Commodities, Ports and Asian Maritime Trade Since 1750

Anthony Webster, Ulbe Bosma, Anthony Webster, Ulbe Bosma, Kenneth A. Loparo, Jaime de Melo, Anthony Webster, Ulbe Bosma, Jaime de Melo

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781349556533, 9781137463913
• eBook ISBN: 9781137463920
• Topic: History
• Subtopic: Economic History
• Index: History

This book examines the role of mercantile networks in linking Asian economies to the global economy. It contains fourteen contributions on East, Southeast and South Asia covering the period from 1750 to the present.

1

Commodities, Ports and Asian Maritime Trade Since 1750: The Foundations of the Modern Asian ‘Economic Miracle’?

Ulbe Bosma and Anthony Webster

Since the 1980s, the interpretation of the economic history of Asia has undergone a revolution to match the startling ‘take off’ of the performance of the Asian economies. Prior to this, historical debate about the development and performance of the Asian economies tended to reflect the priorities and assumptions of Western historians and economists. Based on the notion that industrialisation, as experienced in Europe and North America, represented the universal development trajectory of all societies, debate tended to focus on the propensity of Asian economies to follow this ‘normal’ path of economic development. Subsequent to Marx in the nineteenth century, the debate about Asian development has concentrated on several perceptions and questions. The first of these concerns the condition of the Asian economies before the era of Western imperialism, and their capacity for economic modernisation through independent capitalist and industrial development. The second question, and logically following on from the first, is that of the effect of Western imperialism on Asian development capabilities. For Marx, the ‘Asiatic mode of production’ – in which despotic systems of government extracted excessive taxes from impoverished peasants and precluded the development of property rights – locked Asian societies into a state of near-permanent stagnation. This was relieved only by Western imperial intervention, which brought with it modernisation by implanting capitalism and industrialisation. Accordingly, a long debate began about the legacy of Western imperialism in Asia; from the condemnatory judgements of Indian historians such as Naoroji and Dutt, to the almost celebratory assessments of British rule offered by historians such as Morris.¹ Generally, debate followed the assumption that Western agency, rather than local or regional factors, was pre-eminent in driving change – for better or worse.

These Western-centric preoccupations began to be challenged decisively in the 1980s, as reassessments of precolonial Asia showed wealthy and economically dynamic economies – especially in Southern and Eastern Asia. Notions of Asiatic stagnation gave way to a new scenario of precolonial Asian economic vibrancy, in which Asian controlled systems of production and trade generated wealth and prosperity that approximated to those enjoyed in most of continental Europe.² Indeed, Bayly argues that it was the very buoyancy of the Indian economy that enriched regional states and enabled them to rebel against the Mughal Empire. Building on these emergent perceptions of Asian dynamism, Sugihara offers a radically new interpretation of Asian regional economic development from the mid-eighteenth century, which both posits Asia as a unique and distinct regional economic entity and offers a new explanation for Asian economic growth in the latter part of the twentieth century. Sugihara contends that an important consequence of Western (and especially British) imperial and economic incursion into Asia, was to stimulate trade within the region itself, and to create intra-Asian mercantile and financial networks controlled by Asians, which at first ran parallel with and in collaboration with Western interests, and subsequently supplanted them. These networks facilitated long-term Asian growth, notwithstanding the disruptive effects of war and revolution in the first half of the twentieth century, and formed the basis for the region’s longer term ‘economic miracle’.

Sugihara identifies several key factors that made these developments possible. One is that from the late eighteenth century, the East India Company and its British and Chinese mercantile associates developed a key trans-Asian commodity trade: the export of opium from India to China and Southeast Asia. This was essentially a device by which the East India Company could fund its exports of tea and silk from China – commodities that were central to the restoration of company profitability in the wake of financial crises in the 1770s and 1780s. Initially, Asian involvement was confined to the first and the final stages of this particular commodity chain; with Indian cultivators producing the crop, Indian labour processing it into opium, and Chinese merchants in Canton (the Hong merchants) and the Chinese interior delivering the finished product to the market. The intermediary and financial links in the chain were European dominated, particularly through mutual arrangements between the East India Company and private mercantile organisations (agency houses). The company monopolised production and provided financial services in Canton for the agency house merchants who smuggled the opium into China. However, during the nineteenth century, Asian merchants came to displace the Europeans in these intermediary roles, and the ‘Asianisation’ of the opium chain served to strengthen intra-Asian mercantile networks and provided the basis for extending their activities into other commodity chains – notably cotton yarn – fuelling the industrialisation of India, China and Japan.³ The cotton industry and cotton trade in Asia had begun to return to Asian hands from the early twentieth century onwards, as Dejung observes in Chapter 11, this volume.

Industrialisation within Asia was linked to a regional specialisation in commodity production that took place in the second half of the nineteenth century and became most pronounced in Southeast Asia. Growing specialisation, either in cash crops or in food crops, was the result of a drastic decline in transport costs, the favourable terms of trade for primary products from the late nineteenth century until the First World War and increasing liberalisation of world trade. Whereas by the mid-nineteenth century, rice and textile exports from Java and the Philippines had dried up, their sugar, coffee, tobacco and abaca exports soared. Almost simultaneously, Burma, Siam and Vietnam became the world’s most important rice exporters. First, demand came primarily from Europe, but from the 1870s, the exports gravitated east of Suez: to India, China, Japan and last but not least, the commodity frontiers of British Malaya, the Netherlands Indies and the Philippines. Singapore and Hong Kong emerged as the nodal points for the East and Southeast Asian rice trade, as well as the trade in many other commodities for that matter. Meanwhile, Singapore emerged as the single largest destination for commodity exports from colonial Indonesia in the 1920s,⁴ as well as a hub in the extensive labour migration circuits.⁵ The result was, as Sugihara notes, that by the late nineteenth century, the growth rate of intra-Asian trade outstripped that of Asian trade with the West.

Second, the Western imperial presence significantly enhanced the physical and geographical infrastructure to support intra-Asian commerce, especially the development of port cities with their material and mercantile facilities. Calcutta, Bombay, Madras, Penang, Rangoon, Singapore, Batavia, Bangkok, Hong Kong and Shanghai were all either created or expanded by the Western imperial powers, creating a network of commercial communities that consisted of Asian merchants as well as European ones; and also expatriate communities from other parts of Asia. Connections between these ports expanded, adding impetus to the growth of the intra-Asian trade. Sugihara’s contribution to this volume, Chapter 2, builds upon his earlier work. It reinforces the global importance of the development of production and commerce within the Asian region. He offers a new interpretation of the ‘long nineteenth century’ in world economic history, in which the development of regional economies, and especially Asia, played an important role in the growth of the global economy. Rather than being driven solely by the expansionist forces of Western industrialisation and global trade, world economic growth was also sustained by the integration of the high wage regional economy of the West, and the low wage economy of Asia, which had been created by the regional divisions of labour generated by the intra-Asian regional trade.

Building on the extensive body of literature about the Indian Ocean and the South China Sea,⁶ this book focuses on the development of key nodal points in the development of zones of commodity production in Asia – especially ports – and examines the role of key actors (states, institutions and merchants), providing a detailed study of their modus operandi, the effects of their agency on commerce, particularly with regard to commodity chains, and how their behaviour was shaped by market forces, relationships with other actors and cultural factors. An important feature of the imperial presence and the opening up of the commodity frontiers was the unleashing of immense flows of migrant labour. This created new opportunities for Asian merchant networks able to service expatriate communities or others in the imperial economy. Indian chettiars, Chinese ethnic and kinship based kongsi, and other Asian mercantile networks catered for the needs of the commodity frontiers that had opened up in mainland and Island Southeast Asia.⁷

A crucial factor fuelling this growth of trans-Asian commerce and migration was the integration of the myriad banks and financial institutions in Asia into the global banking and financial networks centred on London, the emergent financial capital of the world. Some of these Asian financial institutions were Western in origin, such as the specially created ‘colonial’ or ‘exchange’ banks originally founded in London, which established branches across the East. Others were first established in Asia, such as the Hong Kong and Shanghai Bank, which later opened a major branch in London to deal with the City of London end of the business, as Kawamura details in this volume.⁸ In due course these Asian banks also developed London connections, as in the case of the Yokohama Specie Bank.⁹ The net effect was that by the second half of the nineteenth century Asian mercantile networks enjoyed access to the world’s premier capital market, ensuring that financial support for growth would not be wanting. The Hong Kong and Shanghai Banking Corporation, established in 1865 and discussed by Tomotaka Kawamura (Chapter 10, this volume), catered for local Chinese and British businesspeople in port towns throughout Southeast Asia and became involved in the sugar industry in the Philippines and Java.¹⁰

Throughout the British Empire and British dependencies in Asia, the colonial banks played a key role in financing infrastructure, plantations and mining. However, much of the financial resources were accumulated locally. The Java sugar industry, the largest industrial conglomerate in Asia, serves as a case in point as it drew most of its funding from its own profits. In a way, this relative autonomy vis-à-vis the metropolitan banking sector and multi-national character of the mercantile communities of Java, as discussed by Knight in this volume, is related to the capacity to accumulate capital in Asia itself. Other sources of finance came, as mentioned, from the opium trade. Wealthy opium traders – the Semarang-born Chinese tycoon Oei Tiong Ham was one of them – reinvested their capital in sugar production, shipping and rice milling.¹¹ Meanwhile, they maintained strong links with Japanese capital, which provided almost half the financial backing for exports from the Java sugar factories in the 1920s. Catering for emerging Asian urban consumer markets, trading corporations such as Oei Tiong Ham’s Kian Gwan house opened offices all over Asia, stretching as far West as Karachi.¹² Here we see all the key elements of the Asian mercantile networks coming together: Japanese economic expansion, emerging urban Asian consumer markets stretching from Japan to present-day Pakistan, the intertwining of European and Asian entrepreneurial networks, and the connections between various commodity frontiers, in this case rice and sugar, maintained by large trading houses.

This volume is concerned in particular with the process by which these Asian mercantile networks emerged during the period from the late eighteenth century to the mid-twentieth century, the ‘long nineteenth century’ of Western imperial hegemony.¹³ The timing coincided with the moment the British appropriated a central position in the trade between India and China and continued into postcolonial times. This ‘imperial’ period is often seen as one in which indigenous agency was increasingly limited by colonial norms and institutions. The contributions to this book argue, however, that there was considerable continuity with earlier dynamics and that actors forged new alliances to capitalise on new opportunities. The chapters examine different aspects of the development of both Western and Asian businesses and business networks, and offer insights into a number of key aspects of the factors that both promoted and inhibited their development.¹⁴

Historians have long recognised the importance of mercantile networks to imperial rule, facilitating as they did a host of vital commercial relationships and commodity exchanges.¹⁵ At their most effective, mercantile networks overcame major barriers to the development of commerce in an age when transport was slow and hazardous, communications were unreliable and slow, and political conditions were frequently uncertain and unstable. A major problem was trust. How to be sure that goods would be supplied, contracts honoured, confidentiality kept and assistance made available in emergency situations? Such universal and timeless challenges to commerce were amplified in the eighteenth and early nineteenth centuries by technological barriers to transport and communications, as well as by political instability and war. As Graham comments, much previous analysis of mercantile networks in this period stresses the importance of kinship, religious or socio-cultural bonds holding groups of merchants together, even where distance and uncertainty were especially problematic. However, this tends to overlook the extent to which globalising commercial networks could not rely upon such well-established linkages. New connections and trust relationships frequently had to be constructed outside the ‘comfort zone’ of familiar networks.¹⁶ This, of course, was much harder, as such new contacts required the bridging of language, religious and cultural barriers, as well as negotiating differences in business practice and culture.

As already mentioned, if one examines the growth of Asian cities such as Hong Kong, Singapore, Calcutta, Bombay and Jakarta, it is clear that collaborative synergies between mercantile groups also existed, both within those cities and across the Asian region, which promoted economic growth.¹⁷ It is important to explore how commercial networks minimised risk and shared information, and how business culture facilitated the success of Asian business mercantile networks, especially in the rise of new commercial activities. In the difficult conditions of Asian trade during the period under study, there were few effective external constraints to curb dishonesty and protect merchants. Poor communications, corruption, war and an absence of effective official scrutiny of business practices made it essential that participants in Asian commerce could trust the word and reputation of distant trading partners in unfamiliar places, and frequently from different ethnic groups. Even modern means to check business behaviour are frequently unsuccessful.¹⁸ Some contributions in this volume focus explicitly on the strategies adopted by individual merchants and their networks in order to overcome these formidable obstacles.¹⁹

In spite of these impediments, close Chinese-British-Dutch collaboration secured early nineteenth-century plantation financing on Java, in some ways resembling the collaborati...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures, Maps and Tables
• Acknowledgements
• Notes on Contributors
• List of Abbreviations
• 1. Commodities, Ports and Asian Maritime Trade Since 1750: The Foundations of the Modern Asian ‘Economic Miracle’?
• 2. Asia in the Growth of World Trade: A Re-interpretation of the ‘Long Nineteenth Century’
• 3. On the Edge of Asia: Maritime Trade in East Indonesia, Early Seventeenth to Mid-twentieth Century
• 4. Semarang, a Colonial Provincial Capital and Port City in Java, c.1775
• 5. Revisiting the ‘Decline of Surat’: Maritime Trade and the Port Complex of Gujarat in the Late Eighteenth and Early Nineteenth Centuries
• 6. Western Merchants in the Foreign Settlements of Japan (c.1850–1890)
• 7. Neglected Orphans and Absent Parents: The European Mercantile Houses of Mid-Nineteenth-Century Java
• 8. Building Intra-Asian and Transcontinental Mercantile Networks in the Age of the British East India Company: The Rise and Fall of the House of John Palmer
• 9. Linking Global and Local Networks of Credit and Remittances: Ma Tsui Chiu’s Financial Operations in Hong Kong, 1900s–1950s
• 10. British Exchange Banks in the International Trade of Asia from 1850 to 1890
• 11. Transcending the Empire: Western Merchant Houses and Local Capital in the Indian Cotton Trade (1850s–1930s)
• 12. Holding Back the Tide: Liverpool Shipping, Gentlemanly Capitalism and Intra-Asian Trade in the Twentieth Century
• 13. Pursuit of Profit in the Shadow of Decolonisation: Indonesia in the 1950s
• 14. The Chinese and Indian Corporate Economy: A Radical Construction of Law, the State and Corporations
• Bibliography
• Index