointed governor-general of the VOC. He saw the possibility of the VOC becoming an Asian power, both political and economic. 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. In the 1620s almost the entire native population of the Banda Islands was driven away, starved to death, or killed in an attempt to replace them with Dutch plantations. These plantations were used to grow nutmeg for export. Coen hoped to settle large numbers of Dutch colonists in the East Indies, but implementation of this policy never materialised, mainly because very few Dutch were willing to emigrate to Asia.

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 the precious metals, which were 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.

The VOC traded throughout Asia, benefiting mainly from Bengal. Ships coming into Batavia from the Netherlands carried supplies for VOC settlements in Asia. Silver and copper from Japan were used to trade with the world's wealthiest empires, Mughal India and Qing 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. When the VOC tried to use military force to make Ming dynasty China open up to Dutch trade, the Chinese defeated the Dutch in a war over the Penghu islands from 1623 to 1624, forcing the VOC to abandon Penghu for Taiwan. The Chinese defeated the VOC again at the Battle of Liaoluo Bay in 1633.

The Vietnamese Nguyen lords defeated the VOC in a 1643 battle during the Trịnh–Nguyễn War, blowing up a Dutch ship. The Cambodians defeated the VOC in the Cambodian–Dutch War from 1643 to 1644 on the Mekong River.

In 1640, the VOC obtained the port of Galle, Ceylon, from the Portuguese and broke the latter's monopoly of the cinnamon trade. In 1658, Gerard Pietersz Hulft laid siege to Colombo, which was captured with the help of King Rajasinghe II of Kandy. By 1659, the Portuguese had been expelled from the coastal regions, which were then occupied by the VOC, securing for it the monopoly over cinnamon.

To prevent the Portuguese or the English from ever recapturing Sri Lanka, the VOC went on to conquer the entire Malabar Coast from the Portuguese, almost entirely driving them from the west coast of India.

In 1652, Jan van Riebeeck established a resupply outpost at the Cape of Storms (the southwestern tip of Africa, now Cape Town, South Africa) to service company ships on their journey to and from East Asia. The cape was later renamed Cape of Good Hope in honour of the outpost's presence. Although non-company ships were welcome to use the station, they were charged exorbitantly. This post later became a full-fledged colony, the Cape Colony, when more Dutch and other Europeans started to settle there.

Through the seventeenth century VOC trading posts were also established in Persia, Bengal, Malacca, Siam, Formosa (now Taiwan), as well as the Malabar and Coromandel coasts in India. Direct access to mainland China came in 1729 when a factory was established in Canton. In 1661, Ming general Koxinga led a fleet to defeat the Dutch. After Koxinga's Ming loyalists defeated Dutch reinforcements from Java in 1662, Frederick Coyett, the Dutch commander, surrendered Taiwan. (see History of Taiwan).

In 1663, the VOC signed the "Painan Treaty" with several local lords in the Painan area that were revolting against the Aceh Sultanate. The treaty allowed the VOC to build a trading post in the area and eventually to monopolise the trade there, especially the gold trade.

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

Many of the VOC employees inter-mixed with the indigenous peoples and expanded the population of Indos in pre-colonial history.

Reorientation

Around 1670, two events caused the growth of VOC trade to stall. In the first place, the highly profitable trade with Japan started to decline. The loss of the outpost on Formosa to Koxinga in the 1662 siege of Fort Zeelandia and related internal turmoil in China (where the Ming dynasty was being replaced with the China's Qing dynasty) brought an end to the silk trade after 1666. Though the VOC substituted Mughal Bengal's for Chinese silk, other forces affected the supply of Japanese silver and gold. The shogunate enacted a number of measures to limit the export of these precious metals, in the process limiting VOC opportunities for trade, and severely worsening the terms of trade. Therefore, Japan ceased to function as the linchpin of the intra-Asiatic trade of the VOC by 1685.

Even more importantly, the Third Anglo-Dutch War temporarily interrupted VOC trade with Europe. This caused a spike in the price of pepper, which enticed the English East India Company (EIC) to enter this market aggressively in the years after 1672. Previously, one of the tenets of the VOC pricing policy was to slightly over-supply the pepper market, so as to depress prices below the level where interlopers were encouraged to enter the market (instead of striving for short-term profit maximisation). The wisdom of such a policy was illustrated when a fierce price war with the EIC ensued, as that company flooded the market with new supplies from India. In this struggle for market share, the VOC (which had much larger financial resources) could wait out the EIC. Indeed, by 1683, the latter came close to bankruptcy; its share price plummeted from 600 to 250; and its president Josiah Child was temporarily forced from office.

However, the writing was on the wall. Other companies, like the French East India Company and the Danish East India Company also started to make inroads on the Dutch system. The VOC therefore closed the theretofore flourishing open pepper emporium of Bantam by a treaty of 1684 with the Sultan. Also, on the Coromandel Coast, it moved its chief stronghold from Pulicat to Nagapattinam, so as to secure a monopoly on the pepper trade to the detriment of the French and the Danes. However, the importance of these traditional commodities in the Asian-European trade was diminishing rapidly at the time. The military outlays that the VOC needed to make to enhance its monopoly were not justified by the increased profits of this declining trade.

Nevertheless, this lesson was slow to sink in and at first the VOC made the strategic decision to improve its military position on the Malabar Coast (hoping thereby to curtail English influence in the area, and end the drain on its resources from the cost of the Malabar garrisons) by using force to compel the Zamorin of Calicut to submit to Dutch domination. In 1710, the Zamorin was made to sign a treaty with the VOC undertaking to trade exclusively with the VOC and expel other European traders. For a brief time, this appeared to improve the company's prospects. However, in 1715, with EIC encouragement, the Zamorin renounced the treaty. Though a Dutch army managed to suppress this insurrection temporarily, the Zamorin continued to trade with the English and the French, which led to an appreciable upsurge in English and French traffic. The VOC decided in 1721 that it was no longer worth the trouble to try to dominate the Malabar pepper and spice trade. A strategic decision was taken to scale down the Dutch military presence and in effect yield the area to EIC influence.

In the 1741 Battle of Colachel, warriors of Travancore under Raja Marthanda Varma defeated the Dutch. The Dutch commander Captain Eustachius De Lannoy was captured. Marthanda Varma agreed to spare the Dutch captain's life on condition that he joined his army and trained 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; and it signalled the decline of Dutch power in India.

The attempt to continue as before as a low volume-high profit business enterprise with its core business in the spice trade had therefore failed. The company had however already (reluctantly) followed the example of its European competitors in diversifying into other Asian commodities, like tea, coffee, cotton, textiles, and sugar. These commodities provided a lower profit margin and therefore required a larger sales volume to generate the same amount of revenue. This structural change in the commodity composition of the VOC's trade started in the early 1680s, after the temporary collapse of the EIC around 1683 offered an excellent opportunity to enter these markets. The actual cause for the change lies, however, in two structural features of this new era.

In the first place, there was a revolutionary change in the tastes affecting European demand for Asian textiles, coffee and tea, around the turn of the 18th century. Secondly, a new era of an abundant supply of capital at low interest rates suddenly opened around this time. The second factor enabled the company easily to finance its expansion in the new areas of commerce. Between the 1680s and 1720s, the VOC was therefore able to equip and man an appreciable expansion of its fleet, and acquire a large amount of precious metals to finance the purchase of large amounts of Asian commodities, for shipment to Europe. The overall effect was approximately to double the size of the company.

The tonnage of the returning ships rose by 125% in this period. However, the company's revenues from the sale of goods landed in Europe rose by only 78%. This reflects the basic change in the VOC's circumstances that had occurred: it now operated in new markets for goods with an elastic demand, in which it had to compete on an equal footing with other suppliers. This made for low profit margins. The business information systems of the time made this difficult to discern for the managers of the company, which may partly explain the mistakes they made from hindsight. This lack of information might have been counteracted (as in earlier times in the VOC's history) by the business acumen of the directors. By this time these were almost exclusively recruited from the political regent class, which had long since lost its close relationship with merchant circles.

Low profit margins in themselves do not explain the deterioration of revenues. To a large extent the costs of the operation of the VOC had a "fixed" character (military establishments; maintenance of the fleet and such). Profit levels might therefore have been maintained if the increase in the scale of trading operations that in fact took place had resulted in economies of scale. However, though larger ships transported the growing volume of goods, labour productivity did not go up sufficiently to realise these. In general the company's overhead rose in step with the growth in trade volume; declining gross margins translated directly into a decline in profitability of the invested capital. The era of expansion was one of "profitless growth".

Colonialism, monopoly and violence

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.

The VOC charter allowed it to act as a quasi-sovereign state and engage in brutal conquests. One example is the Dutch conquest of the Banda Islands, between 1609 and 1621, after the islands resisted the nutmeg monopoly. The Dutch launched punitive expeditions that resulted in the near-destruction of Bandanese society. They invaded the main Bandanese island of Lontor in 1621. 2,800 Bandanese were killed, mostly from famine, and 1,700 were enslaved during the attack.

The total population of the islands was estimated at 15,000 people before the conquest. Although the exact number remains uncertain, it is estimated that around 14,000 people were killed, enslaved or fled elsewhere, with only 1,000 Bandanese surviving in the islands, and were spread throughout the nutmeg groves as forced labourers. The treatment of slaves was harsh and the native Bandanese population dropped to 1,000 by 1681. 200 slaves were imported annually to sustain the slave population at a total of 4,000.

In 1623 on Ambon (Amboina), VOC officials arrested, tortured, and executed ten English East India Company employees along with Japanese and Portuguese auxiliaries for an alleged conspiracy, an episode known as the Amboyna massacre that ended Anglo-Dutch cooperation in the Moluccas and showcased the Company's reliance on judicial coercion to police its monopolies.

In 1740, amid a severe downturn in Batavia's sugar economy, VOC troops and allied militias killed thousands of ethnic Chinese residents; scholarly estimates range from about 5,000 to over 10,000 deaths in what became known as the Batavia massacre.

Earlier, in 1636, VOC forces mounted a punitive expedition on Lamey (Lamay) Island off Taiwan after shipwreck incidents; most inhabitants were killed or deported and the island was effectively depopulated.

Dutch slave trade and slavery under the VOC colonial rule

By the time the settlement was established at the Cape in 1652, the VOC already had a long experience of practicing slavery in the East Indies. Jan van Riebeeck concluded within two months of the establishment of the Cape settlement that slave labour would be needed for the hardest and dirtiest work. Initially, the VOC considered enslaving men from the indigenous Khoikhoi population, but the idea was rejected on the grounds that such a policy would be both costly and dangerous. Most Khoikhoi had chosen not to labour for the Dutch because of low wages and harsh conditions. In the beginning, the settlers traded with the Khoikhoi, but the harsh working conditions and low wages imposed by the Dutch led to a series of wars. The European population remained under 200 during the settlement's first five years, and war against neighbours numbering more than 20,000 would have been foolhardy. Moreover, the Dutch feared that Khoikhoi people, if enslaved, could always escape into the local community, whereas foreigners would find it much more difficult to escape and survive or avoid recapture.

Between 1652 and 1657, a number of unsuccessful attempts were made to obtain men from the Dutch East Indies and from Mauritius. In 1658, however, the VOC landed two shiploads of slaves at the Cape, one containing more than 200 people brought from Dahomey (later Benin), the second with almost 200 people, most of them children, captured from a Portuguese slaver off the coast of Angola. Except for a few individuals, these were to be the only slaves ever brought to the Cape from West Africa. From 1658 to the end of the company's rule, many more slaves were brought regularly to the Cape in various ways, chiefly by Company-sponsored slaving voyages and slaves brought to the Cape by its return fleets. From these sources and by natural growth, the slave population increased from zero in 1652 to about 1,000 by 1700. During the 18th century, the slave population increased dramatically to 16,839 by 1795. After the slave trade was initiated, all of the slaves imported into the Cape until Britain passed the Slave Trade Act 1807 were from East Africa, Mozambique, Madagascar, and South and Southeast Asia. Large numbers were brought from Ceylon and the Indonesian archipelago. Prisoners from other countries in the VOC's empire were also enslaved. The slave population, which exceeded that of the European settlers until the first quarter of the nineteenth century, was overwhelmingly male and was thus dependent on constant imports of new slaves to maintain and to augment its size.

By the 1660s the Cape settlement was importing slaves from Ceylon, Malaya (Malaysia), and Madagascar to work on the farms. Conflict between Dutch farmers and Khoikhoi broke out once it became clear to the latter that the Dutch were there to stay and that they intended to encroach on the lands of the pastoralists. In 1659 Doman, a Khoikhoi who had worked as a translator for the Dutch and had even travelled to Java, led an armed attempt to expel the Dutch from the Cape peninsula. The attempt was a failure, although warfare dragged on until an inconclusive peace was established a year later. During the following decade, pressure on the Khoikhoi grew as more of the Dutch became free burghers, expanded their landholdings, and sought pastureland for their growing herds. War broke out again in 1673 and continued until 1677, when Khoikhoi resistance was destroyed by a combination of superior European weapons and Dutch manipulation of divisions among the local people. Thereafter, Khoikhoi society in the western Cape disintegrated. Some people found jobs as shepherds on European farms; others rejected foreign rule and moved away from the Cape. The final blow for most came in 1713 when a Dutch ship brought smallpox to the Cape. Hitherto unknown locally, the disease ravaged the remaining Khoikhoi, killing 90% of the population. Throughout the eighteenth century, the settlement continued to expand through internal growth of the European population and the continued importation of slaves. The approximately 3,000 Europeans and slaves at the Cape in 1700 had increased by the end of the century to nearly 20,000 Europeans, and approximately 25,000 slaves.