Nature and Character of European Commerce
Role of Portuguese Companies
The Portuguese maritime enterprise during the fifteenth century culminated with Vasco da Gama’s voyage to India. For the very first time in the history of mankind, East and West were linked by sea, event that brought about a revolution in the world trade, and opened the door of new territories for the expansion of European maritime powers.
By the end of the sixteenth century, the Portuguese Crown progressively faced the challenge and competition of the fleets of the northern European countries, in particular from the Netherlands and from England.
The decline of the trade with the Far East, in the beginning of the seventeenth century, among other reasons, led to the creation of the Portuguese East India Company in 1628. The outcome of the Company’s business cannot be considered a success, on the contrary.
In fact, due to noteworthy problems of undercapitalization, the company did not endure as long as the period for which it was initially established. It was dissolved five years after its incorporation. However, the importance of the Portuguese East India Company cannot be judged only by its commercial success.
In spite of its short life, the conception and subsequent incorporation of the Company represented a milestone in the historical origins of Portuguese companies and of Portuguese company law.
Following a long and difficult process of organization, at last the Company came into daylight. The King Filipe III granted the constitutional document setting up the long wished trade company.
The lack of interest shown in investing in the future Company, throughout all the period of its formation (since the King Filipe III’s Royal Charter of 1624 until the date of incorporation in 1628), was somewhat a prediction about its future short life. The exact same difficulties in raising investments for the Company led to the undercapitalization that determined its premature end.
In order to make the Company attractive for private investors, the King granted the Company a set of privileges, the most important among them was the monopoly of the pepper trade, curiously included in the list of assets that were part of the consideration due by the King.
Other monopolies were given to the Company, to complement the pepper monopoly and to make it even more attractive for investors, like the monopoly of trade in coral, ebony and cowries, and if the Company was interested, also the monopoly of the cinnamon.
An appealing benefit awarded to the Company was related to the product of the conquests and pillages achieved by the Company’s vessels. One fifth of the sack should have been distributed among the captains and soldiers. The other four fifths of the value of the sack were property of the Company. Territorial conquests made by the Company’s fleets were considered as belonging to the Crown. This provision constituted a powerful incentive for a belligerent approach in relation to other ships and to the indigenous peoples.
The Company struggled from the beginning with the scarcity of the capital that was needed to undertake its assignment. In that period of almost five years only fifteen ships were equipped and sent to the Orient. Out of these fifteen ships only seven completed the round trip to Lisbon.
This extremely poor performance led to the virtual bankruptcy of the Company. Half of the capital invested in the Company had simply vanished. The Company was dissolved on 13th of April of 1633, through a Royal Charter.
Dutch East India Company
The Dutch East India Company was founded in 1602 and remained active until 1799.
The Dutch name was Vereenigde Oost-Indische Compagnie, what literally means the United East Indian Company.
Formed as a combination of mercantile organizations from various cities in Holland and Zeeland, the Company was involved in commerce in Asia itself, as well as between Europe and Asia. It grew to become the largest trading and transport enterprise in the world.
In the sixteenth century trade with Asia was mostly controlled by Portugal. By the end of the century the English and Dutch also managed to get a hold on trade in Asia and broke the Portuguese supremacy.
The first Dutch ships completed the return voyage from Asia in 1597. Soon after, more expeditions to Asia were organized. To be able to compete with the English and the Portuguese, the government under the leadership of Johan van Oldenbarnevelt, took the initiative to establish a cooperative venture out of the small trading companies and granted them a monopoly to trade with Asia.
This new company was organized as a shareholder company. The chairmen of the board were all rich and important men.
A first expedition under the command of Cornelis de Houtman and Peter Dirkz Keijzer sailed to “the East” in 1595/1596, resulting in the Dutch having their sea route to the Indies: everything east of the Indus River. Several companies were started for trade with the east. They competed fiercely with each other. This decreased profits and no one could stand against enemies such as the Portuguese. Therefore under political pressure all companies were united to the Dutch East India Company.
This commercial enterprise had the exclusive right (patent) on driving trade from the Netherlands to all land east of the Cape of Good Hope4. It founded factories in the east. These were fortified trading settlements with warehouses, administration of justice, law, etc.
Starting from these factories, it obtained spheres of influence or even occupied territories. In this way the Company, which was in the Netherlands only a trade company, had real sovereignty rights in these territories of the “East”. So, it had the right of declaring war and concluding a peace treaty.
All this was dominated by trade, namely to obtain spices for the lowest possible price. For this aim, contracts were signed with native princes. In such a contract was fixed that spices only should be delivered to the VOC. In exchange, the native rulers were military supported by the VOC.
By mutual rivalry between two princes the Company offered aid to one of them, mostly the weakest. Only with the help of the Company this prince could go on fighting. So he was dependent. His opponent also started negotiations to get rid of the problems. An exclusive contract gave the Company a monopoly on spices.
English East India Company
Between the early 1600s and the mid-19th century, the British East India Company lead the establishment and expansion of international trade to Asia and subsequently leading to economic and political domination of the entire Indian subcontinent.
It all started when the East India Company, or the “Governor and Company of Merchants of London trading with the East Indies”, as it was originally named, obtained a Royal Charter from Queen Elizabeth I, granting it “monopoly at the trade with the East”. A joint stock company, shares owned primarily by British merchants and aristocrats, the East India Company had no direct link to the British government.
Through the mid-1700s and early 1800s, the Company came to account for half of the world’s trade. They traded mainly in commodities exotic to Europe and Britain like cotton, indigo, salt, silk, saltpetre, opium and tea.
Although initial interest of the company was aimed simply at reaping profits, their single minded focus on establishing a trading monopoly throughout, made them the heralding agents of British colonial Imperialism.
For the first 150 years the East India Company’s presence was largely confined to the coastal areas. It soon began to transform from a trading company to a ruling endeavor following their victory in the Battle of Plassey against the ruler of Bengal, Siraj-ud-daullah in the year 1757.
Warren Hastings, the first governor-general, laid down the administrative foundations for the subsequent British consolidation. The revenues from Bengal were used for economic and military enrichment of the Company.
Under directives from Governor Generals, Wellesly and Hastings, expansion of British territory by invasion or alliances was initiated, with the Company eventually acquiring major parts of present day India, Pakistan, Bangladesh and Myanmar.
In 1857, the Indians raised their voice against the Company and its oppressive rule by breaking out into an armed rebellion, which historians termed as the Sepoy Mutiny of 1857. Although the company took brutal action to regain control, it lost much of its credibility and economic image back home in England.
The Company lost its powers following the Government of India Act of 1858. The Company armed forces, territories and possessions were taken over by the Crown. The East India Company was formally dissolved by the Act of Parliament in 1874 which marked the commencement of the British Raj in India.
The British East India Company was formed to claim their share in the East Indian spice trade. The British were motivated the by the immense wealth of the ships that made the trip there, and back from the East. The East India Company was granted the Royal Charter on 31 December, 1600 by Queen Elizabeth I. The charter conceded the Company monopoly of all English trade in lands washed by the Indian Ocean (from the southern African peninsula, to Indonesian islands in South East Asia).
British corporations unauthorized by the company treading the sea in these areas were termed interlopers and upon identification, they were liable to forfeiture of ships and cargo. The company was owned entirely by the stockholders and managed by a governor with a board of 24 directors.
The first voyage of the company left in February 1601, under the commandership of Sir James Lanchaster, and headed for Indonesia to bring back pepper and fine spices. The four ships had a horrendous journey reaching Bantam, in Java in 1602, left behind a small group of merchants and assistants and returned back to England in 1603.
The second voyage was commandeered by Sir Henry Middleton. The third voyage was undertaken between 1607 and 1610, with General William Keeling aboard the Red Dragon, Captain William Hawkins aboard the Hector and the Captain David Middleton directing the Consent.
The Company’s ships first arrived in India, at the port of Surat, in 1608. In 1615, Sir Thomas Roe reached the court of the Mughal Emperor, Nuruddin Salim Jahangir (1605–1627) as the emissary of King James I, to arrange for a commercial treaty and gained for the British the right to establish a factory at Surat. A treaty was signed with the British promising the Mughal emperor “all sorts of rarities and rich goods fit for my palace” in return of his generous patronage.
Trading interest soon collided with establishments from other European countries like Spain, Portugal, France and Netherlands. The British East India Company soon found itself engaged in constant conflicts over trading monopoly in India, China and South East Asia with its European counterparts. Losing horribly to the Dutch, the Company abandoned all hopes of trading out of Indonesia, and concentrated instead on India, a territory they previously considered as a consolation prize.
Under the secure blanket of Imperial patronage, the British gradually out-competed the Portuguese trading endeavor, Estado da India, and over the years oversaw a massive expansion of trading operations in India.
The British Company’s win over the Portuguese in a maritime battle off the coast of India (1612) won them the much desired trading concessions from the Mughal Empire.
In 1611 the Company’s first factories were established in India in Surat followed by acquisition of Madras (Chennai) in 1639, Bombay in 1668, and Calcutta in 1690.
The Portuguese bases at Goa, Bombay and Chittagong were ceded to the British authorities as the dowry of Catherine of Braganza (1638–1705), Queen consort of Charles II of England.
Numerous trading posts were established along the east and west coasts of India, and most conspicuous of English establishment developed around Calcutta, Bombay, and Madras, the three most important trading ports. Each of these three provinces was roughly equidistant from each other along the Indian peninsular coastline, and allowed the East India Company to commandeer a monopoly of trade routes more effectively over the Indian Ocean.
The company started steady trade in cotton, silk, indigo, saltpeter, and an array of spices from South India. In 1711, the company established its permanent trading post in Canton province of China, and started trading of tea in exchange for silver. By the end of 1715, in a bid to expand trading activities, the Company had established solid trade footings in ports around the Persian Gulf, Southeast and East Asia.