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When The Dutch Ruled The World: The Rise & Fall of the Dutch East India Company - YouTube
Channel: Business Casual
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The Netherlands: a tiny European country that
is actually one of the wealthiest and most
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important economic centers of the continent.
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The surprising success of the Dutch is invariably
tied to one company, which was arguably the
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greatest and most successful one in history.
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Today, we鈥檒l see how the Netherlands transformed
from swampy backwater into a global trading
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empire thanks to the Dutch East India Company.
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This video is brought to you by Cheddar, who
made a video about a different kind of spice
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than the ones the Dutch were trading, but
when you鈥檙e finished here make sure to check
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out their channel.
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The Netherlands today might be an economic
powerhouse, but back in the 16th century,
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well, it wasn鈥檛 doing too great.
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To start things off, it wasn鈥檛 even independent:
instead it was under the domain of the Spanish
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Empire.
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As one of the earliest European colonizers,
the Spanish Empire controlled vast territories
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across the world and used the money it gained
from slavery and trade to fund numerous wars
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of conquest and suppression.
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The Netherlands ultimately became victim of
one such war: they had became part of the
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empire unwittingly due to marriage and spent
the next 80 years trying to break free.
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But the Dutch independence effort ran into
a big problem very early on.
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You see, the Dutch were a seafaring people:
fishing and mercantile shipping was their
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thing and they had been doing it for centuries.
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The main goods they shipped were spices coming
from the Far East, but this was before the
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Dutch had any colonies of their own.
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Back then Portugal held a virtual monopoly
on the spice trade, controlling all the major
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trade routes to Asia and back.
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Thus, what the Dutch did was to buy all their
spices from Lisbon and then ship them around
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Europe to sell them at a profit.
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But Portugal was absorbed into the Spanish
Empire in 1580 and, of course, the first thing
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the Spanish did was to close off Lisbon to
the Dutch merchants.
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Suddenly the main artery of the Dutch economy
had been cut off and there was really only
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one thing the Dutch merchants could do: they
had to sail to Far East and build their own
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trading network.
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At first this effort was very decentralized:
merchants from various Dutch cities would
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establish companies for single voyages.
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Essentially, they would fund a few ships and
their sailors and they would send them off
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to find a new trade route to the Far East.
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Some missions were successful and came back
with lots of spices, but most did not go very
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smoothly.
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During the first six years of the expedition
effort a total of 65 ships were sent out.
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1 in 10 never made it back, and those that
did, came back with only a third of their
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crew on average.
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Suffice to say, being a sailor in these early
fleets wasn鈥檛 a very safe job.
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Nevertheless, these early voyages gave the
Dutch the knowledge and experience on how
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to establish a more permanent trading network.
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But coordinating individual merchants, each
of whom was competing with the rest, is difficult
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to say the least and with the English, Spanish
and Portuguese all trying to create their
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own trading empires, the Dutch knew that they
had to band together.
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In 1602 under the patronage of the Prime Minister
of Holland, the various expedition companies
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united into a single company with vast sovereign
power.
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It鈥檚 name wasn鈥檛 the Dutch East India
Company, even though that鈥檚 how we call
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it today.
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It was actually called the United East India
Company, or VOC for short and its creation
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marked a new chapter in the history of the
Netherlands.
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The political motivations were clear: the
Dutch needed a new economic engine to fight
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off the Spanish and to restore their wartorn
country.
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The VOC was their only hope which is why it
was granted not only a monopoly on trade,
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but also the ability to train its own army,
to negotiate and declare war, to occupy land
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and even to enforce slavery.
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But just getting permission to do all these
things meant nothing if the VOC couldn鈥檛
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actually do them, and to conquer the Far East
would require a lot of capital.
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The VOC, however, figured out an ingenious
solution, which would later on become the
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cornerstone of modern capitalism.
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In the center of Amsterdam, the VOC built
a trading house, where every Dutch citizen
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could go and buy shares of the company, effectively
giving the VOC money now in exchange for a
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claim on its profits in the future.
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The VOC had effectively created the world鈥檚
first stock market and the VOC itself had
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become the first publicly-traded company in
history.
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Pretty much every rich man in the Netherlands
invested in the VOC and even many immigrants
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did so.
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In total, the VOC鈥檚 initial public offering
raised over 6 million guilders, which is equivalent
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to about $110 million today.
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And keep in mind, this is coming from a country
that鈥檚 half-occupied by Spain and whose
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economy had been in the drain for a decade.
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Of course, circumstances were favorable to
the Dutch: the Spanish Empire was at war with
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England at the time, allowing the Dutch to
sweep into the Far East and kick out the Portuguese
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establishment.
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The first victim of the VOC鈥檚 colonial ambitions
was Indonesia: the Dutch conquered modern-day
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Jakarta in 1611, slaughtering the locals and
building vast spice plantations on nearby
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islands.
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With the island of Java as its headquarters,
the VOC spread throughout the Far East.
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Their factories in India produced exquisite
silks and fabrics, which the VOC then shipped
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to Japan to trade for their famous and crucial
supply of silver.
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The VOC got silk from China as well, which
also produced valuable porcelain.
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What matters though, is that the profits margins
the VOC earned by monopolizing these trade
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routes were as high as 1500%, and all of this
money was of course being funneled into the
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Netherlands.
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They finally won their independence in 1648
and with that out of the way the VOC鈥檚 profits
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were invested in one type of project unique
to the Netherlands: land reclamation.
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You see, the Netherlands is extremely flat
and is below sea level, which makes it prone
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to flooding; but, if you build dikes and keep
the water out, you can turn swamps into farmland
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and that鈥檚 exactly what the Dutch did with
their VOC profits.
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Just by looking at the geography you can tell
when the VOC was running at full force.
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In total, over one and a half thousand ships
sailed for the VOC during its two centuries
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of existence and its influence is still felt
to this day.
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Many former Dutch colonies, for example, still
bear the scars of the oppression they suffered.
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But the VOC has other interesting legacies
that few people know.
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Cape Town, for instance, started out as a
VOC resting station in 1652.
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A decade earlier, a VOC merchant discovered
two big land masses south of the Dutch Indies.
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He called them New Holland and New Zeeland
and you can guess which name stuck and which
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one didn鈥檛.
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But in any case, just as the ideal set of
circumstances gave the Dutch the opportunity
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to become a colonial empire, a perfect storm
in the late 18th century ended up destroying
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the VOC.
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To start things off, the Dutch lost a disastrous
war against the British in 1784 which disrupted
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the VOC鈥檚 network in Asia.
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Then, just a decade later, the newly-created
French Republic invaded the Netherlands and
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conquered them.
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WIth the British attacking in Asia and the
French attacking at home, the VOC really had
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no chance and officially went into bankruptcy
in 1799.
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Sadly, without the spice trade the Netherlands
lost their status as a global power.
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And speaking of spice, Cheddar (who were kind
enough to sponsor this episode) made a great
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video on how Old Spice was saved by one of
the most iconic marketing campaigns in recent
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history.
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If you don鈥檛 know, Cheddar鈥檚 channel covers
business and technology in fun bite-sized
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videos that leave you craving for more, so
if you haven鈥檛 seen them go check out their
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channel, watch the video and consider subscribing
if you wanna see more.
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In any case, thank you for watching.
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If you liked the story of the VOC consider
liking the video and subscribing if you haven鈥檛
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already.
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We鈥檙e gonna see each other again in two
weeks, and until then: stay smart.
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