Why Nations Fail: The Origins of Power, Prosperity, and Poverty (39 page)

T
HE
M
OLUCCAN
A
RCHIPELAGO
in modern Indonesia is made up of three groups of islands. In the early seventeenth century, the northern Moluccas housed the independent kingdoms of Tidore, Ternate, and Bacan. The middle Moluccas were home to the island kingdom of Ambon. In the south were the Banda Islands, a small archipelago that was not yet politically unified. Though they seem remote to us today, the Moluccas were then central to world trade as the only producers of the valuable spices cloves, mace, and nutmeg. Of these, nutmeg and mace grew only in the Banda Islands. Inhabitants of these islands produced and exported these rare spices in exchange for food and manufactured goods coming from the island of Java, from the entrepôt of Melaka on the Malaysian Peninsula, and from India, China, and Arabia.

The first contact the inhabitants had with Europeans was in the sixteenth century, with Portuguese mariners who came to buy spices. Before then spices had to be shipped through the Middle East, via trade routes controlled by the Ottoman Empire. Europeans searched for a passage around Africa or across the Atlantic to gain direct access to the Spice Islands and the spice trade. The Cape of Good Hope was rounded by the Portuguese mariner Bartolomeu Dias in 1488, and India was reached via the same route by Vasco da Gama in 1498. For the first time the Europeans now had their own independent route to the Spice Islands.

The Portuguese immediately set about the task of trying to control the trade in spices. They captured Melaka in 1511. Strategically
situated on the western side of the Malaysian Peninsula, merchants from all over Southeast Asia came there to sell their spices to other merchants, Indian, Chinese, and Arabs, who then shipped them to the West. As the Portuguese traveler Tomé Pires put it in 1515: “The trade and commerce between the different nations for a thousand leagues on every hand must come to Melaka … Whoever is lord of Melaka has his hands at the throat of Venice.”

With Melaka in their hands, the Portuguese systematically tried to gain a monopoly of the valuable spice trade. They failed.

The opponents they faced were not negligible. Between the fourteenth and sixteenth centuries, there was a great deal of economic development in Southeast Asia based on trade in spices. City-states such as Aceh, Banten, Melaka, Makassar, Pegu, and Brunei expanded rapidly, producing and exporting spices along with other products such as hardwoods.

These states had absolutist forms of government similar to those in Europe in the same period. The development of political institutions was spurred by similar processes, including technological change in methods of warfare and international trade. State institutions became more centralized, with a king at the center claiming absolute power. Like absolutist rulers in Europe, Southeast Asian kings relied heavily on revenues from trade, both engaging in it themselves and granting monopolies to local and foreign elites. As in absolutist Europe, this generated some economic growth but was a far-from-ideal set of economic institutions for economic prosperity, with significant entry barriers and insecure property rights for most. But the process of commercialization was under way even as the Portuguese were trying to establish their dominance in the Indian Ocean.

The presence of Europeans swelled and had a much greater impact with the arrival of the Dutch. The Dutch quickly realized that monopolizing the supply of the valuable spices of the Moluccas would be much more profitable than competing against local or other European traders. In 1600 they persuaded the ruler of Ambon to sign an exclusive agreement that gave them the monopoly on the clove trade in Ambon. With the founding of the Dutch East India Company in 1602, the Dutch attempts to capture the entire spice trade and eliminate their competitors, by hook or by crook, took a turn for the better for the Dutch and for the worse for Southeast Asia. The Dutch East India Company was the second European joint stock company, following the English East India Company, major landmarks in the development of the modern corporation, which would subsequently play a major role in European industrial growth. It was also the second company that had its own army and the power to wage war and colonize foreign lands. With the military power of the company now brought to bear, the Dutch proceeded to eliminate all potential interlopers to enforce their treaty with the ruler of Ambon. They captured a key fort held by the Portuguese in 1605 and forcibly removed all other traders. They then expanded to the northern Moluccas, forcing the rulers of Tidore, Ternate, and Bacan to agree that no cloves could
be grown or traded in their territories. The treaty they imposed on Ternate even allowed the Dutch to come and destroy any clove trees they found there.

Ambon was ruled in a manner similar to much of Europe and the Americas during that time. The citizens of Ambon owed tribute to the ruler and were subject to forced labor. The Dutch took over and intensified these systems to extract more labor and more cloves from the island. Prior to the arrival of the Dutch, extended families paid tribute in cloves to the Ambonese elite. The Dutch now stipulated that each household was tied to the soil and should cultivate a certain number of clove trees. Households were also obligated to deliver forced labor to the Dutch.

The Dutch also took control of the Banda Islands, intending this time to monopolize mace and nutmeg. But the Banda Islands were organized very differently from Ambon. They were made up of many small autonomous city-states, and there was no hierarchical social or political structure. These small states, in reality no more than small towns, were run by village meetings of citizens. There was no central authority whom the Dutch could coerce into signing a monopoly treaty and no system of tribute that they could take over to capture the entire supply of nutmeg and mace. At first this meant that the Dutch had to compete with English, Portuguese, Indian, and Chinese merchants, losing the spices to their competitors when they did not pay high prices. Their initial plans of setting up a monopoly of mace and nutmeg dashed, the Dutch governor of Batavia, Jan Pieterszoon Coen, came up with an alternative plan. Coen founded Batavia, on the island of Java, as the Dutch East India Company’s new capital in 1618. In 1621 he sailed to Banda with a fleet and proceeded to massacre almost the entire population of the islands, probably about fifteen thousand people. All their leaders were executed along with the rest, and only a few were left alive, enough to preserve the know-how necessary for mace and nutmeg production. After this genocide was complete, Coen then proceeded to create the political and economic structure necessary for his plan: a plantation society. The islands were divided into sixty-eight parcels, which were given to sixty-eight Dutchmen, mostly former and current employees of the Dutch East
India Company. These new plantation owners were taught how to produce the spices by the few surviving Bandanese and could buy slaves from the East India Company to populate the now-empty islands and to produce spices, which would have to be sold at fixed prices back to the company.

The extractive institutions created by the Dutch in the Spice Islands had the desired effects, though, in Banda this was at the cost of fifteen thousand innocent lives and the establishment of a set of economic and political institutions that would condemn the islands to underdevelopment. By the end of the seventeenth century, the Dutch had reduced the world supply of these spices by about 60 percent and the price of nutmeg had doubled.

The Dutch spread the strategy they perfected in the Moluccas to the entire region, with profound implications for the economic and political institutions of the rest of Southeast Asia. The long commercial expansion of several states in the area that had started in the fourteenth century went into reverse. Even the polities which were not directly colonized and crushed by the Dutch East India Company turned inward and abandoned trade. The nascent economic and political change in Southeast Asia was halted in its tracks.

To avoid the threat of the Dutch East India Company, several states abandoned producing crops for export and ceased commercial activity. Autarky was safer than facing the Dutch. In 1620 the state of Banten, on the island of Java, cut down its pepper trees in the hope that this would induce the Dutch to leave it in peace. When a Dutch merchant visited Maguindanao, in the southern Philippines, in 1686, he was told, “Nutmeg and cloves can be grown here, just as in Malaku. They are not there now because the old Raja had all of them ruined before his death. He was afraid the Dutch Company would come to fight with them about it.” What a trader heard about the ruler of Maguindanao in 1699 was similar: “He had forbidden the continued planting of pepper so that he could not thereby get involved in war whether with the [Dutch] company or with other potentates.” There was de-urbanization and even population decline. In 1635 the Burmese moved their capital from Pegu, on the coast, to Ava, far inland up the Irrawaddy River.

We do not know what the path of economic and political development of Southeast Asian states would have been without Dutch aggression. They may have developed their own brand of absolutism, they may have remained in the same state they were in at the end of the sixteenth century, or they may have continued their commercialization by gradually adopting more and more inclusive institutions. But as in the Moluccas, Dutch colonialism fundamentally changed their economic and political development. The people in Southeast Asia stopped trading, turned inward, and became more absolutist. In the next two centuries, they would be in no position to take advantage of the innovations that would spring up in the Industrial Revolution. And ultimately their retreat from trade would not save them from Europeans; by the end of the eighteenth century, nearly all were part of European colonial empires.

W
E SAW IN CHAPTER
7 how European expansion into the Atlantic fueled the rise of inclusive institutions in Britain. But as illustrated by the experience of the Moluccas under the Dutch, this expansion sowed the seeds of underdevelopment in many diverse corners of the world by imposing, or further strengthening existing, extractive institutions. These either directly or indirectly destroyed nascent commercial and industrial activity throughout the globe or they perpetuated institutions that stopped industrialization. As a result, as industrialization was spreading in some parts of the world, places that were part of European colonial empires stood no chance of benefiting from these new technologies.

In Southeast Asia the spread of European naval and commercial power in the early modern period curtailed a promising period of economic expansion and institutional change. In the same period as the Dutch East India Company was expanding, a very different sort of trade was intensifying in Africa: the slave trade.

In the United States, southern slavery was often referred to as the
“peculiar institution.” But historically, as the great classical scholar Moses Finlay pointed out, slavery was anything but peculiar, it was present in almost every society. It was, as we saw earlier, endemic in Ancient Rome and in Africa, long a source of slaves for Europe, though not the only one.

In the Roman period slaves came from Slavic peoples around the Black Sea, from the Middle East, and also from Northern Europe. But by 1400, Europeans had stopped enslaving each other. Africa, however, as we saw in
chapter 6
, did not undergo the transition from slavery to serfdom as did medieval Europe. Before the early modern period, there was a vibrant slave trade in East Africa, and large numbers of slaves were transported across the Sahara to the Arabian Peninsula. Moreover, the large medieval West African states of Mali, Ghana, and Songhai made heavy use of slaves in the government, the army, and agriculture, adopting organizational models from the Muslim North African states with whom they traded.

It was the development of the sugar plantation colonies of the Caribbean beginning in the early seventeenth century that led to a dramatic escalation of the international slave trade and to an unprecedented increase in the importance of slavery within Africa itself. In the sixteenth century, probably about 300,000 slaves were traded in the Atlantic. They came mostly from Central Africa, with heavy involvement of Kongo and the Portuguese based farther south in Luanda, now the capital of Angola. During this time, the trans-Saharan slave trade was still larger, with probably about 550,000 Africans moving north as slaves. In the seventeenth century, the situation reversed. About 1,350,000 Africans were sold as slaves in the Atlantic trade, the majority now being shipped to the Americas. The numbers involved in the Saharan trade were relatively unchanged. The eighteenth century saw another dramatic increase, with about 6,000,000 slaves being shipped across the Atlantic and maybe 700,000 across the Sahara. Adding the figures up over periods and parts of Africa, well over 10,000,000 Africans were shipped out of the continent as slaves.