Last week while browsing through a goodwill store, the video Pirates of the Caribbean was seen, not surprisingly having seen it on the screens many years ago the video cost was $3.00 for a dollar and on that day half price. The movie is based on real life – when Columbus discovered the Americas, while trying to find a shorter route to the South China Seas (because the spice trade was very profitable) Columbus declared the land for Spain. Not long after, gold fever struck the next group of adventures and soon the Aztec empire was gone and Spain controlled the countries. The gold mines of Mexico quickly made the Spanish the wealthiest country in Europe and other countries wanted a share. England had smaller ships and encouraged their people to rob the Spanish – Francis Drake achieved his fame this way. The pirates of the day were entrepreneurs who did not want to pay their share to the crown on any country. The navy of England and others were sent to bring the gold back to England and only tolerate a small amount of linkage.

The above is related to a book called Merchant Kings by Stephen Brown, Douglas & McIntyre, Vancouver, 2009. In the book, Mr. Brown outlines 6 firms that that ran country related trading firms that were owned by investors, the wealthiest members of the country, but also were backed by the resources of the host country. The 6 trading companies outlined are the Dutch East India Company, The English East India Company, The Dutch West Indies Company, the Russian American Company, the Hudson’s Bay Company, and the British South Africa Company. Similar to all private trading companies, the aim of the company is to make a very healthy profit for the shareholders and pay a dividend. The easiest method to do this was to control a monopoly or be a monopoly like business. Along the way for the all these companies, decisions were made to use the native population as serfs – to do the cultivation of resources so the trading companies could resell in Europe at a very high markup.

In the case of the Dutch East India Company – in what is now called Indonesia, but in the 1600’s was called Sumatra, Java, Borneo, Banda Islands – spices such as cloves, nutmeg, cinnamon, and other spices were grown. When the Dutch East India Company arrived the previous traders were from Arabian and came through the Italian city of Venice. Naturally the stores they told of how the spices were arrived at reinforced the spices were at the ends of the earth. For someone in Europe to go to the South China Seas meant to go around Africa, through the Arabian Sea and around India. The journey would take two or three years and not all ships made it back with their cargos. At the time in Europe much of the year the food that was placed on the dinner table was very bland, spices brought out the flavours of the food. Having spices in the house was in demand and a profitable business for those who imported them. The Dutch East India Company was the most aggressive in the area and secure their monopoly were lead by Jan Pieterszoon Coen.

The British East India Company was a rival to the Dutch East India Company and after having been defeated, regrouped in India to take advantage of the silks and cotton trade. Also India was a major provider to the world of saltpeter which was a major ingredient in gunpowder. As a country, England backed the British East India Company and a number of wars were shorten when the other side did not have gunpowder. From controlling the saltpeter trade, the company eventually defeated the Moguls who ruled India. The leader of the company was Sir Robert Clive. The shift from the Moguls to the company would control the treasury of India, later profits went down because to influence the economic cycle is one thing to administer a country is more expensive undertaking and not something companies wish to do. The administration was taken over by the British military and India was in the British orbit. The British East India Company imported teas which is why the UK drinks teas (in was less expensive that coffee). when profits were down in India, the company began extensively trading with China and along the way discovered illegal drugs (opium) is very profitable.

With success in the South China Seas, the Dutch formed the Dutch West Indies Company which went to what is now called New York but then was called New Amsterdam. The company charter claimed all the lands that was drained by the Hudson River. People were still looking for a quick method to go to the South China Seas. The head of company in New Amsterdam was Pieter Stuyvesant who ran the city similar to a company town but the town never produce any mineral riches and company towns are taxed at higher rates. Eventually more people other than Dutch came to New York as well as the British controlled New England and the Mid Atlantic states sent their navy into New York and Mr. Stuyvesant surrounded the lands to the British who changed the name to New York. In the years to come the American Revolution was fought and a country would evolve the United States.

The other 3 companies will be highlighted in part 2

Linking to dividend paying stocks, in all the above examples, from a financial point of view, they were successful as they found areas to be strong and create monopoly and sending dividends to the shareholders. How all the above people did what they do is the subject of many books, although for a long time all those trading companies were sending profits and dividends to the shareholders in Europe. Should a company be running a country? such as they did from 1600 to 1900’s that is interesting question?

There are more questions than answers, till the next time – to raising questions