Commodity Trading, Globalization and the Colonial World

Spinning the Web of the Global Market

Christof Dejung, Paul Cohen

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781317296195
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Commodity Trading, Globalization and the Colonial World: Spinning the Web of the Global Market provides a new perspective on economic globalization in the nineteenth and twentieth centuries. Instead of understanding the emergence of global markets as a mere result of supply and demand or as the effect of imperial politics, this book focuses on a global trading firm as an exemplary case of the actors responsible for conducting economic transactions in a multicultural business world. The study focuses on the Swiss merchant house Volkart Bros., which was one of the most important trading houses in British India after the late nineteenth century and became one of the biggest cotton and coffee traders in the world after decolonization.

The book examines the following questions: How could European merchants establish business contacts with members of the mercantile elite from India, China or Latin America? What role did a shared mercantile culture play for establishing relations of trust? How did global business change with the construction of telegraph lines and railways and the development of economic institutions such as merchant banks and commodity exchanges? And what was the connection between the business interests of transnationally operating capitalists and the territorial aspirations of national and imperial governments?

Based on a five-year-long research endeavor and the examination of 24 public and private archives in seven countries and on three continents, Commodity Trading, Globalization and the Colonial World: Spinning the Web of the Global Market goes well beyond a mere company history as it highlights the relationship between multinationally operating firms and colonial governments, and the role of business culture in establishing notions of trust, both within the firm and between economic actors in different parts of the world. It thus provides a cutting-edge history of globalization from a micro-perspective. Following an actor-theoretical perspective, the book maintains that the global market that came into being in the nineteenth century can be perceived as the consequence of the interaction of various actors. Merchants, peasants, colonial bureaucrats and industrialists were all involved in spinning the individual threads of this commercial web. By connecting established approaches from business history with recent scholarship in the fields of global and colonial history, Commodity Trading, Globalization and the Colonial World: Spinning the Web of the Global Market offers a new perspective on the emergence of global enterprise and provides an important addition to the history of imperialism and economic globalization.

Part I
European Expansions

1 From Winterthur to Bombay

The Establishment of the Firm

In November 1844, Swiss merchant Salomon Volkart left the familiar surroundings of his native town of Niederglatt and traveled to India via Naples, Smyrna, Constantinople and Cairo. The main objective of his expedition was to seek out new markets for Swiss textile products in Naples, the Levant and India.¹

Volkart’s journey to India is a striking example of the global market orientation of the Swiss textile industry of the day. The high quality standards of proto-industrial textile production, early industrialization and the small domestic market paved the way for Swiss companies to venture abroad and increasingly market their goods on the world market from the eighteenth century onwards. Since the protectionist economic policies of many countries made large areas of the European market inaccessible to the Swiss, they began to export their products on a large scale to North and South America, and to the Levant.² From 1840 onwards, they also made inroads into markets in Africa, India and Southeast Asia. By 1845, roughly 40–50 percent of Swiss exports went to North and South America, while 15–20 percent was shipped to Asia and the Middle East.³ Switzerland was by no means unique in this respect. Recent studies have shown that the success of the British textile industry rested largely on its ability to export cotton products to West Africa and North and South America. This is an indication that the market for cotton textiles had achieved increasingly global dimensions since the medieval period in Europe. Although the bulk of the textiles purchased in Europe, Africa, the Middle East and East Asia came from India until the eighteenth century, afterwards a growing number of cotton products manufactured in European factories were sold on the global market.⁴

Global Market Orientation and Market Information

The distinct orientation of the Swiss economy toward the global market attracted attention in other European countries. During a fact-finding mission to Switzerland on behalf of the British government in the late 1830s, John Bowring, a member of parliament, noted with astonishment the progress made by Swiss merchants and manufacturers:

It could not but excite the attention of any reflecting person, that the manufactures of Switzerland—almost unobserved, and altogether unprotected—have been gradually, but triumphantly, forcing their way into all the markets of the world, however remote, or seemingly inaccessible.

He went on to note that Switzerland had no ports, nor did it produce the raw materials for its own industry, nor were its companies protected from foreign competition by tariffs or subsidies. In the eyes of this British observer, this made Switzerland a shining example of the virtues of a free trade policy.⁵ Since Switzerland’s geographical location as a landlocked country made shipping costs abroad relatively high, Swiss manufacturers specialized in high-quality products to minimize the impact of transport costs.⁶ To determine which exports would be most marketable, Swiss manufacturers conducted intensive market surveys of the tastes, habits and incomes of their overseas customers. Starting in the 1830s, leading industrial firms began to employ their own representatives and travelers to acquire first-hand information on the latest fashionable colors and patterns.⁷ In many cases, however, market information was gathered in the conventional manner by local merchants.⁸ The vital nature of this information is revealed in a report filed by an inspector who visited Switzerland on behalf of the Belgian government in 1846 and was thoroughly impressed with the business acumen of Swiss manufacturers, who he viewed as far more savvy than their Belgian rivals:

Unlike the Swiss, we don’t know which goods can be sold in each locality, nor how the tastes of consumers vary from region to region due to climate and customs; we often work in a haphazard manner, as noted earlier.

To illustrate his point, he recounted a visit to the Winterthur company of Greuter & Rieter, which in the mid-1840s dispatched a draftsman to Sumatra to study the colors, patterns and scents of the sarongs there. The Winterthur textile printing works even copied certain irregularities perceived to be defects, as the women purchasing these textiles apparently viewed these as marks of quality.⁹

All of this indicates that Stanley Chapman is mistaken in his assumption that the overseas export business was an exceedingly speculative endeavor prior to the introduction of the telegraph, at least with regard to the Swiss textile industry.¹⁰ Swiss producers and the merchants cooperating with them were intimately familiar with foreign markets and tailored their exports as best as possible to local requirements.¹¹ Salomon Volkart also conducted detailed market analyses during his journey to India. For instance, he visited a silk weaving mill in Poona and sent samples of the articles manufactured there to one of his employers in Europe, Swiss textile manufacturer Hüni & Fierz, in the hope “that you will manage to work in this area as well.” He wrote that he was convinced that his extensive journey clear across India would sooner or later lead to interesting new fields of activity for his Swiss employer, adding:

With your keen acumen, you have perhaps already guessed my ambition here, namely, after sounding out every locality there, to establish a type of export business with you that would be most lucrative if it could be run in an agency-like manner.¹²

These statements show that at this point in his career Salomon Volkart was already giving intensive thought to his prospects for the future. He had just turned 29 and had acquired extensive business qualifications. Salomon Volkart came from a respected family in the area around Zurich. Since children from rural regions were not allowed to attend city vocational schools, he was enrolled in an institution for farm boys in Zurich and went on to attend the Hüni Institute in Horgen, a respected private secondary school that provided the sons of up-and-coming rural families with training in commercial occupations. During his school days, he befriended Eduard Fierz, the brother of Johann Heinrich Fierz, who later commissioned Volkart to travel to India in the mid-1840s. In 1832, Volkart began an apprenticeship at Caspar Schulthess & Co. zum Rech, a distinguished financial institution in Zurich. Starting in 1844, he worked in Italy, first as a commercial clerk at the olive oil company of M. Croce in Genoa, and subsequently as a treasurer at the German firm of Stellinger & Co. in Naples. After the company headquarters was severely damaged in a catastrophic fire, Volkart returned to Switzerland. In September 1844, he went to Leipzig to visit Swiss merchant Hans Caspar Hirzel, who had made a fortune trading with South Asia and had made the journey to India himself twice during the 1820s.¹³

Hence, Salomon Volkart already had extensive business experience and excellent contacts in diverse European countries when he traveled to India in 1844–1845. During his stay in Bombay, he contacted Bernhard Rieter, a younger brother of Johann Heinrich and Johann Rudolf Rieter, the partners of the Greuter & Rieter cotton printing and dye works in Winterthur. Bernhard Rieter had been in Asia since 1843 to find a market for the products of Greuter & Rieter. During Volkart’s stay in India, Rieter had an office on the premises of the German trading company Wattenbach & Co. in Calcutta, where Salomon Volkart visited him in late 1845.¹⁴

During his stay in Calcutta, Volkart may have discussed with Bernhard Rieter his plans to open a trading firm in Japan. Since nothing came of this project, he returned to Europe and tried to persuade Eduard Fierz to join him in establishing a trading company in Singapore. In addition to importing European goods to the region, this would have created an opportunity to gain a foothold in the Chinese market in the wake of the Treaty of Nanking of August 1842, which marked the end of the First Opium War and forced China to open five ports to trade with Europe. Fierz declined the offer, however, because he was suffering from ill health and believed that the firm of Hüni & Fierz offered him more promising career prospects. This led Salomon Volkart to take a position with Greuter & Rieter in 1846. Acting on behalf of this Winterthur company, already in July of that same year he purchased in Venice a large consignment of glass beads that were destined for export to India. In 1848, he married Emma Sultzberger, the daughter of Winterthur town councilor and tax official Johann Heinrich Sultzberger.¹⁵

The Establishment of the Volkart Brothers Trading Company in 1851

In the summer of 1845, shortly after Salomon Volkart had arrived in Bombay, his younger brother Johann Georg Volkart had begun a commercial apprenticeship with Hüni & Fierz. He had received this post in part thanks to a recommendation by Salomon Volkart.¹⁶ In February 1847, the younger brother left Switzerland and took a position in Bombay with Huschke, Wattenbach & Co, a joint venture established in the early 1840s by two German trading companies: Wattenbach & Co. operating in Calcutta, and Huschke & Co. in Bombay.¹⁷ It appears that Johann Georg Volkart also received this job thanks to his older brother, who put in a good word for him. After only one year, Johann Georg Volkart was promoted to manager of the branch in Bombay. In 1849, the two partners Huschke and Wattenbach dissolved their joint company and opened separate offices in Bombay. Johann Georg Volkart worked for another year in the newly established branch of Wattenbach & Co. in Bombay before it was closed again.¹⁸

After Johann Georg Volkart returned to Switzerland, the two brothers founded on 1 February 1851 the “commission agency under the direction of Volkar...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Tables and Figures
• Acknowledgements
• Introduction
• Part I European Expansions
• Part II Looking Behind the Scenes
• Part III The De-Europeanization of Global Markets
• Part IV State Interventions and Multinational Trading Companies
• Conclusion
• Bibliography
• Name Index
• Subject Index
• Place Index