6 - The English and Dutch East Indies companies: how the East was won

Summary

The East India companies of the Dutch and of the English represented the most successful examples of merchant organization in the early modern era. Both exploited the possibilities of long-distance trade in highly valued exotic goods from the Orient to western Europe as well as seaborne traffic in the Asian trading world and, eventually, the potential for extracting taxes and tribute within Asia. Both confronted the problems of long voyages, delays in communications, political and commercial competitors in both Europe and Asia, and uncertain control over their agents. It was most likely the combination of the large scale of their operations, the long distances, and the lengthy transit times that led to the most important institutional innovation made by the two companies: the transformation of merchant trading or working capital committed initially to the duration of a particular voyage into fixed or permanent capital committed perpetually to the enterprise. The transformation was effected quickly by the Dutch company, apparently by 1612, whereas the English company had certainly made the transition by 1659.

After that transformation, both companies were joint-stock corporations whose shares were actively traded in surprisingly modern stock exchanges in both Amsterdam and London. The daily prices for the English company's shares are available from 1698 on, and the every-other-day prices for the Dutch shares are available for at least the period 1723–94. These are used later to weigh the relative importance of organizational, commercial, and political factors in determining the fortunes of each company over the course of the eighteenth century, when the English company overtook the Dutch.