One of the early successes of capitalism, free trade, and the combination thereof was the opening up of South Asia and East Asia, “the Indies,” to Europe and particularly to the enterprise of private companies in Great Britain and Holland. Emily Erikson looks particularly at the East India Company and its trade with Asia.
Unlike most historians, Emily Erikson believes that the success of this trade depended heavily on what is called the private trade. The East India Company allowed its employees (factors) to carry on a trade of their own while they also served the Company. This private trade created opportunities that the East India Company could then exploit. These private companies usually enjoyed the same exemption from taxes and other levies as the East Indian Company.
Erikson has analyzed eight different port types in East Asia and then compiled a list of some 260 port cities and their types. Her list includes not only the most celebrated ports of call, but also various smaller ports and their trade. This trading activity with the smaller ports lasted for various lengths of time, called spells.
The goods traded were relatively stable: pepper and other spices, coffee, tea, raw silk, textiles, and eventually cotton and cotton yarn to feed the textile industry in Great Britain. Erikson mentions the “calico craze”, woven cotton cloth, also printed in India.
The types of seaport that she calls “market” and “colonial” eventually dominated this international trade. But the ports-of-call types continued to participate in the trade, both with coastal communities in South Asia and the Dutch East Indies, but also Europe.
The bulk of the trade was, however, the internal trade amongst port cities. And there were lots of smaller port cities – we might call “start-ups”- that participated in this growing port-to-port trade.
The East India Company did not own its ships; they were leased for long periods of time. Often a company’s ships would stay in one port for months looking for potential trade goods. They were free to go where trade information led them. Hence the company’s ships took as long as two years to make it to the Indian Ocean, around to the various ports of call, and then back to Britain.
As this side of the business continued to expand, another set of British investors constructed “factories” or warehouses, ship-repair, and other port facilities. Some of the ports attracted permanent settlements: private traders who established their businesses in these port towns, but also a community of Indians who became the middlemen between ports and inland markets. Other enterprising Indians provided housing for the new merchants and traders.
Trade needed to be two-way. Britain – Europe – exported a long list of consumer goods to these Asian customers. The British government and the Company worried that “balancing” of trade between South Asia and Britain would involve the drain of gold and silver,’ which was needed to back the British currency. It was a violation of a major tenant of mercantile theory which measured a country’s wealth in part by the reserves of precious metals held by the banking system.
The South Asia and East Asia Trade was financed by British savers. Britain had enjoyed a remarkable period of economic growth and hence some of the capital that financed the trade with South Asia was from those profits. India Bonds were considered a safe investment, they paid good interest, were relatively liquid, and popular with old money. Many a deal was struck in the coffee houses of London.
There has been much discussion about whether the activity of the private traders was detrimental or a boon to the economy of the East India Company. Emily Erikson definitely believes it to have been a boon.
One thing led to another. Eventually the East India Company attracted sufficient numbers of civilians to require some better way of governing the Company and its business. The British governance of the East India Company became the Government of India, a trained bureaucracy which also became revenue collectors and established themselves in the countryside. Portuguese made roughly the same adaptation with trade to governance. Hence the colony of Goa. The Dutch East Indies made many a Dutchman wealthy. These smaller coastal ports became the opportunity for European trade to restructure the South Asian economy.
Did this European trade in Asian goods retard the economic development of the sub-continent? That is not the argument Emily Erikson makes in her Between Monopoly and Free Trade. Though many economic historians do.