The Rise of the East India Company

FROM THE LECTURE SERIES: Turning Points in Modern History

By Vejas Liulevicius, Ph.D., University of Tennessee, Knoxville

The establishment of the English East India Company played a crucial role in shaping the modern commercial world. It is one of the turning points in history that set the trend for a modern way of conducting trade. It also helped England establish its Empire.

A cargo ship of Dutch East India Company.
The Dutch East India Company was a powerful rival to the English East India Company. (Image: Kiev.Victor/Shutterstock)

How Was the English East India Company Founded?

In the late 16th century, there was a growing rivalry among the European countries to venture into the East. The goal was to trade spices, which had proved to be hugely profitable – so much so that some countries like Spain and Portugal had built vast trading empires out of this venture.

This was an opportunity that the English did not want to miss out on. So, on New Year’s Eve, 1600, a group of 218 merchants pitched their idea to the Queen and she granted them a royal charter. Based on this charter, the merchants were allowed to trade in the East Indies as a company for 15 years. It was an autonomous entity with the permission to enforce laws to defend itself and advance its trades to the best of its ability. This way, England made its way through spice trading to becoming one of the most powerful empires in the world.

Learn more about the adventures of Zheng He.

The Dutch East India Company

The English East India Company was not the only company of the kind to conduct trade in India. In fact, it had a very powerful rival called the Dutch East India Company. It was known as the VOC, which was the acronym of Vereenigde Oost-Indische Compagnie, its name in Dutch. Although it was two years younger than the English East India Company, it had flourished dramatically. It had grown 10 times bigger than the English East India Company.

The secret to the success of the VOC was that it had an advanced system of organization and financing. Among the rival companies, the VOC had pioneered in many areas of trade. Permanent share capital and issuing stocks to attract investors were among these ground-breaking initiatives. The company was in itself like a country, with the right to make war or peace, an army, 150 merchant ships, and it was directed by the Seventeen Lords. The company was so powerful that, according to estimations, it conducted half of all Europe’s foreign trade.

A trading post of the Dutch East India Trading Company.
Lawang Sewu (“Thousand Doors”) is a landmark in Semarang, Central Java, Indonesia, built as the headquarters of the Dutch East Indies Railway Company. (Image: Damar Aji/Shutterstock)

Rivalries between Large Corporations

Although the Dutch and the English companies both aimed to beat the Portuguese, they could not continue to tolerate each other. Soon they grew into rivals who wanted each other out of the picture. Gradually tensions escalated and finally flared up to the point that there was an incident in which the two countries explicitly showed animosity towards each other.

This is a transcript from the video series Turning Points in Modern History. Watch it now, on Wondrium.

So what was this decisive incident? It happened on Amboyna Island in Indonesia, which is now called Maluku. It was especially important for both the Dutch and the English for its clove plantations. Both countries had trading posts near each other. One day, the Dutch traders arrested a Japanese mercenary who was acting suspiciously. Under torture, he revealed a surprise attack planned by the English. The Dutch took the opportunity to counterattack in advance. They arrested the English neighbors and engaged in a series of violent acts that concluded with the execution of 10 Englishmen.

This incident aroused downright animosity and led to a series of wars between the Netherlands and England. The hostility is so deeply rooted in English culture that it is also reflected in the English language. Derogatory phrases like to go Dutch, Dutch treat, Dutch courage, and Dutch uncle all have their origins in this historical antipathy.

These wars had several other repercussions. The capture of the ship New Amsterdam by the English and renaming it as New York, and a change of trade strategies by the English were the most important ones. The English East India Company shifted to trading in India and engaged in the trade of a wider range of goods including raw silk and cotton and a lot more.

A trading post
The English East India Company shifted to trading in India and engaged in the trade of a wider range of goods including raw silk and cotton and a lot more. (Image: Everett Art/Shutterstock)

Learn more about the Opium War in China.

The Challenges of the English East India Company

During the 17th century and the early years of the 18th century, England underwent massive and radical changes that included:

  • The civil war between the king and the parliament and beheading of King Charles I in the 1640s
  • Oliver Cromwell’s commonwealth
  • The restoration of the monarchy in 1660
  • The Glorious Revolution and the dethroning of King James II in 1688
  • The unification of Scotland and England and the birth of Great Britain in 1707.

Through all these political upheavals, the English East India Company managed to survive, in some cases by not-so-honest means. They did not turn away from bribery or conspiracy to get their charter renewed or beat their rival English companies. The company continued to thrive until it was a huge force in British and Indian politics.

Common Questions about the Rise of the East India Company

Q: What did the East India Company do?

The East India Company’s rise was motivated by gaining profit through the trade of spices. At that time, spices were considered luxury goods imported from mysterious lands of the East. Many European countries wanted a share in this profitable venture.

Q: Why was the East India Trading Company successful?

The East India Trading Company had a monopoly and had exclusive rights to conduct trade and make profit. It also had an advanced administrative structure. Spices were a profitable trade and provided a great return on investment.

Q: Who founded the East India Trading Company?

The English East India Trading Company was a chartered company that was formed by 218 British merchants. There were also the Dutch East India Company and the French East India Company. These companies were rivals in trading spices in the East.

Q: How did the East India Trading Company make money?

The East India Company made money by trading spices. But it expanded the range of its commodities into other things like textiles, tea, and coffee.

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