Nepali Wanderer

In the first phase of exploration, Spain amassed such enormous wealth that it seemed poised to dominate the world for centuries. However, this supremacy waned in less than half a century. Even a union with its Iberian neighbor, Portugal, couldn’t halt Spain’s decline, driven by the profligate use of its wealth and a series of ill-fated wars and defeats. The primary reason for Spain’s failure to capitalize on its wealth can be understood through a basic economic principle.

Spain literally struck silver in South America, especially with the discovery of Cerro Rico in modern-day Bolivia, which enriched Spain almost overnight. Cerro Rico produced 80 percent of the world’s silver at the time, making Spain the wealthiest empire. However, as Economics 101 teaches, an oversupply of silver diminished its value. This devaluation meant that Spain’s vast wealth, and consequently its power, eroded rapidly.

While Spain’s decline was partly due to an economic miscalculation, another empire rose through a financial innovation. The Netherlands, or the Dutch Republic, previously under Spanish rule, spearheaded this transformation. After seceding from Spain in 1581, the Dutch needed to generate wealth to resist Spanish reconquest. They turned to the lucrative spice trade.

However, investing in exploration and sea trade was risky. Ships laden with spices brought immense wealth, but accidents, shipwrecks, or attacks could lead to massive losses. Only wealthy monarchs and merchants could afford such risks. But the enterprising Dutch had a plan — they devised a method to spread this risk by raising capital from a broader base. Their ingenious solution? Stocks!

The Dutch created the world’s first joint-stock company, the Vereenigde Oost-Indische Compagnie, more commonly known as the Dutch East Indies Company or VOC. Amsterdam soon became home to the first trading house on Earth. This one Dutch innovation revolutionized the world of finance, giving birth to the idea of joint-stock companies and corporations. Every giant corporation that shapes and runs our modern world traces its origins back to this pivotal moment, thereby making VOC the most influential company in history.

Empowered by substantial capital, the VOC quickly took control of key ports in India, Sri Lanka, and the East Indies, surpassing Portugal as the dominant force in the spice trade. The Dutch established their presence in Java, founding what is now Jakarta, and began colonizing the region that would become Indonesia. The spice trade cemented the Dutch Republic as Europe’s wealthiest empire. Amsterdam became the world’s trade and art capital, teeming with creative artists and wealthy patrons.

The Netherlands also ventured into the New World through the Dutch West India Company, soon followed by France. While Spain colonized Central and South America, the Netherlands and France focused on trade, particularly in fur, a highly prized commodity in Europe. France founded Quebec City around the Saint Lawrence River in North America, while the Netherlands established New Holland around the Hudson River. New Holland — doesn’t quite have the same ring to it, does it? Well, thanks to the arrival of another northern contender in the exploration race, that name was soon destined to change. (Guess what it’s called now!)

This later comer was none other than England! With their arrival, the stage was set for the next era of exploration and colonization. As northern European countries — Netherlands, France, and eventually England — expanded in America, the transatlantic connection became the world’s new economic hub. The global power shift from the Mediterranean to the Atlantic began, a dynamic that persists today.

Next, we will explore the British Empire, where the sun never set!