Monopoly and private trade: ‘rival empires of trade in the orient’ revisited (1600-1800)
Chris Nierstrasz, University of Warwick
In his classic study of the struggle between ‘rival empires of trade in the orient’, Holden Furber was alerted to some fundamental differences in the way in which the East India companies organized their trade in Asia. He noted that these differences formed part of the explanation of the success and failure in the rivalries between these empires. Throughout the period under investigation, profit from trade in Asia, at least in the case of the Dutch East India Company (VOC, hereafter) and of the English East India Company (EIC, hereafter), served as a means of financing trade to Europe. To make a profit in Europe at the lowest possible cost, both the VOC and the EIC were determined to send the absolute minimum amount of silver possible to Asia. Furber argues that the two companies each made a different choice in their intra-Asian trading policies: the VOC pursued a monopoly and the EIC opted for freedom of trade. Part of the success of the VOC in the seventeenth century can be attributed to its monopoly.[1] Part of the reason for the reversal of roles inthe dominance between the EIC and the VOC in the eighteenthcentury was the former’s advocacy of the policy of freedom of trade.[2]The main aim of this paper is to question this static view of the organization of intra-Asian trade. It will attempt to argue thatneither company was dogmatic in its policy on intra-Asian trade nor was there a clash of systems. Companies made careful assessments of the financial possibilities and priorities, while weighing itsservants'interests in the process.
Limiting the export of silver
All companies saw the profits gained from intra-Asian trade as a way to limit their export of silver to Asia. Using various publications, it is possible to reconstruct the amount of silver sent from Europe to Asia in both the seventeenth and the eighteenth centuryand these two amountswill be related to changes in policy. Om Prakash has already given a good overview of the Dutch and English exports of silver, which can be supplemented by Bowen’s figuresof the East India Company exports of silver, 1760-1833.
Table 1 Average annual value of treasure exported by the English and the Dutch east India Companies to Asia, 1601-1794 (in million florins rounded off to the nearest thousand; £1=f.12= Rs 8)
YearsEnglish East India CompanyDutch East India Company
1601-100.1430.651
1611-200.5881.019
1621-300.4841.236
1631-400.4520.850
1641-50n/a0.920
1651-60n/a0.840
1661-701.0731.210
1671-803.0531.129
1681-904.0581.972
1691-17002.5612.860
1701-17104.2763.927
1711-204.9703.883
1721-306.5136.603
1731-405.9144.012
1741-507.2363.827
1751-607.7825.896
1761-70n/a5.354
1771-80n/a4.832
1781-90n/a4.790
1790-94n/a4.243
Source: Om Prakash, ‘Precious-metal flows in India, Early Modern Period’, in: Dennis Flynn, Arturo Giraldez and Richard von Glahn, Global Connections and Monetary History, 1470-1800 (Aldershot 2003), 152, table 6.1.
Figure 1. East India Company exports of silver, 1760-1833
Source: H.V. Bowen, the business of Empire: The East India Company and Imperial Britain, 1756-1833 (Cambridge 2006), 225, figure 8.1.
Scrutiny of the table and figure reveals that initially the VOC did run into some costs in its efforts to establish itself, but after 1630 it succeeded in limiting its exports of silverby resorting to using theprofits from its intra-Asian trade. After 1680, there was a sharp increase in exports of silver which only ended after 1730, when exports fell again.Subsequently, it never again achieved the former level of success, but the VOC succeeded more or less in stabilizing its exports of silver after 1750. In the seventeenth century,the EIC was not very successful and it faced an almost constant rise in the amount of silver exported between 1601 and1765. At that point, if we accept Bowen’s figures, suddenly the EIC hardly needed to export any silver at all until 1785. Only shortly after 1765 was some money sent to China, but as country traders began sailing to Canton[3] and demanded bills of exchange on Europe, they quickly obviated the need to send silver to China. After 1785, the EIC beganexporting silver again almost until the end of the period under investigation here. It has to be borne in mind that both companies augmentedtheir exports to Europe substantially as they moved from a concentration on spices to include cotton textiles, tea and coffee in their eighteenth-century portfolios.[4]In other words, less silver was exported from Europe, but more goods were exported from Asia:what made this possible?
Intra-Asian trade
Direct or indirect profits from intra-Asian trade are completely or partially responsible for the cuts in the exports of silver. In the business of the VOC, the silver export between 1630 and 1680 was simply replaced by profit from trade. It is difficult to make the substitution completely visible, as there was no substantial period of tradebefore this development. In the EIC, a large part of the silver export was replaced by income from taxation, but part of it was also replaced by income from private trade, the fruits of the country trade between India and China after 1768. In private trade the influence was indirect, derived from the taxation of private trade or from the remittance of fortunes through bills of exchange. In the debate, both methods of organizing intra-Asian trade are viewed as offering some advantages and disadvantages. The monopoly focused all possible profit on the European trade and Asian products were obtained at a better price,[5] but this required constant attentionand capital was not very flexible towards changing trade patterns. Private trade was less focused on the profits of the company, but required less attention, less capital and was considered flexible.[6]
However, a glance at the regulations on intra-Asian trade of both companies reveals that neither was dogmatic in insisting on one system of trade.[7]In fact, the shifts in their policies are crucial to grasping how companies worked and what developments influenceda change of course. In the first period of research, 1600-1680, initially both the Dutch and the English strove to achieve a monopoly which even led to a treaty being made in which they agreed to respect each other’s monopolies over their respective subjects. As the VOC captured most of the advantages of the spice trade, it was very successful in breaking open markets in Asia and building a profitable monopoly in Asian trade. As the EIC was unsuccessful in its attempt to institute a similarly profitable monopoly, in 1667it decided to abolish the monopoly and free up intra-Asian trade to its servants and subjects.[8]
In the second period, 1680-1740, the English slowly made private trade work,and mostly from the 1720s, it is said to have gained momentum. The VOC was being confronted with new problems. Itsmonopoly still remained profitable, albeit less profitable than before because of rising costs. This prompted more silver exports from Europe, required among other purposes to pay for the increasing stream of different new products. Debts in the Republic of Seven Provinces rose until in 1736 the Gentlemen XVII, the Directors of the VOC, decided to step in and limit the loans. The EIC did not fare much better and its subjects were not successful enough in private trade for it to be able to reduce the export of silver.
In the third period, 1740-1780, both the VOC and the EIC embarked on a radical change of course. As not enough money was coming in from Europe and the monopoly was not able to raise enough money, the VOC took the radical step of commencing to allow private trade, although still keeping its most profitable commodities under monopoly.[9] The less profitable of its former monopoly were opened to its subjects, as the company shrewdly assessed what it wanted and what it did not, upto 1796.[10]In essence, this decision meant directing investment away from intra-Asian trade towards European trade, as the turn-over in the VOC’sintra-Asian monopoly was halved in the period 1750-1795. The loss of income from the monopoly was partly compensated for by allowing more bills of exchange on Europe from 210 million guilders in the eighteenth century against 30 million in the seventeenth.[11] The EIC experienced a different development.As it acquired territory in Bengal it obtainedenough revenue fromtaxation to pay for exports and could limit its silver exports to India. When a successful private trade was instated between Bengal and China, less silver was also sent to China. The EICalso decided that its servants, who quickly became rich ‘nabobs’, could no longer participate in the intra-Asian trade, leading to the ascent of British Agency houses in intra-Asian trade.
In short, neither company was dogmatic in its choice of either monopoly or freedom of trade.Apparently, there were disadvantagesin allowing or not allowing servants the right to private trade. What was the disadvantage of allowing private trade to servants?
Private trade as remuneration
If the choice either to pursue a monopoly or to allow servants to participate in private trade was not dogmatic and decided according to the exigencies of the companies, what did private trade or monopoly mean from the perspective of the servants? The most definitive source about Dutch private trade is the correspondence of Lubbert Jan van Eck (letters for the period 1754-1765).[12]Using this key source, even Furber’s conclusions on private trade can be reinterpreted.
The first conclusion is that servants displayed a more ambiguous attitude towards private trade than might have been expected. Under the earlier system of VOCmonopoly, servants did profit to a lesser extent than they might have done under private trade, but they did not have to take any risksas they simply profited from the work and risk taking of the company. Van Eck’scorrespondence reveals some ofthe stresses conducting private trade caused servants. Servants would have had to invest their own capital in trade which meant running a risk and wait for the resultant profit or loss. They were obliged to put their trust in partners over whom they had no control. As such private trade was a last resort for the Company inremunerating its servants.[13]In order to balance the loss in security, the VOC servants demanded a higher stakein the profit and simply declined to pay tax to the VOC. In this climate, a strong hierarchical and regional control was imposed on private trade.The higher-ranking VOC servants made sure that they, and not their lower-ranking underlings, would reap the most profit from private trade. As seniors,they had waited a long time for opportunities to enrich themselves and they did not want to share any good fortune with junior servants. Other outsiders, like free burghers, the Dutch version of free merchants, were also forced to take second place or were simply kept under control by imposing a tax on them.
Other ways of acquiring income other than private trade found greater favour with theVOC servants. In the hierarchy of most preferred places to work, the areas where private trade was allowed, were less popular than areas where the VOC maintained colonies. Income from government was easily obtainable. In Asia a strong gift-giving culture to grease the palms of authority was rife. Whatever the morality of the custom,itwas indubitably much less risky than private trade. Van Eck’s income from his period as Governor of Ceylon, where private trade was not allowed, is striking.He made 300,000 of his 600,000 guilder fortune in three years in Ceylon without resorting toprivate trade and not in his earlier twenty-year-long career in private trade.
In the English literature, there are ways of finding out the view points of servants on private trade.Different stories about how they excluded others, mainly through wielding the weapon of taxation, are known.Before the conquest, servants had already tried to exclude free merchants from the trade from Bengal by imposing a higher tax on their trade.[14]They also saw trade of certain area as their possession.[15]The best known example of such proceedings is the monopolization of the salt,betel-nut and tobaccoin Bengal by several highly placed servants there.[16] The resulting radical increase of income after Plassey, partly fuelled through military expansion in combination with new private trade possibilities, is the main reasons the Directors in England decided toban EIC servants fromparticipating in private trade. As the servants also had otherways of finding remunerationof similar proportions to and probably exceeding that of VOC servants in the regions they controlled, it was no longer thought necessary to let them pursue private trade.[17] This decision probably marked the beginning of a major trading innovation, the Agency House, in which servants invested while other English subjects outside the EIC were left to conduct intra-Asian trade. The fact that the Dutch were much less able to the conquest of colonies might be part of the reason an innovation in the direction of Agency Houses did not take place in their case and Dutch private tradeand the VOC quickly lost to this new form of competition in Asia.[18]
Conclusion
In this paper a comparison has been made between Dutch and English intra-Asian trade in the period 1600 to 1800. Furber’s assumption of a clash of differently organized empires of intra-Asian trade proofs to simple as both the EIC and the VOC structurally changed their policies on intra-Asian trade to adapt to new challenges. Charting these changes helps us to understand changes sweeping through Asia in the eighteenth century.The views of servants of both companies on private trade simply underline and reinforce this new analysis,while a more subtle and complex explanation for the change in dominance between the EIC and the VOC emerges.
[1] Jonathan Israel, The Dutch Republic, its Rise, Greatness, and Fall 1477-1800 (Oxford 1998), 941-943and Els Jacobs, Koopman in Azië (Zutphen 2000), 1-4.
[2]Holden Furber, Rival empires of trade in the orient, 1600-1800(London 1976), 275, (...)The Dutch company’s restrictions on the ‘private trade’ of its servants prevented the growth of a Dutch private country fleet at all comparable to the British. (...)’
[3]Chris Bayly, “The British Military-Fiscal State and Indigenous Resistance India 1750 -1820”, in Stone, Imperial State at war, 340 and Peter Marshall, East Indian Fortunes, The British in Bengal in the Eighteenth Century (Oxford 1976), 198-9.
[4]Femme Gaastra,“De Verenigde Oost-Indische Compagnie in de zeventiende en achttiende eeuw.” Bijdragen en mededelingen betreffende de geschiedenis der Nederlanden 91 (1976) 249-272.
[5] Femme Gaastra,De geschiedenis van de VOC (Zutphen 2002), 20, 119 and 127; Jacobs, Koopman in Azië, 11-19.
[6]Bruce Watson, Foundation for Empire, English Private Trade in India 1659-1760 (New Delhi: Vikas, 1980), 17, (…) we can see (...) with those of the Englishmen (…).
[7]J.K.J. de Jonge,De opkomst van het Nederlandsch gezag in Oost-Indië (’s-Gravenhage 1862-1909), Volume 10, xix.;J. de Hullu, ‘Een advies van Mr. Pieter van Dam, advocaat der Oost-Indische Compagnie, over een gedeeltelijke openstelling van Compagnie’s handel voor particulieren, 1662’ Bijdrage tot de taal-, land-, en volkenkunde van Nederlands-Indië (’s-Gravenhage, 1918) volume 74,267-298.P. van Dam, Beschryvinge van de Oostindische Compagnie, edited by F.W. Stapel and C.W.Th. van Boetzelaer, book I, part I (‘s –Gravenhage 1927), xvii.
[8] Marshall, Fortunes, 19.
[9] Chris Nierstrasz, ‘Reguleren of Corrumperen? De VOC en hervormingen in de Privé-handel (1743-1799)’, Tijdschrift voor Zeegeschiedenis, October 2006.
[10]Schooneveld-Oosterling, Generale Missiven, Volume 11; Collectie Alting, Consideratien , vrije vaart in Souratta, f38.NA, Hoge Regering, Extract Generale Resolutien, 307, 259-261.NA, High Government, 20 November 1745, Extract of a circular missive, 307, f351-352.ANRI, 4516, July 1783;. ANRI, 2211, regulations from 1771 until 1780.
[11] Femme Gaastra, “Particuliere geldstromen binnen het VOC-bedrijf 1640-1795”. Van Gelderlezing 2002.
[12] Nationaal Archief, Den Haag, Archive of L.J. Baron van Eck.
[13]Nicholas Dirks, The Scandal of Empire, India and the Creation of Imperial Britain ( London 2006), 38, “ If the Company allowed no private trade, their servants must starve.”
[14]Marshall, Fortunes, 54 and 74; Watson, Foundation, 119 and 135.
[15]Watson, Foundation, 126.
[16] William Bolts, Considerations on India affairs; particularly respecting the present state of Bengal and its dependencies (London 1772), Volume I, 164-166.
[17] Dirks, Scandal, 53H.V. Bowen, Elites, Enterprise and the Making of the British Overseas Empire 1688-1775(New York 1996), 184.
[18] Marshall, Fortunes, 46.