The following is a review of So Great a Proffit: How the East Indies Trade Transformed Anglo-American Capitalism, by James R. Fichter.
This is a book about the original Tea Party — and so much more. It is a story of early free traders’ battles against English monopoly on the way to American independence. It is a tale of the development of America’s merchant class and the fortunes that were built on the Asia trade. And it is a saga of British trade politics on the cusp of reform.
In the rich and fascinating account by James Fichter (馮建明), assistant professor of history at Lingnan University, colonial America’s anger at the English East India Company’s monopoly of the tea trade prompted not only the revolutionary fight for U.S. independence but the equally revolutionary implementation of free trade — not trade free of taxes and tariffs but simply the freedom to trade freely with anyone, anywhere.
In November 1773 American patriots dressed as “Mohawks,” hatcheted open tea chests and dumped the tea leaves into Boston Harbour. This was a spark in what became a conflagration. In short order the Declaration of Independence and a revolutionary war followed. A decade after the Tea Party, Britain recognized U.S. independence.
Ironically, the original Boston Tea Party was prompted by a “cut” in tea taxes –- not a rise — in an effort to undercut smuggled Dutch tea. Americans feared that this move, if successful, would allow the company to tighten its grip on the Asia trade. This had little to do with political independence, but independence from the East India Company’s monopoly on trade with Asia.
Parliament gave the East India Company a monopoly on the Asia trade in 1600. By the 1770s the venture grew into the largest and most powerful corporation in the world. It functioned as an extension of the British crown, raising armies, levying wars and signing treaties.
To the American colonists, the Company’s monopoly on the tea trade was odious. Economic tyranny, in their minds, bled into political tyranny. The company’s conduct in Asia, wrote one colonist in 1773, “had given ample Proof, how little they regard the Laws of Nature, the Rights, Liberties, or Lives of Men. They have levied War, excited Rebellions, dethroned Princes and sacrificed Millions……They have, by the most unparalleled Barbarities, Extortions, and Monopolies, stripped the miserable Inhabitants of their Property, and reduced whole Provinces to Indigence and Ruin.”
In the years following America’s War of Independence U.S. traders pushed into the Pacific, above all to India and China where they competed against the English East Indies Company. In doing so the Americans provided the most dramatic real-world example of theories that Adam Smith, through “The Wealth of Nations,” was espousing in those very years.
The American traders were unusual in their ability to trade freely. European powers had their national companies — the Dutch, the French and the Swedish all had East India Companies. These state-sponsored companies were granted monopolies, chartered in the same way that a town or university was chartered. The idea that companies could trade freely was a novelty.
By the late eighteenth century the English East India Company was the world’s largest corporation. Like monopolies everywhere, it was inefficient. The East India Company’s high costs and sluggish service made it unable to compete. The Company appears more like the precursor to the Soviet planned economy than a modern company.
The East India Company journeys were plotted years in advance. Company ships were lavish and expensive, a boon to well-connected builders but a drag on profitability. Ships traveled in convoys and lingered in port. In London, auctions of tea and other goods were held not when the ships arrived, but according to a fixed schedule. Freight rates were inflated, running at four times that of private competitors on the India routes. The U.S. had eight crew members for every tonne of cargo to the Company’s 15.
The Company’s energy was dissipated in imperial wars. English officials wanted London to become the “emporium of Asia.” But it was free-trading Americans who seized the title. The Americans showed the virtues of free trade. In 1813, three decades after the Tea Party, the English East India Company was stripped of its monopoly over the India trade.
Trade with Asia led to the development of a new and vastly wealthy merchant class in the United States. For the first time Northern merchants’ fortunes began to rival those of southern plantation-owners whose wealth was founded on slavery. Importantly, the Northern riches consisted of the silver used as hard currency to buy the tea, the silk, and the porcelain that came from Asia. Southern assets were in property and slaves and supported an aristocratic lifestyle. Northern wealth was in specie, hard currency, and became the capital for investments in the banks, the mills, the railroads and canals that industrialised the North.
Fichter’s account underscores how cash-poor the northern U.S. was in the early days of the republic. On average, only $3 to $4 of cash per person was in circulation at the end of the eighteenth century. Barter was common.
The Asia trade changed that. Merchants needed to finance their purchases with silver; although American traders experimented with bartering everything from sea slugs to fur, silver was what Asian sellers demanded. Over time, profits from the Asia trade led to an accumulation of physical wealth in the form of specie on a scale that had never been seen in the U.S. Indeed, no Northerner had ever been truly affluent before the Asia trade.
The Asia trade also opened American eyes to new goods. An elephant was brought back from Calcutta in 1796 and toured America, the first time that the country had seen one of the animals. Indian cloth bought by American traders may not have been as fine as the East India company’s but it was affordable to far more people and opened a new world of choice to consumers. At the more luxurious end, the austere houses of northern merchants were now adorned with “a Qing vase, fine tea, silk robes, an Indian umbrella, an aboriginal weapon.”
This is a dense and detailed book, one that rewards the patient reader with vivid and unexpected insights into a little-known chapter in the development of trade and political economy at the dawn of the industrial revolution.
Originally published in the Hong Kong Economic Journal. Can be accessed at forum.hkej.com/node/58697.