Chapter Two
Understanding Eurasian Trade in the Era of the Trading Companies.
Jan de Vries
From Oriental Despotism to the Great Divergence
For centuries, if not millennia, Europeans understood Asia to be the source of exotic luxuries. By the early Seventeenth Century, the largest single most commonly traded commodity between Asia and Europe by volume, pepper, might have been considered a bulk good. However, this is only relative to the silks, diamonds, fine spices and other costly products shipped from the East. And even pepper was, as a Dutch expression still has it, peperduur (as costly as pepper.) Goods from the East were coveted by many, but generally accessible only to a small elite. What relevance could this commerce in luxuries have to the overall development of European economic life? It was, at best, a ‘rich trade’ offering profits for a small number of elite merchants. Since the demand was limited to elite consumers, it could not hope to grow rapidly without endangering those profits via market saturation. In short, European trade with Asia was interesting but not really important.
This view of Eurasian trade continued to prevail into the 1970s. When Immanuel Wallerstein launched his influential ‘World Systems’ interpretation of economic life in 1974, he felt justified in excluding Asia from his account of the European world system of the early modern era. Wallerstein wrote:
At this epoch [the Sixteenth and Seventeenth Centuries], the relationship of Europe and Asia might be summed up as the exchange of preciosities. The bullion flowed east to decorate the temples, palaces, and clothing of Asian aristocratic classes, and the jewels and spices flowed west. The accidents of cultural history determined these complementary preferences. Henri Pirenne and later Paul Sweezy give this demand for luxuries a place of honor in the expansion of European commerce. I am skeptical, however, that the exchange of preciosities, however large it loomed in the conscious thinking of the European upper classes, could have sustained so colossal an enterprise as the expansion of the Atlantic world, much less accounted for the creation of a European world-economy.[i]
‘In the long run,’ Wallerstein concluded, ‘staples account for more of men’s economic thrusts than luxuries’. Wallerstein had a second reason to exclude Asia from the European world economy. Europe’s relations with Asian states ‘were ordinarily conducted within a framework and on terms established by the Asian nations. [Except for a few colonial footholds] … the Europeans were all there on sufferance’. [ii] Asian goods were precious and costly, but from Wallerstein’s neo-Marxist perspective, the trade in these goods could not (yet) be a significant source of capital accumulation. Hence, Asian-European trade could be set aside as superficial.
A few years later, in 1981, Eric Jones tackled the relations of Europe and Asia in the early modern era. In The European Miracle, the luxury goods and exotic tropical commodities were barely visible. To Jones, Asia was most notable for its capacity to produce people. The essential difference between European and Asian civilization was the focus of the latter on maximizing human numbers as a response to its disaster-prone environment. As a consequence, Asia did not increase its capital stock to keep pace with population growth. Jones wrote that
Income per capita was higher in Europe than Asia partly because natural disasters were fewer. There was less of the compulsion that Asians felt to breed as many sons as possible in order to ensure family labour for the phases of recovery.[iii]
Jones had little to say about long-distance trade except to illustrate his characterization of the ‘basic logic’ of the European and Asian civilizations:
Trade [in Asia] was political in complexion, and this impeded the extension of the market... Most of such foreign-going trade as there was involved luxuries, among them the ornamental or reputedly aphrodisiac products of hunting in the jungles… Where natural and social risks were high, so were liquidity preferences and hoarding[iv]
This last comment refers to the commonly held view of Asia as a ‘bullion sink.’ The inflow of silver and gold had no great economic effect (via monetization, market development, or price inflation) because the Asian demand for precious metals was primarily for hoarding, jewelry, and decoration. Bullion flowed to Asia to die.[v] Hovering in the background of all this, one finds the lingering influence of Marx’s ‘Asiatic mode of production’ and Weber’s related interpretation of Oriental religions. Asia and Europe were assumed to follow very different paths.
Today, these works, highly influential thirty years ago, appear antique in their basic assumptions about Europe-Asian economic relations. The past fifteen years has witnessed a reinvigoration of large-scale, comparative economic history in which the imperial and colonial histories of an earlier time, Weberian historical sociological interpretations, and the Marxisant world systems approach have all had to make room for a project of reform and reinterpretation. This project is sometimes referred to as the California School, but most simply identified by the term ‘great divergence’. Its most prominent exponents are Kenneth Pomeranz, whose The Great Divergence (2000) established the project’s chief characteristics; R. Bin Wong, whose China Transformed (1997) introduced the idea of a reciprocal comparative approach and whose later book, co-authored with Jean-Laurent Rosenthal, Before and Beyond Divergence (2011), adds theoretical bite to the project; and the late Andre Gunder Frank, whose ReOrient (1998) provided a polemical trumpet flourish for the whole enterprise.[vi]
These and many other recent books and articles speak to a new interest in global history by offering sustained comparative analyses on a Eurasian scale that are shorn of Eurocentric assumptions. The revisionists of the ‘California School’ argue that East and West were more similar than dissimilar in their economic performance, and that dissimilarities in institutions and laws do not generally support assessments of superiority and inferiority. Thus, Europe and Asia, or their economically more advanced zones, were on the same economic trajectory in the early modern era. That is, until the end of the Eighteenth Century, when the West postponed the onset of the developing ecological problems that faced all of Eurasia in the Eighteenth Century, and circumvented them altogether over the Nineteenth Century, by exploiting two windfalls of massive significance: cheap and accessible energy (coal) and the virgin soils and abundant natural resources of the New World. These contingent events, or historical windfalls, produced a ‘great divergence’: the West diverged from the East economically and, in short order, achieved political and cultural dominance as well.
This challenge to the old verities is now an established position, perhaps even a new orthodoxy.[vii] While the old historiography was, in truth, a history of Europe that called attention to its virtues by invoking an exceptional, motionless, history of Asia as a cautionary tale, the new position is developed by specialists of Asian history and relies on the exceptionality of European history to explain Asian historical trajectories. However, in these historians’ hands, Europe’s exceptionality does not mean that Europeans were exceptional; it means they were exceptionally lucky.
Trade does not figure prominently in this new story. It is definitely toppled from the central role that Frank had given it: the means whereby Europeans learned from Asia, riding to prosperity and then on to world dominance on ‘Asia’s back’ via the undeserved advantage of cheap silver.[viii] To the extent that trade enters into Pomeranz’s account, the issue is not Western trade with China, which he rarely addresses. Rather, Pomeranz’s account focuses on Chinese trade; or, rather, the Chinese trades that did not emerge during the Ming and Qing dynasties. For example, Chinese expansion to western lands led to the resettlement of many tens of millions of people, but it did not give rise to extensive specialization and inter-regional trade. Likewise, the large Chinese merchant Diaspora to South East Asia did not give rise to any substantial trade in tropical raw materials with the Chinese metropole. Pomeranz placed great store in the ‘ghost acreage’ of New World lands as a key to the West’s release from Malthusian constraints, but the vast lands and resources at China’s periphery played no such role. The enormous migration to these lands witnessed instead the ‘multiplication of largely independent, self-sufficient cells’.[ix]
China, Pomeranz argued, did not cultivate long-distance trade links because it faced no pressing need for them. Parthasarathi makes a similar argument in his study of early modern India. Both of these sub-continental polities, it appears, produced all they truly needed without recourse to long-distance trade.[x] This is not an argument designed to appeal to an economist. No ‘need’? By whose definition? Perhaps the observed absence of need reflected an absence of demand: the poverty of most consumers and the restricted expression of elite demand stood as an obstacle to the rise of long-distance trade and specialized production. However, this leads toward a contrast between a dynamic west and stagnant East, which the great divergence literature is dedicated to supplanting.
An alternative is to explain the growth of European-Asian trade as an expression of a different type of Asian ‘need’: the need for silver. By this argument, Asian societies, abundantly supplied by their superior manufacturing sectors and vast peasant economies, felt no need for goods produced elsewhere. But a marginal augmentation to the enormous, domestically-oriented productive capacity of India and China’s proto-industries could generate a supply of goods for export sufficient to elicit from Europe an influx of silver capable of ‘oiling the wheels of the Chinese economy’ and acting as the ‘motor’ of the Indian subcontinent’s economy.[xi] In this, we have an account of the growth of Eurasian trade that converts European initiatives into a response to developments internal to the dynamic economies of Asia.
However, it remains a curious fact that while the modern interest in globalisation has intensified interest in the early modern creation of a globe-girdling network of long-distance trade, recent efforts to practice a global history have shifted attention away from the trade that linked the societies of Eurasia. A central premise of this new literature is that the major polities of Eurasia were experiencing a common set of challenges and developing responses to them that shared strong family resemblances. These geographically far-flung polities were connected by common, shared experiences in the early modern era, but trade was not the primary connector, and direct interactions and confrontations were not decisive. Rather, European and Asian societies all faced common external conditions (environmental, climatic, demographic) and the logic of their situations required that they explore innovations in military technology, fiscal institutions, and social discipline that necessarily imparted broad similarities to the ‘gunpowder empires’ of early modern Eurasia[xii]
Eurasian Trade: Side Show or Main Event?
Both the old and the new approaches to the interactions of Europe and Asia in the early modern era make claims—implicit as well as explicit—about the nature of the trading relationships that connected them, and which with the opening of the Cape route grew steadily in importance over the following three centuries. In a volume focused on the European reception of ‘goods from the East’, it is appropriate to begin our assessment by examining those that emphasize special qualities of those goods. They can be bundled into three distinct claims:
1. Goods from the East were exotic. They were primarily tropical products, unavailable within Europe, and inherently desirable.
These claims imply that there was something inevitable and obvious about this trade. Once the Asian goods were available in Europe on a dependable basis and at an ‘affordable’ price, demand was bound to grow: consumer demand was like a coiled spring, awaiting release by intrepid European traders. Today, this type of argument is not as self-evident as it once appeared. Broad consumer acceptance of novel and exotic goods is far from inevitable. Moreover, while most of the early goods sent to Europe from the East were, indeed, tropical products unavailable from European sources (spices and pepper), they were not literally exotic. Demand grew precisely because they were already familiar and desired. But this demand was not unlimited, and the growth of trade volume from Asia to Europe would have ceased in the Seventeenth Century were it not for the emergence of new trade goods, most of which were not literally exotic, tropical commodities. Why would European consumers necessarily embrace them? Perhaps because they were of uniquely fine quality.
2. Asian goods were superior. They embodied unique craft skills and design elements. They were exquisite in a way that could not readily be imitated in Europe.
This claim implies that Asian manufacturers - of silk and cotton textiles, porcelain, lacquer wares, and chinoiserie more generally – produced unique products. Consumers seeking their special qualities had no alternative but to purchase Asian imports. It is certainly true that as the demand for the tropical spices and pepper slowed, further trade growth in the Seventeenth Century depended increasingly on Asian manufactured goods. The claim that Asian goods possessed unique qualities that imparted a measure of monopoly power in European markets competes with an alternative explanation for the growth of Asian manufactured exports to Europe: that they were cheap.
3. Asian manufacturers were the low-cost suppliers. Not only were costs low, but the supply of low-cost labor was highly elastic, allowing goods from the East to be supplied to international markets in large and growing amounts at constant costs.
This argument resonates with recent experience in East-West trade, and is consistent with earlier assumptions of a neo-Malthusian type that China and India had dense peasant populations whose productivity in agriculture was low. This made their labor available for manufacturing, usually in a proto-industrial framework, at low cost. But, the great divergence literature denies the validity of these key assumptions, arguing that labor productivity in (advanced parts of) Asia was comparable to that in (advanced parts of) Europe. Therefore, they argue, if Asian wages were lower than those in Europe (when measured in silver equivalents), this only reflected another aspect of Asian economic prowess: its highly productive rice-growing sector, which provided staple food at lower cost than was possible in Europe.[xiii] Unfortunately, there are reasons—theoretical and empirical—to question these arguments.[xiv] The claim of a highly productive agriculture is not consistent with the very large share of the labor force wedded to Asian agriculture until well into the Twentieth Century; nor is it consistent with the sharp competition for land between food and raw materials production emphasized by great divergence interpreters such as Pomeranz and Marks.[xv]