Dutch East India Company (1602): The VOC and the Spice Islands

The Dutch East India Company, known by its Dutch initials VOC, was a trading company chartered by the government of the Dutch Republic on 20 March 1602 to hold a monopoly on Dutch trade with Asia. It brought together rival merchant companies into a single enterprise with permanent capital and transferable shares, a model that made it a landmark in the history of business. Armed with the power to make war and treaties, the VOC built an empire of forts and trading posts across Asia and dominated the spice trade for much of the seventeenth century.

Background: the race for spices

In the sixteenth century the sea route from Europe to Asia around the Cape of Good Hope was controlled by Portugal. Spices such as pepper, cloves, nutmeg and mace commanded high prices in Europe, and Lisbon was the main market where northern European merchants bought them. Some of the most valuable spices grew only in a few places: cloves in the northern Moluccas and nutmeg and mace in the tiny Banda Islands.

The Dutch provinces were at war with Spain in the Eighty Years’ War, and from 1580 Spain and Portugal shared a king. Dutch merchants found access to Portuguese spices increasingly difficult and began to look for their own route. In 1595 a fleet under Cornelis de Houtman sailed for the East Indies. It lost many men but returned in 1597 with enough pepper to prove that the voyage could be made.

A rush followed. Between 1598 and 1601 several new companies, often called the voorcompagnieën or “pre-companies”, sent out about 15 fleets. Jacob van Neck’s voyage of 1598–1599 made a large profit. But the companies competed against each other in Asia, pushing up prices for spices there and pushing them down in Europe.

The founding of the VOC

The leading statesman of the Dutch Republic, Johan van Oldenbarnevelt, and the States General pressed the rival companies to merge. They had economic and political reasons. Competition was hurting profits, and a single, strong company could also fight the Portuguese and Spanish in Asia as part of the war against the Habsburgs.

The merger was agreed in early 1602, and the charter was granted on 20 March 1602. It gave the new company a monopoly for 21 years on Dutch trade east of the Cape of Good Hope and west of the Strait of Magellan. It also gave the VOC powers usually held by states: it could build forts, keep soldiers, conclude treaties with Asian rulers, wage defensive war and appoint governors and officials.

The company kept the local structure of its predecessors. It was organised in six chambers, in Amsterdam, Zeeland (Middelburg), Delft, Rotterdam, Hoorn and Enkhuizen. Overall policy was set by a board of 17 directors, the Heeren XVII (“Gentlemen Seventeen”). Amsterdam had eight seats and Zeeland four, while the smaller chambers shared the rest.

A new kind of company

The VOC raised about 6.4 million guilders from investors, a very large sum for the time, of which the Amsterdam chamber subscribed roughly 3.7 million. Anyone could subscribe, and over 1,000 people did so in Amsterdam alone, from wealthy merchants to craftsmen and servants.

What made the company unusual was that its capital was permanent. Earlier companies, Dutch and English, had usually been wound up after each voyage and the profits shared out. Investors in the VOC could not withdraw their money from the company, but they could sell their shares to someone else. A lively market in VOC shares quickly developed in Amsterdam, and a purpose-built exchange building opened in the city in 1611.

This market soon developed sophisticated practices. In 1609 the merchant Isaac Le Maire, a former director, organised a group that sold VOC shares they did not yet own in the hope that the price would fall. This is often cited as one of the earliest recorded cases of short selling, and in 1610 the States General issued a ban on the practice. The company paid its first dividend in 1610, partly in spices rather than cash.

Building an empire in Asia

The VOC soon turned to force. In 1605 a fleet under Steven van der Hagen took the Portuguese fort on Ambon, the first major Dutch territorial possession in Asia. In 1609 the company created the post of Governor-General to direct its affairs in Asia, and Pieter Both took up the role in 1610.

The most important Governor-General of the early years was Jan Pieterszoon Coen. In 1619 he captured the Javanese port of Jayakarta and built Batavia, today’s Jakarta, which became the company’s Asian headquarters. Coen believed that the company must control spice production by force. In 1621 he led the conquest of the Banda Islands, in which a large part of the islanders were killed, died of hunger or were enslaved or deported, and Dutch planters using enslaved labour took over the nutmeg groves.

Rivalry with the English, who had founded their own East India Company in 1600, was fierce. In 1623 VOC officials on Ambon tortured and executed ten Englishmen, along with Japanese and Portuguese men, on charges of plotting to seize the fort. The episode, known in England as the Amboyna massacre, poisoned Anglo-Dutch relations for decades, and English traders largely withdrew from the eastern archipelago.

Through the mid-seventeenth century the company expanded steadily:

• It traded with Japan from 1609, and after 1641 its post on the artificial island of Dejima in Nagasaki harbour was the only European trading base allowed in Japan.
• It took Malacca from the Portuguese in 1641, gaining control of a key strait.
• It held Fort Zeelandia on Taiwan from 1624 until it was expelled by the Ming loyalist Koxinga in 1662.
• It gradually drove the Portuguese from the coasts of Sri Lanka between 1638 and 1658.
• In 1652 Jan van Riebeeck founded a supply station at the Cape of Good Hope, the origin of Cape Town.

How the company worked

Ships left the Netherlands each year, usually in several fleets, and sailed to Batavia, a voyage of around eight months. From Batavia, goods were distributed through an intra-Asian network. The company found that trade within Asia was essential: it bought Indian cotton textiles to exchange for spices in Indonesia, and Japanese silver and copper to pay for goods in China and India.

Over almost two centuries the VOC sent close to 5,000 voyages to Asia. Nearly a million people sailed east on its ships, many of them soldiers and sailors from Germany and Scandinavia as well as the Netherlands. A large share of them never returned, dying of disease in Asia or at sea.

The company’s power rested on violence and coercion as well as trade. It used enslaved labour on a large scale, transported enslaved people between its Asian posts, and fought wars against local rulers such as the Sultanate of Makassar in the 1660s. These aspects of its history are now a major subject of research and public debate in the Netherlands and Indonesia.

Decline and dissolution

The company’s greatest profits came in the seventeenth century. In the eighteenth century the spice trade became less central as European demand shifted towards textiles, tea and coffee, where the VOC faced strong competition from the English and French companies. Costs of administration and warfare rose, and corruption among officials was widespread.

The Fourth Anglo-Dutch War of 1780–1784 was a disaster for the company, with many ships and cargoes lost to the British. The VOC fell deeply into debt. After the French-backed Batavian Republic replaced the old Dutch state, the company was nationalised in 1796. Its charter expired on 31 December 1799, and its possessions and debts passed to the Dutch state, which later ruled them as the Netherlands East Indies.

Myths and facts

Myth: the VOC was the richest company in history, worth trillions in today’s money. Figures of this kind circulate widely online, but they rest on questionable comparisons between seventeenth-century share prices and modern economies. Historians do not accept them as reliable.

Myth: the VOC was simply a peaceful trading firm. In fact its charter gave it the powers of a state, and it regularly used military force to secure monopolies and territory.

Fact: it was a genuine innovation in finance. Its permanent capital, tradable shares and the market that grew around them are widely seen as important steps towards the modern corporation and stock exchange.

By the numbers

Timeline

• 1595, April: Cornelis de Houtman’s fleet sails from the Netherlands for the East Indies.
• 1602, 20 March: The States General grants the charter of the VOC.
• 1605, February: The VOC takes the Portuguese fort on Ambon.
• 1610: Pieter Both becomes the first Governor-General; the first dividend is paid.
• 1619, 30 May: Jan Pieterszoon Coen captures Jayakarta and founds Batavia.
• 1641: The VOC takes Malacca and moves its Japan trade to Dejima.
• 1652, April: Jan van Riebeeck founds the station at the Cape of Good Hope.
• 1780–1784: The Fourth Anglo-Dutch War causes heavy losses.
• 1796: The company is nationalised.
• 1799, 31 December: The charter expires and the VOC is dissolved.

Why it matters

The VOC shaped both the business world and the map of Asia. Its permanent capital and tradable shares helped create the modern stock market, while its forts and trading posts laid the foundations of Dutch colonial rule in Indonesia. Its history of commercial innovation alongside conquest, monopoly and slavery makes it one of the most important and most debated institutions of the early modern world.