3.2: a World Economy

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AGE 6. The Time of Regents and Monarchs

3.2 A World Economy

What is this lesson about?

Amsterdam became one of the biggest cities for trade in Europe because of the Spanish conquest of Antwerp, the Baltic trade and companies sailing to the East Indies to trade. 

By establishing the VOC and the WIC, the Dutch Republic successfully took part in trade with many countries around the world and became one of the wealthiest countries.

people in this lesson

Jan Pieterszoon Coen

Main Questions

1. Why did Amsterdam become an important trade city?
2. What was the Baltic Trade?
3. Why was the VOC established?
4. What made the VOC a powerful company?
5. What was the WIC and why was it established?

Important dates in this lesson:

1585: Spanish conquer Antwerp

1602: foundation of the VOC

1621: foundation of the WIC

Word Duty

WORD DUTY

Baltic trade: the trade of luxury products in exchange for grain and wood between the 

Dutch Republic and countries around the Baltic sea 

Commercial center: a place where goods from all over the world were stored and eventually 

sold throughout Europe 

VOC: Dutch East India Company; trading company which sailed to the East-Indies and traded mainly in spices and silk 

Monopoly: being the only company that has the right to trade in a certain product 

Capitalism: an economic system in which trade and industry is controlled by private owners who want to make as much profit as possible

Shares: represent parts of a company; you can buy and sell them for a profit, if the company is successful 

Multinational: a company that is represented in many locations around the world 

Governor-General: a person who looked after the large trading network of the VOC in the EastIndies 

WIC: Dutch West India Company; trading company which sailed to the West-Indies and mainly traded in staves 

Privateering: the capturing and destroying of enemy ships 

Amsterdam: The largest trade city 

In 1585, the Spanish army conquered the city of Antwerp, the most important trade city of North-western Europe at that time. Because the waterways to the city were closed off, no trade ship was allowed to go in or out. Because of this, the merchants who traded in Antwerp had to find another trade center. They found this in Amsterdam. 

Amsterdam always had many foreigners living there, often more than half the city’s population. In the seventeenth century the largest number of immigrants came from the Spanish Netherlands. Many were Protestants moving for religious reasons.

Amsterdam had a big and easily accessible port. In the sixteenth century, Dutch merchants brought luxury products like wine and salt to countries around the Baltic Sea, such as Poland and East Prussia. In return, the merchants brought huge amounts of grain and wood back to the Republic to sell it to other countries. This is called the Baltic Trade. 

Top: Dam Square with the new Town Hall in the 17th century. 

Left: The expansion of the Amsterdam canal ring.

First, fill in the names of the other group members

1a) Why did Antwerp merchants need to find another city for their trade?

1b) Which two products were imported in the Republic from the Baltic?

Baltic Trade

Goods brought in from other countries were not immediately sold, but were stored in warehouses instead. The merchants waited for a buyer who really needed the goods and then sold them for the highest possible price. For example: the merchants stored a lot of grain and then waited for a famine to break out in another country. The starving people would pay a large amount for the stored grain. 

The trade in Amsterdam boomed even more when many small Dutch companies started sailing to the East Indies and brought back luxury products like silk, cinnamon and pepper to trade. As a result, Amsterdam became a commercial center, a place where goods from all over the world were brought in, stored and eventually sold to places throughout Europe.

warehouses at the Brouwersgracht in Amsterdam

2. Which of the following sentences is true?

1. In the Baltic Trade, Dutch merchants would trade with East Prussia and Poland
2. The Dutch merchants brought wood and grain and traded these for luxury products
3. The goods that were brought back were immediately sold to other countries
4. Merchants stored a lot of grain so they could help other countries when a famine broke out

Which text about the development of Amsterdam is correct?

1. a new defensive wall was built around the new quarters
2. new quarters arose behind a new defensive wall

Put the events in the correct chronological order

Westerkerk 

Jordaan

the Townhall 

(Paleis op de Dam)

extension of the Heren-, Keizers- en Prinsengracht

Prinsengracht

What was the main function of the
Amsterdam canal system?

1. people could more easily travel around Amsterdam using the canals
2. troops could be transported to the defensive walls quickly in wartime
3. products could be brought to and stored into the warehouses
4. merchants could travel easily to the markets of the city with their products

So, the function of the canals was mainly:

1. economical
2. military
3. religious
4. communicative

The rise of the VOC 

The many small Dutch companies that sailed to the East Indies had to compete with each other. As a result, their profits reduced because they had to sell their goods at lower prices. This also meant that the Republic received less profit taxes from the sold goods. In 1602, the States General decided it would be more effective to join all the small companies together into one unified company. Representatives from the small companies were invited by the States General to establish the Dutch East India Company ('Vereenigde Oost-Indische Compagnie'), also known as the VOC.

3. Why did the States General decide to form
one big trading company?

The States General granted a monopoly to the VOC. This means that the VOC was the only Dutch company allowed to trade spices in the East Indies.

Setting up the VOC was very expensive: ships had to be built, crews had to be hired. To finance this and to spread the risks, the VOC issued shares. By buying a share, people owned a small part of the company. If the company was successful, the value of their share would increase and could be sold against a profit. Therefore, many people would invest money in the VOC and its trading opportunities. This is the beginning of a new economic system based on commercial capitalism.

VOC shipyard

original VOC share

4a) The VOC had a monopoly.
This means that that the VOC was the only Dutch company allowed to trade spices in the East Indies.

1. TRUE
2. FALSE

4b) What are shares?

1. parts of a company that the company shares with other companies
2. products from a company that you can buy
3. parts of a company that you can buy and sell
4. products from a company that are stored in warehouses

4c) Why did the VOC issue shares?

4d) Did people who bought a VOC share have faith in the success of this company? Explain.

4e) Today people still buy and sell shares.
Can you think of a modern company that sells shares?

4f) Suppose someone gives you € 5,000,- to buy shares,
which company would you choose? Why?

The power of the VOC 

Seventeen lords, called the Lords Seventeen ('Heeren XVII'), managed the daily affairs of the VOC. The VOC had many privileges. By decree of the States General, it was allowed to wage war, take and execute prisoners and invade areas in the East Indies to establish colonies and set up trading posts. 

The VOC established a large trading network with many trading posts throughout the East Indies. The Company became the first multinational in the world because it traded with so many different areas in the East Indies. To oversee this large trading network, the VOC appointed a Governor-General who looked after all the financial and other affairs in the East Indies. The Governor-General resided in Batavia, the present-day city of Jakarta.

Batavia in the 17th century

5a) "The VOC had many privileges"
What are privileges?

5b) The VOC was a multinational.
What is a multinational?

1. a company that only sells local products in one village or city
2. a company that sells products all over the country
3. a company that sells products in different countries all over the world
4. a company that sells products no other company sells

5c) Name two modern multinationals

5d) What privileges did the VOC have that
modern multinationals do NOT have?

Jan Pieterszoon Coen

To get more profit from the spice trade, the VOC decided to cut out the local merchants by taking over areas overseas. They placed these areas under the direct control of the Dutch Republic, making them colonies of the Republic. In this way, the Republic acquired a monopoly on the trade of spices such as cinnamon, clove, mace and nutmeg. Batavia and Sumatra are examples of these colonies. 

In 1619, Jan Pieterszoon Coen (1587-1629) was appointed the Governor-General of the VOC. Coen came up with an idea to make the trade with the East Indies more profitable.

To establish a monopoly on the spices nutmeg and mace, Coen used the VOC's right to wage war to establish control over the Banda Islands. These were the only islands where these spices were grown. This proved to be a black day in the history of the Republic: to gain control over the Banda Islands many men, women and even children were killed. Their villages were burned down to the ground and their ships were destroyed. 

6a) What was the main reason the VOC decided to
colonize the trading posts in the East Indies?

6b) . Why did Coen want to control the Banda Islands?

6c) Today many Dutch cities have a street named
after Coen.
Write down one reason why you think
this is a good thing and one reason why
it is a bad thing.

To the West! 

On the other side of the world were other trading opportunities. In 1621, the Dutch West India Company ('West-Indische Compagnie') or WIC was established. The WIC was managed almost similarly to the VOC. It established many trading posts and colonies in North and South America and the Caribbean, like Curacao and Brazil. 

The WIC traded mostly in gold, sugar and slaves. They bought slaves on the west coast of Africa. African tribe leaders would often sell their captured enemies as slaves. These slaves were shipped to a trading post of the WIC, such as Curacao. 

Here the slaves were sold at auctions, mostly to work on plantations in North or South America.

logo of the Geoctroyeerde Westindische Compagnie

WIC ships sailing to America

Dutch slave traders bringing slaves to the slave market

Slaves were crammed together

 and treated miserably on the

WIC ships. Slaves that got sick or died during the journey across the Atlantic were thrown overboard. You will learn more about the Atlantic slave trade in one of the next lessons.

Besides trade, the WIC was also allowed to capture and destroy Spanish ships that journeyed between the Spanish colonies and Spain. Their goods and silver were taken by the WIC. This was called privateering and caused a big blow for the Spanish economy. The States General supported privateering to stop Spain from waging war against the Republic.

click for interactive poster

7a) Why did the States General allow privateering for the WIC?

7b) After 1648, the WIC started to concentrate less on
privateering and more on slave trade.
Can you explain this?

overview Dutch trading posts and colonies

click for interactive map

New Amsterdam as it appeared in 1664. Later, under British rule, it became known as 

New York.

painting by Johannes Vingboons (1664)

Summary Lesson 3.2 

Summary Lesson 3.2

Write down a question about something from this lesson that you don't understand.

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