By 1600, the Portuguese had become one of the many players in Indian Ocean trading
ventures, shipping spices, precious metals, horses, and other goods, often in partnership
with Asian merchants. They had a string of fortifi ed trading posts and a few
churches, but had not signifi cantly altered centuries-old patterns of commerce involving
merchants from different regions. That changed with the entry of the Dutch and
then the British into Asian waters.
In the last decade of the sixteenth century, large well-built Dutch ships, often captained
by mariners who had worked for the Portuguese, sailed to South and Southeast
Asia, returning with huge quantities of spices. So many ships went, in fact, that Dutch
markets were fl ooded with spices, which depressed the price and reduced profi ts. This
situation led Dutch merchants in 1602 to agree to pool their resources in a new form
of commercial enterprise, the United East India Company (Vereenigde Oost-Indische
Compagnie, abbreviated VOC), which was given a national monopoly on trade with
the east by the Dutch States General. The VOC separated managers from investors,
who now bought permanent shares in the company rather than simply backing a single
expedition; profi t was given annually to investors, based on all the company’s operations
together, so that risk was minimized. This form of business organization became
known as a “joint-stock company,” and was later adopted by other companies in the
Netherlands and elsewhere. Investment in joint-stock companies became generally
profi table – though there were spectacular collapses – and increasingly fashionable;
the circle of investors grew to include men and women with only a small amount of
disposable income, as well as major merchants and bankers.
The States General provided fi nancial support to the VOC in its early years and
granted it political sovereignty over the territories under its control, allowing it to
build forts, appoint governors, maintain armies and navies, and wage war against
indigenous states. The VOC initially worked from fortifi ed trading posts, many of
which were captured from the Portuguese. Its managers, under the leadership of a
governor-general, decided that the force of the Dutch navy could allow the company
to reorganize the trading network to favor its interests. Dutch forces captured the Javanese
port of Jakarta in 1619, renaming it Batavia, and the VOC established a naval base
and ship-building yard there. The managers made alliances with Chinese merchants
already living in the area, who set up sugar plantations and organized the recruitment
of laborers from China for the sugar crop and for harvesting timber for ships and export.
Dutch forces also defeated those of many small states in the East Indies, Ceylon
(modern Sri Lanka), and the coast of India where spices were produced or traded; these
were often bloody battles and the Dutch sometimes enslaved the remaining population
and forcibly transported them to a different location to work.
By the 1680s, the islands surrounding Batavia had become Dutch colonies and the
VOC had a worldwide monopoly on spices. The Indian Ocean network was being radically
transformed from one of partnerships to one in which Asian merchants were more
dependent, though local and Chinese traders continued to make healthy profi ts. Dutch
colonies also included several strongholds captured from the Portuguese in India, and
Cape Town on the south coast of Africa, which became an important resupply point for
ships. The Dutch were active in carrying goods of all types around Asia as well – what was
termed in this era the “country trade” – making large profi ts from transporting Japanese
silver to China, Chinese porcelain to India and Japan, and Indian opium to China.
The Dutch colonies in and around the Indian Ocean had mixed populations, of
which European employees of the VOC were a tiny number; even in Batavia, the largest
colony, Europeans were less than 10 percent of the population. Most Europeans were
soldiers and sailors, and the vast majority of them were men. The VOC allowed employees
who had served their time to stay on as “free burghers,” but their numbers were
very small, other than in Cape Town, where free burghers and other settlers – called
“Boers,” the Dutch word for farmer – began to move out into the countryside in the
eighteenth century to raise crops and livestock.
Along with European, indigenous, and mixed-race people, many Dutch colonies included
signifi cant numbers of free Asians who came from elsewhere, and all included
large numbers of slaves; one recent estimate fi nds that enslaved people made up between
one-third and two-thirds of the population in Dutch East Indian cities. Until the 1660s,
most enslaved people were from South Asia, and after this from Southeast Asia and
Africa; some were directly owned by the VOC, but most by private individuals. They
were used primarily as domestic laborers with a range of tasks, though some worked in
mining, shipping, and agriculture, especially on spice and sugar plantations.
Outright slavery was only one type of forced labor system in the East Indies. Chinese
merchants brought in from China unskilled laborers – later called “coolies,” a word that
is now seen as derogatory in many areas – with terms of employment that were close to
slavery. Immigration by Chinese laborers into Batavia was technically illegal, but Dutch
authorities looked the other way as the Chinese were needed for sugar production; this
situation kept labor cheap and the price of sugar relatively low. It was not low enough
to compete with sugar produced by slave labor in Brazil, however, and, when the bottom
fell out of the sugar market in 1740, unemployed Chinese laborers were ordered to
be shipped to VOC tea plantations on Ceylon. Rumors spread that they would actually
be thrown overboard on the way, laborers rioted, and VOC authorities responded by
searching and looting all Chinese houses in Batavia. In a three-day wave of violence,
every Chinese resident of the city was killed, probably totalling around 10,000 people.
There were calls for an investigation, but these went nowhere. The toleration for diversity
in their homeland that contributed to Dutch fi nancial successes in Europe was
much more limited in the colonies.
While the massacre in Batavia had no immediate ramifi cations, it was symptomatic
of the VOC’s growing inability to deal with the consequences of exploitation and to
respond effectively to economic and political developments. The VOC was also slow at
recognizing changing consumer demands in Europe, sticking with spices, which had
always provided a solid profi t, rather than investing in new commodities that had a
much larger potential market. There was some change. Tea and coffee, for example,
represented about 25 percent of the value of all goods imported into Amsterdam from
the East Indies in 1780, whereas a hundred years earlier they had not been imported at
all; during the same period, the share represented by spices dropped from 60 percent
to 35 percent. Figures for other ports in other countries showed an even more dramatic
shift, however, and the Dutch share of international trade declined steadily. Expenditures
regularly outweighed revenues in the latter half of the eighteenth century, and the
company was disbanded in 1799.
Dutch preeminence in the Indian Ocean ended not only because of problems within
the VOC, but also because of the rising power of the VOC’s English competitor, the
English East India Company. The EEIC actually received its charter two years earlier
than the VOC, in 1600, but strong Dutch pressure in the East Indies led English merchants
to concentrate on India. Company envoys spent much of the seventeenth century
requesting an imperial decree, or farman , from the powerful Mughal rulers of
India granting them regular trading privileges throughout the Mughal Empire. They
were given privileges in a few areas, including Bombay on the west coast, but even these
were revoked when the company declared war on the Mughals in 1686 to speed up the
process and lost disastrously. Only abject apologies – including full prostration in front
of the Mughal emperor – and a large fi ne persuaded the emperor to allow them back in.
The EEIC then concentrated on trade through Madras and Calcutta on the east coast
of India, dealing less in spices and more in new types of consumer goods, especially
cotton and silk textiles, saltpeter (for gunpowder), and, by the eighteenth century, tea
and opium.
British trade in and around India increased dramatically in the fi rst half of the eighteenth
century. In contrast to the VOC, which at least in theory forbade its agents to do
business privately, the EEIC encouraged this. Individual British merchants along with
small companies called syndicates began to specialize in the “country trade” around
Asia, making alliances with Indian partners. High demand in Europe for Indian goods,
and in China for Indian opium, allowed for profi ts at all stages of trade.
The EEIC also continued to push for an empire-wide farman , and in 1716, after the
company threatened to pull all its business out of western India, the Mughal emperor
Farrukhisiyar fi nally agreed. This action opened the way for the EEIC to intervene in
the political affairs of India as the company defended its growing economic power.
During the next several decades, company agents and private English traders, often
allied with wealthy Indian merchants, took advantage of the declining power of the
Mughal state and commercial opportunities of all types to expand their spheres of
operation. They made treaties with Indian princes and conducted military operations,
acting more like a sovereign state than a private company.
In the 1740s, the British and the French backed opposing contestants for the rule
of several states in southern India, thus mixing European and local rivalries. Warfare
spread back and forth for several decades, becoming part of the Seven Years War, with
the British ultimately victorious, in part because they were better able to pay for Indian
troops (called sepoys) who did much of the actual fi ghting and provided key information
about the plans of rival forces. Several key battles were won through the military
abilities of Robert Clive (1725–74), who began his career in India as a teenaged clerk
and bookkeeper in the EEIC. When hostilities broke out between the British and the
French, Clive joined the private army of the EEIC, and proved to be a very able commander.
After a brief stay in England, he went back to India as a governor and military
leader, and defeated a large French-backed force to secure Bengal for British interests.
Clive was well rewarded fi nancially by the EEIC and its Indian allies, and when he
returned to England he became a Member of Parliament. Unrest in India drew him
back again, and he helped to broker an agreement in 1764 granting the EEIC direct
rule of the province of Bengal in northeastern India and several other parts of the
subcontinent; Clive became the fi rst governor-general of Bengal. Other territories had
indigenous rulers, but they too were allied with the EEIC. Inquiries began in Parliament
about the wealth Clive had accumulated, however. He had also long suffered
from what was probably manic depression and various physical ailments, which he
eased by the use of opium. All of these factors converged, and Clive committed suicide
at the age of forty-nine.
In the heroic view of British imperialism – the 1911 Encyclopedia Britannica provides
a good example of this – Clive was regarded as the founder of the British Empire in
India, though more recent scholarship has seen the process as slower and more complex.
As the EEIC acquired more political power, the relationship between its representatives
and local merchants changed from partnership to clientage, and the company
was able to dictate terms and cut into the profi ts of local suppliers. In 1773, for example,
the governor-general of Bengal established a monopoly on the opium trade in India;
the Chinese emperor had banned the smoking of opium in 1729, so the EEIC auctioned
its opium to private British merchants, who then smuggled it into China, with all parties
gaining solid profi ts. (In the nineteenth century, Britain fought two wars to force
China to allow unrestricted opium imports.) Despite signifi cant Indian resistance to
British political and economic measures and a series of wars throughout the rest of the
eighteenth century, British power in India continued to expand.
Historians hotly debate the extent to which imperial ambitions shaped the British
takeover of India. Some view the whole process as somewhat accidental, with the
EEIC and the British government simply responding to economic and political developments
with no clear plan. Others see empire-building as a defi ned aim throughout
the eighteenth century or even earlier. Still others note a change in the 1740s and 1750s,
and use the transformation of Robert Clive from bookkeeper to general and governor
as a symbol of this change.
The VOC and the EEIC were not the only European trading companies in the Indian
Ocean basin. France, Denmark, Portugal, and Sweden all chartered East India Companies
modeled on and designed to compete with those of the Dutch and the English.
They were far less successful, however, because they depended more on government
support than on private investment, lacked long-range planning, and simply could not
compete with the far larger and more established Dutch and British companies.
World History
