the largest company in history? -- 9/21/21
Today's selection -- from Merchant Kings by Stephen R. Bown. In relation to the economy of its time, and though it was chartered two years after the much smaller British East India Company, the mammoth Dutch East India Company may have been the largest company in history. It was given the powers of a government:
"[Dutch] investors quickly grasped the great potential of securing a full cargo of spices [from the East Indies]. Aided by the wealth of practical advice on navigation and local customs that had been detailed in Linschoten's newly published Itinerario and the experience of de Houtman's surviving crew, they formed a new company. The new commander would be Jacob Corneliszoon van Neck, and the seven ships in the expedition would be armed -- they did not expect to be welcomed by the Portuguese. Van Neck, a levelheaded, diplomatic trader, formed friendly relations wherever his ships stopped throughout the Spice Islands. He returned with a full cargo of spices, particularly pepper, that brought a staggering 400 per cent return on invested capital, and the race was on. By 1598 five separate trading companies had launched twenty-two ships to the spiceries. Wherever they sailed in the Indies, they announced themselves as enemies of the Portuguese and as a result were warmly welcomed by the islanders. Within a few years, the mariners and merchants of the numerous Dutch trading companies had explored nearly every coast and visited every port in the region. In 1601 alone, sixty-five Dutch ships left for the Spice Islands.
"The Dutch merchants were so successful, swarming and overwhelming the Portuguese traders, that they started to compete with each other, lowering the price of spices in Europe and raising them in the East Indies. The investors, now worried, came upon a simple yet effective solution: they would form a single company to limit competition among themselves and combine their efforts against the Portuguese and Spanish. The merchants of Amsterdam approached the States General, the governing body representing all the provinces of the United Netherlands, requesting a monopoly for themselves only and excluding merchants from other Dutch cities and provinces. For years the States General had been admonishing merchants from the various provinces to cease their cutthroat competition and join in common cause against their enemies. Their warning met with bitter opposition, however: each region feared losing its independence. Yet, after much negotiating, on March 20, 1602, the Dutch East India Company, the VOC, was formed under the auspices, direction and coercion of the States General. The company was to have a twenty-one-year monopoly on all trade with the East Indies.
"The new company's governing 'Council of Seventeen' gentleman merchants met periodically in their offices in Amsterdam. Eight were representatives from the Amsterdam city government, four hailed from Middelburg, and one each came from the cities of Enkhuizen, Hoorn, Delft and Rotterdam. The final director was elected in rotation from cities other than Amsterdam, so that Amsterdam itself, the Netherlands' largest commercial centre, could never hold a majority of the votes and decision-making power. Theoretically, any Dutch citizen could become a shareholder, but soon the entire enterprise was governed by a small number of powerful merchants, with capital invested for a ten-year period rather than in each voyage. This venture, the world's first 'joint stock company,' was set to become the world's largest single business enterprise of the seventeenth century. Mere days after the initial public offering, and before the first shareholders had even paid for their shares, those shares were being traded on the Amsterdam stock exchange for a 17 per cent premium.
"More significantly, the new monopoly was granted powers over the Eastern trade, not normally the province of merchants.
|Japanese export porcelain plate (Arita ware) with the VOC's monogram logo|
"It would be a private commercial corporation operating free from the direct control of the government of the United Netherlands, yet it would have the authority to make decisions in the name of that government. The VOC could make treaties and declare war or peace in the name of the States General, construct forts and arm them with cannons, hire troops, establish colonies, dispense justice and enact laws, even issue its own currency -- its coins were not stamped with the symbol of a nation or head of state, but with the company insignia. The VOC would essentially operate as a state within a state. In the ensuing years, it forged its way around Africa in the wake of the Portuguese and proceeded to battle them for control of the spice trade, rapidly displacing its erstwhile enemy. The historian Philip D. Curtin has commented wryly, 'The VOC began with its military force more important than its trade goods. It was less a capitalist trading firm than it was a syndicate for piracy, aimed at the Portuguese power in Asia, dominated by government interests, but drawing funding from investors rather than taxpayers.'
"The first VOC fleet sailed from Amsterdam on December 18, 1603, with orders not only to trade but to attack Portuguese ships and forts wherever possible. The VOC's relentless assault on the Portuguese progressed relatively smoothly and rapidly, the company pursuing trade and war with equal vigour. In the first years of its existence, cargoes on VOC ships sent out by the Council of Seventeen were weighted as heavily with guns and ammunition as they were with trade goods and silver bullion. When VOC ships clashed with Portuguese galleons, the Dutch almost always won. In 1605 the VOC captured the Portuguese fort on the island of Ambon, its first territorial acquisition, and continued its conquest rapidly. Within a few years the Dutch company spread across the East from Arabia to Japan, with a vast network of trade depots, forts and factories, many of them seized from the Portuguese, who retreated from this violent onslaught."