The Netherlands: a tiny European country that is actually one of the wealthiest and most
important economic centers of the continent.
The surprising success of the Dutch is invariably tied to one company, which was arguably the
greatest and most successful one in history.
Today, we’ll see how the Netherlands transformed from swampy backwater into a global trading
empire thanks to the Dutch East India Company.
This video is brought to you by Cheddar, who made a video about a different kind of spice
than the ones the Dutch were trading, but when you’re finished here make sure to check
out their channel.
The Netherlands today might be an economic powerhouse, but back in the 16th century,
well, it wasn’t doing too great.
To start things off, it wasn’t even independent: instead it was under the domain of the Spanish
Empire.
As one of the earliest European colonizers, the Spanish Empire controlled vast territories
across the world and used the money it gained from slavery and trade to fund numerous wars
of conquest and suppression.
The Netherlands ultimately became victim of one such war: they had became part of the
empire unwittingly due to marriage and spent the next 80 years trying to break free.
But the Dutch independence effort ran into a big problem very early on.
You see, the Dutch were a seafaring people: fishing and mercantile shipping was their
thing and they had been doing it for centuries.
The main goods they shipped were spices coming from the Far East, but this was before the
Dutch had any colonies of their own.
Back then Portugal held a virtual monopoly on the spice trade, controlling all the major
trade routes to Asia and back.
Thus, what the Dutch did was to buy all their spices from Lisbon and then ship them around
Europe to sell them at a profit.
But Portugal was absorbed into the Spanish Empire in 1580 and, of course, the first thing
the Spanish did was to close off Lisbon to the Dutch merchants.
Suddenly the main artery of the Dutch economy had been cut off and there was really only
one thing the Dutch merchants could do: they had to sail to Far East and build their own
trading network.
At first this effort was very decentralized: merchants from various Dutch cities would
establish companies for single voyages.
Essentially, they would fund a few ships and their sailors and they would send them off
to find a new trade route to the Far East.
Some missions were successful and came back with lots of spices, but most did not go very
smoothly.
During the first six years of the expedition effort a total of 65 ships were sent out.
1 in 10 never made it back, and those that did, came back with only a third of their
crew on average.
Suffice to say, being a sailor in these early fleets wasn’t a very safe job.
Nevertheless, these early voyages gave the Dutch the knowledge and experience on how
to establish a more permanent trading network.
But coordinating individual merchants, each of whom was competing with the rest, is difficult
to say the least and with the English, Spanish and Portuguese all trying to create their
own trading empires, the Dutch knew that they had to band together.
In 1602 under the patronage of the Prime Minister of Holland, the various expedition companies
united into a single company with vast sovereign power.
It’s name wasn’t the Dutch East India Company, even though that’s how we call
it today.
It was actually called the United East India Company, or VOC for short and its creation
marked a new chapter in the history of the Netherlands.
The political motivations were clear: the Dutch needed a new economic engine to fight
off the Spanish and to restore their wartorn country.
The VOC was their only hope which is why it was granted not only a monopoly on trade,
but also the ability to train its own army, to negotiate and declare war, to occupy land
and even to enforce slavery.
But just getting permission to do all these things meant nothing if the VOC couldn’t
actually do them, and to conquer the Far East would require a lot of capital.
The VOC, however, figured out an ingenious solution, which would later on become the
cornerstone of modern capitalism.
In the center of Amsterdam, the VOC built a trading house, where every Dutch citizen
could go and buy shares of the company, effectively giving the VOC money now in exchange for a
claim on its profits in the future.
The VOC had effectively created the world’s first stock market and the VOC itself had
become the first publicly-traded company in history.
Pretty much every rich man in the Netherlands invested in the VOC and even many immigrants
did so.
In total, the VOC’s initial public offering raised over 6 million guilders, which is equivalent
to about $110 million today.
And keep in mind, this is coming from a country that’s half-occupied by Spain and whose
economy had been in the drain for a decade.
Of course, circumstances were favorable to the Dutch: the Spanish Empire was at war with
England at the time, allowing the Dutch to sweep into the Far East and kick out the Portuguese
establishment.
The first victim of the VOC’s colonial ambitions was Indonesia: the Dutch conquered modern-day
Jakarta in 1611, slaughtering the locals and building vast spice plantations on nearby
islands.
With the island of Java as its headquarters, the VOC spread throughout the Far East.
Their factories in India produced exquisite silks and fabrics, which the VOC then shipped
to Japan to trade for their famous and crucial supply of silver.
The VOC got silk from China as well, which also produced valuable porcelain.
What matters though, is that the profits margins the VOC earned by monopolizing these trade
routes were as high as 1500%, and all of this money was of course being funneled into the
Netherlands.
They finally won their independence in 1648 and with that out of the way the VOC’s profits
were invested in one type of project unique to the Netherlands: land reclamation.
You see, the Netherlands is extremely flat and is below sea level, which makes it prone
to flooding; but, if you build dikes and keep the water out, you can turn swamps into farmland
and that’s exactly what the Dutch did with their VOC profits.
Just by looking at the geography you can tell when the VOC was running at full force.
In total, over one and a half thousand ships sailed for the VOC during its two centuries
of existence and its influence is still felt to this day.
Many former Dutch colonies, for example, still bear the scars of the oppression they suffered.
But the VOC has other interesting legacies that few people know.
Cape Town, for instance, started out as a VOC resting station in 1652.
A decade earlier, a VOC merchant discovered two big land masses south of the Dutch Indies.
He called them New Holland and New Zeeland and you can guess which name stuck and which
one didn’t.
But in any case, just as the ideal set of circumstances gave the Dutch the opportunity
to become a colonial empire, a perfect storm in the late 18th century ended up destroying
the VOC.
To start things off, the Dutch lost a disastrous war against the British in 1784 which disrupted
the VOC’s network in Asia.
Then, just a decade later, the newly-created French Republic invaded the Netherlands and
conquered them.
WIth the British attacking in Asia and the French attacking at home, the VOC really had
no chance and officially went into bankruptcy in 1799.
Sadly, without the spice trade the Netherlands lost their status as a global power.
And speaking of spice, Cheddar (who were kind enough to sponsor this episode) made a great
video on how Old Spice was saved by one of the most iconic marketing campaigns in recent
history.
If you don’t know, Cheddar’s channel covers business and technology in fun bite-sized
videos that leave you craving for more, so if you haven’t seen them go check out their
channel, watch the video and consider subscribing if you wanna see more.
In any case, thank you for watching.
If you liked the story of the VOC consider liking the video and subscribing if you haven’t
already.
We’re gonna see each other again in two weeks, and until then: stay smart.