INTRODUCTION

In 1600, England had been an insular and agricultural nation, trading primarily with nearby northern Europe. By 1700, England’s commerce was complex and global, as London competed successfully with Amsterdam for American produce and Asian luxuries.

Alan Taylor,  American Colonies:  The Settling of North America, 258.

A theme that runs through this essay is the global maritime rivalry with Holland. England and Holland became global trade rivals in the 1600s. They fought three wars that weakened Holland and eliminated it as a naval rival. 

England’s main instrument in its rivalry with the Dutch in Asia was the English East India Company (EIC). In America and the West Indies, it was the Navigation Acts.

By the end of the century, England was on its way to becoming a global maritime trading and naval power. The Dutch had lost out in North America but had established a vast trading network throughout Asia, centered in the Dutch East Indies (Indonesia). It was generally not competitive with the main Asian trade of the EIC or competitive with England as a European political power.

This essay on the spectacular economic progress of England in the 1600s also provides background and context for three other essays on this blog. 

American Colonial History, 1607-1775

This background essay helps explain the changing relationship between England and her North American colonies in the context of England’s expanding global trade. It emphasizes the importance of England’s Navigation Acts to the American colonies. The objective was to reduce the role of the Dutch in the American colonies and the West Indies and monopolize all trade with the American colonies and the British West Indies.

The Dutch were instrumental in financing early sugar production in Barbados. They also dominated early financing and shipping of the tobacco industry in the Chesapeake (Virginia and Maryland). Dutch shipping rates were lower than those of the English. 

The English sugar islands in the West Indies, mostly Barbados, was the largest source of English imports in the 1600s and an important source of import taxes. In the North American English colonies, England was able to take over the Dutch settlement at New Amsterdam, renamed New York, and using the Navigation Acts, to eliminate Dutch shipping that dominated the trans-Atlantic tobacco trade from the Chesapeake.

NAVIGATION ACTS

As part of its maritime rivalry with Holland, England passed the Navigation Acts.

First enacted in 1651 and strengthened in 1660 and 1663, the Navigation Acts were aimed at the Dutch. All exports and imports of the American colonies and West Indies had to go through England, on English or American ships. Even foreign goods bound for the Americas had to pay custom duties in England. The only exceptions were American exports other than the main exports of tobacco, rice, and indigo. As sugar production in the West Indies, exploded after starting in the 1600s, most other American exports went to the British West Indies.

England imposed high taxes (custom and excise duties) on American tobacco exported to England. During 1660s, new Navigation Acts regulations forced American tobacco growers to ship all their tobacco to England on English ships. Before that, Dutch ships controlled much of the tobacco trade because their rates were lower than English ships. This hurt the tobacco growers because this caused a tobacco glut in England, fewer ships competed for the tobacco trade, and now all tobacco had to go to England and pay high import taxes.

The Navigation Acts were an important part of the mercantilist policies of England. According to mercantilism, the government had the right and the power to shape trade in the political interests of the country. This meant economic war, especially with the Dutch. 

The Dutch and English waged three wars, in 1652-54, 1664-67, and 1672-74. The second war was triggered when an English fleet in 1664 conquered Holland’s American colony New Amsterdam, renaming it New York.

ENLAND AND HOLLAND IN THE AMERICAS

England’s main instrument in its rivalry with the Dutch in Asia was the English East India Company (EIC). In America and the West Indies, it was the Navigation Acts.

This rivalry was part of the wider political and economic environment of the American colonies in the 1600s.

In the 1600s, the West Indies became the most valuable part of the English colonial empire. Sugar from the West Indies was far more valuable than tobacco from the Chesapeake.

In 1686, London imported West Indian produce worth £674,518, compared with £207,131 obtained from all the North American mainland colonies.  Sugar constituted £586,528 of the West Indian total, while tobacco accounted for £141,600 of the mainland produce.

Taylor, 205

In 1650, the main sugar island of Barbados had a greater white population than the Chesapeake and New England combined. 

After failing to raise tobacco and cotton, Barbados struck it rich with sugar, starting in the 1640s. By 1660, Barbados accounted for more trade than all other American colonies combined.

The sugar planters developed a strong lobby in England, partly because many wealthy sugar planters retired to England. They protected sugar imports from high import taxes. The tobacco growers along the Chesapeake were not so lucky. 

In 1668-69 the West Indian sugar crop sold for about £180,000 after it paid about £18,000 in customs duty – compared with the £50,000 reaped (netted) by Chesapeake planters over and above their customs duty of £75,000.

Taylor, 216

This suggests a number of things about the Virginia tobacco growers. It was probably one reason the Barbados planters were wealthier than the Virginia planters, and why Virginia planters went into debt to buy luxuries and expand production (buy land and slaves). It is also intriguing to speculate that this was one reason American tobacco growers complained about being “slaves” to the English crown and merchants who lent them credit. Some of Virginia’s largest planters supported and led the American Revolution.

By 1775, the American colonies were England’s largest trading (imports and exports) partner. 

The new set of Navigation Acts in the 1660s made the economic situation worse for Chesapeake tobacco growers. One aim was to eliminate Dutch ships from buying and transporting Virginia tobacco. This drove down prices and worsened the tobacco glut in England.

England and Holland became global trade rivals in the 1650s and 1660s. In the Americas and West Indies, the Dutch captured most of the carrying trade because they charged less than the English. England passed the Navigation Acts to prohibit American exports to use Dutch ships. In addition to being forced to use English and American ships, almost all produce had to go to England and, in the case of tobacco, pay high excise taxes.

The English East India Company:  Trade with Asia

THE START OF EUROPEAN TRADE WITH ASIA. PORTUGAL IN THE 1500s

Spices and luxury goods from Asia were limited and prices went up after the Ottoman Turks conquered Constantinople in 1453. The last leg of trade with Asia was dominated by Venice.

Before the seventeenth century, trade across Eurasia was mostly conducted in short segments along the Silk Road and maritime routes through the Indian Ocean. Business was organized by family firms, merchant networks, and state-owned enterprises. Trade was dominated by Chinese, Indian, and Arab traders. 

In 1492, Catholic Spain, after a 400-year crusade, finally conquered the last Muslim area. Spain then bankrolled Columbus’ voyages, expecting he would bring back gold and silver from Asia. The national government expected to use this wealth to finance a continuation of its crusade by conquering Muslim North Africa. 

After more than 80 years of trying, in 1497-8 a Portuguese fleet went around the bottom of Africa (Cape of Good Hope) and reached India. And returned laden with spices. It was a very profitable trip. Following voyages established Portuguese trading positions in India and links with Asia east of India. Portugal discovered and conquered the Spice Islands, which were the major source of Asian spices exported to Europe.

Portugal had shown in the 1500s that long-distance voyages from Europe around Africa to India and beyond were both possible and profitable.

But Portugal was a small and poor country. It had a small merchant class. Portugal, relying on a combination of state support (with political objectives) and charted private shipping (much of it foreign), was not able to fully exploit the profit potential of the trade. The number of trips were small, partly because financing was sporadic and inadequate. 

Portugal’s Asian trade and Spain’s conquest of Latin America meant that rivalry among Europe’s nation-states was no longer confined to Europe and the Mediterranean. It was now global. Trade and conquest outside of Europe brought new wealth to European countries; the wealth could finance increased national power.

The spice trade from Asia to Europe was both highly profitable and risky. By 1600, both England and Holland were ready to try.

THE ENGLISH EAST INDIA COMPANY:  TRADING WITH ASIA

England had defeated a Spanish attempt at invasion in 1588 and was thinking about how to become a colonial power. The country began thinking about colonies in North America and the West Indies. 

The merchants of both countries realized that the traditional way to finance trading voyages – merchants and ship owners raising capital for each voyage separately and distributing profits and capital after the voyage – would be inadequate for the huge capital requirements of a sustained, large scale, risky trading venture in Asia. Merchants, investors, and shipowners would have to solicit outside investors to raise enough capital.

They succeeded. For 200 years, the EIC and the VOC were the two largest private companies in Europe, based on book value (total capitalization).

The instrument of England initiating trade with Asia in 1600 was the English East India Company (EIC), a government sanctioned trading monopoly. The goal throughout the century was to reduce or eliminate the competition from the Dutch East India Company (VOC). 

Eventually, the EIC evolved into a quasi-state that ruled most of India. The EIC brought great wealth to England’s merchant class and helped develop new financial institutions.

THE ENGLISH EAST INDIA COMPANY (EIC) AND DEVELOPMENT WITH TRADE WITH ASIA

Why England and Holland both decided to make very large investments in the long-distance Asian trade at this time.

• Both countries had a poor chance of becoming continental powers in Europe. 
• Both countries had small populations compared to France, Spain, and Austria.
• Both countries were Protestant, often at war with the larger Catholic countries of Europe.
• Neither could compete with the Catholic countries in European continental wars.

In contrast, both countries were maritime countries with a strong merchant class growing rich on maritime trade and finance.

• ·      Holland was a republic dominated by its merchant class. 
• ·      England was a constitutional monarchy where Parliament had to approve taxes.
• ·      Both had a shipbuilding industry and experienced sailors, the basis of strong navies.
• ·      Both were capable of building large merchant ships that were often armed.
• ·      Financing trade made Amsterdam the financial capital of Europe.

ADVANTAGES OF A PRIVATELY-FINANCED, LONG-DISTANCE TRADING MONOPOLY

The merchants of both countries realized that the traditional way to finance trading voyages – merchants and ship owners raising capital for each voyage separately and distributing profits and capital after the voyage – would be inadequate for the huge capital requirements of a sustained, large scale, risky trading venture in Asia. Merchants, investors, and shipowners would have to solicit outside investors to raise enough capital.

They succeeded. For 200 years, the EIC and the VOC were the two largest private companies in Europe, based on book value (total capitalization).

THE EIC AND VOC IN ASIA

The English East India Company (EIC) was founded in 1600 and the Dutch equivalent (VOC) in 1602. Both had charters that gave them a monopoly on trade between their home country and Asia. They almost immediately became rivals. 

In Asia, the EIC suffered defeats at the hands of the competing Dutch East India Company (VOC). The Dutch, led by a very aggressive director, defeated and replaced the Portuguese in the Spice Islands. Then the VOC was able to repulse attempts by the EIC to capture the islands. The Dutch eliminated English attempts to establish entrepots in the Dutch East Indies (Indonesia). The VOC also was the only foreign country allowed to trade with the isolationist Tokugawa shogunate in Japan. The VOC sold the Japanese desired products from all over Asia in exchange for the silver needed to finance the inter-Asian trade and products exported to Holland.

The EIC early centered their operations on the entrepot trade in western India. The EIC’s first ships arrived in India in 1608, received permission to establish a factory (trading center) in 1613, and was granted permission by the Mughal emperor in 1615 to establish factories throughout the Mughal Empire.

A historical look at the early evolution of global trade and how this led to the creation and dominance of the European business corporations English East India Company (EIC) and Dutch East India Company (VOC).

Both countries saw an opportunity to become rich using their merchants, merchant capital, and shipping.

The Beginning of the Industrial Revolution in England

This essay describes the most immediate causes of the Industrial Revolution starting in the late 1700s, including some of the reasons it happened in England. But England had undergone changes in the prior two centuries that increased the chances the Industrial Revolution would start there. Economic growth had depended on England developing a global trading system partly based on its imperial empire. Trade (importing raw materials and exported finished goods), shipping, increased wealth, and a rising merchant class prospering from trade were key to this change. This transformation began in 1600.

THE RISE OF ENGLAND AS A NAVAL AND MARITIME TRADING POWER IN THE 1600s

Except for the Dutch, no other European nation depended on foreign trade for such a high proportion of its employment and gross national product.

English merchant shipping more than doubled, from 150,000 tons in 1640 to about 340,000 in 1686.

Taylor, 259

The explosion of imports from the West Indies was one reason for the large increase in English shipping in this period. A related reason was the Atlantic slave trade, which England came to dominate. Barbados needed a large number of slaves to harvest sugar cane and produce sugar. The port of Bristol became wealthy by specializing in this trade. The town later put up a statue to one of its wealthiest slave traders. It was pulled down in 2020 in a Black Lives Matter rally.

Shipbuilding remained a major industry in England into the 1900s.

By 1700, England was the leading naval power in Europe, with the largest fleet. The English navy was twice as large as the Dutch navy.  London was Europe’s most important center for commerce and finance, passing Amsterdam. England’s power and wealth now depended on overseas trade and commerce. 

In 1600, England had very little trade outside of Europe. By 1700, about 40% of English shipping tonnage carried American and Asian goods. 

England had developed a global trading system. It would begin to assemble a global imperial system. Holland could not match England but continued to own a very lucrative colony in the Dutch East Indies and carried out extensive intra-Asian trade.

 INTO THE FUTURE

The main point of the essay on the EIC is that the creation of the modern corporation and the extension of long-distance international trade developed together. These created great wealth in England, especially in its trading, shipping, and merchant class. Unlike wealth in land, this wealth was liquid (mobile) and would later be invested in railroads and manufacturing.

Like the EIC, railroads and manufacturing companies were able to raise large amounts of capital, partly because the companies were limited liability companies and shareholders could sell their shares on the stock exchange. The “railroad mania” of the 1840s was the first stock market speculative bubble of the industrial age. It didn’t end well but it didn’t discourage widespread ownership in new companies.

Also suggests reasons why England was in the best position to start the Industrial Revolution. England was manufacturing goods to be sold in the new English colonies; these markets, especially America, would expand in the 1700s. By mechanizing cotton textile production, England opened up a new, major source of trade revenue. England imported cotton from India and exporting cotton textiles to India and rest of the world.

Later, in the 1800s, America would become the dominant source of cotton for English textile mills. Also the basis for America’s cotton textile industry. Sadly, this rescued slavery from possible extinction. 

In both countries, the production of cotton textiles was the first industry of the Industrial Revolution. Cotton textiles were England’s largest source of exports throughout the 1800s. Cotton was the main export of the United States in the 19th century. Export earning helped pay for importing machinery and other industrial inputs.

For a description of the EIC’s structure and strategy, see

The English East India Company:  Trade with Asia

For a conjecture that the EIC might be a model for future multinational corporations, see

The English East India Company (EIC):  Model for Future Multinational Corporations?

For an excellent survey of colonial America and the historical context, see

Alan Taylor,  American Colonies:  The Settling of North America.

For all posts in this blog, including links, see 

List of Posts by Topic

There are essays on colonial American History, American Economic History, and why England and America were the countries that started the Industrial Revolution. Also essays on;

China.

Information, innovation, and how markets work. 

Business, finance, and economics. 

Global and national demographics, population projections, and how they interact and influence economies. 

Rome.