The Dutch East India Company at the Dawn of Modern Capitalism: “Civilized Dispossession” on the Banda Islands

By | October 25, 2021

On 15 March 1599, the people of Banda Island (Banda Lonthoir), in what is now eastern Indonesia (see Figure 1), beheld a foreign ship with an unknown flag. It turned out to be the Geldria, commanded by Dutch Admiral Jacob van Heemskerk, spearheading a Dutch merchant fleet. About two decades later, a violent and repressive attack landed on Bandanese shores, organized by Jan Pieterszoon Coen, the Governor General of what had by then become the Dutch East India Company (Vereenigde Oostindische Compagnie, or VOC). Unprecedented in scope and ruthlessness, Coen’s 1621 massacre saw the death of more than ninety percent of the Bandanese population. The subjugation of the Banda archipelago marked a key step in the emergence of the VOC as a major force in global commerce; thereafter, it would control the East Indian spice trade for nearly two centuries.

Figure 1: Contemporary map of the Banda islands

In considering corporations as vehicles for the diffusion and consolidation of capitalism, histories such as that of the VOC on the Banda islands provide fertile ground for understanding processes of corporate domination and coercion. These discussions of dispossession often focus on “hard” power and the use of violence – coercion, harm, or injury—by corporations or the governments that sponsored them. However, hard power rarely provided a direct path to corporate accumulation: violence inevitably invokes backlash and resistance. Corporate accumulation was therefore often accompanied by legal, cultural, or academic discourses which sought to “civilize” these actions. Indeed, legal authority often trailed closely behind marauding adventurism in colonial contexts, ready to narrate and legitimize the seizure of goods. 

In our recent paper, “Civilized Dispossession’: Corporate Accumulation at the Dawn of Modern Capitalism,” we use historical methods to examine the interplay of dispossession and legitimation by the VOC, and contribute to a broader understanding of corporations as drivers of capitalism. Specifically, we try to understand why or when legitimation and dispossession are foregrounded in the development of corporate operations, and, more broadly, how corporations provide vehicles through which these two processes propel capitalism via a mechanism we term “civilized dispossession.”

The VOC on the Banda islands: “Civilized dispossession”

Our explicatory historical case study suggests that the “civilized dispossession” of the Bandanese people by the VOC developed in several stages: 1) Initial instances of Dutch legitimation; 2) Dutch legitimation to enforce Dutch-Bandanese agreements; 3) Dutch legitimation to enable dispossession of the Bandanese, and 4) Wholesale dispossession of the Bandanese. We outline these stages below, and in the process outline the interplay between legitimation, dispossession, and resistance on the Banda islands during this critical period (1599-1621) in the development of modern capitalism.

1599-1602: Initial instances of Dutch legitimation

Dutch capitalism emerged from the decentralized commercial and financial infrastructure of the Low Countries, which, with many navigable waterways and diverse soil, was conducive to interregional exchange and competition. In the late 16th century, two circumstances pushed Dutch merchants to join the commercial capitalist battle for control of the East India trade. First, the Iberian Crown, claimant to the Low Countries, had blocked the supply of Asian goods to the Dutch Republic. Second, the Republic’s main rivals, Portugal and England, suffered from undercapitalization: while Portuguese resources had become overstretched because the Iberian Crown centralized the East India trade, the English Crown had dissuaded investors with its predatory borrowing practices. The initial Dutch expeditions were equity-financed by local investor consortia and liquidated upon completion. Although these expeditions were mostly profitable, they faced natural risks and hostile threats. Moreover, investors were financially constrained, because they were jointly and severally liable for debts and paid for supplies and specie in advance—sometimes on credit. Therefore, they sought and received financial and military support from the fledgling Dutch state.

The principal target of the Dutch merchants soon became the Banda archipelago, the world’s “storage room” of nutmeg and mace. In commercial capitalist spirit, the ambition was to maximize procurement of these spices and to prevent their sale to other nations. However, the first Dutch approach toward the Bandanese was not overtly dispossessive, if only because the earliest expeditions could not financially accommodate military action beyond immediate self-defense. In 1599, Admiral Jacob van Heemskerk and his fleet were the first to arrive in the region. Not knowing what to expect, Van Heemskerk attempted to entice the Bandanese through rationalization and normalization, proposing large spice purchasesand the respect of local trade customs.

A complication encountered by these merchants was that Bandanese society was flat and decentralized. Situated at the eastern edge of the Muslim world, the Banda islands were an entrepôt for trade between Muslims and non-Muslims, which had prevented the formation of a central authority. However, the islands’ proximity and mutual reachability fostered alliancing. Hence, instead of “simply” partnering with a local monarch, outside merchants would have to engage several local shahbandars (“harbor masters”) and orang kaya (“rich men”), who were willing to unite against any external threat. The Bandanese were suspicious toward the Dutch, having withstood Portuguese attempts at domination. In addition, they relied on international demand for spices to facilitate the import of essential goods; it was therefore essential to obtain the best possible prices to maintain the existing trading structure.

The Dutch agenda therefore fundamentally clashed with Bandanese interests, who could not afford to favor the Dutch. They negotiated strongly and restrained the Dutch procurement of spices, much to the discontent of Van Heemskerk. Moreover, the Dutch observed how the Bandanese could mobilize to protect their interests, raising the specter of violence. This observation, which suggested that the fruits of the land had to be shared with the Bandanese, prompted discourses of dehumanization.

In May 1602, negotiations resulted in the first Dutch-Bandanese trade agreement. The text reiterated Dutch goodwill, formalized religious freedom, and limited Dutch involvement in the archipelago. In addition, it stipulated that the Dutch had exclusive rights to buy nutmeg and mace, unless they could not pay with goods that were valuable to the Bandanese. To the Dutch, the agreement was pivotal: Dutch foreign relations emphasized legal order—a view that was applied consistently regardless of context—so the agreement would legitimize the expansion of trade through the authority of the law. The Bandanese, however, with a tradition of informal negotiation, assigned little authority to this (or any) written agreement. Although they likely understood the meaning of the agreement to the Dutch, the Bandanese may have signed it to appease and thereby stall the potential threat, perhaps assuming that the latter would not strictly enforce the agreement. The Bandanese continued to uphold the pursuit of their trade interests and actively persisted in their practices, often rejecting Dutch goods, unilaterally adjusting prices and violently resisting perceived intrusions. These forms of resistance limited the agreement’s practical use to the Dutch.

This state of affairs signaled to the Dutch that they had to procure more Asian goods to become a more legitimate trade partner to the Bandanese. The need for better rationalization permeates Van Heemskerk’s writing: “In order to trade most beneficially in Banda (…), it is necessary, that we buy (…) various kinds of china, cotton (…) and textiles.”[i]Building up intra-Asian trade required capital, and thus stronger institutional backing of the trade effort, especially since Dutch merchants were bidding against each other for these goods. Seeking to generally extend their purchasing power, investors performed legitimation work, asking the Dutch state to unite the Dutch East India trade. For example, in 1601, a group of anonymous merchants petitioned the Dutch parliament, the Staaten-Generaal or “States General,” making the moral-rational argument that “(…) one would profit well and risk half the capital (…) that one risks now, (…) to the extent that (…) the crowd of companies were reduced to one fund, mass and office (…),” adding that “for the means and substance of this [united] company to be better managed (…) to the pleasure and satisfaction of the general sail, it would be good (…) to make the fastest ordinances and institutions.”

1602-1609: Dutch legitimation to enforce Dutch-Bandanese agreements

Seeing the need for a broader and larger capital structure and the benefits of a coordinated effort, the Dutch Grand Pensionary, Johan van Oldenbarnevelt, sought to unite the Dutch East India trade. In 1602, the States General issued a charter that created the VOC, granting it a monopoly on East India trade and the right to declare war and administer territory. The VOC was backed by one large semi-permanent and anonymous capital allotment and was therefore less susceptible to the withdrawal of funds by shareholders. Furthermore, in conjunction with the separation of ownership and control, the relative permanence of its capital structure gave the VOC considerable operational reach. Simultaneously, the birth of the VOC marked a step toward a policy of violent dispossession. The VOC’s board of directors, the Heeren Seventien (“Lords Seventeen,” HXVII), were closely affiliated with the States General and could therefore make concerted economic and political decisions. The Company’s charter explicitly communicated dispossessive intentions, stating that “strongholds and fortifications can be built, and governors, public prosecutors and soldiers installed.” The Banda archipelago was a concrete target: its spice trade was to be kept from other nations.

The VOC’s first expedition to the Moluccos consisted of a fleet of thirteen ships and fifteen hundred men. In 1605, its admiral, Steven van der Hagen, arrived in the archipelago to persuade the Bandanese into selling more spices, using similar techniques of rationalization and moralization. However, despite this ostensibly peaceful intention, the veiled threat of attack meant that Bandanese consent to negotiation took place under an implicit duress. The new deal gave the VOC a permanent position and thus a stronger authoritative basis for the legitimation of its activities. However, the Bandanese could still sell to others if the Dutch had no useful means of payment. They had insisted on this term to stop the VOC from becoming a monopsonist. Moreover, they continued to recalculate prices to manipulate the values of their goods, as well as defending their positions by force, risking Dutch reprisals. This enduring resistance against the VOC’s expansion inspired further discursive dehumanization. For example, in 1608, Admiral Cornelis Matelief de Jonge wrote that the Bandanese were “mean (…) beggars, (…) [who] give no good word to anyone (…).” Moreover, public support for the dispossessive idea of total control over the Banda islands started growing. For example, in 1608, influential merchant Jacques l’Hermite wrote the following. 

“A different resolution will have to be taken regarding the Bandanese.” because “they are deliberate crooks (…). (…) It is sad that we have to fight and spend and that [the] English can so easily procure their loads from underneath our wings. They can [only] do us damage on Banda, which would be stoppable if those on Banda put on their glasses (…). After all, great profits, and even more, can be made there if Your Honorable controlled all of the Moluccos [which included the Banda islands] alone.”

However, the power to enforce contracts with the Bandanese required still more resources. Although permanent, the VOC’s capital was still revolving, resting on the back-to-back financing of expeditions. This system provided insufficient room for investments in the military presence needed to secure the intra-Asian trade (De Jonge, 1865). Fortunately for the VOC, the 1608 truce in the Dutch-Spanish war of independence provided some financial relief, enabling the VOC to reaffirm its claim to the monopoly on Bandanese spices. Most importantly, during this period a permanent headquarters in Batavia (modern-day Jakarta) was established, which was to be led by a Governor General. Pieter Both, the first to assume this office, had the specific dispossessive goal to “tie the spices [of the Moluccos] to the United Company, so that they would not fall into the hands of any other nation (…).”[ii] To prepare for Both’s arrival, Admiral Pieterszoon Verhoeven, the head VOC merchant in the Banda islands, was ordered “to bind the islands (…) by treaty or by force (…).”[iii]

Heeding his instructions, Verhoeven alternated between legitimation and dispossession, most notably when building a fortress on Banda Neira. Initially he sought the permission of the orang kaya in an attempt at normalization;when they wouldn’t consent, he proceeded anyway, seizing Bandanese territory. Thereafter, the Bandanese ceased frontal opposition, effectively granting the fortress a degree of legitimacy. However, they continued their resistance with guerilla attacks, eventually killing Verhoeven. Verhoeven’s assassination triggered further Dutch dispossessive action: Verhoeven’s successor, Admiral Simon Janszoon Hoen, declared war on the Bandanese, sent out punitive expeditions, expelled the English and finished construction of what would become Fort Nassau. The Bandanese, aware of their precarious position, vied for peace and signed a new treaty that formally granted the Company sovereignty over Banda Neira and unconditional access to Bandanese spices.

Although it decreased the Bandanese ability to break the build-up of the VOC’s presence, this victory did not end resistance altogether. Outside Fort Nassau, they could still ambush the Dutch, and when in 1610 the English landed once again in the archipelago, they had new opportunities to channel sales away from them. Therefore, despite its Asian headquarters and increased assertiveness, the VOC struggled to enforce its contracts and to secure its trade activities. In fact, capital had become so scarce that the Company had started to finance its expeditions through debt, which was hurting its international reputation and made some shareholders fear for their return on investment (De Jonge, 1865). This sentiment inspired legitimation work, as one investor, Isaac le Maire, wrote to Van Oldenbarnevelt to criticize the HXVII and argue that controlling East India trade would require three times as much capital.[iv] Le Maire’s move generated such financial pressure that the HXVII had to request extra state subsidies and make two structural changes to signal stability to investors: accounting practices were harmonized across the VOC’s different branches so that they could borrow from each other, and the Company started to pay out dividends (on credit).

1609-1619: Dutch legitimation to enable dispossession of the Bandanese

Frustration about the stalemate fueled dispossessive discourses in the Dutch Republic, where the call for full military subjugation of the Banda islands intensified. In a remonstrance offered to the HXVII in 1612, Jacques l’Hermite wrote: “If the Bandanese will always be free to break the peace as they deem fit, it will bring nothing but damage (…)  [,] unless (…) a significant force is sent there to subdue them completely (…).”[v] Realizing the financial implications of this move, L’Hermite also performed legitimation work to make the HXVII expand the VOC’s working capital: “It won’t be possible to bring the Bandanese (…) to reason, unless more fortresses will be built (…), which will undoubtedly cost big money to build and maintain (…).”[vi] Relatedly, Jan Pieterszoon Coen, a high-ranking member of the High Government, wrote repeatedly to his superiors in Europe that the VOC needed more capital, using a similar rationalizing argument.

“If Your Honorable contend that [East India] possesses a great capital of goods, (…) one should consider what is necessary annually to get such a rich return, for the payment of soldiers and the supply of such a superior [intra-Asian] trade, which you intend to conduct, but haven’t conducted yet; apart from supplies (…), capital in [East India] has to be (…) stronger than it has ever been.”[vii]

Heeding these calls, the HXVII instructed Pieter Both that “before anything else, one has to make sure that trade on [Banda] is completely attached to the VOC (…).” Both obliged, sending out punitive expeditions against the Bandanese and ordering construction of a second fortification, Fort Belgica, thus engaging in further dispossession through violence and territorial expropriation. He subsequently drew on the exclusivity contract signed by the Bandanese to legitimize these acts. However, even with two fortresses, the VOC could not fully control the islands. The Bandanese still resisted the VOC, a situation which continued during the terms of the two Governors General who followed Both, Gerard Reynst and Laurens Reael. By 1616, the HXVII realized that full dominance required more than discourses. Desiring more aggressive leadership, they promoted Coen to Governor General.

Coen’s appointment was not arbitrary: by that time, changes at the Amsterdam capital market that had been triggered by the VOC’s emergence as a national symbol held the promise of significantly widening the Company’s operational reach. Because VOC investors had several years to pay up their commitment, the shares were inherently speculative. Given the generally positive prospects of trade, this aspect incited forward trading in the form of sale-repurchase deals. In addition, the HXVII performed legitimation work to secure the long-term capital backing of the VOC. As members of local merchant elites, they actively managed investor relations, portraying the business in a positive light and using a patriotic narrative connecting investment in the Company to the prosperity of the Dutch Republic. Observing the VOC’s connections with the state, investors widely recognized VOC shares as solid, and as share trading took off, shares became an attractive collateral for loans. Consequently, VOC-related securities brought a tidal wave of capital onto the Amsterdam capital market. In 1609, this development led to the creation of a clearing house, the Wisselbank, or Bank of Amsterdam (BA). With trustworthy, efficient, and cheap services, the BA attracted so much capital that until 1620 interest rates declined, despite surging demand for capital.

With its low interest rates and large capital reserves, the BA could extend large loans to the VOC for its outbound voyages. However, to fully seize this opportunity, the HXVII needed to modify the Company’s financial architecture. Until 1617, each VOC branch was responsible for equipping its own expeditions. Although the entire VOC preferred to borrow through the Amsterdam branch, which paid the lowest interest rate, local directors were still personally liable and Amsterdam’s directors were unable to shoulder the Company’s total debt. To protect their individual members against insolvency, in 1617, the HXVII transformed the Company’s debt from a personal liability into a joint liability of all directors. This provided a strong basis for increasing leverage, which enabled major operational expansion. Figure 2 illustrates this expansion in terms of annual shipments to Asia, which started to quash those of the English East India Company. At the same time, the VOC became more explicit about excluding its main competitor in Banda and officially barred the English from the archipelago.

Figure 2: Total annual outbound shipping (tons), VOC and English East India Company

Source: Bruijn, Gaastra and Schöffer (1987), Dutch Asiatic Shipping Database

1619-1621: Wholesale dispossession of the Bandanese

Coen started his tenure in 1619. His aggressive stance toward the Bandanese was a function both of the latter’s resistance—in particular of Verhoeven’s assassination, which he had witnessed—and of his education, which allowed him to economically analyze the East India trade. Coen saw a strong capital structure as a crucial institutional advantage. To Coen, there was no trade without capital, no profit without trade, and no lasting presence without profit. As Governor General, he repeated his earlier requests for capital from Europe, using a dispossessive agenda as a rationalizing argument:

“(…) [A] large number of people has to be sent here annually from the Netherlands, as well as many soldiers and experts of war (not forgetting many ships and large sums of money), (…) to seize and retain places. (…) Since we can deliver returns of 80 to 100 tons of gold, how would the Company not be able to carry the burden (…) that we require each year?”[viii]

Coen deemed investing in the intra-Asian trade necessary to take control of key trades such as the Bandanese spice trade. If there was insufficient capital to finance the intra-Asian trade, Coen argued, one should resort to leverage. He performed rationalizing legitimation work to promote the use of credit, urging his superiors to “pay serious attention to the (…) advice to give [Asia] as much credit as the actions [need] and as many vessels, money and other necessities as the VOC’s general finances allow.”[ix] The HXVII granted his request, but also cautioned him: “With the equipment that we have sent (…), next to the great sums of cash, she [East India] has burdened the Company to such an extent that, unless Your Honorable [Coen] send (…) extraordinary returns, it would be unjustifiable to continue this.”[x] By 1622, the HXVII had amassed 8 million guilders of interest-bearing debt on deposit and had reached the limit of its leverage: “Our credit cannot suffer anymore. Many of our shareholders oppose our heartfelt policy. (…) Our charter is in danger.”[xi]

The first Governor General to be backed by truly powerful corporate institution, Coen was also particularly determined and ruthless. His dispossessive intention to purge the Banda islands was manifested in his desire “(…) to plant a colony, since this is the only way to secure East India (…)”. Coen legitimized his agenda through rationalization, arguing that full colonization of the Banda islands would “[r]elieve the Company from the excessive annual costs (…).”[xii] Indeed, Coen’s arrival in Banda decisively changed Dutch-Bandanese relations.

The Bandanese fled to the hills, where they continued to resist the VOC’s procurement of spices by violating its terms, and launched nightly attacks on Coen’s VOC with the aid of the English. Meanwhile, Coen neither expected nor wanted peace with the Bandanese. In March 1621, he commanded them to cease all violence, assuming that they would never comply. On April 21st, after a hanging lamp crashed to the floor of a mosque-billet, VOC soldiers made a child confess that this event had been a prearranged signal to call in lurking warriors. Using this “violation” of contract terms as his pretext, and thus legitimizing his actions by authorization, Coen had all the islands purged, killing more than ninety percent of the Bandanese population and driving out the remaining English. After fulfilling the conquest of the Banda islands, Coen engaged in further authorization-based legitimation, holding kangaroo trials in which forty-four captured orang kaya were sentenced to death. Whereas some of Coen’s men were appalled by the suggestion that the now decimated and voiceless Bandanese population had deserved its fate, the HXVII rewarded Coen for earning the VOC respect. After the massacre, Dutch perkeniers (“plantation owners”) took over the production of nutmeg and mace, solidifying the VOC’s dominance in this market for decades to come.

Concluding Remarks

Our explicatory historical case suggests that the Dutch monopolization of Bandanese spices rested on a fundamentally dispossessive mechanism drawing on discourses of commercial capitalism, which we label “civilized dispossession.” This term describes an approach to market making that, while predicated on a dispossessive world view, integrates practices of both dispossession and legitimation. At the VOC, dispossession relied on coercive (“hard”) power and entailed the expropriation of Bandanese means of production through discursive dehumanization and deprivation, displacement, violence and death. Legitimation drew on persuasive (“soft”) power and consisted in the appropriation—through various discursive techniques—of physical and symbolic resources, most importantly a powerful financial and contractual basis for trade activities.

The analysis suggests that “civilized dispossession” has two main drivers. The first, institutional experimentation, relates to the fact that beyond supporting each other, Dutch legitimation and oppression formed a three-way interplay with Bandanese resistance (see Figure 3). Generally, legitimation toward both the Bandanese population and Dutch stakeholders (the state, investors) gave Dutch merchants the political, economic, and discursive power to progressively separate the Bandanese from their produce. Conversely, dispossessive practices propped Dutch legitimation, predominantly through imposed agreements and post-violence justification. Bandanese resistance against Dutch legitimation and dispossession chiefly aimed to stall the VOC’s rise in the Bandanese spice trade, which threatened the Bandanese standard of living, and consisted in their independent interpretation of Dutch contract terms, maintaining traditional trade practices, and the focused use of violence to enforce their claims. Bandanese resistance incited legitimation efforts on the part of the VOC, inspiring the Dutch campaign back home for more capital, as well as discursive dehumanization of the Bandanese and, eventually, their violent subjugation. The emerging balance between Dutch legitimation and dispossession was shaped by Bandanese resistance, because initially, the Dutch largely pursued a legitimation-oriented strategy, hoping to capitalize on their superior purchasing power and to gain the favor of the Bandanese. However, when met with resistance, they increasingly resorted to violent dispossession to realize their commercial capitalist agenda. We map in summary form this interplay between legitimation, dispossession, and resistance on the Banda islands during the period of this study (1599-1621) in Figure 3.

On a practical note, the intimate connection between dispossession and legitimation that we observe pushes widely operating corporations to rethink the paradigms that govern their interactions with operating environment(s). As long as Western-centric and/or imperialist conceptions are used to support capitalism and corporate expansion, accumulation by dispossession may remain a byproduct of cross-border business activities, even as corporations pursue legitimation. Our case suggests that attempts at legalistic legitimation overlaid upon a profit-logic cannot replace the relational processes of working out differences and building sustainable bonds in the global arena.

Figure 3: Interplay between legitimation, dispossession, and resistance on the Banda islands

Wim van Lent is an Assistant Professor of Strategy at IÉSEG School of Management

Gazi Islam is a Professor of Business Administration at Grenoble Ecole de Management

Imran Chowdhury is an Associate Professor of Business & Management and the Diana Davis Spencer Endowed Chair of Social Entrepreneurship at Wheaton College (MA)

This post is adapted from their paper, “‘Civilized Dispossession’: Corporate Accumulation at the Dawn of Modern Capitalism,” published at Organization Studies.

[i] De Jonge (1864, p. 448): Van Heemskerk’s memorandum to his superiors, written on his way back to the Dutch Republic in 1600).

[ii] De Jonge (1865, p. 133): Article 22 of HXVII’s Instruction to Pieter Both.

[iii] De Jonge (1865, p. 95): Memorandum of the HXVII, dated 29 March 1608.

[iv] De Jonge (1865, p. 375): Isaac le Maire’s remonstrance to Van Oldenbarnevelt, 1609. 

[v] De Jonge (1865, p. 389): Jacques l’Hermite’s remonstrance to HXVII, delivered 20 August 1612.

[vi] De Jonge (1865, p. 387): Jacques l’Hermite’s remonstrance to HXVII, delivered 20 August 1612.

[vii] De Jonge (1869, p. 25): letter from Coen to HXVII, 27 December 1614.

[viii] Colenbrander (1919, p. 438): letter from Coen to HXVII, 14 January 1619.

[ix] Colenbrander (1919, p. 412): letter from Coen to HXVII, 12 November 1618.

[x] Colenbrander (1922, p. 519): letter from HXVII to Coen, 24 October 1621.

[xi] Colenbrander (1922, p. 537): letter from HXVII to Coen, 14 April 1622. 

[xii] Colenbrander (1919, p. 586): letter from Coen to HXVII, 26 October 1620.

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