Dutch East India Company

The Vereenigde Oost-Indische Compagnie (VOC) or the Dutch East India Company is a joint stock company incorporated in 1602. The company pioneered the idea of selling shares on profits to the public in order to raise capital for its operations. It also founded the first stock exchange, the Amsterdam stock exchange in order to facilitate the sale of its shares to the public. Prior to its incorporation, trading companies raise the needed funds before a voyage is scheduled and once the ships return with the goods, the profits are distributed effectively liquidating the company. The risks involved on these ventures are very high because there is always a good chance that some ships would not return and other factors that affect profitability such as piracy or a mutiny. Upon its incorporation, the company stated that once the shares are bought by shareholders, the company is under no obligation to pay the full amount of the shares back. The shareholders can simply sell their shares to other interested parties through the Amsterdam Stock Exchange. In order for the company to exist continually after each voyage is completed, the distribution of dividends will not occur until 10 years from the date of issue. This allowed the company to retain its earnings for expansion instead of liquidating the capital after each voyage.

The company’s first trading hub is in Banten west Java and a second capital was established in the city of Batavia present day Jakarta, Indonesia in 1619 where its close proximity to the Maluku islands provided a good location in staging spices acquired in the islands such as nutmeg, mace and cloves. By establishing a capital and later a company headquarters in Batavia, the Dutch East India Company can effectively control the supply of spices shipped back to Amsterdam. As a part of their expenses, Joint Stock Companies maintain their own military force or even mint their own coin which is used to secure a monopoly on a particular area. In fact, wars between sea going powers such as Britain, Spain, Portugal, France and Netherlands were mostly started between their Joint Stock Companies trying to gain monopoly of a trading colony. In order to maximize profits and minimize risks the Dutch East India Company facilitated the relocation of the native citizens of Banten to free up lands which will be used to grow the spices acquired in the islands of Maluku. The relocation of native residents was done through military force and the rest of the colonies followed the same template. In effect, a Joint Stock Company can act on behalf of the country where it originated from.

Throughout the mid 1600’s, the Dutch East India Company expanded its operations trading goods within Asia. Trading posts were established in Iran, Malaysia, Thailand, Taiwan, China and India and by 1669 a 40% dividend was announced on its shares. The Dutch East India Company is said to have a military force larger than most countries it traded with, with a total of 40 warships and thousands of soldiers fighting under the VOC flag, it can effectively suppress and exploit local citizens of the region as well as keeping the Joint Stock Companies of Britain, Spain and Portugal at bay. By the late 1700’s the company as a result of changing political and business climate slowly declined. High dividend rates that exceeded its surpluses, the Dutch revolution, internal corruption and mismanagement brought the company down into bankruptcy and ceased its operations on March 17, 1798. The newly organized Dutch Batavian Republic took over its debt until 1800. The British took over most of its overseas possessions until the Convention of London in 1814 where Dutch possessions are returned in its former state as of January 1, 1803.

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