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.