The Hidden Economics of Food - Part 15: The Taste of Empire

When Spices Were Worth More Than Gold

Pepper, cinnamon, nutmeg, cloves—today these are cheap commodities, bought without thought.

In medieval Europe, they were treasures. Spices preserved food, masked spoilage, and signified wealth. A pound of nutmeg cost more than a house. Pepper was used as currency.

The spice trade created the first truly global economy. It also created colonialism.

Mercantilism: The Forgotten Framework

Before free trade became orthodoxy, mercantilism guided economic policy. Its core ideas:

Trade Is Zero-Sum

Mercantilists believed exports were good, imports were bad. The goal was to accumulate wealth—specifically gold and silver—through trade surpluses.

This seems crude. Aren’t trade and mutual benefit connected? Yes—but mercantilists understood something modern economics often forgets: power matters in trade.

Monopoly Is Valuable

Free-market economics sees monopoly as inefficiency. Mercantilists saw it as strategy.

If you’re the only seller, you set the price. The spice trade was all about monopoly:

• Control the source

• Eliminate competition

• Raise prices

The Dutch East India Company (VOC) literally destroyed clove trees on islands it didn’t control to maintain its monopoly.

The State Should Direct Trade

Mercantilists didn’t trust markets to produce good outcomes. They believed states should:

• Grant monopoly charters

• Protect domestic industries

• Secure access to resources

• Use force when needed

The East India Companies were instruments of state policy, not just private enterprises.

How the Spice Trade Worked

The Portuguese Phase

Portugal pioneered the sea route to Asia. In 1498, Vasco da Gama reached India.

Portuguese strategy:

• Establish fortified trading posts

• Control key chokepoints

• Use naval force to prevent competition

• Extract tribute from local rulers

This wasn’t free trade. It was armed commerce—trading under threat of violence.

The Dutch Phase

The Netherlands surpassed Portugal in the 17th century. The VOC became the world’s first mega-corporation:

• Monopoly charter for Asian trade

• The right to make war, sign treaties, establish colonies

• Its own army and navy

• Stock traded on the first stock exchange

The VOC didn’t just trade spices. It controlled their production:

• Conquered the Banda Islands (source of nutmeg)

• Massacred the population to ensure control

• Imported slaves to work the plantations

• Destroyed competing nutmeg sources

This is how monopoly was maintained: through violence.

The British Phase

Britain’s East India Company eventually surpassed the Dutch:

• Shifted focus from spices to textiles (then opium)

• Built territorial empire in India

• Governed vast populations

• Collected taxes, administered justice, waged war

The Company was a corporation that became a government—ruling 100 million people with its own army.

What Modern Economics Forgets

Today’s economics teaches that mercantilism was confused—that it misunderstood mutual gains from trade.

But mercantilism understood things textbooks often miss:

Power Shapes Trade

Trade agreements aren’t made between equals. The spice trade was shaped by who had guns, ships, and the willingness to use them.

This remains true. Trade negotiations favor the powerful. Rules are written by those who benefit from them.

First-Mover Advantages Are Real

The Portuguese and Dutch didn’t win the spice trade through efficiency. They won by getting there first and establishing control.

First-mover advantage matters. Countries and companies that dominate industries maintain dominance through accumulated capabilities, not just current efficiency.

Accumulation Builds Power

Mercantilist accumulation of gold seems pointless—you can’t eat gold. But gold bought armies, ships, and influence.

The wealth accumulated from the spice trade funded:

• British industrialization

• Dutch financial innovation

• European imperial expansion

Primitive accumulation preceded development. The critique of mercantilism came from those who had already accumulated.

States Create Markets

The spice trade required state action:

• Charters granted monopoly rights

• Navies protected trade routes

• Armies conquered territories

• Laws enforced contracts

Markets didn’t create themselves. States created markets—then defenders of markets forgot the creation.

The Violence We Forget

The spice trade was brutal:

The Banda Islands

When the Dutch conquered Banda in 1621, they:

• Killed or enslaved virtually the entire population (about 15,000 people)

• Divided the islands among Dutch planters

• Imported slaves to work nutmeg plantations

This genocide created a monopoly. Nutmeg prices could be whatever the VOC wanted.

Indian Textiles

British policy deliberately destroyed Indian textile manufacturing:

• Tariffs protected British cloth

• British cloth was dumped in India

• Weavers lost livelihoods

• India went from textile exporter to textile importer

This wasn’t comparative advantage—it was policy designed to transfer production to Britain.

The Opium Trade

When Britain ran trade deficits with China (for tea), it balanced them by selling opium:

• Opium was grown in India under British control

• Smuggled into China against Chinese law

• When China tried to stop the trade, Britain went to war

• The Opium Wars forced China to accept the drug trade and cede Hong Kong

“Free trade” meant freedom for Britain to sell drugs at gunpoint.

Mercantilism’s Rehabilitation

Modern development policy often uses mercantilist tools while denying it:

Export Promotion

Countries promote exports through subsidies, undervalued currencies, and state support—just as mercantilists recommended.

Infant Industry Protection

New industries are shielded from competition until they’re strong enough to compete—classic mercantilist logic.

State-Directed Investment

Industrial policy directs resources to strategic sectors—as mercantilist states directed resources to trade.

Accumulating Reserves

Countries accumulate foreign exchange reserves for stability and power—modern analogues to gold accumulation.

The mercantilist toolkit works. That’s why successful developing countries use it.

The Spice Legacy

Today’s spice trade is unremarkable. Pepper comes from Vietnam, cinnamon from Sri Lanka, nutmeg from Indonesia. Prices are low. Trade is peaceful.

But the legacies remain:

Unequal Development

Countries that controlled the spice trade (Netherlands, Britain) developed early. Countries that were controlled (Indonesia, India) developed late or not at all.

Institutional Patterns

Colonial institutions—extractive, unequal, designed for external benefit—persist in post-colonial states.

Capital Accumulation

European capital accumulated through colonial trade funded industrialization. Former colonies started with deficits.

The Rules

International trade rules were written by former colonial powers and serve their interests.

What Spices Teach

The spice trade shows how global capitalism actually began—not through free exchange among equals, but through monopoly, violence, and state power.

This doesn’t mean free trade is always wrong. It means:

• Trade theory shouldn’t ignore history

• Power shapes outcomes at least as much as efficiency

• States create the conditions for markets

• Those who benefited from mercantilism shouldn’t lecture others about free trade

The nutmeg on your kitchen shelf is cheap and unremarkable. But it carries the ghosts of Banda—thousands killed so a corporation could raise prices.

Economics should remember what the spice rack forgets.