As we saw in our previous story, Spain had accumulated such massive wealth through their exploration that they had everything in their arsenal to rule the world for long. But Spain, which looked destined for absolute world domination for centuries to come, lost its supremacy in less than half a century. If one were to compress the history of the last 2000 years into a two-hour movie, Spain would play the role of an overnight lottery winner who loses all the winnings in almost no time. Even the Union with their Iberian neighbor Portugal could not stop its downfall caused by profligacy of their wealth and series of miscalculated wars and defeats. But the main reason why Spain could not make the most of its massive wealth can be explained by a simple law of Economics 101, related to the world of money.
Spain at one point thought it had literally struck Silver, and that too in an infinite amount. When the Spanish conquistadors discovered one hill in the modern day Bolivia known as Cerro Rich (which in Spanish means Rich Hill), that hill enriched Spain in no time with almost all the Silver in the world. 80 percent of the total Silver on earth came out of that one hill alone, so one can imagine how cash-rich Spain had become because of that one single discovery.
Silver in those days (as it is today) was one of the most valuable commodities along with Gold. So, the colossal amount of Silver made Spain the richest empire in the world. But as we can understand from the simple law of Economics – as the supply of Silver vastly supplanted the demand of Silver, Silver lost in value. And that meant the vast wealth of Spanish Empire, and its power – as it is often money that leads to power – waned in no time. That coupled with a series of miscalculated wars and defeats meant Spain lost its world supremacy in less than a century.
Just as it was the failure to understand the nuances of money that led to the fall of one massive empire, it was an ingenious innovation in money that propelled the rise of another. And ironically, it was a country that was under the Spanish empire before that engineered this innovation in money. Netherlands (or the Dutch Republic, as it was referred to at the time), a country that had just ceded from Spanish empire, heralded a new era of exploration. And it was not the usual kings and the monarchs that led their era of supremacy, but rather merchants, and a company – perhaps the most influential company ever established in history – that stamped the authority of a small northern country in the world map.
When Netherlands ceded from Spain in 1581, it had to find a way to accumulate wealth to fight back against the possible Spanish conquest again. As the biggest wealth in the world lay in the Spices, Netherlands also sought to look for ways to control the route to Spices. But the investment in exploration and sea trade in those days was not always a safe bet. Although the safe arrival of ships with spices meant massive fortune, possible accidents and wreckage of ships, or attack of the ships by competing with rivals on the way meant massive chances of loss of massive investment. So, only the rich monarchs and merchants could afford to take that amount of risk. And it was the Dutch that engineered the innovative way of spreading this risk, as they found a way to raise massive investment that would far outbalance the occasional massive loss of fortune. And in a world where people believed in even lotteries, there was a way to raise capital from a large number of population without incurring massive risk to limited investors. Stocks was their answer, and the ingenious Dutch created the first joint stock company in the world, in the name of Vereenigde Oost-Indische Compagnie, popularly known as the Dutch East Indies Company, or simply VOC, and Amsterdam soon housed the first trading house on earth.
That one Dutch innovation had a massive impact in human history as it led to the idea of joint stock companies and corporations. All gigantic companies and corporations today that not only shape our world but also run it in one way or another, trace its origin to that one beginning, which is why VOC is considered as the most influential company on earth ever created. And that one ingenious innovation in the world of money meant the influence of money would increase hundred fold. We will gradually narrate the influence of money in subsequent chapters too, so let us first travel to the era of exploration heralded by the entities driven by money.
VOC, enriched and empowered by its massive capital, soon took control of the important ports in India, Sri Lanka and the East Indies, eventually replacing Portugal as the King of the Spice trade. It eventually took control of the island Java and established its own city there, which became the modern day Jakarta, effectively starting its colonization in a collection of islands which became the modern day Indonesia. Netherlands also started its exploration into the new found world, that is America, and was soon followed by its northern neighbor France in the race for exploration. And while Spain had chosen the route of colonization in America, effectively colonizing Central America and South America, Netherlands and France chose the route of trade in America, and mainly focused on the trade of fur – a highly priced commodity in Europe. France started a city around the Saint Lawrence river in North America, which later became the Quebec City in modern day Canada. The Netherlands too started its own city around the Hudson river in North America, calling it the New Holland. This New Holland later came to be known as the New York in modern day United States. And the reason it became New York from New Holland was because of the entry of another northern country in the exploration race – England – who stamped its authority on the next era of exploration and colonization.
Although England had earlier also tried its hands at exploration (in fact as early as 1497) – it was only in 1607 that it was finally able to stamp its mark in the new found world. And much like the Netherlands, it was a company that started this new course for England. A Landon based company called Virginia established a town called Jamestown in the eastern Atlantic coast of North America. After creating its first colony, there was a flurry of increased migration from England to North America, eventually leading to the creation of 13 colonies in the eastern coast of what is known today as the United States. And while the Netherlands and France had focused mostly on fur trade in North America initially, England shifted its focus on plantation of cash crops, starting with tobacco and later on cotton. Eventually, the massive profits created by its companies in North America meant England and its other companies could establish their colonies in the vast riches of Asia. England eventually colonized a land in Asia which in later years was considered the jewel in their crown – the colonization of India and its vast riches.
British East India Company, established in 1600 to control the spice trade in India and the Indies, eventually colonized India. Although the company forayed into India as just traders as first, it slowly started spreading its influence across other spheres too, and strengthened its control over the area. Eventually, with key victories like against the Nawab of Bengla in 1757, it colonized India.
But England was to suffer a massive blow in North America. The 13 colonies in the eastern coast raised massively, and soon started unifying against the English, due to issues like increase in tax and effectively zero participation in English Parliament and decision making. Finally, the 13 states fought together against the English and proclaimed their independence in 1776. The unified thirteen colonies in eastern coast eventually gave rise to the massive country with 50 states today, the modern day United States. The first region in North America colonized by the London based company called Virginia that we talked about above would become the modern day Virginia state in the United States.
England had lost its massive chunk of land in the form of colonies in the United States. But for its one loss, there was another gain. In less than 12 years of its losing the United States, England added the last missing piece in the world map to its crown. In 1788, England established its colony in the continent of Australia.
Contrary to the popular belief, Australia was not discovered by Captain James Cook of England. It was discovered by other explorers more than a century before James Cook had, with the Dutch explorers coming across the islands as early as 1606. The Dutch even named the Islands ‘New Holland’ and ‘New Zeeland’, with Holland and Zeeland both being two of the seven provinces of the Dutch Republic then. ‘New Holland’ would go on to become Australia, and ‘New Zeeland’ would become New Zealand.
But the discovery of James Cook is well known for a reason, as it led to the eventual arrival of English fleets in New South Wales, Australia, in January 26, 1788, thereby eventually starting the British Colony in Australia. England colonized Australia for more than a century, and January 26 is still considered as the official National Day in Australia, despite its independence from England.
So, if you think of it, within a span of 30 years, the fate of three massive countries collided – USA, India, and Australia – all at the hand of one nation, England. And if you consider the whole era of exploration, it led to the rise of 4 of the 5 biggest countries in the world, whether you pick the list in terms of land, or population.
The era of exploration also had a massive effect on the change in power dynamics of the world. It was the exploration era that shifted the power of influence and economy from Asia to Europe, and even within Europe, from Mediterranean to Atlantic. For a large part of human history, it was the Mediterranean economy like Greece and Italy that had been Europe’s most powerful regions. Post exploration it was the North European Atlantic economies like Britain and France that influenced the European ascendancy, which remains the case even today.
But overall, the discovery of Australia meant one major milestone for human history. The map of the world we know of today – the one that was half empty when the era of exploration had started – had got filled up. Although small islands and land pieces would be discovered later too, the conspicuous pieces that we see in world maps today had come together finally.
But maps are basically lines and curves drawn over physical structures composed of land and water. The elements that we associate with maps too are fiction. A fiction that feels as real and central to our lives as our other two main characters – religion and money – the fiction of the country. Notice how we have casually called a piece of land Australia, Netherlands or India, without there being anything in the physical structure that contributes to their names. All countries on earth, ultimately are fictional characters too. And while these characters too feel like they have been here forever, these characters are actually just recent phenomena, at least compared to our other two characters – money and religion – just as we saw in this article with the formation of the United States, the most powerful country on earth.
So, next up, we will talk about the rise of countries that are so prominent in our modern day contemporary world.