A Splendid Exchange: How Trade Shaped the World

by William J. Bernstein

bases in Angola and Mozambique, the VOC was forced to establish a new outpost at Africa’s remote southern tip, the Cape Colony, in order to protect its Indian Ocean routes. Impressive as was the war-making machinery of the VOC and WIC, their most potent weapon was Dutch finance. In 1602, investors provided the VOC with 6.5 million guilders in initial funding—about $100 million in today’s money—to hire men, purchase ships, and acquire silver and trade goods to exchange for spices. This capital was permanent, that is, if things went well, it would yield profits that would go mostly to pay for the expansion of business. Although the investors hoped for a modest annual dividend, they had no reason to expect to see their original 6.5 million guilders back anytime soon. This may not seem at all unusual to the modern investor, but at the beginning of the seventeenth century, the appearance of permanent capital in Holland demonstrated an extraordinary degree of confidence in Dutch financial institutions.