The Globalization of Merchant Banking before 1850

The case of Huth & Co.

Manuel Llorca-Jaña

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351543934
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

London merchant bankers emerged during the 1820s in the wake of financial turmoil caused by the wars of American Independence, the Napoleonic campaigns and the Anglo-American war of 1812. Though the majority of merchant bankers remained cautious in their affairs, Huth & Co established an impressive global network of trade and lending, dealing with over 6,000 correspondents in more than seventy countries. Based on archival research, this comparative study provides a new chronology of early nineteenth-century commercial and financial expansion.Huth & Co. were truly market-makers and key intermediaries of commodities and capital flows in the international economy. This is an important example of a firm shaping globalisation well before the transport and communication revolution of the last quarter of the nineteenth century. But rather than a case study, this is a comparative study concerned with the commercial and financial activities of the leading merchant-bankers of the periodThis book will be of great interest to business and economic historians interested in the nature of the early decades of the first globalization.

1 Early life and activities of Frederick Huth, founder of the company, c.1777-1822

Early training in Hamburg and Corunna, 1791-1809

Nowadays Huth & Co. is recognized as a leading London merchant banker of the nineteenth century. Yet Huth’s commercial origins must be traced to Germany¹ and northern Spain. Frederick Huth, the founder of Huth & Co., was born in Stade, Hanover (nowadays part of Germany) in 1777.² Although he died a very wealthy man in 1864 (aged 87), his origins were humble. Frederick was the son of a soldier who settled with his family in 1781 at Harsefeld (south-west of Hamburg), where Frederick attended local schools. His future did not look particularly promising. By then, Frederick’s father was working as a tailor, earning barely enough to support his growing family. But things were to change for the better. Aged 14, Frederick was fortunate enough to be admitted as apprentice to a Basque³ merchant house in Hamburg (called Brentano Urbieta & Co.).⁴ Huth was given a little room in Urbieta’s premises, and apart from learning on the job, twice weekly he attended the local and prestigious Handelsakademie (business school) to receive a formal education in commerce.

The location of this Spanish house was not unusual at that time, since many Basque merchants established themselves in European Atlantic ports during the 1780s–1790s, including places like Bayonne, Bordeaux, Amsterdam, Ostend, London and Hamburg.⁵ With its good connections to other leading seafaring cities, such as London and Amsterdam, Hamburg was an important entrepôt of colonial produce, in particular that garnered from outposts of the British and Spanish empires.⁶ Hamburg has thus justifiably been described as ‘a wonderful city for a future merchant, for it was a city on the move’.⁷ For example, from Hamburg, Urbieta’s dealings included imports of Spanish produce from Malaga and Cadiz, including re-exports of Havana’s sugar, Venezuela’s coffee, Central America’s cochineal and indigo, and Buenos Aires’ hides.⁸ In turn, merchants in Hamburg were well connected to several of the most important European consumer centres of the time.⁹ But Hamburg was also one of the prime exit doors of German manufactures (linens in particular, but also ironware), which were re-exported to France, England, the Netherlands, Spain, her colonies, and many other places. Indeed, most of the ‘production from the famous manufacturing regions in Germany’s interior was destined for foreign and overseas markets’.¹⁰

Furthermore, when in 1795 Amsterdam was taken by the French, Hamburg made further commercial gains. Many of the merchants who had been working in Le Havre, Amsterdam and Antwerp emigrated to Hamburg, bringing with them vast trade networks as well as their capital,¹¹ thus increasing the cosmopolitan character of this city. In short, Frederick Huth could not have asked for a better European port in which to start his commercial education, and in particular to gain a good understanding of the international trading networks operating from Europe at that time, including the keys to succeed in multilateralizations of trade involving other (distant) regions. Incidentally, Joseph Hambro, the founder of Hambro & Son of London (a competitor of Huth & Co.), also served his apprenticeship in Hamburg, and according to the biographers of this company, ‘there could be no better place for a future merchant to serve his apprenticeship’.¹²

Indeed, it was in Hamburg that Frederick Huth swiftly learned the most basic tricks of international trading. Frederick did so well that, in 1795, aged just 18, he was promoted to senior clerk by Juan Antonio Urbieta, the head of Brentano Urbieta & Co. By then Huth’s period of apprenticeship had ended. The following year Urbieta took him on his annual linen-buying tour of Silesia.¹³ Linen accounted for a high proportion of the goods sent to Spain by Brentano Urbieta & Co. (many of which were subsequently re-exported to the Americas),¹⁴ this being one of the few products they purchased directly from producers, including those in remote locations.¹⁵ It is worth stressing here that Huth’s knowledge of this product will prove influential in his future dealings from London. In any case, only two years later, Huth’s performance continued to be so outstanding that in 1797 Juan Antonio decided that Frederick would be of better use in Corunna, where Brentano Urbieta & Co. had a branch house that was contributing significantly to the firm’s overall revenues.¹⁶

Several changes in Spanish law underlie this decision. The most important of these enabled foreign Protestants (such as Frederick Huth) both to live and to work in Spain. Previous to that, in 1764 the Spanish crown created its first postal service connecting Spain with Spanish America (correos marítimos, or maritime mail, in a monthly basis), with Corunna (rather than Cadiz) being chosen as the port from which the packet boats would depart. There was no better place in Spain to access timely information regarding Spanish America.¹⁷ A year later, in 1765, Corunna and other nine ports were allowed to trade with the Spanish Caribbean, a concession which was further enhanced in 1778 when Corunna (and twelve other Spanish ports) was allowed to trade directly with the entirety of Spanish America, the combined effect of which increased Galician foreign trade beyond all previous limits. This development will be of future importance because it was in Galicia that Huth became familiar with direct trades with Spanish America. Indeed, from Corunna Huth was sent to South America several times acting as the Urbietas’ supercargo between the late 1790s and early 1800s. During these trips Huth landed in places such as Rio de Janeiro, Callao, Valparaiso and Buenos Aires. Corroborating the excursions of Brentano, Bovara (another partner)¹⁸ and Urbieta in that region, according to data collected by Barbier, in 1802 two vessels chartered by this Basque house arrived at the River Plate, and another three between 1804 and 1808. In this later period, the firm also chartered another three ships for Callao,¹⁹ and it was as part of these trips that Huth gained valuable firsthand knowledge of these markets, which must surely have showed him the potential of the region, in particular after independence. In fact these travels may have led to Huth’s decision in 1822 to open branches in Peru (and in Chile two years later), as discussed below.

More importantly, Huth’s appointment in Galicia is crucial to understanding his later and strong connections with Spain after he moved to London in 1809. Having spent nigh on twelve years in Spain, Frederick Huth not only had a first-mover advantage over potential competitors but had also longstanding friends who could be trusted – and who trusted him – at a time when one of the main obstacles to international trade was the lack of trust, and trust was intimately linked with another crucial element of cross-border business: reputation.²⁰ Frederick’s reputation began to grow as a result of his early training in Hamburg, and it was surely enhanced in Spain amongst those who knew him well. And indeed, apart from Britain and Germany, it was in Spain that Huth & Co. of London concentrated most correspondents for the entirety of the period 1809– 1850. In turn, the links with Spain were instrumental to the firm’s strategy of business diversification.

The Corunna house was led by Cypriano Urbieta, a brother of Juan Antonio, who soon started to rely heavily on Huth. Apparently Cypriano had other (more) important interests than commerce,²¹ and therefore Frederick was free to shine, winning an enhanced reputation with the Urbietas in the process, so much so that after his final trip as supercargo to South America, Frederick was made chief clerk (and junior partner) of the Corunna house, thus completing a meteoric ascendancy within the firm. Despite this new responsibility, and the consequent salary increase, two years later in 1805 he decided that – thanks to the invaluable commercial experience and formal training he had gained in Hamburg, Corunna and South America – it was time to open his own business.²² Furthermore, by then he had married a young Spanish lady called Manuela Felipa Mayfren (1785– 1856), which also prompted him to set up on his own. Although an orphan, it was thought that Manuela was actually the daughter of a senior courtier to the king of Spain,²³ a connection that would prove very useful for Huth & Co.’s future business operations from London.

Huth’s activities as a sole merchant in Corunna between 1805 and 1809 are poorly documented, but this is not surprising given the small scale of his activities at this time. We can, however, presume that during these years he traded principally with Hamburg, other German provinces, France, Russia and South America, thus replicating some of Urbieta’s businesses at both Hamburg and Corunna, and surely making the most of the contacts he had previously cultivated while working for the Basque house. Yet Huth’s independent business in Galicia proved to be short-lived. Napoleon’s invasion of Spain in 1808 forced him, his wife and their two children²⁴ (and many other residents) to leave Corunna a few months later and the Huths arrived in London in 1809,²⁵ with no more than £700 in funds and a few letters of introduction given by his friend and merchant Juan Francisco Barrié,²⁶ a senior member of the Real Consulado de Comercio of Corunna. Although of French origin, Barrié had taken Spanish nationality in 1803.²⁷ They became very close friends during Huth’s time in Galicia,²⁸ and indeed it is believed that Barrié assisted Huth when he opened his own business there in 1805.²⁹ But Huth also had some valuable London contacts he had previously cultivated while working for Brentano Urbieta & Co. Indeed, amongst those who also helped Huth in his early days in London was Fermín³⁰ de Tastet (1793–1863), head of Tastet & Co., ‘a well known Spanish house’ of London,³¹ and a contact provided directly by the Urbietas when Huth moved to England.³² Firmín, like so many London-based ...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of tables
• Acknowledgements
• Introduction
• 1 Early life and activities of Frederick Huth, founder of the company, c.1777-1822
• 2 Expansion of the firm during the 1820s-1830s and the South American branches
• 3 Huth & Co.'s Spanish and German connections during the 1820s-1840s
• 4 The Liverpool branch, agents in Britain and the US connection
• 5 A global enterprise of trade and lending
• 6 Risk-management credit strategies
• 7 Conclusions
• Bibliography
• Index