Sapiens: A Brief History of Humankind

Indonesia is the world’s biggest archipelago. Its thousands upon thousands of islands were ruled in the early seventeenth century by hundreds of kingdoms, principalities, sultanates and tribes. When VOC merchants first arrived in Indonesia in 1603, their aims were strictly commercial. However, in order to secure their commercial interests and maximise the profits of the shareholders, VOC merchants began to fight against local potentates who charged inflated tariffs, as well as against European competitors. VOC armed its merchant ships with cannons; it recruited European, Japanese, Indian and Indonesian mercenaries; and it built forts and conducted full-scale battles and sieges. This enterprise may sound a little strange to us, but in the early modern age it was common for private companies to hire not only soldiers, but also generals and admirals, cannons and ships, and even entire off-the-shelf armies. The international community took this for granted and didn’t raise an eyebrow when a private company established an empire.

Island after island fell to VOC mercenaries and a large part of Indonesia became a VOC colony. VOC ruled Indonesia for close to 200 years. Only in 1800 did the Dutch state assume control of Indonesia, making it a Dutch national colony for the following 150 years. Today some people warn that twenty-first-century corporations are accumulating too much power. Early modern history shows just how far that can go if businesses are allowed to pursue their self-interest unchecked.

While VOC operated in the Indian Ocean, the Dutch West Indies Company, or WIC, plied the Atlantic. In order to control trade on the important Hudson River, WIC built a settlement called New Amsterdam on an island at the river’s mouth. The colony was threatened by Indians and repeatedly attacked by the British, who eventually captured it in 1664. The British changed its name to New York. The remains of the wall built by WIC to defend its colony against Indians and British are today paved over by the world’s most famous street – Wall Street.

As the seventeenth century wound to an end, complacency and costly continental wars caused the Dutch to lose not only New York, but also their place as Europe’s financial and imperial engine. The vacancy was hotly contested by France and Britain. At first France seemed to be in a far stronger position. It was bigger than Britain, richer, more populous, and it possessed a larger and more experienced army. Yet Britain managed to win the trust of the financial system whereas France proved itself unworthy. The behaviour of the French crown was particularly notorious during what was called the Mississippi Bubble, the largest financial crisis of eighteenth-century Europe. That story also begins with an empire-building joint-stock company.

In 1717 the Mississippi Company, chartered in France, set out to colonise the lower Mississippi valley, establishing the city of New Orleans in the process. To finance its ambitious plans, the company, which had good connections at the court of King Louis XV, sold shares on the Paris stock exchange. John Law, the company’s director, was also the governor of the central bank of France. Furthermore, the king had appointed him controller-general of finances, an office roughly equivalent to that of a modern finance minister. In 1717 the lower Mississippi valley offered few attractions besides swamps and alligators, yet the Mississippi Company spread tales of fabulous riches and boundless opportunities. French aristocrats, businessmen and the stolid members of the urban bourgeoisie fell for these fantasies, and Mississippi share prices skyrocketed. Initially, shares were offered at 500 livres apiece. On 1 August 1719, shares traded at 2,750 livres. By 30 August, they were worth 4,100 livres, and on 4 September, they reached 5,000 livres. On 2 December the price of a Mississippi share crossed the threshold of 10,000 livres. Euphoria swept the streets of Paris. People sold all their possessions and took huge loans in order to buy Mississippi shares. Everybody believed they’d discovered the easy way to riches.

39. New Amsterdam in 1660, at the tip of Manhattan Island. The settlement’s protective wall is today paved over by Wall Street.