The Scramble
For
Palms
A Comparative Historical Investigation:
Two Companies sourcing
Two Commodities in
Two Colonies
Eelco Boss
Afstudeerthesis voor de Master ‘Politiek en Maatschappij in Historisch Perspectief’
Studentnummer: 3417069
e.c.boss@students.uu.nl
Inleverdatum: 27 juni 2014
1
CONTENTS
LIST OF TABLES, MAPS AND FIGURES
4
INTRODUCTION
5
1
CREATING CONTEXT: COMPANIES, STRUCTURES AND COMMODITIES
10
1.1
The nature of the companies: Two of a kind?
10
1.2
The background of the case: The scramble for raw materials
14
1.3
The commodities
17
1.3.1
The Oil Palm (Elaeis guineensis)
17
1.3.2
The Coconut Palm (Cocos nucifera)
17
2
3
LEVER BROTHERS IN THE BELGIAN CONGO
23
2.1
Why the Belgian Congo?
23
2.2
Assessing the subject of investment
27
2.3
The first twenty years
34
2.4
Wrong judgement?: the competition with the Asian palm oil
39
JURGENS’ VEREENIGDE FABRIEKEN IN THE NETHERLANDS EAST INDIES 44
3.1
Prelude, some early attempts
44
3.2
Assessing the subject of investment
47
3.3
The only five years
51
3.4
A new margarine ingredient: palm oil
55
2
4
COLONIAL CONTEXTS AND FACTOR ENDOWMENTS
58
4.1
Labour
59
4.2
Land
65
4.3
Capital
69
4.4
How governments shaped the competitiveness of businesses
72
CONCLUSIONS
76
BILBLIOGRAPHY
80
3
LIST OF TABLES, MAPS AND FIGURES
Tables:
I: Palm oil exports in 1000 tonnes, 1909-1935
19
II: Coconut palm acreages in 1928
21
III: Principal villages and rivers in the concessions
32
IV: copra oil export to the USA related to other countries
51
Maps:
I: Suitable climate for oil palms
19
II: Levers concessions in the Belgian Congo
32
Figures:
I: Total employed capital related to HCB’s profits
38
II: Palm oil production: NEI, BC, HCB, compared.
43
III: financial assessment for a 1000 ha. palm oil plantation in South Sumatra
46
IV: NEI copra oil exports and prices
52
V: prices of copra, copra oil and palm oil in guilders 1911-1925
56
VI: NEI copra, copra oil and palm oil exports 1911-1940
56
VII: number of immigrant workers by ethnicity in East Sumatra
63
VIII: Indentured labour pro hectare in the Sumatra plantation belt
64
4
INTRODUCTION
If one food ingredient were to symbolize the current level of economic globalization, palm oil would
be the most likely candidate. In virtually all industrial processed foodstuffs containing vegetable oils,
the applied oil is palm oil. The reason: it is cheap, broadly applicable and it is the highest yielding
vegetable oil pro hectare available in the world. In the dawn of the Industrial Revolution the West
African colonies like Sierra Leone and Nigeria were the key suppliers of this material. In the
beginning of the twentieth century the Belgian Congo also became a notable palm oil supplier.
Western capital drove up production in the Congo. Until the mid-twenties of the twentieth century,
Africa had the monopoly on palm oil. In South-East Asia the palm oil production was practically nonexistent. Today Indonesia and Malaysia are the number one and two palm oil producers and producing
about fifty times more palm oil than Nigeria currently does. But most remarkable, the Democratic
Republic of Congo no longer plays a role of any significance in the palm oil trade.1 Obviously
somewhere in the history of this commodity a major change has taken place. In this thesis I will argue
that some of the explanatory factors of this ‘reversal of production’ can be found in the early twentieth
century colonial history of these countries.
But the rise of palm oil production in Southeast Asia and the stagnation in West Africa only
provides the background for the central theme of this thesis: the influence of colonial contexts on the
performance of multinational businesses. I will take the perspective of two entrepreneurs that sourced
their vegetable oils, inter alia, from two early suppliers of palm products: the Belgian Congo and the
Netherlands East Indies. Two ‘extractive’ colonies that in the course of the last century took divergent
paths of economic and cultural development. The divergence in palm oil production make these
colonies a good fit for comparison. The way in how these entrepreneurs tried to source vegetable oils
from these regions will provide answers on how different colonial contexts influenced the success of
their businesses. These differences created long-lasting effects on the economical performances of
these (former) colonies that still can be felt.2
Two of Unilever’s predecessors, ‘NV Anton Jurgens’ Vereenigde Fabrieken’ and ‘Lever
Brothers Ltd’, will be central in this comparative approach. Their strategy for acquiring vegetable oils
in the period 1900 - 1925 will be the central topic. In this timeframe major changes in the vegetable oil
industry took place, such as the upcoming Asian palm oil production. One of the central theme’s in
Unilever’s early history is the recurrent challenge to acquire enough raw materials, to be more precise:
the oils and fats that were needed for producing soap and margarine. The focus will be on two
attempts of vertical integration. Jurgens’ Vereenigde Fabrieken in the Netherlands East Indies and
Lever Brothers in the Belgian Congo.
Index Mundi, ‘commodity production statistics’ (unknown version)
http://www.indexmundi.com/agriculture/?commodity=palm-oil& (20st june 2014)
2
See e.g.: Ewout Frankema & Frans Buelens, Colonial Exploitation and Economic Development. The Belgian
Congo and the Netherlands East Indies compared. (Abingdon, 2013), 7-8.
1
5
The interest in controlling the raw materials markets by buying plantations and oil mills is not a
development that suddenly occurs or arises in a chairman’s mind. It can be seen as part of the
development of gaining control of the ‘bargaining power of suppliers’ as described in Michael E.
Porter’s now classical article ‘the five forces that shape industry competition’.3 Businesses should not
only concentrate on beating competitors, but should also be aware of other ‘forces’ that shape
competition: ‘Customers, suppliers, potential entrants, and substitute products are all competitors that
may be more or less prominent or active depending on the industry.’4 In his article Porter develops a
model in which these forces challenge the position which an industry currently holds. The most
successful is the company that limits the influence of all these forces. The vertical integration of
Unilevers predecessors can be seen as attempts to contain Porters ‘power of suppliers’. The oil traders
in British West-Africa were powerful suppliers of palm oil for the Lever Brothers soap works in Port
Sunlight and the Netherlands East-Indian copra traders and Rotterdam trading houses ended up as key
suppliers for Jurgens Vereenigde Fabrieken. The need for containing the power of these suppliers were
manifold: these suppliers were not dependent on Lever and Jurgens for their sales and could ask
relatively high prices for their oils from this comfortable position. A contingent factor like the First
World War made this problem even more urgent. Palm oil and coconut oil were important raw
materials and both the soap and margarine industry heavily depended on these materials. Jurgens and
Lever tried, so to say, to cut out the middlemen by integrating vertically, developing their own raw
materials facilities near the source: Africa and Asia. The how, where and why is one of the subjects of
this thesis. But how does the colonial context influence the way in which entrepreneurs like Jurgens
and Lever perform their vertical integration? It is especially this last question that is relevant in the
current debate on how the colonial legacy influences the current state of affairs in former European
colonies.
The aim of this thesis will thus be twofold, first to establish the how and why of these
attempts of vertical integration by Lever and Jurgens and second, to analyze how these attempts to
integrate vertically interfere with the local conditions and response of the European colonial
governments. In (colonial) institutional history much attention is dedicated to how institutions that
arranged e.g. access to land, taxation, access to power, influence parameters such as GDP, life
expectancy, GINI-coefficient, etc.5 But how these colonial contexts influenced the prosperity and
efficiency of businesses, and how they affected the process of decision making in companies, when it
comes to investments, is a relatively undocumented area. ‘Colonial contexts’ is a broad concept that
needs specification.
Michael E. Porter ‘How Competitive Forces Shape Strategy’, Harvard Business Review, 57 (1979) 86-93.
Porter, ‘How Competitive Forces’, 86.
5
See e.g.: Daron Acemoglu, James Robinson, Why Nations Fail: The Origins of Power, Prosperity and Poverty,
(New-York, 2012)
3
4
6
In the context of this thesis this term applies to governmental policies that influenced the availability
and specialization of factor endowments, such as access to land, access to labour, infrastructure,
modes of attracting capital, the incentive to innovate etc.
My hypothesis is that the main determinant of the performance of both companies’
subsidiaries, is the degree to which colonial governments did ‘specialize’ factor endowments in favor
of the competitiveness of their businesses. As will turn out, colonial governments responded
differently to the demands of ‘modern’ European multinationals. Indeed, we will see that earlier
colonial experiences and strategies highly influenced the level to which colonial governments could
adapt to ‘new’ demands for specialized factors. I will demonstrate that the level of adaption is the key
determinant of the success of the subsidiaries. Ultimately this will clarify the ‘divergence’ in palm
products between the Netherlands East Indies and the Belgian Congo.
This hypothesis assumes that the structures of Jurgens’ Vereenigde Fabrieken and Lever
Brothers and the peculiarities of the raw materials cannot be the main determinant of the success of
their overseas subsidiaries. In the first chapter these assumptions will be investigated to build a firm
comparative framework. In this comparative framework the raw materials and the enterprises are to be
seen as more or less interchangeable and the colonial contexts as the determining factor for the success
or failure of an enterprise. However, history is not a laboratory in which we can do clear-cut
comparisons ceteris paribus. Contingent factors obscure conclusions as we will see and this always
will be one of the limitations of historical research. Nonetheless, I will try to ‘weigh’ these factors in
relation to the rationality of entrepreneurs decisions.
To understand the dynamics of competition and to provide a theoretical perspective that will
explain the behavior of the two companies, I will use the theories of the earlier mentioned Michael E.
Porter on competition and that of Alfred E. Chandler jr. on business history, because their writings on
these subjects are currently highly influential and widely acknowledged. 6 Porter focuses on the
perspective of the company and pays little attention to the historical perspective of how colonial
governments influence the competitiveness of companies. But the application of his theory on
competition on the two cases can provide us with explanations although the historical perspective
might also refine assertions made by Michael E. Porter and Alfred E. Chandler.
It will set out multi-layered and complex facts. The policies of a company like Lever Brothers
or Jurgens’ Vereenigde Fabrieken are exposed to economic laws, the behavior of competitors, human
psychology, governments, and contingent factors. The unfolding of these ideas needs to include an
assessment of all those factors, in order to provide a clear picture of the developments that are central
to this thesis. To compose the general overview I will use both primary and secondary literature and I
will examine the most important sources here.
7
In Unilever’s historiography two classical works are often cited: the commissioned work of Charles
Wilson, History of Unilever7, (1968) and David Fieldhouse’s non-commissioned work Unilever
Overseas8 (1978). Wilson’s is considered to be the standard business history, but is also criticized
because of the lack of a proper annotation and the, to some extent, inadequate assessment of the
developments of Jurgens’ Vereenigde Fabrieken.9 Fieldhouse refines the work Wilson did on
Unilever’s subsidiaries overseas. He treats Levers Belgian Congolese subsidiary, ‘Huileries du Congo
Belge’ (HCB) extensively, but Jurgens subsidiaries in the Netherlands East Indies only briefly and
sometimes even incorrectly, as I will point out in chapter 3. It seems that his lack of knowledge of the
Dutch language prevented him from thoroughly assessing the primary sources. If one considers the
professionally tended and widely acclaimed archives of Unilever, both in Rotterdam and in Port
Sunlight, it is surprising that no general study has been carried out more recently than thirty-five years
ago. This is particularly surprising when one becomes aware of Unilever’s enormous influence on
food production and the market penetration of Unilever’s brands today. In my view, it is worth
exposing the history of a company with this importance, it should not remain a closed book. During
the research for this thesis in the Unilever Archives in Port Sunlight it became apparent that the last
person who had opened the correspondence files between William Lever and HCB, had been
Fieldhouse.
In this thesis the works of Fieldhouse and Wilson will be a point of departure, but it will also
be heavily backed by the use of primary materials from the archives, newspapers and more recent
secondary materials. Especially the expedition reports from the Congo made on behave of William
Lever and the dairy of Lever’s Congo trip gave valuable insights in the mind of a Western
entrepreneur. They read like a novel, resembling the tone of the reports of early explorers. These
valuable sources provide much more information than is used in this research and they need further
investigation. Furthermore, the business correspondence of Jurgens and Lever is extensively used in
this research.
It should be acknowledged that both of the colonies, the Netherlands East Indies, and
especially the Belgian Congo have been given much attention in the last years, most notably the prize
winning book by David van Reybrouck, Congo, een geschiedenis,10 and a more scholarly publication,
7
Charles Wilson, History of Unilever. A study in Economic Growth and Social Change, (London, 1968)
D.K. Fieldhouse, Unilever Overseas. The Anatomy of a Multinational, (London 1978)
9
For an critical reflection on Wilson, see: F.J.M. van de Ven, Anton Jurgens Hzn 1867 – 1945. Europees
ondernemer, bouwer van een wereldconcern, (Zwolle, 2006), 14-16.
10
David van Reybrouck, Congo: Een Geschiedenis, (Amsterdam, 2010)
8
8
edited by Ewout Frankema and Frans Buelens, Colonial Exploitation and Economic Development.
Especially the latter book was a welcome source in writing this thesis.11
A comparison is difficult to perform when so many parameters can be distinguished, not least the
distinction of the relevant parameters. This is also a central problem in this research which I tried to
solve by structuring this thesis as follows: In the first chapter I will establish a context, delving in to
the constants: the companies and the commodities. A brief assessment of the companies’ management
structure and strategy will be provided to test my assumption that both companies are comparable. The
dynamics and peculiarities of the cultivation of the oil palm and the coconut palm are needed in order
to make the reader familiar with these commodities, but also to establish that these cannot account for
the divergence in production and thus the success of the enterprises. The second chapter is devoted to
the two investment subjects, Levers Congolese subsidiary ‘Huileries du Congo Belge’ and Jurgens’
Netherlands East Indian enterprises. Both the assessment of the investment opportunities, the process
of decision-making and the performances are central in this section. It will give an insight in the mind
of the entrepreneur and the colonial world of those days. In chapter 3 I will connect these assessments
and performances with their respective colonial contexts and how they influenced the degree of
specialization of the classical factor endowments. This chapter will provide the ultimate proof that
supports my hypothesis. In the case of the researched subsidiaries the conclusion will be that the
Netherlands East Indies suited plantation agriculture better than the Belgian Congo.
11
Frankema and Buelens , Colonial Exploitation and Economic Development.
9
CHAPTER I: CREATING CONTEXT: COMPANIES, STRUCTURES AND COMMODITIES
This thesis takes a comparative stand: two companies, two commodities and two colonies. My
hypothesis is that the two companies are more or less the same, because they operated in the same
markets and merged in the late twenties. This also applies to the commodities; both palm oil and
coconut oil can be used for margarine and soap production. But before granting this as a fact, I will
need to examine the extent to which both companies and commodities are a good fit for comparison.
Besides that, I will devote a section on the challenges the two companies faced to source enough raw
materials. The main hypothesis of this thesis is that the key determinant which influences the
performance of an enterprise, is the colonial context, and more specifically, the level that colonial
governments were inclined to give entrepreneurs access to land, the access to labour, incentives to
innovate, support in building infrastructure etc. This hypothesis will be examined in the last chapter,
following from the developments described in the second chapter and third chapter.
1.1 The nature of the two companies: two of a kind?
On 2nd September 1929, Unilever came into existence by the merger of two multinational companies:
a Dutch one, ‘Margarine Unie’, (which was a merger of two Dutch predecessor companies) and a
British one, ‘Lever Brothers’. The former was mainly engaged in the production of edible fats and the
latter in producing soap and other detergents. Although the history of Unilever thus started in 1929,
the predecessors are to be dated back as far as 1877 (Lever & Co.), 1854 (firma Antoon Jurgens) and
1858 (firma Van den Bergh). These companies were established during the industrialization process of
the second half of the nineteenth century, which was responsible for an increase in welfare in several
countries in Western Europe, in particular in Great Britain and Germany. The predecessors of Unilever
can thus be seen as companies that brought products that used to be luxury products for the elite, to the
masses. In the first place Great Britain, later also in the rest of Europe and the world. 12
It were the common interests in a range of fields that caused the two competitors paths to
cross. Both Lever Brothers and Margarine Unie were spilling over into each other’s fields: Lever
Brothers was broadening its business into margarine production and Margarine Unie had interests in
soap making. Thus, the common interests in consumer markets, production processes, the international
scope, but foremost, the aggregation of raw materials, was the basis of the merger. One could state that
the two Unilever predecessors that are subject of this research, were the same type of companies both
in structure as in niche. But to what extent? This is a theme that needs to be examined before
12
Wilson, Geschiedenis van Unilever I, 1-5, 18.
10
analyzing their attempts to integrate vertically. It is for this reason that I will examine the management
structure of both Lever Brothers and Jurgens Vereenigde Fabrieken in the timeframe of this research.
The point of departure will be the typology established by Alfred D. Chandler jr. for the very reason
that he provides an unique framework in which the structure of both companies fit and can be
interpreted.
In business history Unilever and its predecessors reflects the development of the modern
industrial enterprise, in which Alfred D. Chandler jr. saw the birth of an economy of the ‘Visible
Hand’. In this economy it is not Adam Smiths ‘Invisible Hand’ of market mechanisms that shape the
activities of the economy and allocating its resources, but the ‘Visible Hand’ of modern industrial
enterprises and their management.13 Lever Brothers and Jurgens Vereenigde Fabrieken can be seen as
two examples of the emerging modern industrial enterprise in Chandlers definition, because of two
reasons: they contained many distinct operating units and they were managed by a hierarchy of
salaried executives. The enterprise is to be seen as a ’governance’ structure. This in contrast to the
traditional business enterprise of family-owned business with no or just a few salaried managers and a
low level of integrated processes. Chandler assumes that the modern industrial enterprise became the
most powerful institution in the United States and Europe in the second half of the nineteenth century
in the wake of the capital-intense railway and telegraph companies. A division between ownership and
management was the result: the ‘managerial revolution’. 14 The communication networks (railways
and telegraphs) created the circumstances in which goods could be transported more easily in
increased volumes, at greater speed and more regularly. The result was that enterprises could develop
new technologies and processes, produce on a much larger scale and thereby lower production costs.
This is what Chandler calls ‘economies of scale and scope’. These enterprises not only competed in
price, but also in market share and improving processes, their product, marketing, purchasing and
labour relations. The result was often that these companies widened their attention to markets abroad,
turning into the first multinationals.15
Chandler also assesses the peculiarities of Unilevers development into a modern industrial
enterprise and the role that managerial decision-making processes played in this. He states that there is
no other enterprise that reveals as much about Britain’s history of industrial enterprises as Lever
Brothers. It is useful to look at his assessment because it may reveal something of importance to
define the development of Unilever, although Chandler only treats the British predecessor of Unilever,
Lever Brothers Ltd.
Chandler notes that British capitalism is a personal one in the sense that British enterprises, in
contrast to Germany and the American ones, were personally managed. The notion of ‘personal’ can
be attributed to the governance structure and to the style of management. British enterprises
13
Alfred D. Chandler, jr. The Visible Hand, The Managerial Revolution in American Business, (Cambridge,
1977), 1.
14
Alfred D. Chandler jr., Scale and Scope. The Dynamics of Industrial Capitalism. (Cambridge, 1990), 1, 14.
15
Chandler, Scale and Scope, 8.
11
distinguished themselves by the great role the initial entrepreneurs and their families played in the
middle- and top-management decision making.
Most enterprises thus had a relatively small management structure. 16 Until 1921, William Hesketh
Lever (1851-1924) individually made all the critical decisions at Lever Brothers. ‘His success in massproducing, packaging, branding, and advertising soap, and in recruiting a sizeable staff, made him the
British industry’s foremost first mover.’17
In 1921, Lever transferred the headquarters of his company to London, where he acquired an
office building that would be called ‘Lever House’. This transfer had a symbolic significance, Lever
Brothers had become a heterogeneous industrial enterprise, and had outgrown the status of a Liverpool
soap works. The transfer to London also symbolized a tendency to a more rational company
structure.18 But the salient detail of Levers management style still was thath he was the one who drew
the policy lines and ‘single-handedly made the top-level decisions. He corresponded directly with
local managing directors or chairmen.’19 This was a feature of Lever Brothers management that
Fieldhouse calls ‘primitive’. 20 In the context of this research the following excerpt from a letter to the
local director of ‘Huileries du Congo Belge’, L.H. Moseley is symbolic to the level Levers
interference went and his attitude to the level of independence local directors had.
‘Dr. Horn has mentioned to me to-day that you have under consideration the accepting of the
Agency for Johnny Walker Whisky for the Congo. I do not look favourably on our accepting
Whisky or beer agencies. I should have less objections to beer agencies than to Whisky, but
whisky agencies I think would be objectionable from every point of view. The acceptance of
an agency implies doing all one can do to advance the sale of the product for which one acts as
agent, and the consumption of whisky in hot tropical countries, in my opinion, is most
undesirable. I have no recollection of this matter ever having been named to myself, but in any
case I am confident you would not have accepted any agency for any article, alcoholic or nonalcoholic, food or clothing, or whatever it might be without laying, not only the question of the
agency but the terms on which was offered to us, before me.’21
But in the late twenties the absolute power of Lever as the autocrat was no longer tenable. His absolute
power needed to be redistributed. A major economic crisis in the early 1920’s and the financial
problems that ensued, caused Lever to form a ‘Special Committee’ consisting of four members:
16
Chandler, Scale and Scope, 239-240.
Ibidem, 378.
18
Wilson, Geschiedenis van Unilever I, 307
19
Chandler, Scale and Scope , 380.
20
Fieldhouse, Unilever Overseas, 32.
21
UAPS, Lever to Moseley, 23 june 1915, LBC box 53
17
12
William Lever and his son, and two trusted directors. It turned out that only the pressure of his banks
could withdraw Lever from his autocratic leadership.
The death of William Lever in 1925 marked the transformation to collective management, led by his
successor and former auditor, sir Francis D’Arcy Cooper. 22
But to what extent was the management structure of Jurgens’ Vereenigde Fabrieken
comparable with that of Lever Brothers’? Chandler pays no attention to the Dutch predecessor
companies of Unilever, but had he done this, he would probably have been impressed by the salient
similarities between the two companies. Franciscus van der Ven, who has written a biography of
Anton Jurgens (1867-1945), attempts to assess the business structure of Anton Jurgens Vereenigde
Fabrieken and also uses Chandlers theories. He concludes that Anton Jurgens is to be seen as the
Netherlands ‘first mover’ in margarine production, by which he means that due to innovation, the
creation of a professional staff and marketing, he could take the lead in the margarine business. Where
William Lever took the lead in Great-Brittain, Jurgens was his Dutch counterpart and they both saw
the world as a potential market. Both in production and in marketing their companies were not tied to
their home-countries, making them early examples of multinational companies. Jurgens was highly
inspired by British managerial practices, which is not surprising when one recognizes that in the late
1890’s Jurgens primary market was Britain. He even modelled his book-keeping on British lines and
at one time considered moving the enterprise to England.23
Chandlers concept of the ‘managerial revolution’ also applies to Anton Jurgens Vereenigde
Fabrieken, because Anton Jurgens recruited salaried managers who neither owned the company nor
had any share in it. But Van der Ven argues that Anton Jurgens’ Vereenigde Fabrieken does not
completely fit the Anglo-Saxon perspective that Chandler has, because Van der Ven does not take
account of the fact that Anton Jurgens’ Vereenigde Fabrieken was a family enterprise. Van der Ven,
also makes no mention of the exception Chandler makes for British enterprises. I argue that, when
Chandlers exceptions are taken into account, the nature of Anton Jurgens Vereenigde Fabrieken does
comply with his conception of the characteristics of British capitalism. 24
Chandler sees Lever Brothers as an example par excellence of British capitalism. But if we
take a close look at Jurgens Vereenigde Fabrieken, it neatly fits Chandlers description of this kind of
capitalism: a small staff combined with strong personal leadership, mostly by the founder of the
company or his family. Both in structure and in style the management of Jurgens Vereenigde
Fabrieken was personal, personified in Anton Jurgens. This resembles the way in which William
Lever led his enterprise. Both Lever and Jurgens managed their enterprises in an authoritarian way,
often by verbal instructions and top-down.
Chandler, Scale and Scope, 380; Wilson, Geschiedenis van Unilever I, 307; Biography F. D’Arcy Cooper,
Oxford DNB, (unknown date) http://www.oxforddnb.com/templates/article.jsp?articleid=32550&back=,47718,
(2th June 2014)
23
Ven, van de, Anton Jurgens Hzn. 1867-1945, 308.
24
Ibidem, 309-310.
22
13
Ultimately, almost every decision was taken by Jurgens and Lever. Contradiction was not appreciated,
and both ‘bosses’, as they were called by their subordinates, interfered with the smallest details. 25
According to Chandler the Lever-, and consequently the Jurgens-experience, demonstrates a
few things: first, that British managerial changes were often reactive because of the personal
management. Second, a lack of attention to the corporate structure. This was because personal
management (like Lever’s) relied on federations of small enterprises instead of rationalizing
production into bigger and centralized production facilities. Third, that the reshaping and modernizing
of a company did require a strong organization to take over control. Levers and Jurgens’ personal
management style could ultimately not provide this ‘strong organization’ and were reshaped in the
nineteen twenties and thirties.26
The conclusion of all this, is that the decision making in the researched timeframe, in both
enterprises often was in one hand, the hand of the founder/director and was to a great extent limited by
his psychological and social opportunities. The policy of the enterprise is thus defined by the
temperaments and abilities of the director; looking closer at the chairmen’s considerations will thus
give insight into the way in which employed their capital in the Western colonies. The two enterprises
are thus to a high level comparable in management structure, markets, multinational nature and
strategy. This was to be sure also the reason that these enterprises would ultimately merge into
Unilever, but it also makes them a good fit to perform this research as I have suggested.
1.2 The scramble for raw materials
It was not only the structures of both companies that were virtually identical, in the sourcing of raw
materials both companies met as fierce competitors on the vegetable oils market. In order to provide a
complete picture in which the two cases are to be accommodated, I will center my focus on the
developments in sourcing raw materials that apply to both companies. It will provide a historical
context in which vertical integration can be understood.
In the 1880’s, in order to obtain sufficient quantities of animal fats for the production of
margarine, Anton Jurgens’ Vereenigde Fabrieken widened their sourcing area from the Netherlands to
the whole of Europe, thereby becoming a serious competitor for this raw material for soap works and
candle makers. The Jurgens-firm became Europe’s lead buyer of fats for margarine production in
Europe. During the course of the 1880’s, the importance of animal fats from the United States of
America increased. The rise and concentration of America’s meat industry in Chicago produced a
surplus of animal fats, available for exportation to Europe’s incipient margarine industry. The beef fat
and lard from America became an important ingredient for margarine, but also for Europe’s growing
soap industry.
25
26
Ven, van de, Anton Jurgens Hzn. 1867-1945, 308; Wilson, Geschiedenis van Unilever I, 59-60.
Chandler, Scale and Scope, 388-389.
14
In the long run, dependency on American slaughterhouses, which held a near-monopoly in the market
of animal fats, was too uncertain for the margarine production in Europe: price-fixing, trust formation,
strikes, the upcoming margarine production in America and import barriers/tariffs made it necessary
for Europe’s margarine industry to seek an alternative source of fat in the course of the second decade
of the twentieth century. Right from the beginning, besides containing a high percentage of animal
fats, margarine also contained a small amount of vegetable oil, mostly olive oil from France. Raising
the proportion of vegetable oils in the final product was considered as a way to broaden the range of
available ingredients for margarine. Because olive oil was an expensive type of oil, the search for
cheaper alternatives was started. Cottonseed oil, sesame oil, peanut oil were all considered, and they
all offered an alternative for a period of time, but problems in mixing the ingredients, especially
different sorts of fats, impeded progress in finding a definitive solution. 27
In about 1914, the refinement of vegetable oils was improved and the hydrogenation of palm
oil and coconut oil were applied on a grand scale. The content of animal fat in margarine dropped
between 1907 and 1918 from approximately 65 % to less than 5 %. The importance of the vegetable
oil market grew considerably and it took on worldwide importance; palm oil, copra and coconut oil
were mainly sourced in West Africa and the Asia. In these regions labour was relatively cheap and
land plentiful. Thereby the fats extracted from the oil palms and coconut palms caused little soil
depletion. The vegetable oils could thus be produced more cheaply than animal fats, also because they
were primary products in the sense that they were not subject to the costs of conversion entailed in the
animal industries. The First World War accelerated this process of conversion to vegetable fats. 28
As a soap producer, Lever became increasingly aware of the competition that the margarine
industry provided. But from 1906 on, Levers fear that rising raw material prices would rise became
reality: the prices of vegetable oils and fats soared. This was not just a temporary rise in prices, but a
permanent one, due to the upcoming demand of edible fats in the food industry, in particular the
margarine factories. The modern technology of hydrogenation had done its work. Thereby, the world
demand for oils and fats exceeded its supply. This situation created a race for new sources of oils and
fats, in which the margarine producers were generally able to pay higher prices. Lever suggested a
joint effort of a number of soap works by an exchange of shares and by doing so creating a
‘combination’ or ‘syndicate’ of soap producers. He had expected to cut expenses on marketing,
advertising and supply costs of the soap-producing process, but this turned out to be a miscalculation.
But it is a perfect example of how an entrepreneur tries to deal with Porters’ forces that shape strategy,
and in Levers case, it led to a tendency to cooperate and even monopolize trades. This is a prominent
feature of Levers style to beat competition, as we will see later when his Belgian Congolese subsidiary
is treated.
27
Wilson, Geschiedenis van Unilever I , 33-95.
Ibidem, 117-139; Katharine Snodgrass Copra and Coconut Oil. Fats and Oils Studies no.2, april 1928
(California, 1928), 4-5.
28
15
However, under the influence of the anti-trust discourse in the United States of America, public
opinion turned against Lever and his soap combination. This resulted in disappointing performances
and decreasing turnover.29
The problem of obtaining enough and affordable raw materials was a constant potential
hindrance to maintaining a stable business. All forms of international cooperation were considered and
hereby Lever came across the Dutch margarine producers Jurgens and Van den Bergh, although this
would not lead to any profound partnership at this stage.30
In 1901, during a trip to the Pacific, he made his first moves to get the whole production cycle
under his influence by taking an interest in a coconut plantation on the Solomon Islands. This
enterprise was initially not very successful, as transport difficulties and labour shortages adversely
affected earnings. Nevertheless, this did not deter Lever from investing in plantations, in order to
safeguard the sourcing of raw materials for his soap. Because Lever was confronted with an
undercooled relationship with the British Colonial Office, which was not enthusiastic about his
plantation plans in British Africa, he turned his attention to the Belgian Congo, the case central in this
research. 31
The 1920s began with a major crisis, the prices of palm oil produced dropped, and the demand
for margarine dropped as well. This crisis not only hit Levers enterprises, but also Jurgens’ Indian
adventures as we will see later. Shortly after the war, Lever started an ambitious scheme of buying and
integrating more oil mills and other providers of raw materials in his conglomerate, such as whaling
companies and oil trading companies, of which the Niger Company is a notable example. This Niger
Company turned out to be a pig in a poke, but more important: the post-war euphoria and economic
hausse developed into a severe economic depression. This depression caused enormous financing
problems for Lever. The market for raw materials slumped, causing a huge loss on Lever's raw
material stocks and his plantations and other raw materials suppliers. Only the profits made in the soap
works prevented Lever from sliding into a state of bankruptcy. The same crisis made Jurgens abandon
the Netherlands East Indies copra oil mills, in which he had heavily invested during the First World
War.32
The mid-twenties showed a slow recovery from the bad performances at the beginning of this
decade. Consolidation and rationalization were the key concepts. Though the merger of the Dutch
margarine producers Jurgens and Van der Bergh into the Margarine Unie endangered Lever's materials
position and threatened his margarine interests, both parties recognized the importance of coming to
an agreement for their mutual benefit. The negotiations that were initiated for such an agreement
eventually led to the establishment of Unilever in 1929.33
29
Wilson, Geschiedenis van Unilever I , 85-94, 140-143.
Ibidem, 144-156.
31
Ibidem, 181-194.
32
Ibidem, 277-300.
33
Ibidem, 333-348.
30
16
The whole process of incorporating into the soap industry the cultivation of crops for the subsequent
extraction of the necessary raw materials is an example of ‘vertical integration’, the supposed
advantage of which is the elimination of the (cartels of) brokers and being able to obtain the raw
materials at cost price, thereby raising the margin of profits. In both Lever's and Jurgens case this
unfortunately proved to be a theoretical assumption, but caused by different factors. In Levers case it
were predominantly structural causes and in Jurgens case it were predominantly contingent causes, as
we will see later.
My assumption that Jurgens’ and Lever’s incentive to integrate vertically was on the same
base and under the same circumstances (margarine and soap needed the same raw materials) does hold
firm, but not entirely. Margarine producers could afford to pay higher prices for raw materials than
soap works, and thus Lever was forced to integrate vertically earlier by acquiring plantations or
concessions. For a margarine producer like Jurgens, the urge became more apparent a decade later
than for Lever, and it was also stimulated by a contingent factor, the First World War. That makes that
the urge to integrate vertically was stronger felt by Lever than in Jurgens’ case.
1.3 The commodities
Palm oil, copra oil, palm kernel oil all are oils that suit the production of margarine and soap. I will
need to introduce the commodities to define to what extent their cultivation differed and could be
influenced by the colonial contexts. The names of the two commodities suggest common features, but
that is far from the truth. Both the coconut palm and the oil palm have different patterns of use and
cultivation that influenced the sourcing of the oils that these trees provide.
1.3.1 the oil palm (Elaeis guineensis)
Palm oil and palm kernel oil are extracted from the fruits of the oil palm (Elaeis guineensis).
The oil palm is a native crop of West Africa. It grows in the humid tropics in groves of varying
density, mainly in the coastal belt between the latitude 10 degrees North and 10 degrees South. Its
natural habitat is relatively open grounds and it therefore originally spread along the banks of rivers
and later on land cleared by humans for long-fallow cultivation. The oil palm as a cash crop provides
two important raw materials: palm oil and palm kernel oil.34
34
C.W.S. Hartley, The oil palm (Elaeis guineensis Jacq.) (London,1988), 5-7; W.A.I.M. Segers, P. Boomgaard
(ed.) Changing Economy in Indonesia. A Selection of statistical sources material from the early 19 th century up
to 1940. Volume 8: Manufacturing Industry 1870-1942 (Amsterdam 1987) 126.
17
Map I: suitable climate for oil palms
The importance of palm oil and palm kernel oil for the Western European colonial powers grew
notably because of the increasing demand for vegetable oils in general, in the wake of the Industrial
Revolution, and also because of improvements in processing vegetable oils, which made them more
convenient in the soap and, especially, the margarine industry. The best example of those
improvements is the already earlier mentioned hardening process, hydrogenation, which became
operable in 1902. Originating from West-Africa, palm oil had been a food crop for the native Africans
for centuries. It was gathered in the wild, and European-style plantations were introduced in the late
nineteenth century. These early African plantations were not very successful and could not compete
with the African smallholders, who did not need high capital investments. It were the West African
smallholders from Nigeria, Sierra Leone and Dahomey, that dominated the palm oil market of West
Africa well into the 1950’s. Palm kernel oil was mainly made in Europe, in oil mills concentrated in
Germany and England. Palm kernels could be easily shipped without any decay of the quality. The
pericarp of the palm fruit, which produces the palm oil, on the contrary, could easily turn rancid and
had to be processed near to the harvest area.35
Kenneth F. Kiple & Kriemhild Coneè Ornelas ‘the Cambridge History of Food’, lemma ‘palm oil’ (version
unknown) http://www.cambridge.org/us/books/kiple/palmoil.htm (april 24, 2013)
35
18
In the early days of the twentieth century virtually all the palm oil was exported from West-Africa,
more particularly the Western colonies Nigeria, Dahomey and Sierra Leone, with the Belgian Congo
playing a marginal role. The export of the oil was in the hands of local trading firms, that bartered with
African smallholders, who collected the fruits in the wild and processed them on their own premises.
The quality of this product was vulnerable and was exposed to local conditions. This West African oil
was typically used for soap and candle making.
In the second decade of the twentieth century the oil palm was successfully introduced as a
cash crop in the Netherlands East-Indies and a little later in British Malaya. The climate and soil on
the island of Sumatra turned out to be very fertile for the oil palm, as had been discovered earlier in the
case of rubber and tobacco. The first substantial exports also date from 1919, and after a wavering start
from the 1920’s, the palm oil production boomed. The cultivation flourished especially on massive
plantations on Sumatra’s east coast and nearby Aceh. In 1934 the Netherlands East Indies took the
lead in palm oil production , leaving Nigeria in second place. 36
Table I shows how rapidly this ‘palm oil divergence’ took place. Although Nigeria showed
considerable growth during the twenties, it could not hold pace with the overpowering Southeast
Asian growth rate. In the thirties Southeast Asia accounted for more than a third of the world export of
palm oil.
Table I: palm oil exports in 1000 tonnes, 1909-1935
Average 1909-1913
Average 1926- 1930
Average 1931-1935
Total world
121
224
325
Nigeria
82
124
124
Dahomey
13
16
14
Belgian Congo
2
26
46
Africa other
24
27
23
Africa % of world total
100%
86%
64%
Dutch East Indies
0
29
105
Malaya
0
2
13
Asia % of world total
0%
14%
36%
Source: Dr. P.A. Rowaan, Palmolie, 5
36
Dr. P.A. Rowaan Palmolie (Amsterdam 1939) 5-6; Segers Changing economy in Indonesia 126; Kiple &
Coneè Ornelas ‘the Cambridge History of Food’, lemma ‘palm oil’; Ir. J. F. Schmöle, Algemeen Proefstation der
A.V.R.O.S. Selectie in het Deli Type van den Oliepalm (Medan, 1933) 3; Hunger De Oliepalm 9-10, 206-218,
266.
19
The introduction of the oil palm in the Netherlands East Indies did not only led to a divergence in
quantity but also induced an impulse of quality. The Sumatran and Malayan oil caused a serious
competition between the African and the Asian palm oil, because its applicability was broader: it
could be more easily used for margarine production. The main determinant of the oils quality, the level
of free fatty acids, would be the central focus.37
The climate for oil palms turned out to be more favorable in the Netherlands East Indies: more
and more evenly distributed rain throughout the year, more sunshine and slightly higher temperatures,
providing more ideal circumstances to produce palm oil. Congo’s climate was a bit arrear with its dry
season and monsoons. But in both colonies the oil palm had the potential to flourish well.38
It is obvious that the growth in Asia and in the Belgian Congo was to be attributed to the
rationalization of the cultivation process. The growth in the Belgian Congo is largely the result of
Levers initiatives that led to the rationalization of the palm oil cultivation in this colony. But, as later
will be disclosed, the rationalization in the Belgian Congo took different track to that in Asia.
1.3.2 The coconut palm (Cocos nucifera)
Coconut oil, copra and copra oil are all products extracted from the coconut palm (Cocos nucifera).
The Coconut palm is a common crop in the whole of the tropics, probably originating from the Indian
Ocean region. Copra is the dried pulp of the coconut and copra oil the oil derived from copra. Oil
extracted from the fresh coconut flesh is coconut oil or kelapa .The remains of both methods of
extraction resulted in a third product, bungkil, which could serve as food for cattle. Achieving the
creation a market for this by-product, bungkil, was an important factor leading to the successful
establishment of oil mills in Europe. Coconut oil has been in use for centuries in virtually all the
tropics for edible purposes, but also for illumination. In the first half of the twentieth century copra oil
exported to Europe served, similarly to palm oil, as an important ingredient for soap making and
margarine production. Copra oil had an advantage over coconut oil, because it maintained its quality
longer. Coconut and copra oil suited margarine production well because they have only a slightly
lower melting point than butter and their consistency is almost the same as butter. The white color
helped the oil resembling butter. In the American margarine industry the percentage of coconut oil
used in the final product rose from 5% in 1917 to 45% in 1926. In America’s soap industry the level
rose from 10% in 1912 to 20% in 1923. The same development could be seen in the margarine
production in Europe. By 1914, 80-90% of the copra oil milling for the European market was done in
Germany, because of the leadership this country had obtained in the oil milling industry. These
developments illustrate the growing importance of coconut oil in the Western countries during the first
decades of the twentieth century.39
37
Dr. P.A. Rowaan, Palmolie, (Amsterdam 1939) 4-6.
Statistics on rainfall, sunshine and temperature can be found in: Hartley, The Oil Palm, 98-103.
39
Snodgrass Copra and Coconut Oil, 7-11; Dr. T. Umbrello ‘Coconut palm’ (version unknown)
http://faculty.ucc.edu/biology-ombrello/POW/coconut_palm.htm (june 19, 2013); Segers, Changing Economy in
38
20
Table II: coconut palm acreages in 1928
Country
Acreages
India
1330
Philippines
1200
Netherlands East Indies
1000
Ceylon
1000
Oceania
540
Malay States
510
Africa
165
Tropical America
160
French Indo-China and Cochin China
120
Source: Snodgrass, Copra and Coconut Oil, 40.
Table II shows that three Western countries controlled the major portion of the world supply: GreatBritain (India, Ceylon the Malay States), United States (Philippines) and the Netherlands (Netherlands
East Indies). In terms of importance the situation considering coconut oil was reversed to that of palm
oil in the first three decades of the twentieth century. Palm oil was a typical African commodity whilst
coconut oil had its center of gravity in Asia.
Jurgens’ investments were done in the Netherlands East Indies, so a more in-depth explanation
of specific conditions of this colony will be useful here. In contrast to the oil palm plantations, which
were concentrated on Sumatra’s East coast, the greatest concentration of coconut palm in the
Netherlands East Indies was centered on the island of Java. The production of copra made it possible
to export this coconut product to Europe and the trade in copra started cautiously in the period from
1870 till 1885. On a rather small scale the coconut palm developed from a ‘nature’ crop tended by
local smallholders, to a ‘culture’ crop cultivated on European plantations. The sole aim of these
European plantations was export for the world market. The local and significant consumption was
ignored by these European producers. But despite these early European plantations, the major part of
the production was still largely in native hands: 95% of the coconut palm acreage was in native hands
in 1917. The milling of the oil was also entirely in native hands, especially Chinese millers, who
produced coconut oil for the domestic market. Contrary to the palm oil, that was a typical export
product, coconut oil played an important role in the domestic market of the Netherlands East Indies,
but also in other Asian colonies.40
Indonesia, 126; Mr. Dr. R.N.J. Kamerling RA, De N.V. Oliefabrieken Insulinde in Nederlands-Indië.
Bedrijfsvoering in het onbekende, (Franeker, 1982), 37.
40
Kamerling, 39-42.
21
The second decade of the twentieth century saw the ‘copra boom’ with a huge rise in copra exports,
due to the growth of the margarine industry. This also stimulated European capital to be invested in
new plantations. The First World War curbed export, bringing a sharp end to the initiated boom. From
1st-April 1915, copra was to be considered as contraband and the unlimited submarine war from the
1st-February 1917 made the export of copra impossible. The result was the availability of huge stocks
of copra lying idle. This fait accompli was the igniter for a new industry: oil milling in situ for the
export to Europe and the United States. Before the war this milling was done after export, mainly in
German oil mills, but since they were cut off from the copra trade alternatives had to be sought.
Already in 1913 the NV Oliefabrieken “Insulinde” was the first to establish an oil mill on Java. In
1918 there were already 20 oil mills on Java alone. In this same timeframe Jurgens entered copra oil
milling in the Netherlands East Indies. His operations and the decline of copra milling in the
Netherlands East Indies will be central in chapter 3.41
To conclude we can establish that palm oil and coconut oil had virtually the same significance
in terms of applicability for both the soap and the margarine industry. Cultivation however, differed,
but not significantly in terms of climate and soils. These factors could be overcome if entrepreneurs
could influence the modes of production and these differed largely. Palm oil production was in the
hands of smallholders in Africa whilst in Asia it was a crop that was entirely maintained by Western
plantation enterprises. For the coconut palm the situation was reversed in Asia (Africa playing an
insignificant role) because the cultivation was mainly in the hands of the smallholders. The oil milling
gives a more less clear picture. Palm oil had to be milled close to the harvest sites because of the
perishability, whilst the palm kernel oil was mainly milled in Germany. Copra oil for the European
markets was also milled in Germany, whilst coconut oil and copra oil for the domestic markets was
milled near the harvest sites. It is no surprise that entrepreneurs who wanted to control the whole
production cycle to improve the quality of the locally milled oils would start by integrating the milling
and end with the cultivation of the crops. Lever followed this whole track, Jurgens only made the first
step.
41
Kamerling, NV Oliefabrieken Insulinde, 44-50.
22
CHAPTER II: THE LEVER BROTHERS IN THE BELGIAN CONGO
Now that we have created a context and established a comparative framework relevant to the cases, the
two stories of Lever and Jurgens need to be told. In the following two chapter I will take the
perspective of the entrepreneurs. What were they looking for? What were their considerations? How
did they act when facing difficulties? The answer to these questions can provide the information that is
needed to obtain the overview that is crucial to construct the institutional influence on enterprises like
those of Levers and Jurgens. Sourcing enough vegetable oils without the menacing brokering was the
ultimate goal for the two companies. In the first section I will examine the process of how William
Lever sought investment opportunities. Palm oil had been one of the main ingredients for soap since
the late nineteenth century and it is not a surprise that William Lever tried to establish a foothold at its
source: British West-Africa.
2.1 Why the Belgian Congo?
‘Si le nombre des industries agricoles est actuellement peu élevé, par contre l'une d'entre elles,
la fabrication de l'huile de palme, est en voie de developpement rapide, depuis l'etablissement
au Congo de la Société des Huileries du Congo Belge, disposant d'un capital tres important.
Cette Societé possède actuellement trois usines, munies d'un materiel perfectionné et se
propose d'en créer d 'autres.’42
In this boasting language the exiled Belgian government tried to attract foreign investors to their only
colony, the Belgian Congo, in 1917. William Hesketh Lever and his Huileries du Congo Belge (HCB)
served as an inspiring example for other investors. Lever took the plunge six years earlier, in 1911,
and it is interesting to see why he ended up in the Belgian Congo. From 1900 on, Lever was obsessed
by the establishment of his own plantations for the supply of raw materials. The establishment of an
oil milling industry in Africa was clearly a strategic move to circumvent the transaction costs the palm
oil merchants in West-Africa caused. Lever tried to stabilize the fluctuating palm oil prices by starting
his own oil industry.43
In 1911, he, apparently frankly, stated in Progress, the Lever Brothers’ company newspaper:
‘(…)”I believe the scheme will be a success, for it will make us independent, I hope, of the
fluctuations in the raw material for the manufacture of soap, and that is a virtual guarantee that
the price will be kept at the level that most appeals to the buyer of the manufactured article.”’44
Le Baron F. Fallon, L’Agriculture au Congo Belge (London, ca. 1917), 22.
Wilson, Geschiedenis van Unilever I, 182.
44
NN, ‘Lever Brothers and the Congo’, Progress, 11 (1911), 1.
42
43
23
Theoretically, he had few major area’s to choose from: only the British and French colonies in WestAfrica. In these area’s the palm oil trade and production was well developed. The Belgian Congo
played only a very marginal role in the business. Oil palm cultivation in Asia was no real alternative
for Lever, because the cultivation was non-existent or in a very experimental stage and it would thus
be a relatively great risk for his capital. The chance is very small that the thought of the Netherlands
East Indies or British Malaya ever crossed his mind in this period. Moreover, the Netherlands East
Indies and Malaya were further away from the European continent.
In the first instance Lever concentrated on the British colonies in West-Africa, chauvinistically
expecting a warm welcome. He was wrong. But why? What factors made that Lever could not get a
foothold in these seemingly ‘friendly’ colonies? I will assess the reasons of the failure to invest in
these colonies because they reveal something about how colonial contexts work.
In 1907 Lever submitted a scheme for plantation production and mechanized processing along
capitalist lines of production. This scheme was intended for Sierra Leone and later, in 1910, Lever
employed similar plans in Nigeria. Lever and the Colonial Office started negotiations discussing the
conditions under which palm oil production could take place. When investing in something, whether it
be a relationship or a new enterprise, one wants certainties so as to reduce the risks of exposing one’s
vulnerability in vain. This was exactly what Lever wanted to a high degree: certainties. Lever asked
for extensive monopoly rights: exclusive rights for 99 years to the erection of processing equipment
within twenty mile radius of each mill, exclusive rights to the construction of railways, preferential
rates on government railways, rent-free sites for the mills, and remission of import duties on materials
for the construction of mills. 45
Besides these formal negotiations, Lever also employed informal attempts to influence the
colonial politics using direct contacts with British politicians, such as the Liberal secretary of state for
the colonies, Lewis Harcourt (1883-1922), to whom he expresses his criticism towards the Colonial
Office for rejecting his proposals, because this was what happened. Levers demanding, somewhat
ungentle, style and ungracious remarks, undermined his bargaining. Sir John Anderson (1882-1958),
an official from the Colonial Office, sighed in 1911: ‘(…) But he always wants better terms than
anyone else, and forgets that our roads and railways have got to be paid for, and also, the better
security of enterprise under British rule. After all, we profess to be in the tropics mainly for the benefit
of the natives and material development is too often at their expense.’46
45
Anne Philips, The Enigma of Colonialism. British Policy in West Africa, (London, 1989) 92.
K.D. Nworah, ‘The Politics of Lever's West African Concessions, 1907-1913’, in: The International Journal
of African Historical Studies, Vol. 5, No. 2 (1972), 248-264, quote is to be found on p. 253.
46
24
Another track Lever took was to contact Edmund Morel (1873-1924), a champion of indigenous rights
and the whistleblower in the case of Leopold II regime’s exploitation practices in the Congo Free
State. The expression ‘Red Rubber’ was coined by him. 47 Morel was highly surprised by Levers
attention, because Lever had openly criticized Morel’s Congo Reform Association.
Lever was convinced that Morel had an influential role in the Colonial Office’s aloof attitude
and tried to get him on his side. He tried to convince Morel of his noble intensions and corresponded
intensively with Morel. Establishing plantations would implicate land purchase and this would do
harm to the land rights of the native peoples in Morel’s opinion. Lever made it clear that all he was
after, were concessions where he could exclusively buy the palm nuts from the natives. He wrote a
letter to Morel in 1910 in which he tries to reassure him that:
‘(…) Up to the present time Lever Brothers have made no application for plantation area, but
we have had enquiries made on our behalf whether such areas were available and on what
terms they could be acquired. Up to the present I have seen no prospect of success in planting
Palm trees in the West Coast of Africa. Much more favorable conditions exist for planting
coconuts in the East Indies and as Coconut Oil and Palm Kernel Oil are practically the same
for the Soapmaker we have never seriously entertained plantation proposition on the West
Coast of Africa.(…)’48
Morel’s initial reaction to Levers courtesy was hesitant, but, as K.D. Nworah argues, Lever probably
tried to prepossess Morel by funding £100,- for a trip to Africa and giving him crucial political support
for his stand for Parliament as a Liberal candidate for Birkenhead. The result was that Morel used his
contacts in the Colonial Office to pave the way for Levers plans. Moreover Morel was convinced that
colonial reform was to be performed from the inside, and he believed that the close cooperation with
Lever gave him the opportunity to ‘humanize’ British capitalism in Africa. But this expectation was
ill-founded. Lever thoughts on the native population were much less enlightened than Morel hoped
them to be. 49
Ultimately, and in spite of Levers attempts of informal influence, the Colonial Office was
reluctant to grant his requirements because of a few underlying structural circumstances, which are
specified by the historian A. Hopkins. Hopkins argues that the planters frontiers were held back
because of the established interests of existing trading companies. These trading companies lacked the
capital or the inclination to enter production (plantation and milling) and they feared the presumed
power that entrepreneurs like Lever could obtain by securing and monopolizing a large part of the
production.
47
See also: Niall Ferguson, Empire. How Britain Made the Modern World. (London, 2003), 296.
UAPS, LBC, box 53, Moseley correspondence, letter from Lever to E.D. Morel esq. (October 17, 1910)
49
Nworah, ‘The politics of Lever’s West African Concessions.’, 261-265.
48
25
It were Manchester and Liverpool traders that exercised a strong influence on the Colonial Office and
feared the conjectured power of Lever. The above-cited K.D. Nworah, has described this process in
detail and it may be added on his account that due to Levers political profile (he was a prominent
Liberal party supporter) he raised a lot resistance from Conservative members of parliament, who
accused him on behalf of the chambers of commerce of using his political influence in a corruptive
manner for establishing monopolies. This did not help him.50
Another reason for the Colonial Office’s reluctance was that they feared disruption of the
native economy. The native Africans had already established an integrated (palm oil) economy, so
peasant production had proven itself, whilst plantation production had not. Officials also feared that
admitting plantations would cause problems with labour recruitment and traditional land rights. Both
matters could easily arouse widespread protests amongst Africans and find political expression that
might undermine the colonial authorities and colonial rule itself.51 Lever had not much patience with
these considerations, in his opinion the natives were to be treated like children, that needed education
in wage labour. Under his rule he would make them happy and diligent.52 The personal and demanding
style of Levers management could also be the origin of personal feuds as occured with Hugh Charles
Clifford, the governor of Nigeria, in the 1920s. Clifford argued that Nigeria’s economy was selfsufficient and more or less independent from the global economy. Under British colonial officials
there was a strong belief that the development of the local economy would be on the shoulders of the
native peasantry, not European capitalism. This unwillingness to accommodate Western industrialists
was not only felt by Lever, but also more widely in the industry. In a trade magazine, discussing the
possibilities of cultivating oil bearing crops in the Netherlands East Indies, one could read that ‘(…)
Holland runs her colonies as business concerns and not as utopian illustrations of the beneficence of
Dutch rule over backward races’. 53
Ultimately it was the independence of the peasant farmers that hindered the modes of
production Lever envisioned. Anne Philips argues that the colonial states in British West Africa were
not able to resolve the labour question (to which Lever referred here above) because they lacked the
resources or were unwilling to employ them to proletarianize the native people. ‘(…) they chose to
remain within the boundaries of peasant production, but by doing this, they eliminated the prospects
for factory processing.’54
One of the results of these political intrigues was that the Colonial Office in 1912 promulgated
the Palm Oil Ordinance, a compromise, permitting monopoly rights within a radius of ten miles for a
period of twenty years.
Nworah, ‘The politics of Lever’s West African Concessions.’, 261-265
A.G. Hopkins, An Economic History of West Africa, (Londen, 1973) 213-214.
52
Wilson, Geschiedenis van Unilever I, 192.
53
NN, ‘A Dutch East Indies Loan’, Oils and Fats Record and Tropical Messenger, vol. III, no. 8 (januari 1922),
141; Philips, The Enigma of Colonialism, 97-98
54
Philips, The Enigma of Colonialism;106.
50
51
26
This ordinance forbade the processing of palm kernels in the West African Colonies, in which the
influence of the traders and chambers of commerce is to be seen, because palm kernels could be
transported to Europe where a palm kernel crushing industry existed.55 Lever was completely
dissatisfied with this ordinance. He was reluctant to invest large sums of money in a capital-intense
industry under such insecure conditions. He could not empathize with the native people who in his
opinion did nothing to exploit their lands and to promote civilization. Levers capital would have to
find a way to meet with less resistance.56
Only later in the twenties did the British officials consider others modes of production
motivated by the increasing competition from palm oil from Sumatra and Malaya, which were of far
better quality. But it took to well into the forties and fifties until plantations were established. In the
meantime, Lever turned his main activities to the Belgian Congo, although he stayed highly involved
in the trade in British West Africa via the Niger Company and later the United Africa Company
(UAC).
The analysis of these attempts provide some conclusions relevant to the comparison with the
Netherlands East Indies: first, the British West African colonial governments provided very limited
access to land. Levers reaction was to establish intense relations with officials and politicians, both
formal and informal. Ultimately it was the fear of ‘creative destruction’ that made the colonial officials
reluctant to cooperate with Lever. The existent distribution of power was threatened by Lever.
Second, Lever felt the urge to monopolize trade and milling in certain areas to safeguard his
investments. He must have felt that the officials were in a position and were open to the granting of
monopolies. When discussing Jurgens Netherlands East Indies subsidiaries we will discover that both
of Levers strategies were never considered by Jurgens.
2.3 Assessing the subject of investment
The disappointing experience in British West Africa would not automatically lead Lever to the
Belgian Congo, because there were many uncertainties to deal with. In 1909 Lever was approached by
Dr. Max Horn, a Belgian government envoy commissioned by Belgium’s Colonial Minister Jules
Renkin (1862-1934), sent to England to solicit investments for Congo. Lever was very interested in
the opportunities in the Congo because just a short time before he received negative responses to his
investment proposals for Nigeria and Sierra Leone. However, Lever knew some of the uncertainties
surrounding the Belgian Congo. It was a virtually undeveloped country and the map of its interior was
largely blank. Lever also had to deal with the British public opinion, because the Belgian Congo was
more or less synonymous to Leopold II’s ‘Red Rubber’ campaign atrocities and investing in this
suppressing colonial regime aroused much criticism.
55
Philips, The Enigma of Colonialism, 93.
Wilson, Geschiedenis van Unilever, 192; for an impression of the colonial administrations reflections on
meeting Levers demands, see the letter from Lewis Harcourt to Governor F.D. Lugard: Nigerian Palm Oil
Concessions, 18 august 1913, in: C.W. Newbury, British Policy towards West Africa. Selected Documents 18751914, (Oxford, 1971), 591.
56
27
The regime change in 1908 from a privately held free state to a Belgian colony did not temper the
distrust towards the Congo public administration. Lever knew that he had to influence the public
opinion strongly. Lever had to make clear that his intentions were contributive to the welfare of the
Congolese; the natives were not to be wage-earners, but self-employed palm fruit cutters.57
This would not be the last time that Lever had to deal with King Leopold’s infamous legacy,
both in Great-Britain and in the Congo itself. Several times he had to deal with accusations of forced
labor, deprived labor conditions and underpayment. This forced him to lead an uninterrupted publicity
campaign about his noble ideals in the Belgian Congo. In Progress he emphasized his good intentions:
‘(…) the natives will be “well treated”. Their labour will not be exploited to everybody’s
advantages but their own. They will have their eight hours’ day, like ourselves. They will be
secured the full rate of wages of the district, not only at the outset but as the improvement of
civilization in these regions necessitates there will be a means of raising their wages.’ 58
To explore the opportunities to invest in the Congo, Lever took two precautionary steps. First,
the sent out two expeditions to the Congo and, second, he found a fellow investor with local
experiences.59
Lever’s plan was to obtain concessions were he could collect palm fruit from wild palm trees,
process them and export them to Europe. A plantation was not on his mind by then. Only after 1930
did HCB turn to cultivation in plantation style, under pressure from the booming palm oil industry in
Asia. This style of cultivation needed less land and the labor force could be more stabilized.60
The first expedition in 1909 was led by Henri de Keyser, a former employee of the Congo
Free State, with a controversial reputation. In 1896 his role as a commander in the Bumba region was
extensively discussed in the British press because it was alleged that he cut of the feet of a chiefs
daughter in order to seize the brass anklets she was wearing.61 In 1904, Guy Burrows, who had also
been a Congo Free State employee, accused De Keyser in his book ‘The Curse of Central Africa’ of
these terrible atrocities. These atrocities would never be prove because Burrows could not produce
any witnesses and he had to withdraw his accusation by court verdict.62 The choice for De Keyser as
an expedition leader was evidently a pragmatic, but not very pleasing one from the perspective of
public opinion. The ‘De Keyser’ controversy turned out to be a bad omen: Lever would be confronted
with Leopolds legacy on various occasions.
See also: Jules Marchal, Lord Leverhulme’s Ghosts. Colonial Exploitation in the Congo (London, 2008), 3.
NN, ‘Lever Brothers and the Congo’, Progress, 11 (1911), 1
59
Fieldhouse, Unilever Overseas, 499.
60
Ibidem, 496.
61
Marchal, Lord Leverhulme’s Ghosts, 2.
62
NN, ‘Congo Officers get Damages. Successfully sue Capt. Burrows, Who Charged them with Atrocities’, The
New-York Times, march 27, 1904; Marchal, Lord Leverhulme’s Ghosts, 2.
57
58
28
The information that was provided by the Belgian Congo government was of poor quality and not very
promising according to De Keyser:
‘(…) OFFICIAL INFORMATION USELESS.
Official information as to distribution and situation is useless. We were constantly being sent
long distances in search of palm forests that were non-existent, in a commercial sense. Maps
were sometimes supplied, interesting as works of art, but of very little use as although districts
and areas were marked “rich” or “Very Fich [sic]” and estimate of the number of trees per acre
was always omitted, neither were swampy or barren areas indicated in these positions.’63
In search for fellow investors for his HCB in 1911, he came across the head of the ‘Banque
d’Outremer’ ,General Thys, who told him in a letter: ‘(…) there aren’t many palms there worth
mentioning, and I know my Congo. If you want to exploit oil palms, you should go to the Mayumbe in
the Lower Congo and even there all the available labor is needed for the cocoa plantations and timber
concessions which, dealing with more valuable products than palm oil and kernels, can pay higher
wages than you can afford.’64 This could have deterred Lever, but it did not. The two expeditions
provided Lever with an assessment that examined possible concession locations by assessing the
classical factor endowments: land and labour. The land was assessed in terms of accessibility by river,
density of palm groves, water supply, suitability for staff-housing, suitability for establishment of oil
mills, the expected quantity and quality of palm fruit to be processed and even the suitability for
plantation-style cultivation. 65
However, in hindsight, the assessments made by the expedition members were poor: according
to Sidney Edkins, the first director of the Lusanga concessions: ‘(…) the existence of the greater part
of the oil palm forests now exploited in all the five areas was absolutely unknown to the people who
selected them. Their personal knowledge of these regions was limited to a walk of a few miles into the
interior at two places in the Lusanga circle and at one place in the Elisabetha and Alberta circles, and it
was on this and some unreliable information given by the Government Officials and the Agents of
Trading Concerns that the positions of the centres of the five circles to be granted were fixed.’66
A larger part of the reports written by De Keyser and Burgess (the leaders of the two expeditions to
the Congo) were devoted to the other factor endowment, labour: the existence of labour supply, the
attitude towards wage labour and the expected productivity. The availability of enough adequate labor
was a recurring problem in the Belgian Congo because the forests were thinly populated and the
people not accustomed to wage-labor.
63
UAPS, LBC, box A, Reports and Letters from mr. De Keyser, Congo trip (1910), 3.
UAPS, UAC/1/11/14/1/15, Notes on the history of HCB by Sidney Edkins, (1937), 1.
65
UAPS, LBC, box A, Reports and Letters from mr. De Keyser, Congo trip (1910); LBC, box C, mr Burgess
General Report on the Palm Oil regions in the Congo (1910).
66
Ibidem, 2.
64
29
But besides that, the native people who were familiar with Westerners in need of labour, had only
experienced the forced labour of the Leopoldian era. This infamous legacy runs like a red threat
through the report, in the Balu Lundzi district: ‘(…) the natives show a distinct disinclination to work
for the white man (…) and show a general distrust for schemes of Europeans exploiting the country in
any way. (…) some villages were deserted on our approach (…). In the Akula Bozumwani district
the expedition had ‘(…) great difficulty in obtaining porters, the men having been practically dragged
to the loads by force and absolutely refusing to carry, except from one village to the other (…) This is
an old worked out rubber district and the inhabitant have not yet recovered from the effects of forced
labour.’ In the Bumba region they remarked: ‘(…)This district has been very densely populated in the
past, the Government having drawn a very large proportion of their workmen and soldiers from this
part, which together with sickness etc. has to great extent depopulated the district.’67
These labour problems were exactly the reason that the Belgian entrepreneur Adrien Hallet
turned his attention from the Belgian Congo to the Netherlands East Indies in 1905, for his rubber
plantations. Hallet gave two basic reasons for this shift in geographical focus: first, in the Congo basin
he was not able to supply enough labour to run his plantations adequate and, second, he found the
transport links poor. In 1923 he stated that he was reluctant to invest in the Belgian Congo unless the
‘labor question’ had been solved, carefully asking the administration not to provide forced labour, only
general support.68 Hallets shift to the Netherlands East Indies was a fortunate one, labour was no
problem there, as also Jurgens would discover. But Lever remained confident, probably because in
comparison to the British West African colonies, he seemed to have a practically free rein in
organizing his business.
Thus, most of the natives were not accustomed to paid labour, or had had bad experiences with
Western entrepreneurs exploiting them. Most of them were not brought into contact with the European
money-economy. This was a serious problem for Lever and the solution proposed in the ‘General
Report of the Oil Palm Regions in the Congo’ gives a revealing insight in the mind of Western
entrepreneurs trying to deal with one of the basic assumptions of Western capitalism: creating needs,
false needs Theodor Adorno would probably say.
UAPS, LBC, box B, Belgian Congo Reports 1911, ‘Mr. Burgess General Report of the Oil Palm Regions in
the Congo’, 10-13.
68
William G. Clarence-Smith, ‘Rubber cultivation in Indonesia and the Congo from the 1910s to the 1950s.
Divergent paths’, in: Ewout Frankema and Frans Buelens (eds) Colonial Exploitation and Economic
Development. The Belgian Congo and the Netherlands Indies compared (Abingdon 2013) 198.
67
30
Under the header ‘CREATING WANTS’ the writer of the report suggests:
‘The most important factor in the labour is the question of the amount of work that the natives
will undertake without compulsion. It appears to me certain that, at first, at any rate, this will
be the minimum possible amount to supply their immediate needs. They are at present in a
state of nature, without any vestige of civilization or education and their actual necessities are
few- food which they grow in the village plantation and obtain from palm trees, the meat being
supplied by the hunters and the irreducible minimum of clothing.(…) They are, however, not
without intelligence and are capable of education and would I think welcome schools and
especially trading stores, which must be well equipped and capable of creating and supplying
new wants. They are at present ignorant of the value of money, but this will soon adjust itself,
now the taxes have to be paid in cash. (…)’69
Just opening a shop (‘store’) near a factory would not arouse enough appetite for Western
consumption goods, so the writer advised:
‘(…) to send a caravan the round of the villages in the collecting area, periodically, with
samples of the most attractive articles for sale, if they have the cash, but primarily to stimulate
a desire for possession, and generally to stir up the commercial spirit.’70
Another challenge was to find enough workforce to collect the palm fruit. The reports of the
expeditions provided an estimate of the expected workforce available in relation to the fruit picking
and milling capacity in the designated areas. 71
The information provided by the two expeditions might not have been what Lever expected,
but the welcoming attitude and the attractive conditions provided by the Belgian government
convinced Lever of the possibilities to establish a palm oil industry in the colony. The agreement
between Lever and the Belgian government was concluded in a convention of 21st February 1911.
Article 11 states that the convention’s: ‘(…) essential aim is to call to economic life several important
regions in the colony. It substitutes activity for paralysis, a powerful modern industrial technique for
rudimentary and primitive methods, and this will enable rational and complete utilization of the
natural resources of the country. The new organization will give to the natives a reform which is
intended to modify his traditional condition.
UAPS, LBC, box B, Belgian Congo Reports 1911, ‘Mr. Burgess General Report of the Oil Palm Regions in
the Congo’, 13-14.
70
Ibidem, 14.
71
Ibidem, 14.
69
31
His economic advance will involve his social advance.
(…) The main issue is consequently not essentially to further the exportation of palm oil. Of course
this result would be reached, but it is a side issue. The convention has a higher and further object, and
the main purpose of the colony was to avail itself of an exceptional opportunity in order to assure to a
notable portion of the colonial territory a quick economic development.(…)’72
This convention is an remarkable aspect of the way how the Belgian Congolese government
tried to lure investors. Lever got his monopoly, but the demands of the Belgian Congolese government
that included the building of roads and the establishment of schools, were striking compared to the
circumstances in the Netherlands East Indies. For Lever it seemed he got the freedom to organize his
palm oil production on his terms, but the demands of the government progressively became a bodice.
Table III: principal villages and rivers in the concessions
Concession
Principal village
Principal river
Alberta
Bumba
Congo
Brabantia
Basongo
Kasai
Elisabetha
Barumbu
Congo
Flandria
Ingende
Ruki
Lusanga
Leverville
Kwilu
Map II: Levers concessions in the Belgian Congo
UAPS, UAC/2/36/1/1/1, Extract from ‘Bulletin Officiel du Congo Belge’ of 2/5/1911, 371
Convention concluded on the 21 februari 1911, between the Colony of Belgian Congo and Messrs Lever
Brothers Ltd of Port Sunlight (England), 9
72
32
The convention granted five circular concessions selected by the expeditions and measuring sixty
kilometeres in radius, in which Lever could ultimately harvest from a maximum of 750,000 hectares
of palm groves. Map II shows the vastness of the concessions in relation with the already
unimaginable vast Congolese landmass. These lands were first to be leased, and when the investment
and production demands as stated in the convention were met (in 1944, they estimated), Lever be
granted them in freehold. A subsidiary would be established with the name ‘Societé Anonyme des
Huileries du Congo Belge’ (HCB), the headquarters of which would be in Brussels, at least a third of
and the machinery for the establishment of mills had to come from Belgium. At least half of the
European staff had to be Belgian. HCB had to set up a rail system, telegraph networks, roads, schools
and hospital in the circles. Within six years the mills in the five concessions should process at least
6000 tonnes of fruit. 25 million Belgian francs had to be invested. The rights of the people who lived
in the concessions were also protected to a certain level: they could use the lands for their own
account, Lever paid a minimum of 25 centimes a day to the workers, but nothing was mentioned about
people that would not accept the labour offered
by HCB.73
However in the Congo Reports it was assumed that governmental support could be depended
on if the native populations showed no inclination to work for HCB. When estimating the price for the
collected palm fruit the writer of the report attaches ‘(…) very little importance to the prices at which
it is stated that the palm fruit will be supplied, as I think it is usually a case of a price being named to
the chief, with which he agrees, without understanding the purchasing power of the sum. (…) If the
native finds that the cash he received will not purchase as much as he considers the labour worth,
supplies will cease, unless Government pressure can be brought to bear on the situation.’74 These
words turned out to be highly predictive.
The convention shows that the Belgian government secured its own interest very well by
demanding investments in infrastructure and securing some rudimentary rights for the native peoples,
having learned a lesson from the predatory economy of the Congo Free State. Both Lever and the
Belgians were happy. The Belgians hoped to exploit their colony by integrating the natives into their
colonial economy and Lever had a maximum of securities concerning his investments. However, for
the natives, an insecure period was about to begin.
73
Fieldhouse, Unilever Overseas, 504-507.
UAPS, LBC, box B, Belgian Congo Reports 1911, ‘Mr. Burgess General Report of the Oil Palm Regions in
the Congo’, 14.
74
33
2.3 The first 20 years
‘(…) we are doing all we possibly can and I am sure we can rely upon whatever help the
Belgian Government can give us to make this undertaking a success. To my mind the whole of
the future development of the Congo depends upon the successful introduction of mechanical
appliances for extracting the oil from the palm fruit. This difficulty once overcome the Congo
will assume a regular steady and progressive character on sound lines and occupation
congenial to the Natives.’75
Now Lever had started his business in the Congo, the task for his men on site was tremendous. The
supply of sufficient (African) labour was a tour de force for many Western entrepreneurs that
established businesses in the Belgian Congo. The two expedition reports had already pointed at this
‘problem’. The reason that the earlier mentioned Adrien Hallet shifted his attention to the Netherlands
East Indies was that he could not obtain sufficient labour for his enterprises, such as plantations.
Potentially, there was probably a large labour force in the Belgian Congo, but the native Congolese
were widely dispersed and unwilling to engage in wage labour, under the conditions provided.
However, William Lever, who had no preliminary experience in African crop cultivation and
was provided with an, despite the reservations made by the expeditions, quite unrealistic prospect of
ideal circumstances, was offered large concessions in which he had to respect the rights of indigenous
peoples to a certain degree. The most important of these rights were the personal freedom (which ruled
out forced labour) and the right to claim land for substitute farming. The indigenous people also had
the right to gather food and other materials in these concessions to sustain their traditional life. But
these peoples were also the only available potential source of labour.76
The indigenous people were thus not accustomed to wage labour. The European style solution
to this ‘problem’ was two sided: the colonial government imposed (money) taxes on these people and
Lever tried to create a demand for Western products, which had to be bought with money. The
subsistence farmers and fishers were thus more or less forced to accept waged labour. But in practice it
would not be so easy, Lever came across severe problems to find sufficient labour. Despite the
measures taken by the government and by Lever, there was hardly an incentive to accept wage labour
because the wages offered were too low to be a serious alternative for subsistence farming and
traditional trade. In addition, working in the concessions was very unpopular amongst the indigenous
peoples because of the widely known and infamous reputation of palm fruit cutting. Subsistence
farming also had the benefit of maintaining their own traditional village life and family relations.77
75
UAPS, LBC, box 53, letter from Lever to Moseley, (August 28, 1911)
Buelens, Congo, 195; D.K. Fieldhouse, Unilever Overseas. The Anatomy of a Multinational (London 1978),
498.
77
Fieldhouse Unilever Overseas, 509-512; Vincent Houben en Julia Seibert, ‘Colonial labour relations in
Belgian Congo and the Netherlands Indies compared’, in: Ewout Frankema and Frans Buelens (eds) Colonial
76
34
Sidney Edkins recalled in his (unpublished) history of HCB the problems in recruiting labour: ‘What
little native population there was in the regions the river passed through lived inland and avoided like
poison the river banks where the boats of the white men, who always wanting them to work, were to
be met with.’ 78 And the labour that he could recruit was ‘(…) poor, underfed, ravaged by sickness
and intertribal warfare, and all were cannibals.’79
The collection and transportation of palm fruit was highly inefficient because the palm trees
grew in the wild on vast tracts of rain forests, thus a lot of labour was needed. This was a major
difference compared to the Netherlands East Indies, where the oil palms were cultivated on large
plantations, maintained by a disciplined workforce.
Competition was fierce in attracting labour, because other Belgian Congolese enterprises faced
the same problem. Furthermore, there was competition on the vegetable oil market. These two reasons
meant that HCB could not pay wages high enough to lure potential labourers. If HCB raised the
wages, the business would not be profitable and it would ignite an upward wage spiral in which both
Belgian Congo colonial officials and other companies were reluctant to engage. It seemed that
anybody could get rich in the colonies, except the native population.80 The selling of newly introduced
Western products to the native population was not as easy as proposed. In 1912 it turned out that the
prices of the goods were too high: ‘(…) agents at Leverville are selling goods to the natives, especially
salt and blue cotton, at prices considerably higher than those current in the district. This may be one of
the causes of the difficulties experienced regarding the supply of native labour.’81 In the recruitment of
labour, HCB constantly had to revert to the government, requiring more and more protection against
anti-labour-recruiters hostilities and to maintain order. HCB demanded police posts, and if the
government did not supply these, they would install them themselves. 82 The cooperation between the
government and the HCB became more close in the process and this is an important difference with
the Netherlands East Indies were the government chose to create a more distant attitude in the same
timeframe. Due an increasing availability of ‘free labour’ an opposite development was to be seen in
the Netherlands Indies: labour became less coercive and there was lesser governmental support in
recruitment of labour.
The native population was not considered to be in a position to represent their own interests.
The management merely spoke about the natives, instead of talking to them. Lever had an idealistic
view of the labour situation in the Congo, believing that the natives were children that had to be taught
how to work like Westerners.
Exploitation and Economic Development. The Belgian Congo and the Netherlands Indies compared. (Abingdon,
2013) 183.
78
UAPS, UAC/1/11/14/1/15, Notes on the history of HCB by Sidney Edkins, (1937), 12.
79
Ibidem, 16.
80
Fieldhouse, Unilever Overseas, 513
81
UAPS, LBC, box 53, letter from Lever to Moseley (May 14, 1912)
82
Marchal, Lord Leverhulmes Ghosts, 6-12.
35
Lever would help them from their natural state into modernity. He wrote in the dairy that he kept
during his first trip to the Congo in 1913-1914 that: ‘‘(…) we left Elizabetha about 12 noon and
stopped about 6 p.m. at a village where a native canoe ought to have been ready for us but was not and
probably never will be. The native is good at promising for “to-morrow” but to-morrow never comes.
We stopped for the night at a wooding station about 9 p.m. I must not forget to mention the 2 native
caretakers we have placed at Elizabetha have done absolutely nothing for three months but regularly
draw their wages and money for food. Mr de Keyser had set them some work to do in clearing etc. but
they had not done it. This shows that to leave natives alone they will not work but simply idle their
time away aimlessly from day to day. Direction and control are the only way to get work out of
them.’83
After the first years Lever faced problems that could not be attributed to the start-up of the
enterprise. In 1916 he complained to L.H. Moseley, the local director of HCB, that the yield of oils
milled by HCB did not meet the quality of the oil made by the West-African smallholders. Besides,
the productivity of the labours was too low compared to West-African labourers: ‘(…) six bunches per
man, per day is absolutely ludicrous!’. In the same letter he unfolded his future plans: ‘In twenty
years’ time there is no doubt that the plantations of palm trees on the river banks will be an infinitely
sounder proposition than selecting palm areas (…)’84 He was right, but it would took a longer time
before plantations could be established in the Congo. In the meantime he had to come to terms with
the current situation, while Lever had to fight off criticism constantly. It made him feel misunderstood,
he wrote disappointed to Moseley: ‘(…) I think if all the opponents to the concession, both in Belgium
and in England, knew of the difficulties to be overcome, the amount of capital to be risked and the
energy of all concerned that is required, all others would change their views equally. The word
‘concession’ conjures up in the mind of most people a “tom tiddlers” ground where the happy
concessionaire merely has to stoop and pick up sovereigns. You and I know, and all the staff of the
Huileries know, that this is not the case in Belgian Congo (…)’85
Most of the time his native employees and their working conditions were a distant factor, but
some complaints of literate natives reached him personally. During his last Congo trip (1924), he
received a letter from several labourers begging him to stay and deal with their worries. They had
complaints about insufficient food supplies, insufficient water supplies, bad housing and ‘(…) wages
too small for such a horrible place of starvation.’86 Lever replied light-heartedly that he had no time to
deal with the matters and: ‘With reference to the rate of the wages, I understand that you receive the
rate that you agreed upon.’
UAPS, LBC, box ‘B’, Mr. Levers Congo Dairy, (Friday 24, 1914), 111a.
UAPS, LBC, box 53, letter from Lever to Moseley, (June 16, 1916)
85
UAPS, LBC, box 53, letter from Lever to Moseley, (August 8, 1913)
86
UAPS, LBC, box 48, letter from six employees of S.A. des cultures office to Lever, (October 28, 1924)
83
84
36
He concludes his letter in reply to the complainants that: ‘As for Mongana [the place where the
employees worked, ECB] being a horrible place as you state, I have rarely visited in my travels in the
tropical world, any place so beautiful, so I think that you must be mistaken in calling Mongana
horrible.’87
The secondary goal of the colonial officials was to produce a predetermined quantity of
agricultural products (palm oil, rubber, cocoa, timber) that could compete on the world market. High
wages would only impede this ambition. This led to an development during the first decade of
operation into a kind of forced labour by other means. The development went in two ways: first the
taxes were adjusted to the demand for labour by Western enterprises per province and were so high
that labourers more or less had to pay their entire income to the tax collector. The second way was to
put administrative pressure on chiefs. The village chiefs had to allocate men to work for HCB for three
years and the chief would get a share of the wages (Which in practice would often be all the wages),
this led to a conscription-like system. The notable fact is that this practice was a close cooperation
between HCB and the colonial officials. This was all part of the convention of 1911 between Lever
and the Belgian government; the Belgians would supply HCB with labour and land, Lever would
develop the concessions commercially, providing the capital and entrepreneurship.88
However, the labour problems differed between the concessions. In Lusanga, the circle with
the densest palm groves and the first to be fully operable, the labour problem was the most severe. In
this region the labour shortage led to the above described practices, but also to child labour and slavelike labour. HCB tried to solve this problem by recruitment of labour from outside the region and by
offering the labourers the possibility of collecting fruit whilst staying in their own villages. This
helped only for a short period, because when the palm oil prices fell in 1931-1933 due to the
worldwide economic crisis of 1929-1932 and its aftermath, HCB was still able to pay the same day
wage as in 1911: 25 centimes, which was extremely low and offered no incentive to take up work at
HCB. In a normal functioning free market the labourers would presumably have abandoned their work
at HCB, but this was of course not what the colonial officials had in mind. Their solution was to raise
the taxes. When some of the communities could not collect enough taxes,they harked back to the days
of King Leopold II, inflicting whipping and other sorts of corporal punishment on man and woman. In
the end the colonial attitude of the Belgian Congo was at least not so different from the Congo Free
State, despite their good intensions. These taxation practices ultimately led to the so-called ‘Pende
revolt’ in 1931, in which the Pende-tribe rose up against the colonial officials and the HCB employers.
The Belgian Congolese army, the Force Public, had to restore order, again reverting to terrible
atrocities.89
87
UAPS, LBC, box 48, letter from Lever to six employees of S.A. des cultures office, (October 28, 1924)
Fieldhouse, Unilever Overseas, 514; Buelens, Congo, 468.
89
Fieldhouse, Unilever Overseas, 516.
88
37
D.K. Fieldhouse, writer of ‘Unilever Overseas’, is right when he emphasizes that due to the
agreement between the Belgian Congo and Lever the only possible outcome was a kind of slave labour
by other means. The convention of 1911 obliged HCB to produce a designated quantity of palm oil
and, conversely, obliged the colonial administration to supply enough labour. This induced the
colonial government to use a fiscal policy backed by physical force to accept work against will.
The problems with recruiting enough labour had a bad influence on the profitability of the
concessions, because they could not be fully operable. Not to mention the terrible human costs this
policy caused. 90
The financial side of the enterprise did not look very sunny in the beginnings. Despite the
enormous capital invested in HCB, profits were absent or relatively low in the first years, as figure I
shows. During the first decade a return of approximately -6,6% was yielded. The second decade
yielded a return of approximately 18,38%, but his period included the post-war economic bubble of
1921-1922, when oil prices rose sky-high. After the second decade the returns collapsed in the
slipstream of the economic crisis of the thirties.
Figure I: Total employed capital related to HCB’s profits
35000
30000
25000
£ X 1000
20000
15000
10000
5000
0
-5000
YEAR
Nett profits in £
total employed capital in £
Source: datasets from: Fieldhouse, Unilever Overseas, 510.
90
Fieldhouse, Unilever Overseas, 509-512.
38
Lever poured far more capital into HCB than was justified from a rational perspective and what was
considered as ‘normal’ in those days.91 His belief in the infinite possibilities, the potential labour
reserve and supposed natural wealth, made HCB into one of his prestige projects in which he could
entertain his idealistic views of how the world should be. When introducing a lecturer from the Congo,
Harry Grattan Guiness, to a Port Sunlight audience in 1912, Lever stated that: ‘(…) the wealth flowing
from the Congo ten years from now would surpass all present conceptions of the European nations.
Much of the food wanted by, and for which a taste had been acquired in, temperate countries, could
only be raised in tropical countries. The product of the oil-bearing palm could be made into butter far
superior to any that could be made from the milk of a cow. (…)’92 A few years later, after a visit to the
Congo, Lever saw his judgements corroborated and again very confident of the possibilities that the
Congo provided, as Jules Renkin recollected in a newspaper article: ‘When Sir William Lever returned
from his tour in the Congo he said to me: “In your colony you have a country possessing far greater
possibilities for development than Brazil, and, believe me, the Congo basin is at least as valuable as
the Amazon” (…)’93
Although Levers steadfastness to stay in the Congo seems to be a clear example of the ‘sunk
costs fallacy’, I conclusively argue that this is not entirely the case. The convention between Lever and
the Belgian Congolese government made a rational choice between pouring more money into HCB or
abandoning the Congo impossible. The terminating of the convention would cause enormous costs for
Lever and one should not forget the strong informal ties between Lever, the HCB and the colonial
government. The friendship between Lever and Belgians colonial minister Jules Renkin may serve as
an notable example. The headlock in which Lever and the colonial government held each other was
stifling and prevented the palm oil cultivation to develop into a competitive commodity. It may serve
as an mirror image of the attitude of the Dutch colonial government in the Netherlands East Indies.
2.4 Wrong judgement?: the competition with the Asian palm oil
The most important conclusion concerning the level of vertical integration of Levers enterprise
in the Congo is that he wanted the whole production process of palm oil in his control, to gain a
maximum of rationalisation. From the palm cutting by labourers to the milling of the oil, he wanted to
set the conditions under which the enterprise would progress. The gaining of a maximum of control is
a pivotal quality of Levers management style, as we have earlier concluded. In Nigeria, under the
given situation, he could only come as far as the milling of palm oil under very restricted conditions,
the smallholders and the trading companies were a too powerful force to simply bypass. Investing in
those British colonies would only put Lever straitjacket that did not suit a man like him.
91
Fieldhouse, Unilever Overseas, 509.
NN, ‘The Congo, Present and Future. Dr. Harry Guiness’s lecture’, Progress, vol.12 (febr. 1912), 57-59.
93
NN, ‘Mr. Jules Renkin in the City’, The African World, (februari, 12, 1916), 17.
92
39
In the Belgian Congo however, with a virtually non-existent palm oil industry, there were no
smallholders that were connected to existing trading routes to take into account. The Belgian Congo
thus provided Lever the broadest possibility to control and establish the production of palm oil in the
way Lever wanted it. This was certainly true in the days that he was erecting his oil mills in his
Belgian Congolese concessions, but only a few years later a serious new competitor showed up: the
Cultuurgebied ter Oostkust van Sumatra [Sumatra East Coast Cultivation Region] and British Malaya
were evolving into a serious competitor for the West African palm oil countries. It would turn out that
this Asian palm oil would be a constant hindrance and spoiled Levers hopes for high profits, if any
profits at all. We will have to delve into the specific Asian conditions under which the palm oil could
flourish to clarify this phenomenon. At the same time this will also sketch some of the contours that
will apply on Jurgens subsidiaries that will be discussed later.
The establishment of big oil palm plantations began in 1911 by the earlier mentioned Belgian
entrepreneur, Adrien Hallet with his company the ‘Soengei Lipoet Cultuurmaatschappij’ [Soengei
Lipoet Cultivation Company]94. It was this very man who had left the Belgian Congo for the reasons
that would be a burden for Lever: labour. Adrien Hallet became confident in the investment
opportunities on Sumatra during a road trip in June 1911, coincidently the same year as Lever signed
his treaty with the Belgians. Hallet recalled:
‘Tous les groupes de palmiers de Sumatra donnaient des fruits abondants et riches, mais c'est
particulièrement à Tandjoeng Morawa Kiri, où une panne d'automobile l'avait immobilisé dans
une allée de palmiers, qu’il fut amené à former sa conviction que le palmier produisait à
Sumatra des fruits plus riches que ceux d'Afrique; que ces fruits étaient plus abondants et
qu'en même temps les produits du palmier étaient exploitables à partir de la cinquième
annèe.’95
In 1912 Société des Huileries de Sumatra (another Hallet-owned enterprise) began cultivating oil
palms and more plantation companies followed. The first substantial exports are also dating from
1919, and after a wavering start from the 1920’s, the palm oil production boomed. 96
94
This plantation company would be succeeded by Société Financière des Caoutchoucs also owned by Adrien
Hallet and his so-called Hallet-Group. This company is still active in rubber and palm oil production under the
name SocFin to this day.
95
Cited in: Hunger De Oliepalm 268.
96
Rowaan Palmolie, 6; Segers Changing economy in Indonesia 126; Kiple & Coneè Ornelas ‘the Cambridge
History of Food’, lemma ‘palm oil’; Ir. J. F. Schmöle, Algemeen Proefstation der A.V.R.O.S. Selectie in het Deli
Type van den Oliepalm (Medan, 1933) 3; Hunger De Oliepalm 9-10, 206-218, 266.
40
In the early thirties Levers successor, Francis D’Arcy Cooper, became more and more aware of the
Sumatran thread. He wrote to the managing director of the HCB in Leopoldville, Elso Dusseljé :
‘(…) I think it is essential for you, in considering your basis of final cost, to keep well in mind
the strong and growing hold which Sumatra oil is obtaining on the world’s markets. I see from
some figures prepared here, that shipments of oil from Sumatra and Malay are definitely on
the increase, as is shown by the following figures which I think will interest you:[enclosed is a table that shows that exports from Sumatra tripled and Malaya quadrupled]. (…)
On the position as set above, there would not appear to be any reason to anticipate higher
prices for Palm Oil, (…) The present C.I.F. New York price of Sumatra oil is about gold
£12.2.6d per ton, whilst from the latest information available here, I see that the average cost
of Congo oil, delivered in New York, for the month of august was gold £14.2.2d and a
comparison of these two figures clearly indicates the necessity for every attention to be paid to
the question of Congo costs although, having regard to the present low market value of the oil,
there would appear to be considerable difficulty in reducing the costs to anything like a
remunerative level. There is a question of transport services between the areas and the coast
which will, perhaps, give scope for reorganization and consequent improvement in costs
(…)’97
But there were earlier warning signs that Lever could have observed.
In July 1921 the trade magazine, ‘Mededeelingen’ [‘Reports’] of the ‘Handelsvereeniging te
Medan’, an entrepreneurial society on Sumatra, gave its readers information for the first time about the
upcoming palm oil industry. This first article is about a major concern in regard to the future of the
palm oil cultivation on Sumatra: the level of free fatty acids. The planters on Sumatra were faced with
a choice: either to produce palm oil with a high level of free fatty acids – al lower quality that would
only suit the soapworks in Marseille and Liverpool and would probably not be profitable- or to opt for
low levels of free fatty acids –a higher quality of oil- and enter the more profitable and upcoming food
market. According to the Handelsvereeniging the choice was easy: planters should develop a
production cycle that guaranteed a low content of free fatty acids, otherwise competition with WestAfrican palm oil would be very fierce. In the course of the twenties planters managed to produce this
high quality palm oil due to their rational approach and the will to invest in capital-intensive
production facilities. At long last this would be an important advantage in comparison with the WestAfrican palm oil.98
UAP, UAC/2/36/7/1/2 Elso Dussejé papers, Letter from D’Arcy Cooper to Dusseljé, 22/12/1932
Kiple & Coneè Ornelas ‘the Cambridge History of Food’, lemma ‘palm oil’; Dr. Ir. N.H. van Harpen Algemeen
Proefstation der A.V.R.O.S. Vetzuurgehalte bij Bulkverscheping van Palmolie (Medan, 1935) 3;’De rentabiliteit
van oliepalmenondernemingen’, Mededeelingen van de “Handelsvereeniging te Medan”, 15 juli 1921, no. 14,
2-3.
97
98
41
However, the upcoming oil market in Asia was not a fact that was only observed by the in-crowd on
the island of Sumatra, foreigners also observed the booming palm oil cultivation in Asia, the American
consul in Medan writing:
‘The production of palm oil is one of the newest, most rapidly developing, and most promising
of the various plantation industries of Sumatra. In fact, this country is likely to become, before
long, one of the leading, if not the leading, sources of the world’s supply of palm oil and
especially of the highest grade of oil suitable for edible purposes’99
But even in the British trade the press was pessimistic about the chances that West African oil
has in comparison with the Asian. If Lever had read the ‘Oils and Fat Record’, he could have noticed
that as early as1921 some thoughts on the developing oil palm cultivation in Asia were shared. Under
the header ‘The Wonderful Dutch Colonies’ the proceeding in this colony were hailed. ‘Hence, if they
seriously set themselves to palm cultivation, as they seem determined to do, we shall not only have to
recognize them as strong rivals, but may have to yield first place to them in the palm oil trade.
Certainly in labour resources we cannot hope to compete, both in number and in quality the Far
Eastern labour markets have unassailable advantages over tropical Africa (…)’100
99
Sydney B. Redecker & Frank Messenger Palm-oil Industry of Sumatra and West-Africa (Washington, 1927) 1.
NN, ‘The Wonderful Dutch Colonies’, The Oil and Fats Record and Tropical Messenger. Vol III, nr. 7
(December 1921)
100
42
Figure II: palm oil production: NEI, BC, HCB, compared.
140000
120000
PALM OIL IN METRIC TON
100000
80000
60000
40000
20000
0
YEAR
Belgian Congo
Netherlands East Indies
Huileries du Congo Belge
Source: datasets from: NEI: : Segers Changing economy in Indonesia 133-134, BC: Ministerie van Koloniën –
Koloniaal Bureau De Olie-Palmboom. 11, HCB: Fieldhouse, Unilever Overseas, 508.
Figure II shows that despite the fact that palm oil production in the Belgian Congo showed
considerable growth, the Netherlands East Indies was able to catch up very quickly. HCB could only
show a moderate growth rate, while the NEI demonstrates an almost exponential growth from 1925
on. This ‘palm oil divergence’ was indeed predicted by the ‘Oils and Fats Record: ‘(…) it will not be
by reliance on forest growth and primitive native methods of extraction, but by plantations cultivated
under up-to-date methods and extraction by the latest mechanical and chemical devices.’101 Ultimately,
it turned out that plantations could generate advantages of scale, that smallholder or concession
cultivation lacked. But Lever was tied by the convention, had sunk a capital in the HCB and thus had
to make it a success, despite all costs.
The reality was that the Netherlands East Indies colonial government had an attitude that
served the demands of the introduction of a new cash crop like the oil palm much better. The most
important feature of this attitude that it created incentives to innovate, to invest and to compete.
101
NN, ‘Helping Our Rivals’, Oils and Fats Record and Tropical Messenger, vol. III, no. 12 (May 1922) 219.
43
CHAPTER III: JURGENS’ VEREENIGDE FABRIEKEN IN THE NETHERLANDS EAST INDIES
In this chapter, we will turn our attention to Anton Jurgens' enterprise in the Netherlands East Indies,
comparing where relevant, different aspects of this enterprise with that of Lever in the Congo.
As a general consideration, it may be noted that in terms of vertical integration, Jurgens' coconut and
copra oil enterprise in the Netherlands East Indies was far less ambitious than Lever’s palm oil
enterprise in the Congo. Jurgens' urge to integrate vertically arose from one important contingent
factor, namely the First World War and the trade restrictions it caused. In the process, Jurgens' first
step was to get control over the trading companies that maintained the copra trade between Rotterdam
and the Netherlands East Indies. Later, he acquired several milling facilities in the Indies. The
production of copra was largely (>95%) under the control of local smallholders and the collection and
transport of copra to the mills was under the control of small, predominantly Chinese, brokers.102
Jurgens never entertained the idea of establishing coconut palm plantations. The establishment
of mills was enough of a risk, and Jurgens' competitors shared this opinion! However, before Jurgens
stepped in to the copra trade and milling, he considered other ways of investment in both Africa and
the Netherlands East Indies.
3.1. Prelude, some early attempts
As seems to be the fate of the Dutch predecessor companies of Unilever, historical writing is patchy
and incomplete. Whereas HCB has been extensively investigated by several historians, the
proceedings of the Dutch in the Netherlands East Indies are far less familiar to us, precisely due to this
lack in research. I will attempt to bridge the existing gap in the history of Jurgens' Vereenigde
Fabrieken in the Netherlands East Indies, because I agree with Fieldhouse that the attempts by Anton
Jurgens to take a leading role in the vegetable oils commodity markets and to invest in the initial
processing of vegetable oil must ‘(…) be seen as the Dutch companies’ equivalent Lever’s more
successful attempts at vertical integration (…) before 1925’103
Anton Jurgens was far more hesitant than Lever in integrating vertically in Western colonies,
although he observed the latter's attempts in West Africa very closely. As a margarine producer, the
former's urge to integrate vertically was less strongly felt than by a soap maker. However, raw material
shortfalls in the First World War, made him speed up his initiatives. In the prelude to this war, Jurgens
virtually followed the same path as Lever had done some years earlier: trying to get a foothold in
Africa. First, he tried Cameroon and oil palms. Cameroon was then a German colony, and there he
established the subsidiary ‘Syndicat für Ölpalmenkultur GmbH’ (SOK). In 1910, SOK started to
cultivate oil palms, but because of the French takeover of the colony in the war, production stagnated
and ultimately ceased. Jurgens turned to Nigeria, where he acquired a trading firm in oil products.
102
103
Snodgrass, Copra and Coconut Oil, 47.
Fieldhouse, Unilever Overseas, 269.
44
This enterprise lasted longer, but suffered hindrance because of anti-German sentiments during the
war. Though Jurgens' Vereenigde Fabrieken was a Dutch company, some of its subsidiaries were
German, and this made that his operations were closely watched by the French and British
authorities.104
In 1913, Jurgens and another Unilever predecessor company, Van den Bergh, jointly created
‘British Sierra Leone Palm-Oil Estates Ltd.’ (BSLPOE). Both Jurgens and Van den Bergh had
participated in a pool-agreement since 1908, in which the profits were shared, thus cooperation
between both companies in aggregating raw materials was often close. The intention with BSLPOE
was to establish and exploit two or three oil palm plantations. However, BSLPOE did not evolve
beyond the phase of prospecting, as the information that reached Jurgens was not conducive to giving
him confidence in the enterprise. The oil content of the palm fruit was considered too low, as was the
quality of the nuts themselves. The climate in Sierra Leone was, in Jurgens’ view, extremely
unhealthy.105 Besides this, there were problems with the Colonial officials in Sierra Leone, just like the
ones Lever had faced before and which have been extensively treated in the previous chapter. The
BSLPOE plans interfered with another - similar - venture of his in Sierra Leone, the establishment of
‘The Copra and Palm Oil Co. Ltd.’ on 10th June 1913. This attempt also failed due to unpredictable
governmental behaviour that made the economic forecast highly unstable, and on 20th August 1914
the enterprise, having lasted little more than a year, was liquidated106
Some time later, when the war had started and intensified the need to source affordable raw
materials, the same plans were entertained in the Dutch/Netherlands East Indies, because a more
friendly attitude was expected here. The first initiative was the examination of a proposal with
estimates made by the ‘Rubber Maatschappij Sumatra’ (RMS) [Sumatra Rubber Company] for
establishment of oil palm plantations in the South of Sumatra.107 This proposal and the attached
estimate is extensive and provides us with an insight into which factors were decisive in the
assessment of this enterprise. RMS suggested a cooperation with the prospect of an independent and
efficient palm oil industry for Jurgens. Mr. Kasteleijn of the RMS promised that: ‘(…) indien u de
cultuur in eigen hand neemt, de grondstof voor uw tegenwoordig bedrijf belangrijk goedkooper
worden.’ ["if you were to cultivate yourself, the raw materials for your current business would become
a great deal cheaper"] and offered Jurgens a trip to Sumatra to: ‘(…) de meest geschikte gronden uit te
zoeken.’ ["select the most appropriate land"] Had Lever only waited a few years.108
Van de Ven, Anton Jurgens Hzn., 195-196; UAR, 1092-11-24, NN, ‘The Dutch East Indies, Nigeria, WestAfrica. The Nigeria debate, South America Z.G.C. & Z.A.O.F. (undated)
105
UAR, 1070, letter from Jurgens to Messrs Van den Bergh, Ltd, (October 16, 1913)
106
UAR, 1070, notes by an unknown archivist (July 1966)
107
UAR, 0628, introduction to this file by an unknown archivist.
108
UAR, 0628, letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to Anton Jurgens’ Fabrieken,
(november 24th, 1915)
104
45
The RMS made estimates for plantations of 1000, 10000, 20000, 30000 hectares, assessing
recruitment of labour, the building of infrastructure, salaries, taxes and an assessment of the expected
profits. Figure III displays an estimate for a 1000 hectare plantation and that would yield from its fifth
year, because then the seedlings bear fruit. The initial costs were high because of the purchase of land,
the clearing of the forests, the planting of the seedlings and the building of real estate. Profits were to
expected from the seventh year. Railroads would be supplied by the colonial government and the
plantation would be relatively close to the coast, thus transportation costs would be low, compared to
Levers concessions in the Belgian Congo.
Figure III: financial assessment for a 1000 ha. palm oil plantation in South Sumatra
400000
300000
200000
100000
GUILDERS
0
1
2
3
4
5
6
7
8
9
10
11
12
13
-100000
-200000
-300000
YEARS
yields
profits
costs and investments
Source: data obtained from: attachment [bijlage B] to letter from mr. Kasteleijn, Rubber Maatschappij Sumatra
to Anton Jurgens’ Fabrieken, (november 24th, 1915), 12.
In contrast with the Belgian Congo, the Netherlands East Indies could provide a labour supply which
was ‘proletarianized’ and thus familiar with Western labour discipline. These labourers were referred
to as koelies [coolies] and were to an elementary degree protected by law. The RMS initially suggested
contracting 500 koelies from Java, preferably families, because these labourers were ‘better’ and their
wives and children would be helpful in weeding and cleaning up the plantation. Jurgens had to
consider some costs that were mandatory from the Netherlands Indies government, such as a rice fee,
payment of salaries on 24 free days and 6 religious and other holidays.
46
The provision of healthcare was another duty of the employer but also ‘(…) zeer in het belang van de
werkgever.’ [very much in the interest of the employer] 109
Despite this, the proposal calculated that costs for salaries would decrease because of: ‘(…) sterfte
onder de koelies, desertie en andere oorzaken die het aantal menschen doet afnemen’. [deaths amongst
the coolies, desertion and other causes that diminish the number of people] The koelies had some
rights, but apparently not enough to prevent them from desertion on a regular basis.110
This assessment reveals that the factor endowments in the Netherlands East Indies were much
more ‘specialized’ than in the Belgian Congo. The RMS could estimate the labour productivity, knew
de prices of seedlings, could predict the yields and could even estimate long-term profits. This
contrasts as night and day with the assessments made in the Congo Reports for Lever. As already
stated, by investing in the Congo nothing was really sure.
However, the financial outlook provided by RMS did not ultimately convince Jurgens to
invest in this project, Jurgens thought that his capital would be non-productive for too long, that it
would take too much time before he could pick the fruits of his investment and solve his materials
supply problems. The RMS tried to convince Jurgens by pointing at the expected end of the war, and
the similarities with rubber, coffee and cocoa concerning the initial costs. It did not help; Jurgens
sought other ways to invest his capital. He chose for a solution that would directly lead to cheaper
materials and profits. Jurgens was eager to take his share in the short-term profits of the Netherlands
East Indian copra (oil) boom. Ultimately, the long-term investments in a palm oil plantation turned out
to be a much better investment. But that is an easy hindsight consideration from the historians
armchair.
111
3.2 Assessing the subject of investment
In the course of the war Jurgens became progressively confident that the Netherlands East Indies could
provide one of the only few solutions for his problems in sourcing enough raw materials. Germany,
with its influential oil processing industry (about 80-90% of the imported copra was processed here),
was cut off from the world market, due to the British blockade. Before the war the vegetable oil
industry had flourished in Germany due to industrialization, a growing margarine industry (in which
Jurgens had a large share), high import duties for vegetable oils (but not for the raw materials) and a
demand for the by-products of oil processing (cattle cakes). British and Dutch margarine producers
were thus highly dependent on the German oil-processors. After the war had started, all the oil
containing materials were transported to Britain, instead of Germany.
109
UAR, 0628, attachment [bijlage B] to letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to Anton
Jurgens’ Fabrieken, (november 24th, 1915), 12.
110
UAR, 0628, attachment [bijlage B] to letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to Anton
Jurgens’ Fabrieken, (november 24th, 1915), 17.
111
UAR, 0628, letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to F. Jurgens (March 9, 1917); letter
from F. Jurgens to mr. Kasteleijn, Rubber Maatschappij Sumatra (March 12, 1917); letter from mr. Kasteleijn,
Rubber Maatschappij Sumatra to F. Jurgens (March 14, 1917)
47
Initially this led to falling prices and abundant stocks, and in the process, ideal circumstances for the
Dutch margarine manufacturers.
By the middle of 1916 the stocks were severely depleted and competition on the oil markets
from the soap and munitions industries became more apparent. Jurgens , like other margarine
factories, adopted a strategy that anticipated the buying and stocking of raw materials in the countries
of production, ‘for better times’. Margarine manufacturers expected a great increase in demand for
margarine after the war ended. Another -more ‘British’- problem caused by the war was the
appropriation of virtually all the palm oil from Nigeria by the British government, effectuated by high
import duties for palm oil. For the margarine producer it became harder and harder to source enough
oil.112
The Netherlands East Indies was one of the world’s largest producers of copra by that time,
and Jurgens expected a warmer welcome than he received in the British colonies. Due to governmental
measures by the ‘Bureau voor de Coprah-handel’ [Copra Trade Office], preventing resale to German
companies, the trading of copra was restricted to the trading companies that existed prior to 1914. The
import of copra oil to the Netherlands was forbidden on 8th September 1915. This made the trading
companies virtually monopolist. Jurgens thought that he was being squeezed by these middlemen. He
reacted by firstly securing better prices and creating stocks of copra in the Netherlands East Indies. He
made a secret arrangement in September 1916 with the ‘Hermans, Marsman & Co.’ trading house.
They would purchase, store and ship quantities of copra on behalf of Jurgens for a 1% commission. In
the directors meeting of 5th February 1917, it was decided that more of such agreements should be
made in the near future so that Jurgens had: ‘(…) own buying agents in all districts and that our
arrangements with them were somewhat on the same lines as those which we have with Messrs.
Herman Marsmann [sic] & Co.’113
‘Manders, Seemann & Co’s Handel-Maatschappij’ (MSC) was one of the other trading
companies that agreed to cooperate with Jurgens, also for a 1% commission. MSC obliged itself to do
business under the patronage of Jurgens; no copra could be traded by them without Jurgens'
permission. Cable messages with regular updates about the local market conditions on the islands were
eagerly awaited. 114
Wilson, Geschiedenis van Unilever II, 176; UAR, 1092-11-24, NN, ‘The Dutch East Indies, Nigeria, WestAfrica. The Nigeria debate, South America Z.G.C. & Z.A.O.F. (undated); Mr. Dr. R.N.J. Kamerling RA, De
N.V. Oliefabrieken Insulinde in Nederlands-Indië. Bedrijfsvoering in het onbekende, (Franeker, 1982), 37.
113
UAR, 0491A, ‘notulen vergadering van directeuren 5-2-1917 & 28-4-1917, 7 april 1922 – 19 november 1924,
exemplaren mr. Randag’, directors meeting monday February 5th 1917.
114
UAR, 1092-11-24, NN, ‘The Dutch East Indies, Nigeria, West-Africa. The Nigeria debate, South America
Z.G.C. & Z.A.O.F. (undated); UAR, 1155, agreement between Jurgens and Manders Seemann & Co’s
Handelsmaatschappij considering trade of copra, (june 7 th, 1917)
112
48
But after the first step in the integration process, the next step was an easy one given the extraordinary
circumstances. Jurgens decided not only to invest in the trade and storing of copra, but also to invest in
the processing of oil when it turned out that this business was to become highly profitable. Since the
German crushing and milling industry had been paralysed, competition was to be expected from other
Western entrepreneurs that deployed their businesses in Netherlands East Indies. Influenced by the
unstable international (war) economy, this became the heyday of copra oil in the Netherlands East
Indies. Because the export prices of copra oil rose quickly and copra itself became much cheaper in
Netherlands East Indies than in Europe due to deteriorating shipment conditions, milling in the
Netherlands East Indies became highly profitable. Oil mills sprang up like mushrooms in Netherlands
East Indies. The ‘United Java Oil Mills’ and ‘NV Oliefabrieken “Insulinde”’ threatened Jurgens
position in Netherlands East Indies by inflating the prices, and Jurgens felt the urge to act and to
extend his interests in the milling industry. He engaged a local banker, ‘De Nederlandsch-Indische
Escompto Maatschappij’ to gain local financial support and information. This bank was more or less a
securities house, used by investors in the Netherlands East Indies.115
If he did not take this step, he would be dependent on those oil millers with their high margins.
On the other hand, ‘Insulinde’ was very much aware of Jurgens' signs of interest in oil milling and
they decided to negotiate with him; they feared Jurgens’ supposed ‘(…) ongelimiteerde credieten
[unlimited credit].’116 After Jurgens' first attempts to buy oil mills in June 1917, negotiations started in
July. ‘Insulinde’ proposed that Jurgens either buy all the ‘Insulinde’s shares or the majority of
‘Insulinde’s’ production, or a division of their spheres of influence. These negotiations failed, as did
later ones in September and November 1917. “Insulinde’ became confident, stating: ‘(…) een
dergelijke tegenstander ons de handen vol zal geven, maar geen onzer is bevreesd voor de te
verwachten ‘competition’’ [an opponent of this ilk will be hard work, but none of us fears the expected
'competition']. 117
A race for the existing oil mills was the result, and the ‘NV Oliefabrieken Insulinde’ came to
be Jurgens all-time antagonist. Jurgens and ‘Insulinde’ goaded each other, and in the process, they
paid irresponsibly high prices for some of the mills, which in comparison with European mills were
rather primitive. Erecting new oil mills was more difficult, because the required machinery had to be
imported, which was problematic during war conditions.118
How different this competitive struggle for oil mills was from the monopolies that were
granted in the Belgian Congo. The word ‘government’ is not mentioned in Jurgens’ correspondence.
Were Lever was tied to his convention with the Belgian government, the Dutch colonial government
did not interfere with competition amongst Western capitalists in this case.
115
De Nederlandsch-Indische Escompto Maatschappij, Van Beleggen en Speculeeren, (Weltevreden, 1930), 148.
Kamerling, De N.V. Oliefabrieken Insulinde, 67-68.
117
Ibidem, 69.
118
Ibidem, 47.
116
49
These different attitudes turned out to be crucial for the success of plantation agriculture but also in
this attempt to industrialize.
Jurgens’ first attempt to buy an oil mill failed in June 1917 because ‘Insulinde’ was faster, and
so bought the Chinese oil mill ‘Sie Kok Tjaw’ in Toeloeng Agoeng. But in September 1917, Jurgens
succeeded and purchased the ‘NV Eerste Makassaarsche Oliefabriek’ (EMO) [First Macassar Oil
Factory Ltd] in Macassar for fl.750,000, from MSC, although the agreement involved MSC
cooperating with Jurgens in its running. EMO was an oil mill that had been founded in 1913 by
MSC.119
A few weeks later, on 16th October, Jurgens extended his operations by buying the ‘NV
Oliefabriek “Jacatra”’ [Oil Factory "Jacatra" Ltd] in Batavia for fl.420,000 with an authorized share
capital of fl.1,000,000 of which 50% was issued. On 3rd December 1918, a plant in Padang was
established Jurgens, the ‘NV Nederlandsch Indische Oliefabrieken’, with an authorized share capital
of fl.2,000,000 . Jurgens was not unaware of the enormous profits that MSC’s balance showed, and in
1919 he decided to intensify his presence in the NEI by taking a share in this company, with which he
had already done business since 1917. In correspondence he revealed that he thought that the purchase
would give him the broadest possible base for his interests in the Netherlands East Indies. Mr. B.
Streefland predicted in his report ‘Plantaardige Olie-industrie in Nederlandsch Indië. Mededeelingen
van de Commissie van Fabrieksnijverheid in Nederlandsch-Indië’120, that even after the war, the oil
milling would be profitable because of the quality of the copra, the cheap labour, the elimination of
middlemen and the lower transport costs for oil and cattle cakes. Streefland, who was a representative
of ‘Insulinde’ in the Indies, was not insensitive to the changes incurred by the end of the war. The
increase of tonnage by shipping companies could be addressed by buying own tankers and tariffs,
would never be a problem because of the above-mentioned benefits in favour of the Indies. Jurgens
was equally optimistic, he did not foresee any problems. So, by 1920, Jurgens had a large share in
MSC, owned three oil mills in the Netherlands East Indies, and in the process had become an
important player in the field of coconut oil milling. The amount of capital that he had invested
amounted approximately fl.10,000,000. 121
Jurgens and ‘Insulinde’ were not the only ones who turned out to be over-optimistic about the
post-war Netherlands Indian economy. Even the director of the colonial department of economic
affairs, E.P. Wellerstein, admitted that the Netherlands Indian economy after the war was in a zoeten
waan [sweet illusion]. The high demand for export products, and the incoming capital caused
businesses and the government to lose their common sense.
UAR, 1155, agreement between Jurgens and Manders Seemann & Co’s Handelsmaatschappij considering
purchase of NV Eerste Makassaarsche Oliefabriek, (june 7 th, 1917); Fieldhouse, Unilever Overseas, 269;
Kamerling, De N.V. Oliefabrieken Insulinde in Nederlands-Indië, 45.
120
B. Streefland, Olie-Industrie in Nederlandsch-Indië (Batavia, 1918), 12.
121
UAR, 1092-11-24, NN, ‘The Dutch East Indies, Nigeria, West-Africa. The Nigeria debate, South America
Z.G.C. & Z.A.O.F. (undated); H.W. Wamsteker, 60 years Unilever in Indonesia, 1933-1998 (Jakarta, 1993), 16.
119
50
The subsequent market crisis, initiated by saturation of the world market and production overcapacity,
came as a total surprise for both the businesses and the government.122
3.3 The only five years
Jurgens’ investments in the Netherlands East Indies turned out to be a grand mistake. The only
year that Jurgens made a profit worth mentioning was 1919, when MSC could show a profit of
fl.1,283,000. The war induced an economic climate in which the copra and coconut oil trade could
flourish and the post-war scramble for oils in ‘hungry’ Europe caused a hausse in the economy as a
whole and for the vegetable oil industry in particular. 1919 was the year that the post-war euphoria
came to a climax. But when the German oil millers took up their pre-war positions, enforced import
restrictions for vegetable oils, and shipping prices fell dramatically, the Netherlands East Indies oil
milling industry hit hard times. The considerable oil exports to the United States of America, which
replaced the oil exports to Europe in part during the war, dwindled because of import tariffs benefiting
Philippine coconut oil.
Table IV: copra oil export to the USA related to other countries
Year
DEI Exports
Imports USA
Imports other countries
Liters
Liters
% of total
Liters
% of total
1914
2.819.111
11.500
0,41
2.807.611
99,59
1915
8.098.085
445.268
0,55
7.652.817
99,45
1916
13.114.837
3.939.092
30,04
9.175.745
69,96
1917
30.665.226
24.630.576
80,30
6.034.650
19,70
1918
28.527.779
16.508.626
56,87
12.019.153
43,13
Source: Hunger, Een waarschuwing voor de hedendaagsche klappernootcultuur, 29.
European customers of the Netherlands Indies coconut oil now had the possibility to buy oil
mills themselves in Germany, and the production of coconut oil in the Indies was no longer tenable.
Margarine producers and soap makers were not dependant on coconut oil and could source other
vegetable oils which could replace it. The demand from the munitions industry, that had needed
coconut oil because of its high content of glycerine, fell away: the Netherlands East Indies oil milling
industry collapsed like a house of cards. A the beginning of 1920s, the European demand returned to
the pre-war level, and the future was highly uncertain.123
Francien van Anrooij, ‘Crisis en financieel beleid in Nederlansch-Indië (1920-1925), in: Francien van Anrooij
et al (eds), Between People and Statistics. Essays on Modern Indonesian History. (Den Haag, 1979), 121.
123
Kamerling, De N.V. Oliefabrieken Insulinde in Nederlands-Indië, 48-49.
122
51
Figure IV: NEI copra oil exports and prices
9000
8000
7000
6000
5000
KG'S / FL.
4000
3000
2000
1000
0
1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925
YEAR
export coconut oil in 10000 kg's
export value x fl.10000
price in fl. per 1000 kg
Source: based on datasets from: Kamerling, NV Oliefabrieken Insulinde, 350-352.
In figure IV the extraordinary growth and decline of the oil milling is to be noted. It reveals the impact
of the post-war economic boom, though the term ‘post-war confusion’ probably applies better. A
closer look to this figure reveals a close relation with the contingent factors created by the war: 19111914: an ‘normal’ market, 1914-1918: steady growth due changing transport conditions and
decreasing milling capacity in Europe, 1919-1920: post-war hausse, caused by inflation and scarcity
with as result a rising demand in Europe, 1920-1922: post-war baisse, caused by increasing
protectionism, and decreasing demand, 1922-1925: normalisation and sustainable growth.
Seeking options to contain the worsening market for oils, Jurgens decided in April 1920 to
negotiate a merger between his oil mills and the ‘United Java Oil Mills’ (UJOM) on initiative of the
latter. Concentrating production and transportation would probably create a solution for the worsening
forecasts on the oils markets. A combination of Jurgens’ mills and the UJOM mills would create a
counterpart for the ‘Insulinde’ mills in production: both had a capacity of 550 tons of oil. During the
negotiations the UJOM representative, Mr. Sandrock, pointed out that the UJOM were a better partner
for merger than ‘Insulinde’, because their mills were situated near to the coast which was better in the
light of transportation and brokage costs. Besides this, Sandrock was convinced that the oil industry in
the Indies would only have a chance for survival when larger contracts with bulk consumers were
obtained.124
UAR, 0635-A, ‘United Java Oil Mills Ltd. I; Mr Anton’s papers, ‘Resume van de voorloopige besprekingen
met den heer Sandrock inzake de United Java Oil Mills Ltd. Gehouden d.d. 3 april 1920 te Nijmegen’
124
52
The new company would have an authorized share capital of fl.30,000,000, exactly the same as that of
‘Insulinde’. UJOM would be the holding company controlled by Jurgens. Jurgens was not convinced
instantly, inspections of the UJOM mills revealed that many of the buildings were in a poor state and
that maintenance costs were expected to be on the high side. The annual report of UJOM in 1920
stated that only mills that lived up to the high standard of European production had a chance to survive
the current crisis. Their own mills apparently did not meet these standards, and this is what they
frankly admitted. UJOM believed that a merger or a ‘belangengemeenschap’ [mutual interests
agreement] with Jurgens was the only way to survive. However, the merger stranded because Jurgens
was not convinced by UJOM’s data, but Jurgens acquired a part of UJOM’s share capital in the
process.125
The ‘Insulinde’ mills were also running into trouble as a consequence of the ‘oil’ crisis, and
they also sought contact with Jurgens and the other competitors. Mr. Damme, of ‘Insulinde’, proposed
a community of interests in his letter of August 1920, addressed to all substantial oil millers in the
Netherlands East Indies. 126 This initial attempt to cooperate was a partial success, this led to the
establishment of the ‘oliesyndicaat’ [Oil Union] who’s aim was to promote the interest of the oil
millers in the Netherlands East Indies and to set up an experimental station, but Jurgens did not join.127
However, apparently under worsening conditions in October 1921, Jurgens made a final attempt to
revive his loss-making business and cooperate with the other millers, including ‘Insulinde’, in a
buyers' cooperative. Jurgens consulted William Lever, who disapproved of the first proposal,
considering it too small-scale, and suggesting a larger group, incorporating other margarine producers
such as Van den Bergh and Maypole. Finally, negotiations were initiated between Lever, Jurgens, the
‘Nederlandsch-Indische Handelsbank’ (the prime investor in ‘Insulinde’) and ‘Insulinde’. The aim was
to take over all of ‘Insulindes’ oil mills. The partners almost reached an agreement, but finally Lever
pulled out, he considered the enterprise as too risky. It is clear that the Lever's withdrawal meant the
end of the Netherlands East Indian oil milling industry.128
For Jurgens it became obvious that the way in which he invested his capital in the Netherlands
East Indies, was a poor one. The resurrected German oil millers became a powerful alternative for the
Netherlands East Indian millers and he decided to withdraw all of his investments in the latter. No
sunk costs fallacy here for Anton Jurgens, but also no (governmental) obligations that held him in the
Netherlands East Indies. The ease in which Jurgens could pull back contrasts the interrelation that
Lever kept in the Congo. In1922 the liquidation of all Jurgens subsidiaries was consummated.
125
UAR, 0635-A, Letter from Th.C. Sandrock to M.H.T. Bury, director of the Amsterdam Office of Jurgens,
June 1920; UAR, 0635-A, undated note from Jurgens assessing the merger; UAR, 0635-A, Letter from H. Jansen
Hutteman to management of the buying department of Jurgens, August 13 th, 1920; UAR, 0635-A, Annual report
of United Java Oil Mills Ltd., 1920.
126
UAR, 0635-A, letter from NV Jurgens administratiekantoor Soerabaia to NV Jurgens inkoopbureau,
Amsterdam, which attached a letter from mr. Damme of NV Oliefabrieken Insulinde.
127
NN, ‘Een Oliesyndicaat opgericht’, Bataviaasch Nieuwsblad (August 27, 1920)
128
Kamerling, De N.V. Oliefabrieken Insulinde in Nederlands-Indië, 243.
53
The shares of MSC, owned by Jurgens were sold for 30% of their original value to the ‘NederlandschIndische Escompto Maatschappij’. The ‘Nederlandsch-Indische Escompto Maatschappij’ finally
liquidated MSC by the end of 1931. The personnel of the EMO was made redundant in May 1922.129
The crisis had an enormous impact on the investments made in the Netherlands Indies. Dr. A.
Sternheim, a contemporary economist, made an estimate of the losses made there. He estimated that of
the capital invested between 1915 and 1920, i.e. fl.337,000,000, about fl.305,000,000 was to be
amortized. He concluded that: ‘(…)onberekenbaar is de energieverspilling die met deze débâcle
gepaard is gegaan’. ["...the energy that has been wasted on this débâcle is uncalculable"]130
An extensive assessment of the rise and fall of ‘Insulinde’ has been made by R. Kamerling in
his PhD thesis ‘De N.V. Oliefabrieken Insulinde in Nederlands Indië’. Kamerling points out several
internal causes (concerning internal managerial factors) and external causes (concerning contingent
causes) contributing to the fall of ‘Insulinde’. Although not all of these factors leading to the fall of
‘Insulinde’ can be attributed to Jurgens' subsidiaries, most of them do. The most prominent of the
external factors is, of course, the extraordinary economic climate inflicted by the First World War. A
range of conditions are to be contributed to the war: the scarcity of the oil and a temporary high
demand for coconut oil for the munitions industry (glycerine), the scarcity of shipment tonnage
inducing low copra prices in the Netherlands East Indies, the elimination of the German oil millers and
all kinds of export restrictions. The end of the War preluded (after a short hausse, after the war) a
chronic decrease of the demand, because of the ‘normalisation’ of the vegetable oil market. The short
depression of 1921, that curtailed the post-war euphoria is another contingent factor that served as a
lever to make an end to the oil milling in the Indies. Finally, also in 1921, the United States
government imposed the Emergency Tariff Bill, which favoured the Philippines and made exports to
the American markets unprofitable.
Some of the internal causes leading to the fall of Jurgens’ Netherlands East Indian empire are
also related to the war, for instance the bad communications. Mail and telegraph communications were
often in abeyance or restricted, leaving Jurgens to react or purchase on the basis of fragments of
information, something he felt he had to do sometimes, feeling great pressure from ‘Insulinde’. The
sometimes unjustified high and reckless investments are to be clarified by this, but also by the
unjustified high expectations of the post-war oil markets. Both Jurgens and ‘Insulinde’ seemed to be
infected with boundless optimism. The war conditions also prevented Jurgens from modernizing the
mills to the specifications and profitability that were common in Europe: machinery had to be
imported and shipped to the Netherlands East Indies.131
UAR, 0491A, ‘Notulen vergadering van directeuren, exemplaren mr. Randag’, April 6/7 1922, 12/13 July
1922 & 14/15 September 1922; Fieldhouse, Unilever Overseas, 269; NN, ‘Manders, Seemann & Co.’,
Soerabaijasch Handelsblad (December 30, 1931); NN, ‘Eerste Makassaarsche Oliefabrieken’, Bataviaasch
Nieuwsblad (April 27, 1922)
130
NN, ‘Groote kapitaalverliezen na den Oorlog’, Nieuwsblad van Friesland, (May 2, 1924)
131
Kamerling, De N.V. Oliefabrieken Insulinde in Nederlands-Indië, 251-254.
129
54
A contemporary assessment of the opportunities for oil milling after the war was made by the
management of EMO. The management pointed out that: the purchase of machinery, implements, etc.
was considerably higher than in Holland. Besides this, the high costs of purchase led to depreciation of
the capital and this could not be compensated by the profits (these were virtually absent). In addition,
the management was convinced that European factories, rather than their counterparts in the Indies,
could better distribute their overhead charges over crushing, refining and churning.132
To conclude/in conclusion, one can state that Jurgens' adventure in the Netherlands East Indies
failed due to an ill-informed and over-optimistic assessment of the prospects of the industry. Besides
this, Jurgens had a wrong feeling of urgency, generated by other over-optimistic competitors. This led
to an overcapitalized and neglected company structure that could never survive the post-war
‘normalisation’, not to mention the 1921 depression.
3.4 A new margarine ingredient: palm oil
During the twenties there was another notable development that would make milling copra oil in the
Netherlands East Indies less profitable: the rise of the palm oil production in Asia. This upcoming
cultivation has already treated in depth in relation to Lever's investments in the Congo, but it also had
effects on Jurgens' margarine production and his raw materials sourcing. Although palm oil had been
used in margarine since the discovery of the hardening process, it was used cautiously. But in the
course of the twenties, palm oil started to increasingly replace copra oil and other fats, partly due to
improved refining techniques, but also to the lower content of free fatty acids that the Sumatran
planters could provide. The red colour of the oil and the strong flavour initially restricted the use of
palm oil in margarine, but improvements in its refinement made the oil white and virtually tasteless,
with only a slight nutty aroma.133
The prices of the copra, copra oil and palm oil are shown in figure V and they illustrate a
slight, but increasingly diverging pattern in the course of the 1920s. Palm oil not only became cheaper
than copra oil, but the NEI could also supply more and more, whilst copra oil stagnated in terms of
export. The rational style in which palm oil was cultivated made it more cost-efficient than the copra
production that still depended on smallholders. Copra showed an upward trend similar to palm oil, but
the growth greatly fluctuated, as is shown in figure VI. Just like the First World War, the Second
World War also induced a sharp decline in the copra demand because of the loss of transport
connections to the dominating German oil industry. L’Histoire se répète.
UAR, 1092-11-24, NN, ‘The Dutch East Indies, Nigeria, West-Africa. The Nigeria debate, South America
Z.G.C. & Z.A.O.F. (undated)
133
James T. Grimstone, ‘Margarine and its future. The part palm oil will play in the trade. Vegetable oils and
their place in the manufacture of higher grades’, Margarine. A monthly magazine devoted to the interest in the
manufacture and sale of margarine, vol. II, nr. 12 (may 1921), 107.
132
55
Figure V: prices of copra, copra oil and palm oil in guilders 1911-1925
120
100
GUILDERS
80
60
40
20
0
YEAR
copra
copra oil
palm oil
Source: based on datasets from: Kamerling, NV Oliefabrieken Insulinde, 350-351, 346-347; consecutive
volumes of: Sauerbeck, ‘Wholesale prices, 1910-1950’ in: Journal of the Royal Statistical Society
Figure VI: NEI copra, copra oil and palm oil exports 1911-1940
600000000
500000000
400000000
300000000
200000000
100000000
0
palm oil export
copra oil export
copra exports
Source:based on datasets from: Segers, Changing Economy in Indonesia, 133-134; Kamerling, NV
Oliefabrieken Insulinde, 350-351, 346-347.
56
It was this innovation, but also the diverging prices of copra oil and palm oil that made palm oil to a
more attractive ingredient for margarine. The increase of the Asian palm oil plantation made palm oil
of a superior quality to a serious competitor for copra oil. The need to integrate vertically disappeared
not only because of the post war ‘normalisation’, but also due to the rise of Asian palm oil.
57
CHAPTER IV: COLONIAL CONTEXTS AND FACTOR ENDOWMENTS
‘(…) the business methods of the Dutch in running their tropical colonies provide so many
enviable contrast with our own bureaucratic system.’134
This very quote perfectly illustrates the displeasure that British entrepreneurs felt in their own colonial
empire. Apparently, the British colonies lost their attraction in favour of the Dutch. But what were
those ‘enviable contrasts’ exactly and how did they relate to that other African colony, the Belgian
Congo?
In the previous chapter, we assessed and evaluated the investments of Jurgens and Lever
through the eye of the entrepreneur. As the sources show, neither Jurgens nor Lever explicitly or
extensively debated the working of the institutions in both colonies, but the assessment of the
traditional factor endowments (land and labour)did imply their involvement. Sources show a certain
awareness of how colonial powers differed and how entrepreneurs should deal with that. A
characteristic example is provided by the ‘Handelsvereeniging te Medan’. In 1925 this association
compared the outlook for palm oil culture in both the Netherlands East Indies as in West Africa: ‘De
concurrentie-voorwaarden nu van de Indische ondernemingen tegenover West-Afrika hangen af van
de productie-voorwaarden en dus van de bekende economische factoren: natuur, arbeid en kapitaal.’
This outlook concluded that the Indian factor endowments were more advantageous because of a
better climate and more labour. Besides this the Netherlands East Indies could produce a better quality
of palm oil, that suited the food industry.135
As I have argued, factor endowments cannot entirely account for the different development
paths in both the Netherlands East Indies and the Belgian Congo. Michael Porter argues that
competitive advantages results from ‘(…) the presence of world-class institutions that first create
specialized factors and then continually work to upgrade them’.136 Thus, colonial governments were
decisive in how these factor endowments shaped successful businesses.
In this chapter, I will put the attempts to establish overseas subsidiaries by Lever and Jurgens
in the perspective of colonial contexts and how they influenced the competitive advantage of these
colonies. I will take the classical factor endowments that Lever and Jurgens considered as their main
determinants in assessing possible investments as the angle from which to analyse the institutions'
influence.
NN, ‘The Netherlands East Indies again’, Oils and Fats Record and Tropical Messenger, vol. III, no 9,
(Februari 1922) 163.
135
NN, ‘De vooruitzichten der palmolie-cultuur’, Medeelingen van “De Handelsvereeniging te Medan”’ (15
dec. 1925) nr 23. 1.
136
Porter, On Competition, 188.
134
58
‘Le Congo Belge est incontestablement une des plus belles colonies du monde tropical; c’est
la plus belle de l’Afrique central. Bien exploitée, elle se rangera un jour immédiatement apres
l'Afrique du sud, parce qu'elle reunit dans son ample territoire tous les climats tropiceaux,
toutes les possibilités agricoles et minières, même la possibilité d'une colonisation blanche, le
summum de la richesse d'une colonie’137
In the earlier quoted brochure ‘L’Agriculture au Congo Belge’, Baron F. Fallon tried to convince
European entrepreneurs to invest in the Belgian Congo during the First World War, in 1917. But this
glorifying brochure was, of course, not enough to convince Western entrepreneurs instantly.
Entrepreneurs assessed the economic viability by obtaining information about what they thought was
relevant, as we have seen in Lever's and Jurgens' cases. The full picture, including the institutional
performance, is only to be constructed in hindsight and the conclusions drawn were not available to
the entrepreneurs. They only had small fragments of an enormous puzzle.
4.1. labour
At the time that Lever made his investments in the Congo, a pivotal transition in Congolese
economic history took place. Lever's investments were significant in this transition, in the sense that
they symbolized the fulfilling of it. This transition started in 1908, when the Belgian government took
over the governance of the former, privately held, Congo Free State, and ended at the end of the Great
War (1918). The primary attitude of the Belgian colonizers in the Congo Free State proved to have a
lasting effect on the institutional make-up of the Belgian Congo, so it will be necessary to give a brief
overview of some economic features of this predecessor state.
The Congo Free State (1885-1908) was owned by king Leopold II, the king of the Belgians,
and is to be seen as a highly extractive and totalitarian plunder economy. Leopold was convinced that
the exploitation of his colony by means of forced labour would ultimately ‘civilize’ the indigenous
population. Leopold ‘taxed’ the native population, and the tax had to be paid in kind. This led to the
demand for higher and higher quantities of raw materials. The forced collection of this ‘tax’,
consisting of raw materials such as copal, rubber and ivory, generated high profits for Leopold, but
only for a short period because of the rapid exhaustion of the rain forests and labour force. Especially
the collection of rubber would be one of the most infamous examples of colonial exploitation by
Western countries. The demand of rubber rose quickly in the last decade of the nineteenth century due
to the invention of the rubber tyre by John Dunlop in 1888 and the upcoming automobile industry. The
expression ‘red rubber’ was coined by E.D. Morel, referring to the atrocities committed by the rubber
traders to the native population that was forced to collect increasing quantities of rubber. 138
Le Baron F. Fallon, L’Agriculture au Congo Belge, (London, ca. 1917)
Frans Buelens, Congo 1885-1960. Een Financieel-Economische Geschiedenis. (Berchem, 2007), 76-85;
97;136.
137
138
59
The result of this economy of plunder and forced labour was the total collapse of the local economy, a
highly disrupted native society and above all a huge decline of the indigenous population. In the worst
affected areas where Leopold’s infamous trading companies Abir and Anversoise exercised their
regime of terror, up to 60% of the native population died. Contemporary entrepreneurs and politicians
saw that this economic model would not serve Belgium’s long-term economic interests, and pressure
from foreign countries to dispossess Leopold from his African property grew day by day. Especially
Great Britain and the United Stated of America put great pressure on the Belgian government to
accelerate the expropriation of Leopold, who was seen as a tyrant in the Anglo-Saxon public opinion.
On 20th August 1908, the Belgian Congo came into existence, with the passing by the Belgian
parliament of the acquisition agreement. From then on, Belgium was a colonial power and everything
would be different; at least the intentions would be. As it later turned out, the practices of the Congo
Free State were difficult to forget.139
As we have seen in chapter 3, Lever entertained similar thoughts like Leopold II on the natives
abilities to work. Although in Leopold’s view the natives could be forced in labour and Lever thought
that they had to be disciplined into labour, the starting point was virtually the same: the Congolese
were degenerate people who should be learned, in one way or another, to work. It is this grotesque
miscalculation that causes misunderstanding and suffering to this very day. 140 These thoughts were
not exclusively reserved to Lever and Leopold, but also British colonial government that was widely
known for its more ‘humane’ attitude entertained such racist views: ‘(…) No real progress will be
made in the development of the resources of this colony until a more energetic race than that which
now inhabits it is at work here.’ stated the governor of the Gold Coast, William Maxwell.141
This ‘labour question’ was not only a recurring challenge for the Belgian Congo government,
the British West African colonies were also puzzled by how they could motivate/make the most of the
apparently vast sources of labour. Although the colonial administration could not openly admit it,
slavery still was a characteristic of the native economy, and the British administration was not capable
of providing an instant solution to this ‘problem’. Colonial officials feared that abolishing this custom
would harm British interests and, fearing the anti-slavery societies at home, that the best way to deal
with the phenomenon was to condone and conceal. But the British labour problems were not as acute
as in the Congo, thanks to the existence of the fast growing coastal cities of Lagos (Nigeria) and
Freetown (Sierra Leone), that increasingly supplied the railway companies and the British colonial
armies.
139
Buelens, Congo, 85-91.
For a contemporary example: Hans Bouma, Congo Business Case, television documentary by the Dutch
public television NPO (aired: 9 December 2013)
141
Quotation from: Philps, Enigma of Colonialism, 38.
140
60
From 1880 to 1897 the Congo Free State also subtracted labour from these cities, but when the British
colonial officials discovered that the labourers hired for the Congo Railway, were pressed into
military service for the Force Public, the recruitment for labour outside the British colonies was
forbidden. 142
The developments in the Congo had created a social climate in which not enough labour could
be mobilized for the for Western-style agriculture Lever envisioned. The conviction that native people
could be ‘taught’ to work through taxation is an institutional feature that the ‘new’ Belgian Congo
inherited from the Congo Free State. The supposed existence of a basically sufficient labour force in
the Belgian Congo and the administrative force to impose taxes led to a ‘race to the bottom’ in terms
of labour, as we have seen in the assessment of Lever's proceedings in the Congo.
In comparison, in the 1870s, the lack of both sufficient labour and a supportive and efficient
colonial administration that could help ‘proletarianize’ the native people of Sumatra in the Netherlands
East Indies, drove the tobacco planter Nienhuis to import labour from China, thereby laying the
foundation of the coolie-system, that would subsequently be supported and regulated by the colonial
government. The coolie-system is a fundamental feature of the success of the plantation belt in NorthEast Sumatra. The question is, why did the West African colonial officials, both the British and the
Belgians not consider this option? On the account of the British, the answer is that they indeed
considered the use of indentured labour, imported from their Asian colonies. Anne Philips, who has
researched the employment of labour in British West Africa, arrives at four explanatory reasons: first,
the transport costs were considered too high since there were no regular transport links between the
Asian and the African colonies; second, the African climate would be as harsh for Asians as it was for
Europeans; third, the Indian colonial officials were becoming more reluctant to accept labour
emigration on a large scale and finally, there was a fear of racial tensions should the number of
indentured labours rise too high.143
In my opinion, these reasons may also be applied to the Belgian Congo, but another
disadvantage Belgium had, was that the Belgian Congo was its only colony. The Belgians could not
revert to a big, urbanized Asian colony full of landless people seeking a better existence overseas,
while Great Britain could. However, on the contrary, the Dutch colony of Surinam did engage a
substantial number of (British Indians) and Javanese in indentured labour, despite the long journey
overseas that also applies to the African colonies. The different outcome may lie in the lack of a large
native population in Surinam that might cause racial tensions, the pre-existence of a plantation
structure, a source of labour in the Dutch sphere of influence (the Netherlands East Indies) to which
the Surinam planters could revert when the Indian colonial government restricted indentured labour
overseas at the start of the twentieth century. 144
142
Philips, Enigma of Colonialism, 29-30.
Ibidem, 39.
144
Leo Dalhuisen, Maurits Hassankhan, Frans Steegh, Geschiedenis van Suriname, (Zutphen, 2007) 102-116.
143
61
In the Netherlands East Indies, the developments were at a very different stage. In the Belgian Congo,
large parts of the native people had no ties with the global economy nor with Western modes of
production, whereas in the Netherlands East Indies this had already been the case since the early
seventeenth century, and there had been even earlier connections with intra-Asian commerce. The
economic policy between 1900 and 1920 was influenced by the ethische politiek [ethical policy] that
shifted the attention of the colonial government from a pure economic focus, to a focus in which the
development of the population was central. In an economic sense, since 1870 the attitude was more
‘liberal’: the cultuurstelsel, [cultivation system], a forced cultivation system, was abandoned and the
influx of private capital was made possible. The government took a step back in favour of private
initiatives.
Sourcing of enough labour was no real problem in the first decades of the twentieth century, at
least, not as it was on the scale in which this occurred in the Congo. Plantation agriculture on
Sumatra’s east coasts had sped up a process of proletarianization. When the first entrepreneur who saw
something of an economic prospect on the East coast of Sumatra, Jacob Nienhuis, wanted to establish
a tobacco plantation145 in the sultanate of Deli in 1863, he faced the same problems engaging people
into wage labour as in the Belgian Congo during the 1910s. But there were two differences: East
Sumatra was a relatively short distance away from large labour reservoirs in China, India and Java,
and there was hardly any government support in place, due to the pioneer state in which the Dutch
colonial presence on Sumatra was in those days. To engage the native people in his business, Nienhuis
firstly tried to supply the local Malays with credit, so they would cultivate tobacco for him on their
own fields. This system failed because he simply could not control the widely dispersed fields and the
Malays often did not live up to their obligations, and, contrary to the Belgian Congo, Nienhuis could
not rely on a policing government that could enforce the Malays to do so. When Nienhuis tried to
cultivate the tobacco himself, he first tried to engage the local Bataks into wage labour, but they were,
just like the subsistence farmers in the Belgian Congo, not enthusiastic about this concept that would
drive them from their traditional way of live. The solution for Nienhuis’ problem would ultimately be
the deployment of Chinese labourers who were called koelies [coolies]. These labourers were paid
according to the quality and quantity of the tobacco produced.146
The immigrant workers who would contribute massively to the economic success of the
plantation belt in Sumatra, were recruited in the South of China and on the island of Java, the densely
populated centre of the Netherlands East Indies. Penang in Malaya, and Singapore were the main ports
of transit for the Chinese immigrant workers. In the first instance, the labourers were recruited by
brokers, but these brokers could not supply the plantations with sufficient numbers of labourers.
An Immigrant Bureau was established in 1888, recruiting and administering the labourers, and taking
care of their allocation among the various (tobacco) plantations.
145
146
This would later be the well-known ‘Deli-Maatschappij’, which still operates today.
Kian-wie, Plantation Agriculture, 4-6; Breman, Koelies, planters en koloniale politiek, 14.
62
This bureau would also service the transfer of the workers' savings to their families in China, since in
South China this served as a strong incentive to work on Sumatra. The quantity and quality of the
immigrant workers rose steadily due to this approach. Basically, these workers were indentured
workers, who would return to China after serving several years on a plantation.147
Tobacco was the first cash crop to be cultivated in East Sumatra, and its cultivation began in
the 1860s, but the first two decades of the twentieth century saw the growing importance of the rubber
and tea cultivation, demanding more new sources of labour. This, and the difficulties in recruiting
Chinese labourers during the First World War, shifted the recruitment activity to the island of Java.
Javanese labourers turned out to be equally reliable workers as the Chinese. The geographical centre
for recruiting labour thus shifted from China to Javaas figure VII shows.148
Figure VII: number of immigrant workers by ethnicity in East Sumatra
250000
LABOURERS
200000
150000
100000
50000
0
1883
1893
1898
1906
1913
1920
1930
YEAR
Chinese
Javanese
Indians
Source: based on datasets from: Kian Wie, Plantation Agriculture, 39
The koelieordonnantie [coolie ordinance] of 1880 provided a judicial framework that protected the
rights and obligations of these labourers. From a modern point of view, this koelieordonnatie favoured
the employers' benefits the most. Especially the poenale sanctie [penal sanction] was an infamous
instrument to force indentured workers to live upto their obligations. There was also much
contemporary criticism of the treatment of the coolies on some plantations.
147
148
Kian-wie, Plantation Agriculture 39.
Ibidem, 38-39.
63
LABOURER PRO HECTARE
Figure VIII: Indentured labour pro hectare in the Sumatra plantation belt
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
YEAR
indentitured laborerer pro hectare
Source:NN, ‘Arbeiders en beplante cultures’, Mededeelingen van “De Handelsvereeniging te Medan”, (15-11930) nr. 1, 3.
A pamphlet ‘De Millioenen van Deli’ written by the lawyer J. van den Brand in 1902 who
argued against the exploitation of Sumatra labourers, aroused so much resentment amongst the Dutch
public opinion, that the colonial government reacted with an investigation and the establishment of the
Arbeidsinspectie [labour inspection] in 1907. This inspection would control the labour conditions on
the plantations of Sumatra. In the 1930s, criticism from the United States and a new tariff law that
forbade goods produced by forced labour, forced the planters to forgo anything which resembled this
kind of labour. The conviction that free labour ultimately was the best way to safeguard workers'
loyalty, took over the belief in coercive measures like the poenale sanctie.149
As Jurgens' negotiations with the ‘Rubber Maatschappij Sumatra’ have shown us, labour was
not considered to be a problem. Neither recruitment nor labour conditions were seen as problematic.
Labour was seen as a factor that could be influenced to a large degree by the entrepreneurs, provided
that the government restrictions on coolie labour were respected. The proletarianization of labour in
the Netherlands East Indies provided entrepreneurs with a highly predictable workforce in terms of
productivity, sortie and economic costs. In terms of productivity, the plantations made efforts as well:
the labour-acreage ratio decreased during the twenties, as table VII shows. The existence of the cooliesystem in the Netherlands East Indies was a clear advantage that the Congo lacked. At the time that
Lever made his investment in the Congo, palm oil cultivation in the Netherlands Indies was virtually
non-existent. Lever was far too enthusiastic about the preparedness to be ‘civilized by labour’ amongst
the native people of the Congo. His over-optimistic views made him invest large sums of money that
hardly paid off.
Kian-wie, Plantation Agriculture , 34-38; 40-41; Thee Kian Wie, ‘Colonial extraction in the Indonesian
archipelago. A long historical view’, in: Colonial Exploitation and Economic Development. The Belgian Congo
and the Netherlands Indies Compared (Abingdon, 2013), 50-51.
149
64
A few years later, the conditions for producing palm oil in the Netherlands East Indies were far better
than in the Congo, but Lever could not have known this; it is the comfortable conclusion of the
historian sitting in his armchair. For Jurgens, labour was no problem worth mentioning, his
investments did not rely on labour as much as Lever's did, but the labour that he needed was easily
supplied, even the recruitment of the (white) management did not pose any problems, whereas Sidney
Edkins described the Belgian Congo in the 1910s as ‘(…) a sort of Botany Bay where no Belgian went
unless he had something to be ashamed of.150 Even in Jurgens' unimplemented plans for a palm oil
plantation on Sumatra, the recruitment of Javanese labour is not considered as a problem, because of
the well-maintained coolie-system.
4.2 Land
The economy of the Belgian Congo inherited at least one aspect of the Congo Free State: the granting
of huge land concessions of assumed terra nullius to privately owned companies. These private
companies were often granted the rights of taxation and the establishment of a police force, thus
creating states within a state. The purpose of these generous arrangements was to attract the influx of
private capital into the Congo. The Belgian Congolese government refined these arrangements,
however, and added some important obligations into the contracts with private companies that would
benefit both the Belgian economy and the local population, such as the establishment of hospitals and
schools. The Belgians seemed to have learned their lessons from the Leopoldian era, obliging the
owner of the concessions to take the rights of the local population into account and posing investment
requirements, not only for the companies' sake, but also for the benefit of the colonial administration
and the colony itself.151
HCB was offered five large concessions on the presumption that the forests in these regions
would contain dense oil palm groves. The picture turned out to be slightly different than was
supposed, because in some areas there were hardly any oil palms. This miscalculation had to do with a
lack of reliable information, making Lever's investments more or less a leap in the dark. The five
concessions were also chosen because of the proximity to navigable rivers. This would make transport
to Leopoldville by boat and from there to the sea by train, easier. But because of the underdeveloped
transport and communication network in the concessions, HCB had to maintain a private railroad
network and a fleet of river steamers and barges, and, if one compares Lever's starting point with, for
instance, Nigeria, this placed higher pressure on production costs and caused competition
disadvantages.152
150
UAPS, UAC/1/11/14/1/15, Notes on the history of HCB by Sidney Edkins, (1937), 3.
Ibidem, 468-469.
152
Fieldhouse Unilever Overseas, 500-503.
151
65
The Belgian Congo is landlocked, except for a small strip of land which connects the enormous Congo
landmass to the Atlantic Ocean. The Congo River flows out in the ocean, but a cataract near the
estuary prevents ships from sailing the first 350 kilometres inland.
The first major foreign investment in the Belgian Congo was, logically, in the building of a railway
between Matadi and Stanley-pool, in order to surpass these cataracts. This railway was completed in
1898. The Congo River provided the colony with a good navigable river, which suited bulk transport
by steamboats. But further inland, transport links were poor and companies had to provide their own
transport facilities. Thus, the colonial administration had to facilitate enterprises to a very high degree
in terms of their wishes in establishing enterprises, were it to attract enough investments to develop the
colony in a Western way. A strong quid pro quo doctrine was the result, and governments and
Western companies held each other in a strong grip. On the one hand, this created an atmosphere in
which entrepreneurs could influence the colonial policies in their favour, and on the other hand also
closely cooperated with the government in terms of the exercise of force, such as the power of the
Force Publique and the tax system. In their concessions, big companies had the right to maintain
private railways, communication networks and police forces. In concessions like the ones of HCB, the
companies had a monopoly in selling goods to the native people. From one point of view this
economic context provided Western entrepreneurs with unprecedented possibilities to establish
plantations, mines and factories in the mode they preferred, and to have a very cooperative
government which would not really object to anything. This would make it very attractive to invest in
the Belgian Congo, but on the other hand, there were the obligations to develop infrastructure from
scratch and a framework of ‘good practices’ and prior knowledge was lacking. The entrepreneurs were
given carte blanche, but an uncertain one.153
In the Netherlands East Indies, entrepreneurs purchased or leased the plantation grounds under
very profitable conditions from local monarchs that were incorporated in the Dutch colonial hierarchy.
These monarchs were not aware of the economic value of their grounds and offered them virtually for
free. The entrepreneurs were at a great advantage having more information and access to capital and
markets than the monarchs, making the negotiations between the parties uneven.154
A catalyst for the expansion of Western plantation enterprises was the introduction of the
Agrarische Wet (Agrarian Law) of 1870, that on one, hand recognized the private ownership of
cultivated ground by the indigenous people, but also granted the government the right to rent lands not
in use by the indigenous people to entrepreneurs, allowing them to rent and develop them for periods
of up to 75 years. This, and the unrestricted access for other (European) businessmen, caused a rush
for land on Sumatra’s East Coast.155
153
Buelens, Congo, 101, 230-232.
Van Zanden & Marks, An Economic History of Indonesia. 83.
155
Ibidem, 73.
154
66
One of the foremost differences between the Belgian Congo and the Netherlands Indies is the virtually
unlimited access of businesses to the Indies and the very selective way in which the Belgian Congo
handled new businesses. This caused more competition in the Netherlands Indies, but also less
governmental support, inducing lively competition amongst companies.
As described before, the oil palm did not occur naturally in South-East Asia. It had to be introduced.
The mentioning of the mode of introduction of the oil palm is of importance, as will turn out later.The
oil palm was first introduced into South-East Asia in 1848, when four seedlings, two originating from
the botanical gardens in Réunion and two from the Hortus Botanicus in Amsterdam, were planted in
the ‘s Lands Plantentuin [National botanical garden and research institute for crop improvement] at
Buitenzorg, Java. During the second half of the nineteenth century, there were several attempts made
by the Netherlands East Indian government to commercialize oil palm cultivation, for example by
integrating the oil palm into the Cultuurstelsel during the 1850s and an attempt to introduce test
cultures in Palembang on Sumatra and at seven dessa’s in the Banjoemas residentie on Java during the
1860s. The idea of all these attempts was to enthuse the local people for the small-scale cultivation of
the oil palm.
Despite all these failed attempts, it took until 1910 that the cultivation of oil palms was taken
up successfully in the Netherlands East Indies, to be more precise, Sumatra. It was Karl Schadt who
planted 2000 oil palms on his concession Tanah Itam Oeloe, located in the subdepartment BatoeBahra. Schadt cultivated the oil palm on a small scale to produce soap for the local market.156
The fact that an institution like the ‘s Lands Plantentuin existed, is characteristic for the
development of tropical agriculture in the Netherlands East Indies. The Dutch did not take the ‘natural
situation’ for granted, but established this research institute that helped entrepreneurs to refine
cultivation techniques and provided them with better crops. It was widely acknowledged that the
Dutch East Indies had the finest botanical garden in the tropics. In 1904 the ‘‘s Lands Plantentuin’ was
incorporated in the newly established Department of Agriculture of the Netherlands East Indies. This
department did not only support Western entrepreneurs, but as a result of population growth and the
ethische politiek also started developing the native agriculture.
The role that the ‘s Lands Plantentuin had in introducing and improving the oil-bearing crops
did not pass unnoticed in the trade press: ‘The botanical gardens at Buitenzorg, in Java, are known to
the savants of all countries, who are freely admitted and assisted in their studies of tropical plant
life.’157 A remarkable aspect of the oil palms to be planted in the Netherlands East Indies was that the
variety that was commonly used there, the so-called ‘Deli type’ or Elaeis Guineensis var. Dura, was
directly bred from the original four oil palms in ‘s Lands Plantentuin. It were the oil palms that Adrien
Hallet saw during his breakdown in Sumatra, that stimulated him to start oil palm cultivation.
Hille Toxopeus, ‘Landbouwkundig onderzoek. Het Algemeen Proefstation voor de Landbouw APL en de
resultaten in de praktijk.’, NEHA jaarboek 1999, 62 (1999), 186-210.
157
NN, ‘The International Tropical Products Exhibition’, Oils and Fats Record and Tropical Messenger, 3
(August 1921), 42.
156
67
According to contemporary literature, the plantations in the Netherlands East Indies and the 24,000
hectares in (British) Malaya were third or fourth generation descendants of the oil palms in ‘s Lands
Plantentuin.
The ‘Deli type’ thus provided a crop that was highly consistent and therefore predictable in its yields
and composition. The fruits were bigger and contained more palm oil, than the variety that grew in the
Belgian Congo. The research station of the A.V.R.O.S., originally a research institute for rubber
cultivation, provided important improvements in the 1920s and 1930s by performing several selection
experiments to raise the yields of the Deli-type oil palm.158
Another important feature of the palm oil extracted from the Deli-type oil palm, was the
comparative low level of free fatty acids, contrary to the oil palms in the Belgian Congo.
The level of these fatty acids is an important quality standard, because the lower their level, the more
suitable the palm oil is for bulk transport overseas and the broader is its applicability, making the oil
suitable as a food ingredient. An important standard during the 1930s was the maximum of 5 percent
free fatty acids; a higher level would limit its applicability, especially for food production, and thus
lowered the value.159
The Belgian Congo lacked a sophisticated structure of research stations and botanical gardens
and HCB copied the traditional mode of cultivating palm oil from Nigeria (harvesting natural palm
groves). Later, when it turned out that plantation-style cultivation accelerated palm oil production in
the Netherlands East Indies, HCB also started establishing plantations. Only well in the twenties did
the Belgians consider creating a botanical garden, seemingly inspired by the Dutch. But it took Lever
end the colonial government decades to adapt to the changing conditions. In the first two decades of
HCB, the belief was still strong that production could be stirred up by ‘motivating’ the native people
to work for them for low wages. Improving modes of cultivating the oil palm were not considered, in
the first place because the Belgian Congo lacked a sophisticated agricultural research structure and
second, because HCB was convinced that the natural palm groves would be as efficient as plantationstyle cultivation. The quality of the Congolese palm groves was mediocre, compared to the Deli type,
used on Sumatra.160
158
Schmöle, Algemeen Proefstation der A.V.R.O.S. 3; Ir. J. F. Schmöle, Algemeen Proefstation der A.V.R.O.S.
Selectie in het Deli Type van den Oliepalm deel II (Medan, 1934); Ir. J. F. Schmöle, Algemeen Proefstation der
A.V.R.O.S. Selectie in het Deli Type van den Oliepalm deel III (Medan, 1935); Hunger De Oliepalm 326-330.
159
Schmöle, Algemeen Proefstation (…) deel II, 12; Harpen, Dr. Ir. N.H. van, Algemeen Proefstation der
A.V.R.O.S. Vetzuurgehalte bij Bulkverscheping van Palmolie (Medan, 1935), 14.
160
Fieldhouse, Unilever Overseas, 517; Noot Oils and Fats
68
The European industry was well aware of this ‘divergence’ in quality and quantity. Not only in the
level of the free fatty acids, but also in absolute yields. Already in 1922 a table in a brochure
promoting palm oil processing machinery showed the remarkable differences in yields between
Sumatran and West African palm oil. 100 kilogrammes of palm fruit provided 31 kilogrammes of
palm oil in Sumatra, and between the 15 and 20 kilogrammes in West Africa.161
4.3 Capital
The traditional Congolese economy was a local barter trade with virtually no connections with the
global economy. All capital and the entrepreneurship thus had to come from outside. As described
earlier in this thesis, the Belgian Congo was desperately seeking investors to develop the colony. But
the way in which they did this was highly selective, similar to the practice in the Congo Free State.
Belgium wished to safeguard the national character of the colony and was wary of foreign capital and
discouraged foreign investments. The Belgians wanted to show their criticasters that they were apt in
their role as colonizers, and this shaped their colonial doctrine that saw the Congo as a purely Belgian
enterprise, both in an ideological and cultural sense as in economic development. Lever’s enterprise
must be seen as an exception to the rule. The Belgians made these exceptions in times of decreasing
investments by Belgian entrepreneurs. Lever was thus personally asked to invest in the Belgian
Congo, and was offered a monopoly position riveted in a rigid convention that secured a minimum
output in palm oil, but also secured Belgian economic interests in the sense that HCB was a Belgian
registered company. The case of Lever is thus illustrative for the way the colonial government
attracted capital: he brought in the capital and the entrepreneurship by the establishment of HCB. The
colonial government stipulated that the capital should also be invested in infrastructure. This was an
important feature in the granting of concessions to entrepreneurs. During the whole era of the Belgian
colonization of the Congo, Belgium was anxious about foreign investments and up until 1955 they
maintained a measure to prevent foreign investments exceeding forty-nine percent of the total
investments.162
This attitude shows a high level of protectionism and close business-government relationships,
totally contrary to the developments in the Netherlands East Indies, where the government stepped
back. It was totally contrary to the Netherlands East Indian attitude that accepted unlimited foreign
investments and did not limit the number of foreign entrepreneurs. Virtually everybody was welcome
to invest. Initially there was a completely laissez faire attitude.
The period between 1870 and 1914 is to be considered as the liberal phase in the Netherlands
East Indian economic history, in which the importance of the colonial state in directing the economy
declined in a rapid manner.
161
Oberrheinische Industrie-gesellschaft Joseph Vögele & Co, Het rationeele winnen van de palmolie en de
palmpitten. (Mannheim, 1922), 2.
162
Fieldhouse Unilever Overseas 497; Buelens, Congo, 73.Guy Vanthemsche, Belgium and the Congo. 18851980 (New-York, 2012), 47, 166.
69
After the decline of the Cultuurstelsel in the 1840s and 1850s the main source of capital and
entrepreneurship was to come from the private sector. From the 1860s on, these were mainly Dutch
entrepreneurs, but when in 1874 the restrictions on international trade were abolished, the importance
of exportation to countries other than the Netherlands grew considerably. In 1874 60% of the exports
went to the Netherlands, in 1914 only 30 %.163
The economic growth and investment opportunities were supported by a network of financial
institutions, like the Nederlandsch-Indische Handelsbank that helped to satisfy the demand for trade
financing. The Nederlandsche Handelsmaatschappij, an institution that monopolized the trade in the
Netherlands East Indies during the cultuurstelsel, invested large capitals in new crops to sustain their
dominant role in the Netherlands East Indian economy. 164This liberal attitude was noticed by the
British press, and in relation to the establishment of railways they applauded the Dutch colonial
government, that left the construction of railways to private investors (this was not exactly true,
however). They looked forward to the prospect ‘(…) what might not be done with our tropical El
Dorados if similar encouragement were given to private capital.’165
With the establishment of plantations, large sums of capital were required. This capital was
thus available, but sufficient information about the quality of the land, the socio-economic and cultural
conditions, lacked among many entrepreneurs. Families in the Netherlands Indies with good contacts
and access to local information were especially successful, but these were only a few of the pioneering
entrepreneurs. Investment risks were often distributed amongst several merchant houses that supplied
the plantation entrepreneurs with sufficient long-term capital, with the harvest as a security. This
system bore certain risks, because of its vulnerability due to periods of a declining market or poor
harvests. The providers of credit had little possibilities to attain much influence on the conducts of
these entrepreneurs. New modes of investment were developed. Merchant houses and banks created
limited companies, cultuurmaatschappijen [plantation companies], that owned the plantations and
acquired long-term finance for them on the Dutch capital market. Directors of the merchant houses
and banks took seats on the board of these cultuurmaatschappijen, to safeguard their interests. In this
way investing in plantation crops was much less risky.166
163
Van Zanden & Marks, An Economic History of Indonesia, 79.
Ibidem, 80.
165
NN, ‘The Netherlands East Indies again’, Oils and Fats Record and Tropical Messenger, 9 (februari 1922),
163.
166
Van Zanden & Marks, An Economic History of Indonesia, 80-83.
164
70
In the course of the 1880s and 1890s, the rise of these cultuurmaatschappijen created a dense network
of banks (cultuurbanken), steamship lines and entrepreneurial organisations, such as the ‘Deli Planters
Vereeniging’, ‘Algemene Vereeniging voor Rubberplanters ter Oostkust van Sumatra’ (A.V.R.O.S.)
and the ‘Algemeen Syndicaat van Suikerfabrikanten in Nederlandsch-Indië’
[Deli Planters' Organisation, General Organisation of Rubber Planters on the East Coast of Sumatra,
General Union of Sugar Producers in the Netherlands Indies], but also trade-associations like the
‘Medanse Handelsvereeniging’ [Medan Trade Society].
These organisations and associations founded/published journals providing economic data and
forecasts, but also invested in experimental stations, for example the proefstation of the AVROS.
This proefstation did extensive research into the oil palm and could provide the planters community
with valuable information on modes of cultivation and the selection of the ideal type of the oil
palm..167
However, the stagnation of the Netherlands East Indian economy caused by the First World
War revealed the limited development of its economy, with its heavy reliance on the export of
agricultural products. Virtually all Western industrial products had to be imported, because the
Netherlands Indies were hardly industrialized. A governmental committee was established in 1915,
commissioned to examine the development of manufacturing industriesbased on the processing of raw
materials provided by the colony itself. Governor Idenburg saw it as a task for the colonial
government to stimulate these developments by giving advice and providing technical education.
From 1919 to 1921 there were even government subsidies to stimulate Western industries to invest.
However, Idenburg had some reservations about the collateral effects of the industrialization process
in the Netherlands East Indies, and in his inaugural speech to the committee, he spoke the prophetic
words, ‘(…) omdat het er voor kan behoeden dat speculanten of phantasten een willig oor vinden voor
de deelneming aan de oprichting van bedrijven op goed geluk, terwijl de ondergang van zulke
bedrijven niet alleen onmiddelijk nadeelige gevolgen voor de betrokkenen heeft, maar ook voor lange
jaren het vertrouwen in andere ontwikkelings-mogelijkheden kan schokken’ [so that it may prevent
speculators and fantasisers finding too easy support and participation for whimsical businesses, as the
failure of such businesses not only has immediate negative consequences for those involved, but also
undermines on a long-term basis the general confidence in development opportunities].168
The commission was convinced that the development of a manufacturing industry in the
Netherlands Indies was required to acquire a more balanced economy.
167
Van Zanden & Marks, An Economic History of Indonesia 80-83; NN Statuten en Huishoudelijk reglement
van de Handelsvereeniging te Medan (Medan, 1912) 7.
168
R.N.J. Kamerling, ‘De copra-olie industrie in Nederlands-Indië gedurende en kort na de Eerste Wereldoorlog
(1914-1921)’ in: Between People and Statistics. Essays on Modern Indonesian History. Presented to P.
Creutzberg. Francien van Anrooij, Dirk H.A. Kolff, Jan T.M. van Laanen, Gerard J. Telkamp (eds), (Den Haag,
1979), 101.
71
The attempts to attract Dutch companies to establish subsidiaries in the Indies failed, they saw
possibilities for the Indies, but only as a future market for their products. Where government policies
failed, the entrepreneurial initiatives succeeded, especially in the period 1916-1919, but only due to the
artificial wartime economic conditions. It was in this context that Jurgens started to invest in the
Netherland East Indies. When the short, but fierce depression of 1920 took its toll, virtually all these
new industries were liquidated. 169
Overall, as Kamerling has established, it was not only the war that hindered a sustainable
industrialization of the Indies, but also some other structural causes.
These causes were the relative cheap transport costs that made the import of manufactured
goods relatively cheap, the low domestic demand for these manufactured goods because of the low
purchasing power of the population, the granting of credit on more advantageous terms to agricultural
enterprises than to industrial enterprises, and finally, that Western industries were far more vulnerable
to periods of recessions than the local, small-scale industries were.170
The situation in the Belgian Congo was remarkably different: HCB, a monopolist, did not do
well, there was an absence of dynamic competition and innovation that stimulated the developments
on Sumatra. The profit and loss figures for HCB clearly show that during the first fifteen years of
operation the only results were losses. Only during the economic hausse of the twenties was HCB’s
palm oil business profitable, the subsequent crisis during the early thirties caused enormous losses.
4.4 How governments shaped the competitiveness of the businesses
Michael Porter argues that national prosperity does not grow out of a country's natural endowments, its
labour pool or its currency’s value. Contrary to the classical economist's approach, Porter posits that a
nation's competitiveness depends on the capacity of its industry to innovate and upgrade.171
Colonial states do not react in the same way as current-day nation-states do. Most of the
colonial states were designed to extract a maximum of wealth to the metropoles, the ‘extractive states’.
This created institutions that were ‘extractive’ and served to maximize economic efficiency.172 This
initial institutional makeup proves hard to change overnight and is not instantly able to adapt to
changing economic demands.173 This phenomenon affected Lever both in British West Africa and the
Belgian Congo. British West-African governments thus protected the established economic power
structures and could not cope with the new modes of capitalistic production that Lever envisioned. His
venture failed.
Kamerling, ‘De copra-olie industrie in Nederlands-Indië.’ 103-104
Kamerling, De N.V. Oliefabriek Insulinde, 30.
171
Porter, On competition, 171.
172
Daron Acemoglu, Simon Johnson and James A. Robinson, ‘The Colonial Origins of Comparative
Development: An Empirical Investigation’, The American Economic Review (2001) 5, 1395.
173
See e.g. J. A. Robinson, ‘The Latin American Equilibrium’, in: F. Fukuyama, ed., Falling Behind.
Explaining the Development Gap Between Latin America and the United States,
(New York, 2008), 161-193.
169
170
72
The government feared that existing modes of production and trade would be destabilized. The fact
that Lever got a negative response was due to the fact that he tried to change these existing power
relations. This defensive reaction is to be attributed to the fear for, what is called, ‘creative
destruction’, which often obstruct the changing of institutions that set the ‘rules of the economic
game’, as Daron Acemoglu and James A. Robinson argue.174
The Belgian Congo was heavy burdened by the legacy of the initial institutional makeup of the
Congo Free State that was fitted for an economy of plunder. Acemoglu and Robinson argue that the
coercive nature of the Congo Free State was founded on older power structures, dating back to the
fifteenth century and older.175 Some features of this institutional make-up lured Lever into the Congo,
because the terms appeared very attractive for a capitalist: the granting of huge concessions, the longterm land leases, which secured him a monopoly and government support to engage enough labour.
For an entrepreneur that wants to control Porter's five competitive forces this seemed a golden
opportunity: the power of the suppliers (fruit cutters) was not a force to contend with; they were, in
essence, robbed of any power on the basis of racist preconceptions which justified the high taxes and
poor wages administered by Lever, in close cooperation with the government. The power of new
entrants was very limited because of the restricted influx of new capital in the colony, and the
monopoly position in the concessions. The threat of substitutes was also no real worry in the rapidly
expanding international palm oil market. Lastly, in terms of competitors, in the Congo, Lever had no
comparable one in the rational processing of palm oil, and he believed that West African palm oil
production would be less efficient in the long run. The only force he could not easily control, was the
bargaining power of the consumers. In the line of Porter's thought, I argue that, due to a lack of
competition in four of the five powers that shape competitiveness, the only way in which Lever could
compete with the Netherlands East Indies was by accepting low returns, and a race to the bottom in
terms of labour conditions.
Compared with the conditions in which oil palm cultivation took place in the Netherlands East
Indies the institutional influence was totally different: due to a ‘liberal’ and a relatively passive
government, the oil palm could flourish. The government was able to create circumstances that made
businesses more ‘competitive’ by specializing factor endowments. The Netherlands East Indies also
had its era of ‘coercion’ during the cultuursysteem, but it was abolished and replaced by a policy that
stimulated the role of the free market. This colonial ‘experience’ that the Dutch had and had developed
in this ‘liberal’ and ‘ethical’ attitude, was particularly manifest on Java. But why did this system of
coercion evolve into the more ‘liberal’ system and why did this not happened in the Belgian Congo?
174
175
Acemoglu & Robinson, Why Nations Fail, 84.
Ibidem, 87-91
73
This is an hotly debated topic among scholars. Cees Fasseur attributes the shift from the
cultuursysteem to a more liberal system to the public debate, that became more ‘enlightened’, rejected
the oppressive nature of the system and disapproved government intervention in economic
activities.176 But Ann Booth argues it were not only enlightened Dutch politicians and Multatuli’s
‘Max Havelaar’ that can account for the shift, but rather Dutch calculation. Due to population growth
on Java and the greater availability of ‘free’ labour, the coercive cultuursysteem became more
expensive. It became thus cheaper to gradually switch to ‘free’ labour.177 In contrast to the Belgian
Congo, where the population decreased between 1890 and 1920 and was much smaller than the
Javanese population. In 1920 the population density in the Belgian Congo was 4.3 people pro km2
against 250.4 people pro km2 on Java.178 The availability of labour thus influences the ‘coerciveness’
of labour in these colonies colonies. This led to a diverging pattern of ‘coerciveness’ in both colonies.
When Sumatra was being ‘pacified’ the governmental laissez faire-attitude towards Western
entrepreneurs that was developed in Java was more or less transplanted to this island. Private and even
foreign capital could flow freely. Within this more relaxed, less controlling institutional framework,
the government nevertheless maintained its presence, developing research facilities, and passing laws
that protected labourers to a certain degree and did not benefit one specific company or granted
monopolies. These are all factors that influence competitiveness because they ‘specialize’ factors, as
Porter argues. 179 Factors became more adapted to the needs of entrepreneurs: e.g. the labour was
disciplined, the financial infrastructure served specific agricultural needs and research propelled the
quality of the crops. Thus the Netherlands East Indies had a comparative advantage in terms of
competitiveness over the Belgian Congo. Due to the developmental ‘path’ of the Congo’s government
did not met the industry’s needs as well as the Indies did. The Belgian Congo and the Netherlands
Indies were, so to say, on a different trajectory.
The Jurgens case is more complex. It is questionable if Jurgens would had invested in the
Netherlands East Indies had the extraordinary conditions of the First World War not existed. The
answer would probably be a no. The war created a ‘window of opportunity’ and the unrestricted
investments possibilities of the Netherlands East Indies did not hinder Jurgens ambitious plans.
Jurgens’ investment is an example of how wartime trade restrictions and protectionism could instantly
disturb the economy, in the process creating an uncertain and perhaps unreal picture of the future.
Before the war the urge to integrate vertically was less felt because of the well-functioning raw
materials markets in Rotterdam and the Netherlands East Indies.
Cees Fasseur, ‘Purse or Principle: Dutch Colonial Policy in the 1860s and the Decline of the Cultivation
System’, in: Modern Asian Studies, Vol. 25, No. 1 (Feb., 1991), 33-52.
177
Ann Booth, ‘Varieties of exploitation in colonial settings. Dutch and Belgian policies in Indonesia and their
legacies’ in: Ewout Frankema and Frans Buelens, Colonial Extraction and Economic Development. The Belgian
Congo and the Netherlands East Indies compared, (Abingdon, 2013), 63.
178
Frankema & Buelens, Colonial Exploitation, 11.
179
Porter, On Competition, 202.
176
74
After the war these conditions revived and created a substitute for copra and copra oil: palm oil. So
indirectly the Sumatran ‘palm oil boom’ lessened the urge to integrate vertically in the Netherlands
East Indies, the power of the suppliers having been contained by a well-functioning market.
75
CONCLUSIONS
In order to reduce costs, multinational enterprises are inclined to command the complete production
cycle as much as possible. This does not necessarily have to lead to vertical integration, the bargaining
in a free market with a multitude of competing suppliers can also lead to a level of control. But to
neutralize Porters ‘bargaining power of suppliers’, Lever Brothers and Jurgens’ Vereenigde Fabrieken
felt the urge to integrate vertically in two Western colonies. In both cases the subsidiaries of these
companies did not entirely live up to expectations because the way colonial governments work was
not fully recognized. As I have argued, it were neither the differences in the companies structure nor
their different trades that can clarify the success or failure of their subsidiaries; it were the colonial
contexts. As I have illustrated, the institutional make-up of the Belgian Congo and the Netherlands
East Indies was quite different and this had its influence on how these two subsidiaries performed.
Both colonies were extractive in the sense that their economies were equipped to transport their wealth
to the metropoles. But the Netherlands East Indies and the Belgian Congo were extractive in different
ways.
In his contribution to the book ‘Falling Behind’180, James Robinson argues that an initial
institutional foundation is very hard to change instantly. He speaks about a ‘Latin American
Equilibrium’ when he explains the economic stagnation of Latin-America. Institutions that are
founded by colonial powers do change, but the apparent change is often cosmetic. Structures that
distribute power are hard to influence, even revolutions and changes of power cannot alter this fact.
This might be a result of ‘creative destruction’, but it is also strongly connected with the capacity of
governments to change. This applies certainly to the Belgian Congo, although their point of departure
was different. In contrast to the Netherlands East Indies, most of the Congolese people lived like
substitute farmers and the local economy was hardly connected to the global economy. There was no
local economy or political body that could easily be integrated in the Belgian colonial empire. The
way the Belgians dealt with this ‘problem’ was to raise taxes in kind and grant enormous concessions
to private enterprises, creating monopolies.
The Belgian Congo thus became a highly extractive and mercantile economy, clearly
inheriting the institutional foundation of the Congo Free State. It is fair to say that the palm oil
production suffered from a ‘Belgian Congolese Equilibrium’, because the institutional makeup of the
Belgian Congo still suited a more or less forced collection of raw, unprocessed materials, and was
unable to support the needs of sustainable and complex cultivation of the oil palm as well as the
processing of palm oil.
J. A. Robinson, ‘The Latin American Equilibrium’, in: F. Fukuyama, ed., Falling Behind.
Explaining the Development Gap Between Latin America and the United States,
(New York, 2008), 161-193.
180
76
The colonial administration was ‘path dependent’ and could not change overnight from an economic
model supporting short term economic interest to a model supporting a sophisticated and sustainable
economy that supported complex cultivation of the oil palm. In Porters perspective, the Belgian Congo
could not deliver ‘specialized’ factors.
Two features of the Netherlands East Indies or to be more specific, Sumatra, enhanced the
success of the oil palm cultivation. First, the lack of a colonial administration when the first cultivation
companies were established on Sumatra did not encumber companies with restrictions and obligations
like the ones in the Belgian Congo. There were no obligations, but conversely no possibility of support
being offered to, for instance, enforce labour. Second, when Sumatra was ‘institutionalized’, the
liberal attitude of Dutch colonial policy in that period (after 1870) and the ethische politiek, created
policies that both stimulated unhindered (foreign) capital influx, and a labour policy that defined and
controlled labour conditions, albeit at a rudimentary level. In the context of Porters framework it can
be said that the Dutch colonial ‘experience’ shaped more specialized factors, by creating free market
incentives.
Nevertheless, there is one factor endowment in which the Netherlands East Indies clearly had
an advantage over the Belgian Congo: labour. The availability of disciplined and ‘free’ labour was far
better in the Netherlands East Indies, just because of population density and the level of urbanization.
As I have argued, the lack of sufficient labour in the Belgian Congo led to a ‘race to the bottom’ in
labour conditions. It is fair to say that if the Belgian Congolese government could dispose of sufficient
labour reserves, the picture would be a different one, probably less coercive one.
The ultimate result of the colonial context of the Belgian Congo was that the palm oil
production in the Belgian Congo turned out to be rigid and monopolistic, whereas in the Netherlands
East Indies a flourishing entrepreneurial ambiance came into existence, with a high level of
competition, but also cooperation, with the setting up of test and research facilities, trade magazines
and professional organisations. In the course of the selected time frame, the Netherlands East Indian
institutional make-up was the greater supporter of growth of the plantation industry.
Despite these developments and all the advice from his subordinates, Lever kept believing that
his palm oil enterprise would finally succeed. But it was also the close cooperation and the convention
signed with the Belgian government that prevented Lever from a quick withdrawal from his Congolese
investments. He could not easily direct his capital to the Netherlands East Indies or British Malaya.
This was another ‘rigid’ feature of Belgian Congo’s institutional structure that prevented entrepreneurs
to circulate their capital easily.
The Jurgens’ case shows that only extraordinary wartime conditions shaped the urge to
integrate vertically in the Netherlands East Indies. The need to do this in peacetime was virtually
absent, because of the competitiveness of Jurgens’ vegetable oil suppliers.
77
The lively competition amongst cultivation companies, stimulated by the ‘liberal’ policies of the
government made the prices of the raw materials competitive. The Jurgens case is thus an
extraordinary example of what happens when ‘liberal’, ‘undisturbed’ markets are disturbed by
different kinds of government restrictions.
Initially, these restrictions motivated Jurgens to invest in the Netherlands East Indies, but the
protective measures after the war, especially by the United States, also prevented oil milling in the
East Indies from flourishing.
From hindsight, the conclusion is obvious that Lever invested in the Congo a bit too early.
This colony could offer better conditions than the British West African ones, but ten years later, the
Netherlands East Indies could offer even better terms for oil palm cultivation. Jurgens venture in the
Netherlands East Indies seemed necessary, but turned out to be a mistake. But from his perspective it
seemed the only thing he could do. A more general conclusion can thus be that when supplier markets
are ‘competitive’ and are undisturbed by restrictive governments policies, monopolies, syndicates or
cartels, the need to integrate vertically is virtually absent.
It is clear that from the multinational's perspective, the Netherlands East Indies provided the
institutions that created the best incentives for capitalist businesses like Levers and Jurgens to flourish.
This is not only an assessment that can be made in hindsight, contemporaries were also aware of these
colonial differences in relation to oil palm cultivation. Capital needs as little resistance as possible to
profit, and the Netherlands East Indies provided the least resistance.
What have these conclusions to offer for today’s developments in Indonesia and the
Democratic Republic of the Congo? I dare to say that the leading position of Indonesia in palm oil
production is to be dated back to the developments in the 1910s and 1920s. The liberal Dutch policies
created the foundation on which palm oil cultivation could be competitive. Indeed, in the course of the
twentieth century the Indonesian economy suffered from some serious setbacks that affected the
growth of production, but it could maintain its comparative advantages over West Africa. Today the
Democratic Republic of the Congo is one of the poorest countries in the world and it ranks second in
the list of failed states.181
Fund for Peace, ‘failed state index’ (version 2013) http://ffp.statesindex.org/rankings-2013-sortable (27th
June, 2014)
181
78
The ‘Belgian Congolese Equilibrium’ still casts its shadow over the Congolese economy, but
discourses change: the granting of concessions has its present day equivalent in ‘land grabbing’.
‘Many financially rich, resource poor countries are now tuning to resource rich, financially poor
countries to ensure security in food, minerals and energy’182 The post-colonial state of Congo is still
heavy burdened with the ‘extractive’ features developed in the colonial history. When Ruben de
Koning assesses the present Congolese mining sector he states that: ‘(…) miners often work in
dangerous conditions and are forced to pay numerous illegal taxes or to work for the military and rebel
forces that control mines.’ and that the Congolese government recently has granted mining
concessions in the size of one third of Congo’s landmass.183 A history repeating?
182
Sandra Evers, Caroline Seagle and Froukje Krijtenburg (eds.), Africa for Sale? Positioning the State, Land
and Society in Foreign Large Scale Land Acquisitions in Africa. (Leiden, 2013), 1.
183
Ruben de Koning, ‘Conflict between Industrial and Artisan Mining in the Democratic Republic of the
Congo’, in: Sandra Evers, Caroline Seagle and Froukje Krijtenburg (eds.), Africa for Sale? Positioning the State,
Land and Society in Foreign Large Scale Land Acquisitions in Africa. (Leiden, 2013), 181.
79
BIBLIOGRAPHY
Primary sources
Abbreviations
UAPS – Unilever Archives Port Sunlight
UAR – Unilever Archives Rotterdam
LBC – Lever Business Correspondence
UA – United Africa Company
Archives
UAPS, LBC, box 48, letter from six employees of S.A.des cultures office to Lever, (October 28, 1924)
UAPS, LBC, box 48, letter from Lever to six employees of S.A. des cultures office, (October 28, 1924)
UAPS, LBC, box 53, letter from Lever to Moseley, (August 28, 1911)
UAPS, LBC, box 53, letter from Lever to Moseley (May 14, 1912)
UAPS, LBC, box 53, letter from Lever to Moseley, (August 8, 1913)
UAPS, LBC box 53, letter from Lever to Moseley, (June 23 1915)
UAPS, LBC, box 53, letter from Lever to Moseley, (June 16, 1916)
UAPS, LBC, box 53, letter from Lever to E.D. Morel esq. (October 17, 1910)
UAPS, LBC, box A, Reports and Letters from mr. De Keyser, Congo trip (1910)
UAPS, LBC, box B, Mr. Levers Congo Dairy, (Friday 24, 1914)
UAPS, LBC, box C, mr Burgess General Report on the Palm Oil regions in the Congo (1910)
UAPS, UAC/1/11/14/1/15, Notes on the history of HCB by Sidney Edkins, (1937)
UAPS, UAC/2/36/1/1/1, Extract from ‘Bulletin Officiel du Congo Belge’ of 2/5/1911, 371
Convention concluded on the 21 februari 1911, between the Colony of Belgian Congo and Messrs
Lever Brothers Ltd of Port Sunlight (England)
UAPS, UAC/2/36/7/1/2 Elso Dusseljé papers, Letter from D’Arcy Cooper to Dusseljé, 22/12/1932
UAR, 1092-11-24, NN, ‘The Dutch East Indies, Nigeria, West-Africa. The Nigeria debate, South America .
(undated)
UAR, 1070, letter from Jurgens to Messrs Van den Bergh, Ltd, (October 16, 1913)
UAR, 1070, notes by an unknown archivist (July 1966)
UAR, 1155, agreement between Jurgens and Manders Seemann & Co’s Handelsmaatschappij considering trade
of copra, (june 7th, 1917)
UAR, 1155, agreement between Jurgens and Manders Seemann & Co’s Handelsmaatschappij considering
purchase of NV Eerste Makassaarsche Oliefabriek, (june 7th, 1917)
UAR, 0491A, ‘notulen vergadering van directeuren 5-2-1917 & 28-4-1917, 7 april 1922 – 19 november 1924,
exemplaren mr. Randag’, directors meeting monday February 5th 1917.
UAR, 0491A, ‘Notulen vergadering van directeuren, exemplaren mr. Randag’, April 6/7 1922, 12/13 July 1922
& 14/15 September 1922
UAR, 0628, introduction to this file by an unknown archivist.
UAR, 0628, letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to Anton Jurgens’ Fabrieken, (november
24th, 1915)
80
UAR, 0628, attachment [bijlage B] to letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to Anton
Jurgens’ Fabrieken, (november 24th, 1915)
UAR, 0628, letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to F. Jurgens (March 9, 1917)
UAR, 0628, letter from F. Jurgens to mr. Kasteleijn, Rubber Maatschappij Sumatra (March 12, 1917)
UAR, 0628, letter from mr. Kasteleijn, Rubber Maatschappij Sumatra to F. Jurgens (March 14, 1917)
UAR, 0635-A, ‘United Java Oil Mills Ltd. I; Mr Anton’s papers, ‘Resume van de voorloopige besprekingen met
den heer Sandrock inzake de United Java Oil Mills Ltd. Gehouden d.d. 3 april 1920 te Nijmegen’
UAR, 0635-A, Letter from Th.C. Sandrock to M.H.T. Bury, director of the Amsterdam Office of Jurgens, June
1920
UAR, 0635-A, undated note from Jurgens assessing the merger;
UAR, 0635-A, Letter from H. Jansen Hutteman to management of the buying department of Jurgens, August
13th, 1920
UAR, 0635-A, Annual report of United Java Oil Mills Ltd., 1920.
UAR, 0635-A, letter from NV Jurgens administratiekantoor Soerabaia to NV Jurgens inkoopbureau, Amsterdam,
which attached a letter from mr. Damme of NV Oliefabrieken Insulinde.
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Index Mundi, ‘commodity production statistics’ (unknown version)
http://www.indexmundi.com/agriculture/?commodity=palm-oil& (20st june 2014)
Kenneth F. Kiple & Kriemhild Coneè Ornelas ‘the Cambridge History of Food’, lemma ‘palm oil’
(version unknown) http://www.cambridge.org/us/books/kiple/palmoil.htm (april 24, 2013)

Oxford DNB, ‘Biography F. D’Arcy Cooper’, (version unknown)
http://www.oxforddnb.com/templates/article.jsp?articleid=32550&back=,47718 (3rd May, 2014)

Dr. T. Umbrello ‘Coconut palm’ (version unknown) http://faculty.ucc.edu/biologyombrello/POW/coconut_palm.htm (june 19, 2013)
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