Rivalry for Trade in Tea and Textiles

The English and Dutch East India companies (1700–1800)

Chris Nierstrasz

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781137486523
• eBook ISBN: 9781137486530
• Topic: History
• Subtopic: Business General
• Index: History

The rivalry for trade in tea and textiles between the English and Dutch East India companies is very much a global history. This trade is strongly connected to emblematic events such as the opening of Western trade with China, the Boston Tea Party, the establishment of British Empire in Bengal and the Industrial Revolution.

1

Imperfect Monopolies

The monopoly of East India companies is frequently considered to be synonymous with the conscious exclusion of competition in order to maximise profits. Proponents of this view say that these companies were only able to manipulate markets to obtain higher profits by their capacity to impose power and wield political privileges. Such privileges needed to be enforced, leading to inefficiency and the passing on of the costs involved as higher prices for consumers. Ensconced in their position to manipulate their markets, these companies made their fortunes by limiting supply when demand was high, later to sell their goods as exclusive and profitable luxuries. The logical upshot is that, if trade had been left to the devices of monopoly companies, no Asian commodity would ever have reached beyond the purlieus of the elites to consumers in all layers of European society. As the introduction has shown, such stereotypes might have held a grain of truth in the case of some of the goods which the East India companies brought back, especially the spices, but, as far as the two commodities which are the focus of this study are concerned, namely tea and textiles, these sorts of conclusions are problematic. Any attempt to gain a real monopoly of the trade in these goods was inhibited by external competition compounded by the internal organisational weaknesses of the East India companies. As this chapter will demonstrate, the real reason criticism of the monopoly companies mounted steadily during the eighteenth century was that the structural imperfections of company trade with and within Asia became increasingly apparent as their monopolies on trade eroded under the pressures and exigencies generated by the rivalry for trade in tea and textiles.

1 Imperfect monopoly in trade

‘( ... ) to have the sole right, at the exclusion of all others to be allowed to sail east of the Cape of Good Hope or through the Magellan Strait, on seizure, of those who would go against this, not only of ships and goods, but also to be punished by life and possessions. ( ... )’¹ With this stern warning, the States General of the Dutch Republic granted the sole right of trade between the Dutch Republic and Asia to the VOC. The goal of this monopoly on trade was to give the VOC sole access to the profits of trade between Asia and the Dutch Republic. Other European East India companies, such as the EIC, had been granted similar rights by their home states, couched in words just as menacing to those who might have nurtured ideas about trying to edge in on the profits.² With every extension of their charter, the East India companies paid for this privilege, which also guaranteed that their home state would help them protect their monopoly on trade to Europe. Despite such backing, the limitations of such a national monopoly are quite blatantly evident considering that all the European companies had been granted similar rights from their own home state. Beyond this national claim on trade with Asia, in reality the monopoly on the trade in tea and Indian textiles to Europe often only dimly reflected anything close to an actual monopoly, as global competition was the real factor which determined the outcome of trade.

This form of a ‘national’ monopoly had made sense in the seventeenth century, when only the EIC and the VOC had been able to enforce their will on the trade in spices to the advantage of their own coffers. However, with the opening up of the trade in tea and textiles in Asia, new prospects and challenges loomed for the EIC and VOC as well as the other companies which had failed in the spice trade in the seventeenth century. This is particularly applicable if it is remembered that, within a span of forty years between 1680 and 1720, the consumption of tea and Indian textiles in Europe was propelled to previously unforeseen heights. The two companies which had been successful in the spice trade, the VOC and the EIC, were very aware of the growing demand for these new commodities and, in their efforts to expand trade in tea and textiles, they did succeed in satisfying it to some extent. Nevertheless, undismayed new companies were created and old ones revived as new competition was forced on the two companies which had dominated the East India trade to Europe in the previous century.

The expansion of the company trade in tea and textiles with Asia was not a national development, but a pan-European one. The monopolies of the EIC and the VOC meant that many Dutch and English merchants had been denied access to Asian trade in their own countries, but now they sensed opportunities opening up elsewhere in Europe. These merchants felt the market for tea and textiles extended far beyond the quantities the VOC and EIC were willing or able to bring back. In order to out-manœuvre the EIC and VOC monopolies, these new merchants teamed up with merchants from all over Europe to form new monopoly companies beyond the Dutch Republic and England. The dormant Danish East India Company was re-founded to profit from these new circumstances with the help of foreign investors.³ Completely new companies, as among them the Ostend and Swedish companies, sprang up.⁴ These last two East India companies were pan-European companies, as was the Danish East India Company, and were indeed partly financed by capital and entrepreneurship from the Dutch Republic and England. In the meanwhile, the French government kept reforming the organisation of the French East India Company, trying to lick it into shape to be a worthy French contender in the trade with China and India.⁵

Until the arrival of these new entrants, the EIC and VOC had competed between themselves, but whenever possible had consciously not satisfied demand in order to maximise profits. With the advent of new competition, a new era of real competition erupted, not so much in the trade in spices but in the pursuit of the new prize goods of tea and textiles. The inability of both the VOC and EIC to supply the new markets for tea and textiles or deter new competitors requires an elimination of some of the old stereotypes of the way their trade has been understood so far. In the discussion on competition between companies, national stereotyping in the trade in tea and textiles has loomed pretty large. The VOC has often been characterised as being so focused on spices that it failed to see the potential of tea and textiles in Europe.⁶ The EIC, in its turn, has been characterised as largely unsuccessful in all spices except pepper, as it had been thrown back on India in the seventeenth century. Smarting about its failure in spices, it is said to have realised the potential of tea and textiles more quickly and acutely than the competition.⁷ Such national stereotypes lack depth and they make the competition appear static, whereas in actual fact both companies continuously adapted their commercial strategies in response to the ever-changing competition for tea and textiles.

1.1 Mix of commodities

Despite their willingness to adapt, the VOC and EIC both struggled to develop new strategies in their search for an answer to the new forms of competition for tea and textiles. The differences in the answers with which they came up can only be understood by looking at their total trade strategy. One point remained constant and still showed the essential monopolistic nature of the EIC and VOC: they both felt entitled to the trade in tea and textiles and had no greater ambition than to push the competition out of business. Nevertheless, the way the VOC and the EIC approached the competition in the trade of tea and textiles diverged significantly.

The goal of the directors of the VOC still remained to bring back the most profitable mix of goods from Asia, with no commodity being excluded from the equation. They assessed profits on goods ranging from such key items as spices, tea and textiles to merchandise, boosted by a niche market in Europe. They also went so far as to assess the profitability of the commodities intended for ballast or stowage. In their pursuit of maximising profits, the VOC directors made a calculation of the profitability of individual commodities on the basis of markets spanning the globe, not only in Europe but also in Asia.⁸ In a process of trial and error, an analysis of the goods in the order lists and in the actual returns of the VOC show a strategy of testing, improving and discontinuing commodities over time. The key factor in such decisions was the profitability of a commodity; if profitability dropped the VOC simply switched to another commodity or decided to sell the commodity in a more profitable market. In the order lists, this dialogue between what the VOC brought back and what the merchants in the Dutch Republic wanted emerges unequivocally. It was engaged in a constant process of product development and innovation, because not supplying the market with what it wanted was considered a loss of profit.⁹

The range of goods the VOC traded in throughout its whole existence is quite astonishing. It cherished its monopoly trade in spices, but also traded in medicinal drugs and other commodities, which it could acquire at a minimal outlay given its strong position of political dominance in the Indonesian Archipelago. Many other commodities enriched the VOC returns to Europe, as Asian commodities flowed to Batavia, the hub of the widespread intra-Asian trade of the VOC, where trade was boosted by the regular presence of Chinese junk traders in the city. Returns included commodities such as borax, camphor, benzoin, dragon’s blood, indigo, ginger, aloes, saltpetre, curcuma, musk and soya amongst many different small items. The VOC servants in Batavia were also the first to grasp the economic potential of cultivating such crops as sugar and coffee in Java.¹⁰ The taxation the VOC was entitled to in Java was levied not in cash but in manual labour. The VOC only profited commercially from this labour by adding the goods which were being cultivated in Java to its trade on Europe and Asian markets. These crops were introduced as cultivars into the environs (or Ommelanden) of Batavia and beyond. Coffee and sugar were initially very successful in the trade to Europe, but sugar only took off when cultivation in America was disrupted by war. Coffee lost most of its attraction after it had been introduced on American plantations, a move which, much to the displeasure of the directors of the VOC, meant that Javan coffee could not compete price-wise in Europe and had to be marketed as a luxury. As wood and timber were essential to the stowage of cargoes of VOC ships, the Company also invested in redwood, ebony and calliatourshout. It was also deeply invested in different kinds of wool, cotton yarns and silk yarns, as well as dyes. During the eighteenth century, when the occasion presented itself, it would also bring back diamonds and jewellery.¹¹

Throughout the eighteenth century, the VOC lists slowly saw the number and variety of goods it returned to Europe ebbing. One reason for this decline was indubitably the drop in VOC returns and decrease in its shipping as the pressure of the expansion of the VOC trade reached unsustainable proportions. Half way through the eighteenth century, the pursuit of more trade and commodities had inflated the returns of the VOC to such an extent that the Company grew too large to bear its own financial burden. This problem was exacerbated by a concomitant loss in profitability, which sent out warning signals that any further expansion would be undesirable. Trade had been inflated to such an extent that the amount of money which had to be borrowed in the Dutch Republic was beyond the means of the VOC to pay back. In the 1740s and thereafter, the VOC directors made a conscious decision to limit its trade to the most profitable items and to restrict its shipping with Asia.¹² After 1750, the process of fewer rich returns followed an inexorable path as the VOC began to rely more on goods from areas over which it had established political control instead of commodities gathered from all over Asia. For instance, returns were supplemented by other commodities such as arrack from Batavia and wine from the Cape of Good Hope.

The power of the VOC strategy lay not only in the returns it could make from its main commodities, but in nurturing modest profits and smaller-scale commodities. As a consequence of this overall trading policy, the VOC was heavily involved in commodities which seem to be insignificant in comparison to the total value of its returns. Although the value of such ‘small’ goods might not have been very pertinent to the economy of the Dutch Republic in value, this strategy of pursuing a wide range of goods was in actual fact very beneficial to the economy of the Dutch Republic. The diversity of goods, or more precisely the accessibility to a large diversity of exotic goods, which is not specified in the literature, is said to have been the motor which drove the trade of the Dutch Republic in the eighteenth century.¹³

The EIC set out a much more limited strategy than the VOC, specialising particularly in pepper, tea and textiles. It laid a heavy emphasis on about twelve different goods, but with pepper, textiles and tea taking a clear lead.¹⁴ Its policy on ballast goods, which were included in the list of twelve items just mentioned, was to invest in a relatively small variety. It pursued a stable trade in such goods such as porcelain, raw silk, saltpetre and, later in the century, in sago. The goal of this specialisation was to import as much tea and as many textiles as possible into Britain, supplemented only by a few other commodities which would attract a wider market or could serve as profitable ballast for the ships. Such a limited strategy is partly explained by the demand by English consumers for these products, the main market being for tea, and the fashionable enthusiasm for Indian textiles known as the ‘Calico Craze’. Yet another,...

Table of contents

• Cover
• Title
• Introduction
• 1  Imperfect Monopolies
• 2  Rivalry for Tea: Empires and Private Trade
• 3  Popularisation of Tea: Smugglers and Different Varieties of Tea
• 4  Rivalry for Textiles: A Global Market
• 5  The Consumption of Textiles: Return Cargoes and Variety
• Conclusion
• Appendix 1  Primary Sources on the Trade in Tea and Textiles
• Bibliography
• Index