The 10 tiny Banda islands bask in the scattered, dazzled confusion of western Melanesia. There isn't much nearby. Java is 2,000km west, and other Indonesian islands are a protracted, bobbing boat trip away. An almost entirely Muslim population of around 15,000 clings to these beautiful volcanic rocks, the oceans plunging 6km beneath them. Waves lap the white beaches and sea winds buffet the palms.

If it wasn't for nutmeg, nobody would have heard of the Bandas. Nutmeg was these islands' making, breaking and remaking. The spice very likely evolved here, and for centuries this was the only place it grew on the planet. The luckless archipelago has therefore suffered an importance in wild disproportion to its size, tossed and tussled over by European powers since its "discovery" in the 16th century. Run, the smallest island, had the hardest time of it, flicking between English and Dutch control like a metronome.



Nutmeg is the rarest of spices. Its woody balls are the stones or pips of fruits that plump from the nutmeg tree, the beautifully named Myristica fragrans. You can eat the fruit, too, if you're lucky enough to get it: in Sulawesi they sugar it, then dry it in the sun so it partially ferments. It's said to taste a bit like crystallised ginger. Mace is the vividly red, lacy covering that creeps like ivy round the nutmeg stone. The trees can live to 100 and will yield up to 20,000 nutmegs a season, but that fecundity has never lowered the cost of the spice.

The history of nutmeg is remarkable and illuminating. By the sixth century, the spice had reached Byzantium, 12,000km away. Around 1,000AD, the Persian physician Ibn Sina described the "jansi ban" or Banda nut. The Arabs traded nutmeg through the dark and middle ages, latterly funnelling it through Venice to season the tables of the European aristocracy. It was always fantastically expensive: a 14th-century German price table reveals that a pound of it cost as much as "seven fat oxen".

It's no exaggeration to say that the hunt for nutmeg helped build the modern commercial world. In 1453, the Ottoman Turks conquered Constantinople (modern Istanbul), embargoing trade across the sole sliver of land through which a few merchants had evaded the Arab-Venetian spice monopoly and forcing Europeans to find new eastern trade routes. Columbus sailed the blue Atlantic looking for a passage to India; and Vasco da Gama rounded the Cape of Good Hope in 1497, his men charging on to the shores of Kerala crying, "For Christ and spices!" The Portuguese military genius Afonso de Albuquerque annexed the Indonesian Molucca islands, of which the Bandas form part, in 1511. The fortresses he built there established and then consolidated a Portuguese monopoly over the world's nutmeg that lasted almost a whole cushy century.

But nutmeg was always worth fighting for. The Dutch East India Company (VOC), that most scrupulous and fair-minded of organisations, seized all but one of the Bandas in the early 1600s, swiftly enslaving the native occupants. In 1603, the English gained a toehold in the trade by arranging to export Run's nutmeg, seemingly without force or guile. The Dutch and English then fought skirmishes, punctuated by faltering truces, over tiny Run for the next 60 years. Eventually, they settled on a compromise. The English agreed to "swap" Run for a Dutch holding in the far west, a fur trading post named Manhattan ...

The Netherlanders enforced their nutmeg monopoly with paranoid brutality, banning the export of the trees, drenching every nutmeg in lime before shipping to render it infertile, and imposing the death penalty on anyone suspected of stealing, growing or selling nutmegs elsewhere. When some Bandanese failed to appreciate the VOC's God-given right to control the nutmeg trade – it's possible the islanders hadn't understood the "contract" to which they'd "agreed" – the then head of the Company, Jan Pieterszoon Coen, ordered the systematic quartering and beheading of every Bandanese male over the age of 15. The population of the Banda islands was around 15,000 when the VOC arrived. 15 years later, it was 600.

With this militarised vision of ruthless capitalism, the VOC became the richest corporation in the world. By 1669 it was paying its shareholders an annual dividend of 40% while sustaining 50,000 employees, 10,000 soldiers and around 200 ships, many armed. The Dutch perpetuated their nutmeg monopoly by obdurate force and pathological secrecy, never revealing to traders the islands' location. Then, in 1769, the impeccably named Pierre Poivre, a kind of roving French horticulturalist somewhere between the Scarlet Pimpernel and Alan Titchmarsh, swooped on to the archipelago under the noses of the Dutch and smuggled out nutmegs and nutmeg trees. The French planted the seeds on their colony Mauritius, and the Dutch monopoly was broken.

Finally, the British occupied the islands from 1796 to 1802, and were then able to grow nutmeg in Penang and Singapore and thereafter in their other possessions. The Caribbean island of Grenada, a longstanding British colony, eventually became the world's second leading nutmeg exporter.

What made nutmeg so captivating, so costly, for so long? One factor was its sheer rarity: you can see a similar effect today in £10,000-a-kilo beluga caviar and in a few red wines glugged mainly by boorish oligarchs. But nutmeg was always more than a flavouring. In its early history, like most spices, the Arabs traded it as scent, aphrodisiac and medicine. During the Black Death, nutmeg commanded hysterical prices because desperate people believed it might ward off plague. Perhaps it did: fleas seem to dislike (pdf) the smell of nutmeg, so it's just possible that someone carrying the spice might have avoided that fatal, final bite.

But the old apothecaries were more cautious with nutmeg than with other spices. The Salerno School, the leading European medical establishment during the early Middle Ages, decreed: "One nut is good for you, the second will do you harm, the third will kill you." That isn't strictly true, but in large doses nutmeg can be intoxicating. Its oil contains myristicin: in large doses this acts as a deliriant, while causing palpitations, convulsions, nausea, dehydration and pain. It's fatal to a number of animals, including dogs.

In the appendix to Naked Lunch, William Burroughs's hilarious, spasmodic and harrowing novel of excess and ecstasy, he writes that South American "medicine men" snorted powdered nutmeg to "go into convulsive states. Their twitchings and mutterings are thought to have prophetic significance." Malcolm X described US prisoners taking nutmeg in his autobiography; the authorities soon discovered and banned the practice.

Nutmeg's hallucinogenic reputation survives, and thanks to the wonders of modern technology we can all join the most boring party in the world by watching videos of gangly teenagers trying to get high on it. Most of the time it doesn't work, but some thrillseekers report positive effects, while this gothy emo type declares woozily after his dose, "I can't really feel my heart and my back hurts a little bit." Heroin, move over.

Historically, mace was more common in cooking: it tended to be cheaper than nutmeg because it's rather more pungent, as well as easier to sell in small quantities. 16th and 17th century French flâneurs would commission engraved portable nutmeg graters: they'd bring these to dinner parties and get down to some fashionable sprinkling. But the French taste for nutmeg fell away in later centuries, and now, in that cuisine, the spice is largely restricted to white sauces such as béchamel. Thanks to Venice, the Italians still have a taste for nutmeg, particularly in Tuscany.

The Dutch, who had time to get to know nutmeg, add it to most of their vegetable dishes. It's also popular in Québec, that gastronomically forsaken province which retains a number of eating habits from 17th century France. The spice is popular in historical spheres of Moorish influence but not, oddly, in India. In England, nutmegs are essential to the spiced foods of Christmas, to custard tarts and to the mealy, stodgy brood of national puddings. It has an affinity with cinnamon and can often take its place, and I like it with – but not instead of – chocolate on a cappuccino. It's lovely in mashed potato.

Of course, the spice is almost universally available today, and not particularly expensive. Dinky, rattling jars on supermarket shelves don't begin to hint at its past, and most people grate it without a thought. But the story of food can sometimes be the story of humanity, and nowhere does that seem more true than in the case of nutmeg, the headiest, most alluring, most blood-soaked of the spices.