The Dutch Republic (1581-1795) also known as the Republic of the Seven United Netherlands, was founded after the rejection of the rule of Philip 11 of Spain. In the seventeenth century, it was the richest country in Europe and it had the attributes of a modern economy with a high ratio of urbanisation, educational institutions, and the location of the birth of both the modern multinational corporation and stock exchange. However, claims that the first modern multinational, Vereenigde Oost-Indische Compagnie (VOC: 1602-1799) — United East India Company in English, but commonly known as the Dutch East India Company — is valued in current US dollars at $7.9tn, are bogus and not based on credible evidence. In 2017 the GDP (gross domestic product) of the United States was valued at $19.4tn according to the Bureau of Economic Analysis.


The English East India Company had followed its Dutch rival in adopting the shareholder model of the modern corporation and when Asia and in particular China, preferred silver rather than European produced goods in exchange for spices and tea, the companies became leading Asian traders in opium — in effect illicit drugs cartels. 

Modern economic growth began in the Netherlands two centuries before it developed in the rest of Europe according to Jan de Vries, professor at the University of California, Berkeley, and Ad van der Woude, professor at the Agricultural University at Wageningen in the Netherlands, in their comprehensive book ‘The First Modern Economy: Success, Failure, and Perseverance of the Dutch Economy, 1500-1815,’ published in 1997 by the Cambridge University Press.

The Republic was an anomaly amidst the sweep of absolute monarchies across Europe and in its early years, it was already the richest country in the world on a per capita basis. The population was about 1.5m in 1600 compared with 18m in France, 5m in Great Britain, 1m in Ireland and Spain (including Portugal) 11m. The province of Holland contributed some 45% of the Republic’s total population. The Holy Roman Empire had a population of about 21m and included most of the area of modern Germany, Austria, and Bohemia (now the Czech Republic) with many self-governing states and cities. However, it did not pose the military threat that France and England did.

The Republic was the first society in the world to exhibit all the characteristics of a modern economy; this was before both the Industrial Revolution in Britain and the French Revolution.

Updates of estimates made by Angus Maddison, the late renowned British economic historian, show that GDP (gross domestic product) per capita in the Dutch Republic in 1600 at $2,662 in 1990 international dollars, was the highest in Europe. It compared with England's $1,167 while Spain was at $892 despite its New World discoveries and over the 500-year span from 1300 to 1800, Spain's output per head remained static. The maritime Republic with historical trade links in the North Sea area did not have significant feudal traditions or ordering institutions that would stifle change and innovation. The centuries-old battle containing the sea also boosted its technological capacity and gave it a canal system linking urban areas with convenient transport by barge.

Amterdam, return ships. Spice Islands, 1599

Return to Amsterdam of Second Expedition to East Indies July 1599, Rijksmuseum, Amsterdam

The Republic of the Seven United Netherlands was a magnet for immigrants and when Louis XIV of France revoked the 1598 Edict of Nantes in 1685, rescinding the civil rights of French Huguenots (Protestants), many of the mainly skilled urban artisans fled to the Republic. Other features of a modern economy included a permanent relief system for poor residents, an advanced court and banking systems. In addition, a modern tax system drew its revenues from a broad social base and had some progressive features.

Based on data on a building worker's earnings, Jan Luiten van Zanden, the Dutch economist, has noted "real wages return to the level they had during the 1540s and 1550s, and remain at that level for more than a century and a half (between the 1580s and the 1760s). I do not find strong evidence for an increase in real wages during the Golden Age of the first half of the 17th century, nor does the decline in cereal prices which sets in after about 1660 have much of an effect on the real wage. Long run stability (but not without fluctuations, of course) seems to have been normal during the greater part of the 17th and 18th century; only after about 1760/70 do real wages begin to decline again."

Richard Paping of the University of Groningen wrote in a 2014 paper: "Already around 1400 the Netherlands was heavily urbanized, with about a third of the population living in towns. Differences in urbanisation between coast and inland were limited. However, the coastal region (Holland) experienced a phase of rapid urbanisation between 1500 and 1650 related to the Dutch Golden Age, resulting in urbanisation-rates of over 55%, while the inland urbanisation-rate was slowly decreasing. In the countryside, the coastal population increased also quite rapidly between 1500 and 1650, whereas the inland regions showed only a gradual increase. In general, the centre of gravity shifted in this period from the inland to the coastal region. After 1700 an extraordinary long phase of de-urbanisation started in the coastal region, while the slow inland de-urbanisation continued. The Dutch urbanisation-rate fell from 46% in 1700 to 37% in 1850."

Outbreaks of bubonic plague and diseases such as smallpox took a big toll on urban populations. For example, from 1635-37, the bubonic plague ravaged the Netherlands, killing 17,193 people in Amsterdam alone in 1636 (about one-seventh of the population). "It is hardly an exaggeration to say," wrote De Vries and Van der Woude, "that the Company (VOC: see below) swept the city streets of beggars and the unemployed." Of the 300,000 seamen who left for the Far East in the 17th century, about a third returned."

The Dutch government was prudent with debt and its high creditworthiness resulted in the lowest sustained interest rates in history. The yield on Dutch government bonds fell from 20% in 1517 to 8.5% by 1600 and to 4% by 1700.

The Dutch were master shipbuilders utilising innovative technology and by 1650 the 2,500 Dutch ships accounted for about half of Europe’s shipping.

They were also a power in fishing and herring caught by trawlers where the catch was salted at sea, was an important export product for the Netherlands particularly to inland areas, but also to the Baltic area offsetting Baltic grain imports.


UNESCO Map: Click for full-scale version

The yearning for spices

Besides improving the taste of food and drinks, spices for centuries were valued in Europe also for their perceived medicinal benefits. However, Europe was at the end of the mainly land trade routes from the exotic East and prices were often high because of the many middlemen involved.

Venice became the main European entrepôt for sought-after Asian spices following the defeat of its rival Italian city Genoa in the Battle of Chioggia in 1380. However, with the defeat of the Byzantine Empire and the capture of Constantinople (Istanbul) in 1453, the Ottoman Turks were a threat to the traditional trading routes from the Eastern Mediterranean. These were linked to the Silk Road land trading routes from Asia to the Levant, that had been used by Arab and Persian traders for centuries.

For the 21-year old Sultan Muhammad II (Muhammad Al Fatih in Turkish: Muhammad the Conqueror) of the house of Ottoman, seizing the capital of Eastern Christendom was a seismic event in Europe. Venetian soldiers had been among the defenders, and in 11 years 3 popes had failed to rally the rulers of Europe to support a new Crusade. By 1480 Sultan Muhammad had control of regions that comprise about 40 countries today and in July of that year thousands of Turks crossed the 75 kilometre stretch of sea from Albania, the former colony of Venice, and won control of the city of Otranto in southeast Italy. The long-feared invasion of Italy had begun. Fate or maybe faith would intervene within months and the conqueror was dead, followed by a retreat of the invading force.

As a dynastic struggle occupied Istanbul, the elites of Europe were anxious to find more reliable trading routes for spices and at reduced costs.

Portugal, a small country with the most westerly point of the European mainland, was eager to sail east and Prince Henry the Navigator (1394-1460) had built up significant knowledge on wind patterns south of the equator, off the west -coast of Africa. In 1588 Bartolomeu Dias of Portugal, sailed around Africa's southernmost point, Cabo das Agulhas, to enter the waters of the Indian Ocean.

Six years after Christopher Columbus  (Italian: Cristoforo Colombo, Spanish: Cristóbal Colón) had sailed west to find the fabled Spice Islands on behalf of the Spanish Crown and had mistaken the island of Cuba for China, Portugal again made history. Early on May 21, 1498, Vasco da Gama’s Portuguese expedition arrived off the southwestern Indian city of Calicut (now named Kozhikode), with the help of a Kenyan navigator. Calicut was not only the port city of the renowned pepper-growing region of Kerala where it originated, it had been a gateway and one of the entrepôts for the other spice growing areas of Asia. 

Ferdinand and Isabella of Spain had asked Columbus to bring back black pepper but he returned with chilli peppers that were native to Mexico. On his fourth voyage to the Americas in 1502, Columbus was introduced to cacao, the bean-like seeds from which cocoa and chocolate are made. They are native to Central America.

The opening of a new sea route down the west coast of Africa and around the Cape of Good Hope into the Indian Ocean, bypassing the Islamic world, was the dawn of the modern history of Europe and the hegemony of Portugal in Euro-Asian trade for almost a century.

Da Gama set sail for India again in 1502 to avenge the killing of Portuguese at a trading post. He had 20 ships which en route attacked Arab shipping off East Africa and back in Calicut harbour, Portuguese cannon pounded the Indian city to encourage the local ruler to agree on a trading deal.

In Asia, the port of Melaka (Malacca) on the Straits of Melaka which link the South China Sea with the Bay of Bengal in the Indian Ocean (see UNESCO map above), in the fifteenth century became the leading Asian entrepôt for pepper, nutmeg, cloves and mace that were produced on islands that are now part of Indonesia.

Anthony Reid, an economic historian who has produced impressive research on Southeast Asia, has estimated in 'Southeast Asia in the Age of Commerce, 1450-1680 Volume One: The Lands below the Winds' published in 1988, that the Malay Peninsula (part of modern Malaysia) had a population of 500,000 in both 1600 and 1800. Melaka was the biggest city in the region with a population of up to 100,000 in 1500, including its hinterland, while others put it at half that estimate. Melaka was significant as Kuala Lumpur, Malaysia's current capital didn't exist until 1857 while a census in 1824 put the population of Singapore at just over 10,000. The population of Bangkok was estimated to be 30,000 in 1822.

In the first decade of the sixteenth century, Portugal sought to copperfasten its ambition to control the European spice trade by capturing choke points into 3 significant sea routes: in 1507 it captured Hormuz at the entrance of the Persian Gulf. and in 1510 the Sultan of Melaka rejected a request by Portugal to agree to establish a trading post in the city.

The Sultanate of Melaka had control of most of the Malay Peninsula and in July 1511 the Portuguese returned with a bigger fleet, led by Admiral Alfonso de Albuquerque. ThePortuguese captured Melaka after a 40-day siege with about 1,400 men including about 400 Indian mercenaries from Goa on India's Malabar coast, where they had established a trading fort.

The Portuguese had the firepower of a fleet of 14 ships but Melaka's defences were weak and local commanders were likely also lacking.

In November 1511, having been told of the location of the Spice Islands, Albuquerque sent 3 ships and they arrived in early January 1512 in the Banda Archipelago (Kepulauan Banda in Malay) within the larger archipelago of over 1,000 islands known as Maluku (Moluccas) in the Banda Sea, in modern East Indonesia. The Portuguese were the first Europeans to visit the islands and they stayed for a month and purchased a lot of spice. Nutmeg was grown on the 10 small volcanic islands known as the Banda Islands while cloves were native to other Maluku islands such as Ambon, Seram, and Ternate. 

Eighteen months later, Albuquerque arrived from Goa at Aden with 24 ships but he was repulsed by defenders of the walled city. The admiral then headed into the Red Sea to attack Jeddah, the port city of Islam's holy cities, Mecca and Medinah, but the winds weren't favourable and he decided to withdraw. 

Aleppo and Alexandria, two of the ancient trading cities that supplied Venice with spices, fell respectively to the Ottoman Empire in 1516 and 1517.

The Economist has noted: "As waves of Portuguese explorers returned to Lisbon with their loads of spices, the Venetians and the Egyptians were stunned: the price of pepper in Lisbon fell to one-fifth that in Venice."

In 1580, Spain had seized control of Portugal, the pioneer of the Age of European Discovery, and both the Republic and England did not want their common enemy to have control of the distribution of spices in Europe.

Prof Reid has written: "Even in the second half of the fifteenth century, when the clove trade was becoming relatively reliable in a series of stages between Maluku (Spice Islands in eastern Indonesia) through Melaka, South India and the Middle East to Venice, the price was still about 100 times higher in Venice than at the production centre and about 30 times higher than in the main Southeast Asian entrepôt of Melaka. A century earlier these ratios must have been two or three times higher."

VOC trading posts, Dutch East India

Map produced by Hofstra University


For the Republic of the Seven United Netherlands despite its modernistic credentials, the downside of the hunt for spices and controlling the markets for nutmeg, cloves and mace (the fleece of the nutmeg used for nutmeg oil), was the genocide of thousands of people on tropical islands in Southeast Asia. Of course at the time Christians did not necessarily view people of colour as human.

In the 1590s the Dutch had been involved in various expeditions to Africa, Asia and Aleppo in the Eastern Mediterranean. Three failed adventures to find a northern route to India had also been sponsored. Meanwhile, England also wanted to get involved in the spice trade because its arch-enemy, the King of Spain, had restricted access to the distribution from Lisbon. Sir Francis Drake, the notorious English privateer, in his epic circumnavigation of the globe, had visited the Spice Islands in November 1579.

On New Year’s Eve 1600 Queen Elizabeth 1 signed the royal charter for the establishment of the East India Company (EIC: 1600-1874) comprising 218 merchants who subscribed £68,373 — according to the Bank of England in 2016 pounds, this was worth £19.1m. The new company, The English Company Trading to the East Indies (the then European name for Asia) was given a monopoly of trade east of the Cape of Good Hope at the southern tip of Africa. A second charter was issued in 1661. There were further changes and its demise was triggered by the Indian rebellion of 1857/58.

VOC share, 1606, Dutch East IndiaIn 1602 the States-General of the Dutch Republic chartered the Vereenigde Oost-Indische Compagnie (VOC) — United East India Company in English, but commonly known as the Dutch East India Company.

One of world's oldest surviving share certificates dating from 1606 >>>>>>>>>>>>

The VOC is regarded as the first modern multinational as in contrast with the EIC until 1657, the VOC was a departure from the single voyage financing system. The initial capital of ƒ6,429,588 guilders would remain unchanged until the VOC’s dissolution in 1799 — in 2016 euros the 1602 investment was worth €107m according to Dutch data. The VOC was granted a monopoly on trade with the Spice Islands east of the Cape of Good Hope and west of the Strait of Magellan. The Republic outsourced war-making and treaty-signing powers as the English did eventually with the EIC. The VOC’s sister company Dutch West India Company (West-Indische Compagnie: WIC) was much less successful and its focus was on slave-trading rather than spices.

The VOC’s control was split between 6 port cities (chambers) led by Amsterdam. It had transferable shares and limited liability for shareholders from the outset but obtained a permanent lock-in capital only in 1612 and limited liability for its directors in 1623 on the renewal of its charter.

Lodewijk Petram, author of ‘The World’s First Stock Exchange’ (2014) writes “In 1602, 1143 investors subscribed to the capital stock of the Amsterdam chamber. The number of shareholders increased over the seventeenth century to 1770 in the period 1679-95.”

The two East India companies in the first two decades of the seventeenth century were busy in the Banda Sea region trying to agree on monopoly supply agreements with the orang kaya (meaning rich people) native leaders. There was not one leader on the island but several headmen and they were not interested in giving the Dutch a monopoly.

In April 1609 Admiral Pieter Verhoeven (Verhoef), formerly of the Dutch navy and now a VOC employee, arrived in Banda with 13 heavily armed ships with an army of 1,000 soldiers and Japanese mercenaries. A month later he announced that the Dutch would build a fort at an abandoned Portuguese site on Banda Neira, the biggest island, despite the objections of the orang kaya. The native leaders lured Verhoeven into an ambush and killed him along with about 46 of his men.

Verhoeven’s secretary, Jan Pieterszoon Coen, escaped the ambush and 12 years later he was back as the VOC governor-general with a plan for a final solution. Most of the population of 15,000 was murdered with the help of Japanese; the nutmeg farms were given to Dutch planters and slaves were brought in to do the donkey-work.

To keep control of supply and prices, the VOC had a policy of destroying crops on islands outside their direct control.

The VOC tried but failed to monopolise the pepper market. Black pepper was native to South India and Ceylon (Sri Lanka) and was grown on Sumatra (see map) and in West Java. 

The VOC captured the pepper port of Cochin on India's Malabar coast in 1663 but Calicut would not surrender just as it had resisted Vasco de Gama 141 years before.

The Dutch East India Company planted stolen Mocha coffee seedlings on the Indonesian island of Java in 1696 and by 1730, the forced labour output was the market leader in Europe. Later slaves developed plantations in French colonies and the South American colonies of Spain and Portugal.

Despite an agreement back in Europe between the Dutch and English on trade in spices, the Dutch in Asia ejected the English East India Company (EIC) from the Pulau Run (Run Island in Malay) and some years later tortured and executed 10 EIC employes.

The EIC retained its claim of ownership of Palau Run (see below) but as it was distant from the main cluster of Banda islands, and the Dutch had the nutmeg trees uprooted there. 

In 1639 the Dutch sank most of an armada of over 70 Spanish-Portuguese ships off the coast of England, putting an end to Iberian maritime supremacy.

In Asia in 1640, at the request of the local king, the VOC ousted the Portuguese from Ceylon (Sri Lanka), the home of cinnamon, and the company got a monopoly of foreign trade, with the exception of elephants.

The Dutch then made a final attempt to seize Melaka from the Portuguese in June 1640 and in December of that year Portugal declared independence from Spain, triggering a 28-year long war.

The Dutch had an agreement with the Sultanate of Johor to share the spoils of a conquest — the Sultanate had been founded in 1528 by a son of the last Sultan of Melaka and it controlled most of the south region of the Malay Peninsula including the island of Singapura (Singapore).

A six-month siege by Dutch-Malay forces resulted in starvation, disease, death and finally capitulation.

According to the Economist, “By 1670 it  (the VOC) was the richest corporation in the world, paying its shareholders an annual dividend of 40% on their investment despite financing 50,000 employees, 30,000 fighting men and 200 ships, many of them armed. The secret of this success was simple. They had no scruples whatsoever.” 

Friso Wielenga, director of the Centre for Dutch Studies at the Westphalian Wilhelms-University in Münster, Germany writes in ‘A History of the Netherlands: From the Sixteenth Century to the Present Day’ (2015), “Between 1630 and 1670, the VOC's average annual profit was ƒ2.1m guilders, and between 1680 and 1720 it was about the same at two million guilders.... Around 1640, the volume of business done in the East Indies represented about 6% of all Dutch trade; over the subsequent decades it rose to 10% and was slightly higher at the turn of the century.

De Vries and van der Woude writes “Total dividend payments by 1650 exceeded eight times the initial investment while the VOC’s share prices rose from ƒ100 to a high of ƒ539 in 1648 and an average level of ƒ450 in the years around 1650. The total return for this investor in 1648 averaged 27% per annum (over 46 years!).”

They add: “Patience was needed because the company paid hardly any dividends in its first ten years and cleverness because its dividends until 1630 were primarily distributions in kind (pepper and spices). To achieve the returns cited above the investor had to be capable of selling these stocks at the prices declared by the VOC directors to be their wholesale value.”

“After 1650 the returns to new investors rarely exceeded by much the yield on government bonds...In sum the VOC was long a profitable enterprise but the assertion that the profits were fabulous and that Dutch capital accumulation proceeded chiefly on the back of colonial exploitation, rest on a superficial interpretation of its bookkeeping practices. The profits earned by the company’s actual equity were modest after the 1650’s and vanishingly small after 1730.”

Nutmeg price Amsterdam 1620-1770

Brian Taylor of Global Financial Data wrote in 2013:

"The dividend averaged around 18% of capital over the course of the company's 200-year existence, but no dividends were paid after 1782...The average dividends of 20-30% of capital were high, but since the price of shares traded around 400 during most of the company's existence...the actual dividend yield was around 5-7%, better than Dutch bonds."

The VOC had a small shareholder base and in 1674, an estimated 1% of the Amsterdam population, owned 45% of the household wealth while 10% owned 93%, based on tax records, according to ‘Well-Being in Amsterdam's Golden Age’ by Derek Phillips (2008).

Only households with an annual income of more than ƒ600 guilders were taxable and in 1742 77% of the city’s population were exempt.

In the eighteenth century as huge margins on spices fell, both the VOC and the now British East India Company (EIC) broadened their trading, including intra-Asian trade, to tea, coffee and textiles. The now Great Britain as an economic power and the EIC were eclipsing the Republic and the VOC. By 1700 Britain had added about 1.6m in population in the century.

According to Prof Reid, from 1650 to 1770, clove prices in the Netherlands were 14 times as high as paid for cloves — the only world source — in the Maluku Archipelago.

In the fourth Anglo-Dutch war in 1780-1784, on the pretext that the Dutch were aiding the American revolutionaries, about 200 Dutch ships were seized, immobilising the country’s shipping.

In 1770, a Frenchman named Pierre Poivre (Peter Pepper) stole clove and nutmeg seedlings from the Bandas and they ended up flourishing on Seychelles, Mauritius, Réunion, and especially Zanzibar. The EIC brought the nutmeg tree to Pulau Penang Malaya, Singapore, India, Sri Lanka, the West Indies, and most notably Grenada.

On trade with Asia, Prof Jan de Vries has said that “the VOC sent one to two million guilders worth of trade goods to Asia annually (5-10% of the value of the goods purchased in Asia) while the EIC sent rather more than this…A 1.1% annual rate of growth sustained over 300 years certainly yields an impressive total increase in the volume of trade: 25-fold. But, did this constitute a ‘trade boom’? At the end of this long era, the total volume of goods sent annually from all of Asia to all of Europe measured approximately 50,000 tons — the carrying capacity of one large container ship of today.”

The VOC had major bases of operations in Batavia (Jakarta), Fort Zeelandia (on Taiwan), and on the man-made island of Dejima in Nagasaki Harbor. Following the desire of Japan's Shogun to maintain isolation, the Dutch were the only Europeans with whom Japan traded or otherwise interacted, for the duration of the Edo period (until the 'opening' of the country after 1854).

As Asia had little interest in European products, silver, in particular, was needed to pay for Asian imports. Supplies from the Americas boosted prices in Europe while new mines in Japan also added to the supply.

In British-ruled Bengal in 1783, Warren Hastings, the governor-general, declared a full opium monopoly for the EIC to enable it to use the drugs to pay via middlemen for Chinese tea imports in defiance of China's drug laws.

When it came to wages and salaries, the VOC was stingy and at its Asian headquarters in Batavia, opium trading was outsourced to a private company to cream off the profits of the drugs trade. De Vries and van der Woude wrote: 

"Company servants who privately established the Amfioen-Soaeteit (Open Society) to sell opium to the Chinese communities earned dividends totaling some ƒ12 million guilders during the second half of the eighteenth century. None of this profit accrued to the VOC, however, and as officials with annual salaries of no more than ƒ1,200 guilders transferred home ƒ200,000 guilders at the end of their tours of duty."

In 1795, Dutch revolutionaries with the help of the French, founded the Batavian Republic (Batavia had been the Roman name for the low countries). The VOC was nationalised in 1796 and its charter was left expire in 1799. Its debt was f120m guilders, which became a state debt.

VOC’s value today equivalent to 20 global corporations!!

When Apple overtook Exxon-Mobil as the world’s most valuable listed company in August 2012 it resulted in a list of history's 9 most valuable companies, adjusted for inflation. The Motley Fool financial site reported that VOC’s “market capitalization would reach ƒ78m Dutch guilders at the height of Tulipmania, since at least a few investors must have wanted to buy something more stable than the Beanie Babies of the 17th century. That would place its modern-day valuation in the $7.4tn range, making the Dutch East India Company the largest company in history.” Its source was Yahoo Finance which linked to an Atlantic report that linked to a 2010 Bloomberg report but the Bloomberg report was about a student researcher finding a certificate for a founder share in the VOC dated Sept. 9, 1606. Auctioneers said the share, the fourth of its kind to emerge could be worth €600,000 ($764,000).

Last month a company Visual Capitalist of Vancouver, Canada, which produces digital media content for investors produced an infographic and content onThe Most Valuable Companies of All-Time.’

The company said: “Widely considered the world’s first financial bubble, the history of Tulip Mania is a fantastic story in itself. During this frothy time, the Dutch East India Company was worth ƒ78m Dutch guilders, which translates to a whopping $7.9tn in modern dollars.”

This gives a 1637 guilder conversion rate of about 100,000 to the current US dollar!!

It’s not clear how the fairytale developed that the VOC’s market cap was ƒ78m in 1637 coinciding with the end of what is sometimes called Tulipmania.

“The rage among the Dutch to possess them was so great that the ordinary industry of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade,” wrote Scottish journalist Charles Mackay in work ‘Extraordinary Popular Delusions and the Madness of Crowds’ published in 1841.

Most valuable company History, Dutch East India

Mackay was the one that was deluded.

Tulips grew wild in the valleys of the Tien Shan Mountains (at the border where China and Tibet meet Afghanistan and Russia) and had been cultivated in Constantinople since about 1100.

Anne Goldgar, professor of early modern history, at King’s College, London in her 2007 book ‘Tuplipmania’ traces the interest in tulips, in particular in special varieties. The speculation was informal and courts would not enforce contracts when interest waned in buying in early 1637. So many buyers at high prices were spared from pain.

“There weren’t that many people involved and the economic repercussions were pretty minor,” Goldgar says. “I couldn’t find anybody that went bankrupt. If there had been really a wholesale destruction of the economy as the myth suggests, that would’ve been a much harder thing to face.”

Goldgar argues that the myth of a massive bubble developed because Christian moralisers exaggerated the economic impact of the speculation and the myth has been repeated ever since by lazy financial journalists and historians.

Lodewijk Petram, author of ‘The World’s First Stock Exchange’ (2014) says “There were some 285 people actively involved in bulb trading in Haarlem, with an estimated sixty traders in Amsterdam.”

The modern valuation of the VOC is risible because:

The average share price in 1637 was only 300% of the 1602 IPO price according to Petram;
The issued capital was ƒ6,429,588 and the market cap was ƒ19.3m in 1637, not ƒ78m;
In the 17th century, the VOC share price peaked at 566% of the IPO price in 1671 and also in 1688;
In 1720, the peak year of the South Sea Company Bubble in London and the Compagnie du Mississippi/ Compagnie d’Occident Bubble in Paris, VOC shares hit an all-time peak of over 1,200% of the IPO price.

There was no Tulipmania in 1637 nor a bubble in VOC shares.

ƒ19.3m in 1637 converts to ƒ489.75m or €222.24m in 2016 according to Dutch data from 1450 provided by the Royal Netherlands Academy of Arts and Sciences (KNAW) — guilder/euro calculator.

The value in 2016 dollars of VOC at its 1637 market cap would be $236.4m.

A conversion rate of 25.4 for the 2016 hypothetical guilder and 11.5 for the euro. The dollar conversion rate would be 12.25.

Where did the 100,000 conversion rate come from?

Voc share price 1602-1698

Lodewijk Petram, author of 'The World's First Stock Exchange' (2014)

The prices for 1450-1800 are taken from Jan Luiten van Zanden, ‘The prices of the most important consumer goods, and indices of wages and the cost of living in the western part of the Netherlands, 1450-1800’ (data supplied by Jan de Vries, Jan Pieter Smits and Arthur van Riel).

The data for 1800-1913 are taken from Arthur van Riel, 'Indices of the cost of living, 1800-1913.' 

Between 1913 and 1998 the data are taken from Jan Luiten van Zanden who has created the index from CBS-indices.

From 1998 on these data are supplemented from the CBS (Dutch national statistics office) index.

The Herengracht Index

The average inflation-adjusted (real) cost of a rich person’s home in the same location in Amsterdam only doubled in the 380 years 1628-2008 while in 1928-1973 period, the ratio of the nominal value index to the real index is 10.7. 

Herengracht Amsterdam historical house pricesThe Herengracht (Gentlemen’s Canal), Keizersgracht (Emperor’s Canal, named after emperor Maximillian of Austria), and Prinsengracht (Prince’s Canal) in Amsterdam date from the 17th century and the three concentric canals (Keizersgracht is in the middle and Prinsengracht is the outermost), along with smaller radial canals, form a spiderweb pattern.

The canal project began in 1585 and the second construction phase from 1612 reflected the nouveau riche wealth of the Republic’s elite.

Piet Eichholtz, a professor of finance and real estate at Maastricht University, in the 1990’s chose the Herengracht to develop a historical house price index, based on repeat sales, as the street reflects "constant quality," as a prime property location for almost 400 years.

The index covered the period 1628-1973 and was later updated to 2008. It tracked 487 properties (excluding commercial use) compared with 614 originally, arising from the combination of lots to allow for the construction of bigger buildings.

Reflecting, plagues, wars, French occupation in the late 18th century and French annexation in the early 19th century followed by decades of stagnation; turmoil of war in the 20th century, depression and recovery after 1945, the real or inflation-adjusted level of the index in 1972/73 was 218.7 compared with 100 in 1628/29.

The nominal value rose to 2,337.2 or just over 23-fold.

Rents, house prices, Amsterdam 355 years

House Prices and Fundamentals: 355 Years of Evidence

Prof Eichholtz commented in his 1997 paper:

“However, it should be noted that this value is very dependent on the choice of the base period. For example, if I would have chosen 1632/33 as the base, there would have been virtually no real increase in index value.”

The real index value had peaked at 358.7 in 1732/33. The Index had moved ahead of the 18th-century peak in 2008, just before another slump.

Prakash Loungani of the International Monetary Fund (IMF) said in a 2010 article that “starting in the late 1990s, prices of houses in Herengracht, and more generally in Amsterdam, doubled in value in 10 years, only to begin another sharp decline (see chart).”

Herengracht Amsterdam historical house prices

The Herengracht Canal -  courtesy of

In 2018 the price of a canal house in Amsterdam depends on the size and location. The starting price is around €1,200,000 and they typically sell for around €2,500,000. Funda, a real estate agency, has a 9-room (kamer in Dutch) house on the Herengracht for sale at €3.490m for an area of 447m²;  a 6-room house on the canal is for sale at €1.595m for an area of 202m².

Research shows that in recent decades house prices in advanced economies are mainly driven by the price of land while the transport revolutions triggered by railroads and the internal combustion engine had previously helped to keep the price of land for housing low through increasing the supply of development land.

What is striking in rich countries is that despite variation in country by country housing policies, there has been a persistent rise in house prices in the long-term since the 1960s when house prices rose from pre-1914 levels. There have been booms and busts but Germany and Portugal are the only countries showing a negative inflation-adjusted (real) rise over 48 and 28 years respectively while Switzerland had the lowest (55%) real rise in 45 years - 57% of Swiss rent and 48% of Germans.

Research covering 14 advanced economies covering the period 1870-2010 shows that land prices have been the main drivers of house prices in recent decades.

Bank for International Settlements data show that in 1970-2016 (46 years) Irish house prices rose a real 175%; France rose 178% in 51 years; Sweden, Netherlands, Austria rose 165% in 45 years, 173% in 42 years and 173% in 30 years. Finland and Denmark rose 81% and 94% in 46 years.

The big risers were the UK at 405% (45 years); Australia 373% (56 years) and Norway 304% (67 years).

The average annual rise for 20 countries was 6.8% in nominal terms and 2.2% in real terms.

Pulau Run, nutmeg, Manhattan

Postscript on Globalisation and Pulau Run, Banda Islands

The Duke of York, a brother of King Charles II and the future King James II of England, was head of the Royal Navy in 1664 during the Second Anglo-Dutch War when the New Netherland surrendered at the urging of local merchants. The colony was renamed New York and the New Amsterdam settlement was also named New York.

Nutmeg, Mace, BandaIn 1667 the Dutch sailed into the Thames Estuary and attacked a Royal Navy base, setting fire and sinking several ships. The towing back to the Netherlands of the flagship HMS Royal Charles was a great humiliation.

At peace talks in Breda, the Netherlands offered the English to return New Netherland but the Dutch refused and made a counteroffer in respect to a much smaller island than Manhattan: Drop the claim to Palau Run in the Banda Islands!

Pulau Run is again growing nutmeg (pala in Malay) trees but it's no longer the sole location for the two spices that the trees produce. However, Indonesia still dominates production at 75% followed by Grenada, a former Carribean British colony at 20%. The latter has even the nutmeg on its national flag!

There is no monopoly price today.

Modern life on the Banda Islands maybe better than in New York or not. It's at subsistence level and apart from spices, fishing and some tourism provide income.

Caucasians visit today to dive and snorkel on coral reefs. To locals, faraway hills are green but their own are as well.

Banda Islands, Indonesia

In contrast to Pulau Run, the city of Melaka has a population of about a half million today.

It was ruled by the Portuguese in 1511-1641; the Dutch in 1641-1795 when the British East India Company (EIC) took control during the French Revolutionary period. The Dutch resumed control in 1818 until 1824 when they traded with the British an area in Sumatra, for the Malay Peninsula. The British took full control in 1825-1957. The EIC had previously negotiated in 1786 with the Sultan of Kedah, the purchase of Pulau Pinang (renamed Prince of Wales Island), located at the northern entrance to the Straits of Melaka, and Stamford Raffles of the EIC in 1819-1824 had agreed with the Sultan of Johor and the governor of Singapore, the surrender of the island in return for annual payments from the EIC.

The Dutch had traded tin that had been mined on the Malay Peninsula but under British rule, Malaya became the world's top producer of tin following an influx of Chinese immigrants. It became a big producer of rubber by developing big plantations with workers from British India. Brazilian seedlings had been dispatched from London's Kew Gardens in the 1870s.

The name "Malaysia" was coined by a Frenchman but its official usage dates from 1963.

Jules-Sébastien-César Dumont d'Urville (1790-1842), a French explorer who travelled to the South Sea in the 1820s, in maps named island groups as Malaysia, Melanesia, Micronesia, and Polynesia.

Malaysia had a GDP per capita of USD$9,400 in 2016 compared with Thailand at $6,200 and Indonesia at $3,600. Nepal was at $850 and Singapore was at $53,000.


The history of the Republic of the Seven United Netherlands shows that the Industrial Revolution wasn’t a sudden ‘Great Divergence,’ from economic development where the standard of living of the population, did not differ much between Western Europe and the rest of Eurasia in particular, China, Japan, and maybe also India.

The Vereenigde Oost-Indische Compagnie (VOC) can justifiably be called the first multinational even though until the nineteenth century it was a rarity for companies, without state backing, to raise funds on a stock exchange.

The 1720 bubbles e.g. South Sea Company, resulted in a stalling in interest in stock exchange floatations for about a century in Britain, France and the Netherlands. The UK’s Bubble Act of 1720 prohibited companies that didn’t have a royal charter to float. It would take until 1855 for a Limited Liability Act to be passed by the British Parliament.

As for comparing the VOC with modern corporations, current day market capitalisation does not work — the VOC share price only once had a significant peak and that was in 1720 while the conversion rate of guilders to current US dollars is not 100,000!

Maybe most powerful ever? No!

In 2016 the BBC gave this accolade to the British East India Company — operating as a joint-stock company from 1657 with transferable shares, it received the effective surrender in India of the young Mughal emperor Shah Alam in 1765.

The EIC had a standing army of 260,000 men in 1803, according to William Dalrymple, the writer and historian.

The VOC did have a big impact but hardly in the long sweep of history. See a summary here that was compiled for UNESCO.

Edmund Burke, the Irish-born member of the House of Commons, attacked the EIC as “a state in the disguise of a merchant.”  

It ruled a fifth of the population of the planet and its annual revenues were greater than Britain’s.

Coen, the Butcher of Banda had written in 1614 to the VOC board, which was called the Heeren XVII  “we cannot carry on trade without war or war without trade.”

Just like the modern multinational which demands public subsidies or blind eyes turned to tax manipulation as part of the duty of profit maximisation, the VOC stated that its duty was to the shareholders even it required dealing with an enemy of the state.   

In 1644 the VOC made clear to the States-General that “the places and strongholds we have captured in the East Indies should not be regarded as national conquests but as the private property of merchants, who were entitled to sell those places to whomsoever they wished, even if it was to the King of Spain, or to some other enemy of the United Provinces.”  

Within a time span of twenty years, three statues were erected for Jan Pieterszoon Coen, the first appearing in Batavia (modern Jakarta) in 1876, the others in Amsterdam (1883) and Hoorn (1893).

The council in Coen's birthplace of Hoorn placed a new plaque under the Butcher of Banda's statue five years ago, acknowledging his bloody history.