VERGAAN ONDER CORRUPTIE … Dutch East India Company (VOC) – Decline and Fall

by Mansell Upham

VERGAAN ONDER CORRUPTIE  …

Dutch East India Company (VOC) – Decline and Fall

Formal decision (18 March 1798) to wind up the VOC

Socio-economic changes in Europe, the shifts in balance of global power, and unsuccessful financial management result in the slow decline (1720-1799) of the VOC – compounded by the financially disastrous 4th Anglo-Dutch War (1780–1784) – result in the Company first being nationalised (1796), finally, dissolved (1799), and all its assets taken over by government with the VOC territories – as well as its colony at the Cape of Good Hope – becoming Dutch government colonies.

After 1730, the fortunes of the VOC begin to decline. Five major problems – not all of equal weight – explain its decline (1750-1780):

1. The steady erosion of intra-Asiatic trade, volume and profitability drastically shrink – the changes in Asiatic political and economic environment that the VOC cannot withstand and the Company is squeezed out of Persia [Iran] and India (Surat, Malabar Coast, and Bengal) confining its operations to the belt it physically controls – from the Cape of Good Hope [South Africa] and Ceylon [Sri Lanka] through to the Indonesian archipelago.

2. Company organisation in Asia (centralised on its hub Batavia [Jakarta]), initially offers advantages in gathering market information, but causes disadvantages in 18th century due to the inefficiency of 1st shipping everything to this central point as well as tea trade where competitors like the English East India Company (EIC) and Ostend Company ship directly from China to Europe.

3. The venality / personal greed of the VOC’s personnel (corruption and non-performance of duties) plagues the VOC on a larger scale than competitors. Low salaries and prohibition of “private-account trading” result in private trade proliferating in the 18th century and seriously undermining the Company’s performance.

From about 1790s onward, the phrase ‘perished under corruption’ (vergaan onder corruptie, also abbreviated VOC in Dutch) sums up Company’s future.

4. The high mortality and morbidity rates among employees decimates the Company’s ranks enervating the survivors.

5. The VOC’s dividend policy – self-inflicted wound. Dividends distributed by Company exceed (1690-1760) surplus garnered in Europe in every decade but one (1710–1720).  In the period up to 1730, directors ship resources to Asia to build up trading capital there. Consolidated bookkeeping therefore probably would have shown that total profits exceeded dividends. In addition, between 1700 and 1740 Company retires 5.4 million guilders of long-term debt and still on a secure financial footing in these years. This changes (after 1730). While profits plummet the bewindhebbers only slightly decrease dividends from earlier level. Distributed dividends are therefore in excess of earnings in every decade but one (1760–1770). To accomplish this, Asian capital stock has to be drawn down by 4 million guilders (1730-1780), and liquid capital available in Europe is reduced by 20 million guilders in same period. Directors are therefore constrained to replenish Company’s liquidity by resorting to short-term financing from anticipatory loans, backed by expected revenues from home-bound fleets.

Despite these problems, the VOC remains (1780) an enormous operation. Its capital in the Dutch Republic, consisting of ships and goods in inventory, totals 28 million guilders; its capital in Asia, consisting of the liquid trading fund and goods en route to Europe, totals 46 million guilders. Total capital, net of outstanding debt, stands at 62 million guilders. Prospects of Company at this time therefore are not hopeless had plans for reform been undertaken successfully.

However, the 4th Anglo-Dutch War intervenes. British attacks in Europe and Asia reduce the VOC fleet by half, remove valuable cargo from its control, and undo its remaining power in Asia. Direct losses of the VOC can be calculated at 43 million guilders. Loans to keep the Company operating reduce its net assets to zero.

From 1720 onwards, the market for sugar from Indonesia declines as competition from cheap sugar from Brazil increases and European markets become saturated. Dozens of Chinese sugar traders go bankrupt, which leads to massive unemployment, which in turn leads to gangs of unemployed ‘coolies’. The Dutch government in Batavia does not adequately respond to these problems.

In 1740, rumours of deportation of gangs from Batavia area lead to widespread rioting. Dutch military search the houses of the Chinese in Batavia for weapons. When a house accidentally burns down, military and impoverished citizens slaughter and pillage the Chinese community. The Massacre of the Chinese is sufficiently serious for the VOC’s 1st official investigation in its history into the government of the Dutch East Indies.

After the 4th Anglo-Dutch War, the VOC is a financial wreck.

After vain attempts at re-organisation by the provincial States of Holland and Zeeland, it is nationalised by the new Batavian Republic (1 March 1796). The VOC charter is renewed several times, but allowed to expire (31 December 1799).

Most possessions of the former VOC are subsequently occupied by Great Britain during the Napoleonic Wars, but after creation of the new United Kingdom of the Netherlands by the Congress of Vienna, some are restored to its successor state of the Dutch Republic by the Anglo-Dutch Treaty (1814).

Despite the VOC’s innumerable and outstanding historical successes and contributions to global modernity, the Company has become increasingly criticized for:

* its quasi-absolute commercial monopoly,
* colonialism,
* exploitation (including slave labour),
* extending geographically the slave trade and global slavery by capitalizing on earlier institutionalized Muslim and traditional indigenous African-Asian slave societies,
* use of violence,
* environmental destruction (including deforestation), and
* its overly bureaucratic organizational structure

serving as a major portent of the perceived evils of, inter alia:

* eroded nation-state sovereignty,
* the European Union (EU)
* neo-colonialism
* economic imperialism
* geographically contained trade blocs
* the United Nations (UN)
* World Government and/or
* a spiralling global corporate tyranny created by ‘neo-liberal’ capitalism …

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