Posts Tagged ‘Trade’

Dutch Bavaria 17th CenturyWe have reached the early 1600’s on our journey in search of the Land Down Under…

No longer is Asia a lonely place for Europeans. The seas are gradually being tamed, but what of the locals and the competition?

The year 1602 is especially significant for it bought a new power into the Indian Ocean. And it came came forth with all the fury of an angry storm sweeping across the Indian Ocean..

This was the year the Dutch East India Company was created. This company was effectively granted what could be called “extra governmental authority”. It was a government within a government, created for national, political and economic purposes. Perhaps the first ever private army, fully owned and operated by the Dutch public.

The Dutch East India Company charter presented the company with a monopoly over trade in the Indian Ocean, with the rights to make war and peace, administer justice, coin money and levy troops. With huge profits to be made controlling the trade between East and West  (spices, opium, Chinese porcelain etc.) armed protection became a feature of the Dutch East India Company (and the British East India Company). Indeed,the company soon controlled an armed force that dwarfed the one back at home.

It was estimated that at its height the Dutch East India Company possessed some 50,000 civilian employees, an army of 40 warships, up to 20,000 sailors and perhaps 10,000 solders.

The Vereenigde Oost-Indische Compagnie, as it was known locally, was granted a 21 year monopoly on trade in the Indian Ocean. The rational for such a monopoly, it must be said, was sound. Single voyages were high risk, and such risks were best shared. Also, prices need to be managed. To much product at one time could see prices tumble. So supply and demand needed to be balanced.

So in 1602 stock was issued for the first time. This raised some 6.5m guilders from the public (a huge sum) with the company also able to issue bonds to finance its short term funding requirements (creating a template for the modern stock exchange) .

Within a few years Dutch Trading Posts began to be established across Asia. The first was in Indonesia.

By 1610 it was thought necessary to appoint a Governor General for Asia, and soon after the Dutch East India Company began to flex its muscle to achieve its economic ambitions.  In Jakarta they expelled Banten forces at gun point to establish Batavia and a centre for the companies activities in Asia. They also deported the native inhabitants of the Banda Islands (source of nutmeg) with an ambition of using slave labour.

By the mid 1600’s the Company was well on the way to dominating Indian Ocean trade, with trading posts established from Iran, to India, South Africa and Siam (Thailand), to name but a few…

With the scent of profit in the air, the waters north of the Great Southern Land were transforming into an economic and political battleground. Not a time for the faint hearted, nor for the locals, caught on the wrong side of the ledger…


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Edward III seal Let’s take a small digression on our journey to the Great Southern Land…

As we have seen, the Spanish and the Portuguese have moved out into the Indian Ocean on their journeys of discovery.

Soon the English and the Dutch will enter our south sea adventure, and in the process, the English will create arguably one of the most successful trading companies the world has ever known, The British East India Company.  A company that eventually not only dominated global trade, but rules millions of people across the globe.

But first, let’s look at the origins of the British taking to the seas…

The first tentative steps are taken in England, around beginning of the 14th century…

The English in trade are largely inward looking. Local Guilds dominate local trade and manufacturing activities, while overseas trade is largely in the hands of foreigners. What overseas trade that occurs is largely in the hands of foreigners, and uncoordinated from a national perspective. The seas are high risk, they have no refined laws, while the typical merchant displays more than a streak of the pirate in his competitive actions.

This all begins to change when, in 1341, Edward III establishes by decree the Staple of Wool and other Merchandise. He signs this decree the year after his destruction of the French fleet at the battle of Battle of Sluys. It is probably still in his mind that the fleet involved in his victory were mostly hired merchant ships.  No doubt, having no organised navy, any growth in English controlled trade will reduce his risk of a successful invasion.

Edward  III decrees states clearly that this critical trade with Flanders should be ordered and controlled. And the nature of that control should be self control.

Edward directs all those merchants involved in overseas wool trade through Bruges in Flanders to elect a mayor and constables and enforce the “rules of trade” covering behaviour, location and (of course) the levying of tax’s for the Crown’s benefit. There is no shared capital; rather they raise fees from members to cover running costs in return for access to a nationally endorsed trade monopoly.

So essentially national interests, as opposed to a pure mercantile hunger, create the first structured English approach to overseas trade, and the first form of a regulated overseas trading company.

In 1407 the Merchant Adventurers establishes itself under the sponsorship of Henry IV.  As Henry provides the royal charter he is well aware that all the recent naval victories of Edward III and Richard II are due to pressed merchant fleet.

So, for the time being, with only two ships at royal disposal, the Crown must promote and support overseas trade. It was in everyone’s interest…

So launches a glorious, and sometimes inglorious, English sea-born adventure…

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