Chapter Two
Understanding Eurasian Trade in the Era of the Trading Companies.
Jan de Vries
From Oriental Despotism to the Great Divergence
For centuries, if not millennia, Europeans understood Asia to be the source of exotic
luxuries. By the early Seventeenth Century, the largest single most commonly traded
commodity between Asia and Europe by volume, pepper, might have been considered a
bulk good. However, this is only relative to the silks, diamonds, fine spices and other
costly products shipped from the East. And even pepper was, as a Dutch expression still
has it, peperduur (as costly as pepper.) Goods from the East were coveted by many, but
generally accessible only to a small elite. What relevance could this commerce in
luxuries have to the overall development of European economic life? It was, at best, a
‘rich trade’ offering profits for a small number of elite merchants. Since the demand was
limited to elite consumers, it could not hope to grow rapidly without endangering those
profits via market saturation. In short, European trade with Asia was interesting but not
really important.
This view of Eurasian trade continued to prevail into the 1970s. When Immanuel
Wallerstein launched his influential ‘World Systems’ interpretation of economic life in
1974, he felt justified in excluding Asia from his account of the European world system
of the early modern era. Wallerstein wrote:
At this epoch [the Sixteenth and Seventeenth Centuries], the relationship of
Europe and Asia might be summed up as the exchange of preciosities. The bullion
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flowed east to decorate the temples, palaces, and clothing of Asian aristocratic
classes, and the jewels and spices flowed west. The accidents of cultural history
determined these complementary preferences. Henri Pirenne and later Paul
Sweezy give this demand for luxuries a place of honor in the expansion of
European commerce. I am skeptical, however, that the exchange of preciosities,
however large it loomed in the conscious thinking of the European upper classes,
could have sustained so colossal an enterprise as the expansion of the Atlantic
world, much less accounted for the creation of a European world-economy.i
‘In the long run,’ Wallerstein concluded, ‘staples account for more of men’s economic
thrusts than luxuries’. Wallerstein had a second reason to exclude Asia from the
European world economy. Europe’s relations with Asian states ‘were ordinarily
conducted within a framework and on terms established by the Asian nations. [Except
for a few colonial footholds] … the Europeans were all there on sufferance’. ii Asian
goods were precious and costly, but from Wallerstein’s neo-Marxist perspective, the
trade in these goods could not (yet) be a significant source of capital accumulation.
Hence, Asian-European trade could be set aside as superficial.
A few years later, in 1981, Eric Jones tackled the relations of Europe and Asia in
the early modern era. In The European Miracle, the luxury goods and exotic tropical
commodities were barely visible. To Jones, Asia was most notable for its capacity to
produce people. The essential difference between European and Asian civilization was
the focus of the latter on maximizing human numbers as a response to its disasterprone environment. As a consequence, Asia did not increase its capital stock to keep
pace with population growth. Jones wrote that
Income per capita was higher in Europe than Asia partly because natural
disasters were fewer. There was less of the compulsion that Asians felt to breed
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as many sons as possible in order to ensure family labour for the phases of
recovery.iii
Jones had little to say about long-distance trade except to illustrate his characterization
of the ‘basic logic’ of the European and Asian civilizations:
Trade [in Asia] was political in complexion, and this impeded the extension of the
market... Most of such foreign-going trade as there was involved luxuries, among
them the ornamental or reputedly aphrodisiac products of hunting in the
jungles… Where natural and social risks were high, so were liquidity preferences
and hoardingiv
This last comment refers to the commonly held view of Asia as a ‘bullion sink.’ The
inflow of silver and gold had no great economic effect (via monetization, market
development, or price inflation) because the Asian demand for precious metals was
primarily for hoarding, jewelry, and decoration. Bullion flowed to Asia to die.v Hovering
in the background of all this, one finds the lingering influence of Marx’s ‘Asiatic mode of
production’ and Weber’s related interpretation of Oriental religions. Asia and Europe
were assumed to follow very different paths.
Today, these works, highly influential thirty years ago, appear antique in their
basic assumptions about Europe-Asian economic relations. The past fifteen years has
witnessed a reinvigoration of large-scale, comparative economic history in which the
imperial and colonial histories of an earlier time, Weberian historical sociological
interpretations, and the Marxisant world systems approach have all had to make room
for a project of reform and reinterpretation. This project is sometimes referred to as the
California School, but most simply identified by the term ‘great divergence’. Its most
prominent exponents are Kenneth Pomeranz, whose The Great Divergence (2000)
established the project’s chief characteristics; R. Bin Wong, whose China Transformed
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(1997) introduced the idea of a reciprocal comparative approach and whose later book,
co-authored with Jean-Laurent Rosenthal, Before and Beyond Divergence (2011), adds
theoretical bite to the project; and the late Andre Gunder Frank, whose ReOrient (1998)
provided a polemical trumpet flourish for the whole enterprise.vi
These and many other recent books and articles speak to a new interest in global
history by offering sustained comparative analyses on a Eurasian scale that are shorn of
Eurocentric assumptions. The revisionists of the ‘California School’ argue that East and
West were more similar than dissimilar in their economic performance, and that
dissimilarities in institutions and laws do not generally support assessments of
superiority and inferiority. Thus, Europe and Asia, or their economically more advanced
zones, were on the same economic trajectory in the early modern era. That is, until the
end of the Eighteenth Century, when the West postponed the onset of the developing
ecological problems that faced all of Eurasia in the Eighteenth Century, and
circumvented them altogether over the Nineteenth Century, by exploiting two windfalls
of massive significance: cheap and accessible energy (coal) and the virgin soils and
abundant natural resources of the New World. These contingent events, or historical
windfalls, produced a ‘great divergence’: the West diverged from the East economically
and, in short order, achieved political and cultural dominance as well.
This challenge to the old verities is now an established position, perhaps even a
new orthodoxy.vii While the old historiography was, in truth, a history of Europe that
called attention to its virtues by invoking an exceptional, motionless, history of Asia as a
cautionary tale, the new position is developed by specialists of Asian history and relies
on the exceptionality of European history to explain Asian historical trajectories.
However, in these historians’ hands, Europe’s exceptionality does not mean that
Europeans were exceptional; it means they were exceptionally lucky.
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Trade does not figure prominently in this new story. It is definitely toppled from
the central role that Frank had given it: the means whereby Europeans learned from
Asia, riding to prosperity and then on to world dominance on ‘Asia’s back’ via the
undeserved advantage of cheap silver.viii To the extent that trade enters into
Pomeranz’s account, the issue is not Western trade with China, which he rarely
addresses. Rather, Pomeranz’s account focuses on Chinese trade; or, rather, the Chinese
trades that did not emerge during the Ming and Qing dynasties. For example, Chinese
expansion to western lands led to the resettlement of many tens of millions of people,
but it did not give rise to extensive specialization and inter-regional trade. Likewise, the
large Chinese merchant Diaspora to South East Asia did not give rise to any substantial
trade in tropical raw materials with the Chinese metropole. Pomeranz placed great store
in the ‘ghost acreage’ of New World lands as a key to the West’s release from
Malthusian constraints, but the vast lands and resources at China’s periphery played no
such role. The enormous migration to these lands witnessed instead the ‘multiplication
of largely independent, self-sufficient cells’.ix
China, Pomeranz argued, did not cultivate long-distance trade links because it
faced no pressing need for them. Parthasarathi makes a similar argument in his study of
early modern India. Both of these sub-continental polities, it appears, produced all they
truly needed without recourse to long-distance trade.x This is not an argument designed
to appeal to an economist. No ‘need’? By whose definition? Perhaps the observed
absence of need reflected an absence of demand: the poverty of most consumers and
the restricted expression of elite demand stood as an obstacle to the rise of longdistance trade and specialized production. However, this leads toward a contrast
between a dynamic west and stagnant East, which the great divergence literature is
dedicated to supplanting.
An alternative is to explain the growth of European-Asian trade as an expression
of a different type of Asian ‘need’: the need for silver. By this argument, Asian societies,
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abundantly supplied by their superior manufacturing sectors and vast peasant
economies, felt no need for goods produced elsewhere. But a marginal augmentation to
the enormous, domestically-oriented productive capacity of India and China’s protoindustries could generate a supply of goods for export sufficient to elicit from Europe an
influx of silver capable of ‘oiling the wheels of the Chinese economy’ and acting as the
‘motor’ of the Indian subcontinent’s economy.xi In this, we have an account of the
growth of Eurasian trade that converts European initiatives into a response to
developments internal to the dynamic economies of Asia.
However, it remains a curious fact that while the modern interest in
globalisation has intensified interest in the early modern creation of a globe-girdling
network of long-distance trade, recent efforts to practice a global history have shifted
attention away from the trade that linked the societies of Eurasia. A central premise of
this new literature is that the major polities of Eurasia were experiencing a common set
of challenges and developing responses to them that shared strong family
resemblances. These geographically far-flung polities were connected by common,
shared experiences in the early modern era, but trade was not the primary connector,
and direct interactions and confrontations were not decisive. Rather, European and
Asian societies all faced common external conditions (environmental, climatic,
demographic) and the logic of their situations required that they explore innovations in
military technology, fiscal institutions, and social discipline that necessarily imparted
broad similarities to the ‘gunpowder empires’ of early modern Eurasiaxii
Eurasian Trade: Side Show or Main Event?
Both the old and the new approaches to the interactions of Europe and Asia in the early
modern era make claims—implicit as well as explicit—about the nature of the trading
relationships that connected them, and which with the opening of the Cape route grew
steadily in importance over the following three centuries. In a volume focused on the
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European reception of ‘goods from the East’, it is appropriate to begin our assessment
by examining those that emphasize special qualities of those goods. They can be
bundled into three distinct claims:
1. Goods from the East were exotic. They were primarily tropical products, unavailable
within Europe, and inherently desirable.
These claims imply that there was something inevitable and obvious about this trade.
Once the Asian goods were available in Europe on a dependable basis and at an
‘affordable’ price, demand was bound to grow: consumer demand was like a coiled
spring, awaiting release by intrepid European traders. Today, this type of argument is
not as self-evident as it once appeared. Broad consumer acceptance of novel and exotic
goods is far from inevitable. Moreover, while most of the early goods sent to Europe
from the East were, indeed, tropical products unavailable from European sources (spices
and pepper), they were not literally exotic. Demand grew precisely because they were
already familiar and desired. But this demand was not unlimited, and the growth of
trade volume from Asia to Europe would have ceased in the Seventeenth Century were
it not for the emergence of new trade goods, most of which were not literally exotic,
tropical commodities. Why would European consumers necessarily embrace them?
Perhaps because they were of uniquely fine quality.
2. Asian goods were superior. They embodied unique craft skills and design elements.
They were exquisite in a way that could not readily be imitated in Europe.
This claim implies that Asian manufacturers - of silk and cotton textiles, porcelain,
lacquer wares, and chinoiserie more generally – produced unique products. Consumers
seeking their special qualities had no alternative but to purchase Asian imports. It is
certainly true that as the demand for the tropical spices and pepper slowed, further
trade growth in the Seventeenth Century depended increasingly on Asian manufactured
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goods. The claim that Asian goods possessed unique qualities that imparted a measure
of monopoly power in European markets competes with an alternative explanation for
the growth of Asian manufactured exports to Europe: that they were cheap.
3. Asian manufacturers were the low-cost suppliers. Not only were costs low, but the
supply of low-cost labor was highly elastic, allowing goods from the East to be supplied
to international markets in large and growing amounts at constant costs.
This argument resonates with recent experience in East-West trade, and is consistent
with earlier assumptions of a neo-Malthusian type that China and India had dense
peasant populations whose productivity in agriculture was low. This made their labor
available for manufacturing, usually in a proto-industrial framework, at low cost. But,
the great divergence literature denies the validity of these key assumptions, arguing
that labor productivity in (advanced parts of) Asia was comparable to that in (advanced
parts of) Europe. Therefore, they argue, if Asian wages were lower than those in Europe
(when measured in silver equivalents), this only reflected another aspect of Asian
economic prowess: its highly productive rice-growing sector, which provided staple food
at lower cost than was possible in Europe.xiii Unfortunately, there are reasons—
theoretical and empirical—to question these arguments.xiv The claim of a highly
productive agriculture is not consistent with the very large share of the labor force
wedded to Asian agriculture until well into the Twentieth Century; nor is it consistent
with the sharp competition for land between food and raw materials production
emphasized by great divergence interpreters such as Pomeranz and Marks.xv
Goods from the East are said to have been unique, superior, and cheap. These
attributes of Asian production are not mutually exclusive, and they may all have played
a role in accounting for the growth of Europe’s demand for Asian goods over time.
However, unless we simply assert an obvious irresistibility of goods from the East, some
consideration needs to be given to European demand for Asian goods. Did Europeans
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acquire in the course of the early modern era - because of events in Europe - a new
capacity to purchase Asian goods?
There are three dimensions to this issue that deserve our consideration:
1. Goods from the East became cheaper in Europe because of a significant reduction in
‘transaction costs’ (the costs of acquiring, shipping, and distributing goods, enforcing
contracts, making payments, and so on). If the European trading companies that
controlled the Cape route for three centuries succeeded in substantially reducing these
costs over those prevailing on the old ‘silk route’, the new, lower prices at which Asian
goods could be sold in Europe might explain much of the growth of this trade. This is,
strictly speaking, a supply-side argument, but the cost advantage is not attributable to
Asian economies; it is a product of western initiatives to supply European markets.
2. Goods from the East benefited from a rising European demand, at any given price,
because European incomes rose. Or, alternatively, European incomes came to be
distributed more unequally, generating increased demand among income strata with a
taste for Asian goods. This argument is more difficult to test than the first, although
Williamson and O’Rourke have attempted to do so, finding that rising European incomes
(especially upper class incomes derived from land ownership) rather that Asian supply
factors accounted for most of the growth of trade in the Seventeenth and Eighteenth
Centuries (but not in the Sixteenth Century).xvi
3. Goods from the East were less important than ‘information’ from the East: new
knowledge (about goods, among other things) that changed tastes, created new
markets, and laid the basis for developing new products. This argument emphasizes the
dynamic aspect of East-West trade. It was not simply a matter of exploiting price
differentials or reducing transaction costs—important though these were—but of
gathering and assessing a vast amount of new information and incorporating it into
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European life. This stood at the foundation of changing tastes, the demand for new
goods, and the development of new markets in the early modern era.
But, if new information helped shape European demand for goods from the East,
the opposite might also have been true. If the intensified and direct trade links between
east and west established with the mastery of the Cape route greatly augmented the
supply of information about Asia available in Europe, it should also have increased
information flows in the opposite direction. The clearest illustration of this point is the
long Dutch trading presence in Japan. For over two centuries, the Dutch were the only
European traders tolerated by the Shoguns of Japan. The shipping route from Holland’s
ports to Nagasaki harbor, site of the Dutch East India Company’s trading station, was the
longest of the early modern era, and Dutch ships visited Japan every year, but very few
trade goods ever traveled all the way from one end to the other in either direction.
What did move over this long trade route was information: Rangaku, or ‘Dutch/western
learning’ moved eastward, as filtered by a caste of official translators, while Dutch
officials, confined to their island outpost in Nagasaki harbor except for annual trips to
pay their respect to the Shogun in distant Edo, sent home political, economic, and
cultural information that fertilized multiple domains of knowledge.xvii
Japan was undoubtedly a special case in the history of East-West trade, but its
experience does serve to illustrate key questions in early modern intercontinental trade:
did all parties implicated in these new commercial systems benefit from the rich
information flows that coursed through their trading arteries? And, if not, why not?
Perhaps the answers to these questions lie in the institutions established by the
European nations trading in Asia, especially the joint-stock trading companies of the
northern European states. These large, bureaucratic organizations have long attracted
the fascinated attention of historians, who have called attention to their large,
permanent capital stocks, their need to coordinate disparate activities across great
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distances, and, especially, their combined commercial and political natures, which led to
the internalization of protection costs (naval and military force) within their larger
commercial missions.xviii What has only recently begun to receive the attention it
deserves is their effectiveness in gathering, analyzing, and acting upon large volumes of
information.xix Commercial, political, navigational, technical, botanical, linguistic, and
cultural information flowed from their numerous trading factories and ships spread
across maritime Asia and parts of Africa toward their command centers in Asia and
Europe.
These nodal points of company trade were ‘information rich’ in a different way
than the rumor-filled markets, bazaars, taverns, and cafés, filled with independent
merchants attempting to trade on their fragments of private information. The European
trading companies faced the challenge of processing and acting upon large amounts of
information in a rational, systematic way. Their allocations of capital among many ports
and many commodities and their decisions, at intervals, to back their trading ventures
with costly physical force required a level of coordination that was altogether
unprecedented in early modern commerce.
What concerns us here is the quality of these companies’ information about
supplies of Asian goods and how to gain access to them, and about the potential
European demand for Asian goods, especially novel goods. While the largest
companies—the English East India Company (EIC) and Dutch East India Company
(VOC)—commanded vast information networks, they generally did not have direct
access either to producers in Asia, or to consumers in Europe. That is (with the
important exception of the fine spices, whose production centers were controlled
directly by the VOC), they generally bought goods at Asian markets via local
intermediaries, and they sold their Asian cargoes in European ports at auction to private
merchants, who controlled the distribution of goods from the East to the ultimate
consumers.
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Thus, at both ends of the trading networks controlled by the European
companies one finds ‘gatekeepers’: private merchants with commercial information
which was otherwise unavailable, or imperfectly available, to the directors of the
trading companies. Indeed, the broader and more complex the commercial operations
of the trading company the greater the likelihood that its own servants (agents of the
directors, sworn to act in the company’s interest) acquired information that they did not
pass on to the center but acted on privately. Since most private traders were
simultaneously company servants, their activities are usually discussed as a species of
corruption and a force undermining the profitability of the companies. They were ‘free
riders’, appropriating company resources for personal gain. However, in many cases,
they were engaged in lines of business quite distinct from those in which the companies
specialized, especially the ‘country trades’ (intra-Asian commerce such as the opium
trade) and financial transactions. This raises the question of whether the activities of
private traders were, on the whole, more complementary than competitive to company
enterprise. I will return to the phenomenon of private traders in Asia below.
In Europe, the trading companies had never involved themselves with the
distribution of goods from the East to final markets. For this they always relied on
private traders, who assembled at the periodic auctions held at company facilities in the
Atlantic ports. Many of these merchants were simultaneously investors in the joint stock
companies, insuring a substantial overlap between company and private trader, but this
overlap became smaller over time. In the case of the VOC, the company directors
(bewindhebbers) of the Eighteenth Century were almost all town regents, without direct
engagement in the domestic trade in Asian goods.xx The companies remained, in
theory, the sole suppliers of goods from the East, but one may question whether the
directors continued to have an adequate hand on the pulse of consumer demand, their
own role in stimulating an expansion of that demand notwithstanding.
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The European ships that pioneered the Cape route sought to supply a known
demand in fine spices and pepper that had long been met via the silk route and
Venetian merchants. But the growth of new information and merchant initiatives led,
over time, to a fundamentally new phenomenon: shifts in consumer demand as
Europeans entered a new environment of consumer choice. Thus, neither reduced
transaction costs in getting Asian goods to Europe nor increased incomes in Europe can
fully explain the long-term growth in demand. For example, a recent quantitative study
of the changing composition of Hamburg’s import trade in the Eighteenth Century found
a major increase in the import of colonial goods (from both Asia and the Americas).
Ulrich Pfister, the author, concluded:
Relative price shifts are unable to explain import growth of American groceries.
Given stagnant income per unit of labor and land, it requires a massive shift in
preferences and/or an increase in labour time [and, hence, money income] to
increase demand for these commodities.xxi
Standard neoclassical trade theory (comparative advantage and regional specialization,
generating lower prices and changes in relative prices) cannot account for most of the
growth and the changing composition of Hamburg’s trade in this period. Instead, Pfister
concludes, the ‘New Trade Theory’ seems to offer better insights: product
differentiation and economies of scale generated a demand for new products, and this
led to increased labor by households in order to secure the new, distinctive,
differentiated goods.xxii
Information and ‘industriousness’ are highly correlated. The incentive to earn
additional income is often generated by knowledge of new goods—of consumer choice.
When the new goods and new knowledge respond to and confirm a felt need—in this
case, the urge to signal ‘respectability’ in the eyes of one’s peers—the result is a
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dynamic shift in the structure of consumer behavior that cannot be predicted from
relative prices alone.xxiii
This survey of the supply (exotic goods, superior goods, low-cost goods from the
East) and the demand factors (lower transaction costs, increased European incomes,
and information-induced shifts in demand) found in the literature on Asian trade
provides an agenda for testing and verification of considerable complexity. Indeed,
there is much we still need to know before many of these competing and overlapping
claims can adequately be tested. We now have a fair overview of the ‘macro’ trends and
developments in the three centuries of company-dominated trade with Asia. But, many
of the ‘micro’ issues—particularly concerning the ‘gatekeepers’ in both Europe and Asia
referred to above—remain poorly understood. In the next section of this essay, I will
introduce the available evidence of an aggregated, or macro-level, type and try to
identify how they reflect on the plausibility of the claims discussed above. In addition, I
will call attention to several questions, mostly of a micro type, which beckon for further
study.
Contours of the Europe-Asia trade, 1500-1830
a) The volume and value of Europe-Asian trade
In an earlier article, I attempted to integrate the existing studies of European maritime
trade with Asia from all the participating countries, beginning with the Portuguese
establishment of the Cape route in 1497 and ending with the disruption to companybased trade at the end of the Eighteenth Century.xxiv My aim was to chart the long-term
course of this trade from a ‘global’, or continental, rather than a national perspective.
The results of this statistical exercise were surprising in two respects: in the steady longterm growth of European maritime trade, and in the moderate pace of that growth. On
what grounds can one claim that the early modern ‘boom’ in trade between Europe and
Asia was slow?xxv And, how can a trade marked by fierce, often violent competition
14
between European trading companies have been steady? Indeed, how can any
economic activity of the early modern era have enjoyed steady growth over three
centuries? The other available time series of long-distance shipping or industrial
production for this era invariable reveal large fluctuations, periods of profound
disruption, even whole centuries of stagnation or reversal.xxvi
[Figure 1.1: Europe’s intercontinental trades, by shipping tonnage,
1501-1795. ]
Figure 1.1 shows the volume of trade, decade by decade, over three hundred
years, and a long-term trend line. Deviations from that trend line are few and brief.
This aggregation of the trade of all European companies active in Asian waters shows a
remarkably steady upward course. What this masks is the substantial volatility of the
trade of each separate country, and, even more, of the various commodities of trade.
Moreover, that steady upward course of trade was not very rapid. The long-term trend
line of the shipping volume returning from Asia to Europe in each decade ascends at the
rate of 1.1 per cent per annum.
Why should we call that slow? To begin with, any measure of the total trade
between Europe and Asia must include the flows of goods that did not make use of the
Cape route, but entered Europe via the Levant. The ‘silk route’ mercantile networks
were not entirely shut down by the new competition. Indeed, after 1550 they appear to
have regained their competitive capacity. But by the 1620s this silk route competition
diminished markedly, and we can accept the measurement of Cape route shipping as
representing nearly all of the Asian goods reaching Europe.xxvii Until the 1620s the
growth of the Cape route trade reflects both ‘trade creation’ and ‘trade diversion’. How
much was diverted from the old trade routes cannot be measured with any certainty,
but it could easily have been one-third of total Cape route volume in the 1620s. Thus, at
15
least in the Sixteenth Century, the real growth of trade was somewhat slower than
revealed by figure 1: perhaps 0.8 per cent rather than 1.1 per cent.
We must also consider population growth. We are primarily concerned with per
capita trade growth, not simply an expansion of trade that reflects a growth of the
populations of either Europe or Asia. Europe as a whole experienced a long-term
population growth of about 0.25 per cent over the three centuries that concern us
here.xxviii Of course, the rate of growth was substantially higher in the Sixteenth and
Eighteenth Centuries, and higher in Northwestern Europe than the Mediterranean
countries, and higher in cities (especially larger cities). Much less is known about
demographic trends in Asia in this period, especially about South and Southeast Asia.
But the overall rate of population growth may well have exceeded that of Europe, and
the population of China almost certainly did so, especially in the Seventeenth and
Eighteenth Centuries. Its average annual growth over the three centuries reached
approximately 0.4 per cent, and its eighteenth-century growth was quite extraordinary,
at 0.8 per cent per annum.xxix This considerably diminishes the increased ‘trade
intensity’ experienced by China as a result of a 1.1 per cent annual growth of trade with
Europe.
Overall, the effects of ‘trade diversion’ and population growth are marginal in
nature. More important, surely, is the simple fact that the flow of trade between
Europe and Asia at its eighteenth-century peak was not imposing. A 1.1 per cent annual
rate of growth sustained over 300 years certainly yields an impressive total increase in
the volume of trade: 25-fold. But, did this constitute a ‘trade boom’? At the end of this
long era, the total volume of goods sent annually from all of Asia to all of Europe
measured approximately 50,000 tons—the carrying capacity of one large container ship
of today.
16
To be sure, these Asian goods were not distributed equally among Europe’s
inhabitants, nor was their production spread equally over the vast expanse of Asia. A
curious feature of the slow, steady growth in the volume of the Cape route trade is that
it was the composite result of:
1. vigorous competition among European trading companies, whose market shares were
subject to substantial fluctuations, and
2. boom and bust cycles of specific Asian commodity exports, centered on widely
scattered Asian locations.
Until the 1620s, the attention of European traders was focused on the Spice (Molukken)
Islands and the South Indian centers of pepper production; thereafter the cotton textiles
of Bengal led Asian export growth, while the pepper and cinnamon of Sumatra and
Ceylon (Sri Lanka) grew in importance. In the Eighteenth Century, attention shifted
toward Mokka’s coffee and, even more, to Canton’s tea. Thus, at the level usually
studied—by European nation and/or Asian commodity—the trade exhibited distinct
cycles and much instability. But in the aggregate, Asian exports grew slowly and
steadily. Any discussion of the supply elasticity of ‘Asian exports’ needs to take into
account the highly dispersed and varied nature of this composite entity. What appears
in the aggregate as an Asian fount of trade goods, available in ever growing quantities at
constant prices, looks different at the micro level—where most trade goods
experienced, sooner or later, either market saturation or supply inelasticities.
A final perspective on the pace of Cape-route trade expansion is offered by a
comparison with the other major domain of intercontinental trade, the Atlantic
economy. By the 1770s the volume of New World sugar shipments to Europe alone
exceeded by more than four-fold the volume of all Asian goods shipped to Europe.
Total sugar exports to Europe grew at 2.2 per cent per annum between the 1660s and
17
1750s, while Chesapeake tobacco exports grew at over 5 per cent per annum from 1622
to the 1750s. Earlier, the shipping volume of Spain’s colonial fleet grew at an annualized
rate of 2.2 per cent from 1511-15 to 1606-10, before beginning its long decline.xxx A
lower-bound estimate of New World commodity exports may be derived from the rate
of growth of African slave transportation to the Western Hemisphere, since slaves
formed the bulk of the labor force active in export-oriented production. The
transatlantic supply of slaves grew by 2.1 per cent per annum over the entire period
1525-1790.xxxi Finally, as a check on these estimates of the growth of the Atlantic
economy, the Sound Tolls levied by the Kings of Denmark on all shipping passing to and
from the Baltic offer a confirmation of these measurements. In the century 1680-1780
the tonnage of ‘colonial goods’ (almost all from the New World, with sugar and tobacco
predominating) grew at 2.6 per cent per annum, nearly double the rate of growth of
Baltic trade as a whole.xxxii
In sum, the Atlantic trade, while highly volatile, grew by at least twice the longterm rate of the Cape route trade over the three early modern centuries. Consequently,
by the late Eighteenth Century, the volume of American exports to Europe was a large
multiple of the volume of Asian exports to Europe. The correct question to pose may
not be what explains the ‘boom’ in the Asia-Europe trade, but what accounts for its
retarded growth?
Perhaps our concern should be focused not on the rate of growth and the
volume of trade, but on the monetary value of trade, and on its scale, or level relative to
the size of the domestic economies linked by Cape route shipping. The most general
statement one can make about the scale of goods entering Europe from the east is that
by the 1780s all the trading companies combined landed about a pound (0.5 kg) of Asian
goods for every European (50,000 tons per 100 million Europeans.) This composite
bundle of Asian goods then had a wholesale value, realized at first sale by the trading
companies, of about 0.625 Dutch guilders or just over one English shilling.xxxiii
18
What would this average level of consumption of goods from the East have cost
the average household? If we set the average household at 4.5 persons and guess that
the retail prices of these goods would be at least double the wholesale price (the
auction price paid to the trading companies), then the annual household expenditure on
Asian goods reaches 5.625 guilders, or ten shillings.
It is, of course, unrealistic to suppose that all Europeans participated equally in
the consumption of Asian goods, but if they had, the annual expenditures of a manual
worker in Southern England or Holland would have taken up at least a week’s
earnings—about two per cent of annual income. Elsewhere in Europe it would have
claimed considerably more—three to four per cent.xxxiv
Finally, we can approach the issue of the overall impact of goods from the East
on European economies by measuring the value of Asian imports as a percentage of
total imports to the major trading nations. In the 1770s broadly comparable data are
available for England, France, and the Dutch Republic. These three countries then
accounted for 85-90 per cent of all Asian trade. Goods from the East accounted for 11
per cent of the value of their combined total imports. Much of this was re-exported to
the numerous European countries without direct imports of their own, but it serves to
show that even in those countries most invested in the Asian trade the volume and
value of Asian trade was far from dominant. New World imports to these same nations,
cumulatively, accounted for three-times the value of Asian imports, and here other
nations played more than a marginal role in supplying Europe.xxxv
It remains possible that the true value of goods from the East was not a direct
one—the value and profits of the trade or the direct utility of the imported goods—but
an indirect one that was revealed by transformations of consumer demand that
redounded to the benefit of producers and traders beyond those involved in the Asian
trade. That is, perhaps goods from the East stimulated a commercialization of societies
19
at the retail level, drawing households into the market in order to acquire the new
goods.
So far, I have focused exclusively on the scope and possible impact in Europe of
goods from the East. But, trade is a two-way street, and the Europe-Asia trade can also
be considered from the perspective of the Asian markets. What did Asians buy from the
European trading companies? They bought three things: European manufactures,
shipping and commercial services, and bullion, primarily silver.
The Asian market for ‘goods from the West’ was highly restricted, and until the
late Eighteenth Century this was a distinctly minor factor. The VOC sent one to two
million guilders worth of trade goods to Asia annually (5-10 per cent of the value of the
goods purchased in Asia) while the EIC sent rather more than this. European exports
included metals and metal products, armaments, woollen textiles, books, and
instruments. The purchasers were primarily states and elite individuals; there was no
social or economic basis for the sale of European goods to ordinary consumers. This is
sometimes held as proof of Asian productive superiority, but it may reflect something
else: a low Asian purchasing power (in terms of silver), and restricted, fragmented
circuits of information that could lead to the development of novel consumer
choices.xxxvi
From a very early date, the Europeans in Asia began devoting their commercial
resources—ships, crews, capital, trade goods—to the conduct of intra-Asian trade. The
Portuguese and later the Dutch and English sent ships into Asian waters (and acquired
additional ships built in Asia) with the intention of retaining them there to earn income
from trade among Asian ports. The profits were ultimately repatriated in the form of
Asian goods shipped to Europe. From a trade balance perspective, this can be viewed as
an export of ‘invisibles’ (shipping and commercial services). In certain periods (1620-70
for the VOC; after 1757 for the EIC) these ‘exports’ were a major factor in balancing
20
East-West trade. The source of Europe’s competitiveness in intra-Asian shipping remains
to be explained satisfactorily. A hypothesis deserving of consideration is that Europe’s
advantage resided in its organized networks of information gathering rather than in any
technical advantage in navigation or commercial practices.
The third and final European export is often the only one mentioned: silver. The
Europe-Asia trade is often simplified as an exchange of Asian goods for European silver,
and it is certainly true that silver accounts, in most times and places, for a lion’s share of
European exports. This raises an obvious question: if European goods found few buyers
in Asia, why was there always a market for its silver? Indeed, why, as many
contemporaries observed throughout the early modern era, did the world’s silver
appear to migrate, as though drawn by a magnet, toward Asia, especially China?
This is a theme we have already encountered. The old ‘oriental despotism’
literature placed great stock on the high Asian demand for bullion, especially silver, and
explained it either as an irrational preference or as the rational response of private
individuals to life in a society without secure property rights, rife with risks of loss and
expropriation. Such societies will exhibit a high liquidity preference and resort to
hoarding—hence the ongoing demand for silver imports.
The great divergence scholars explain the same phenomenon quite differently.
As we have already noted, most of them do not place much emphasis on foreign trade
in their accounts of the Asian economies, but they do hold bullion imports to be
essential to Asian economic health. To Pomeranz, ‘the influx of silver, by oiling the
wheels of the Chinese economy, had some stimulatory effect.’ That is, silver advanced
monetization. It was not hoarded, but placed in monetary circulation. The increased
money supply stimulated market-oriented production, which allowed for greater
specialization, which secured higher productivity. Parthasarathi makes this same point
with respect to India, but more strongly. The silver and gold inflow doesn’t simply ‘oil
21
the wheels’ of the Indian economy, it was the very motor of market expansion,
enlivening specialized production throughout a subcontinent that was ‘awash in money’
thanks to trade with Europe.xxxvii
From this perspective, the Europe-Asia trade, while perhaps a boon to (some)
European consumers, was nothing short of essential to the efficient functioning of major
Asian economies. If goods from the East were a private European pleasure, silver from
the West was a public necessity in Asia, and the proof of this is found in the price.
Asians were prepared to pay more for silver than anyone else in the world. This was
true in the Sixteenth Century, when the Portuguese entered the Indian Ocean area with
silver mined in Saxony and Bohemia, and it remained true into the Eighteenth Century,
when the ships of all the European trading companies sailed round the Cape of Good
Hope with chests of silver that had been mined in Mexico and Peru. Three centuries of
exploiting the arbitrage opportunities of highly unequal world silver prices did not much
diminish Asia’s appetite for silver, as revealed by the persisting price differentials.
How much bullion did the trading companies actually send to Asia? I have made
estimates of this outflow, based on company records, for the Seventeenth and
Eighteenth Centuries and, to place the Europe-Asia bullion flow in perspective,
compared it to the shipments to Europe from the mines of the Western Hemisphere.
(See Table 1.1). There is certainly reason to doubt the accuracy of these estimates,
especially the bullion shipments from the Spanish Empire, but they must be well wide of
the mark to undermine the basic findings:
1. The bullion, mostly silver, shipped annually to Asia via the Cape route was a very
small portion of the annual additions to the European supply until the Eighteenth
Century. Only then did it reach a quarter and, ultimately, a third, of the New
World shipments to Europe. The trade with Asian never ‘drained’ Europe of its
bullion.
22
2. The silver entering Asian economies from the Cape route trades could not have
played a major role in increasing the money supply in large parts of Asia (as
opposed to specific ports and small regions) until the Eighteenth Century. Even
then, at the peak of bullion shipments in 1726-50, the ability of Cape-route silver
to deepen Asian monetization remained distinctly limited.
In 1726-50 the European companies sold approximately 160,000 kg of silver and
silver equivalent in Asia in exchange for goods. If it were entirely monetized, this would
suffice to augment the per capita money supply of some 500 million Asians by 0.32
grams of silver—the equivalent to 0.77 of an English pence or 0.72 of a Dutch
stuiver.xxxviii Even small annual augmentations, when accumulated over many years, can
make a difference, of course, but it is probable that these bullion injections barely kept
pace with Asia’s population growth. That is, the bullion reaching Asia via the Cape route
did little to increase the per capita monetization of the economies.
b. The Importance of Exports to Asian Economies.
If the flow of bullion to Asia was important but not of a scale to be transformative, what
about the direct stimulus of European demand to Asian manufacturers and producers?
How important were European markets for Asian producers? The answer to this
question surely must vary enormously sector by sector. Within sectors such as Chinese
ceramics and Indian cotton textiles many specialists were wholly devoted to the
production of export wares, goods specially designed for specific foreign markets.xxxix
For them, the European market (and other foreign markets) was of critical importance.
But, were their activities of critical importance to their regional and national
economies?
To answer this question we must situate these conspicuous export-dependent
producers into the larger context of Asian production capacities in manufactures and
23
tropical commodities. On this question much remains to be learned. We know, of
course, that the major Asian societies were populous: the populations of both India and
China exceeded that of all of Europe, and Asia as a whole held well over three times the
European population. If, as the ‘great divergence’ school argues, much of early modern
Asia was economically productive at a level at least comparable to Europe, it would only
stand to reason that Asian exports to Europe were never more than a tiny percentage of
production for domestic and other Asian markets. In the absence of detailed
knowledge, this logic stands behind the claims that a highly elastic supply of Asian goods
of high quality and low price could flow to European markets. Europe was, as it were,
simply absorbing a small fraction of the output of an enormous and productive
economic machine.
But was the ‘effective’ domestic market (urban, market-oriented population)
really very large? The great divergence literature is premised on the claim of rough
equality of general level of development and of the standard of living in east and west.
Thus, demand at home, in Asia, could not have been small. Andre Gunder Frank pushed
the argument of Asian manufacturing superiority hard in ReOrient (1998). The
unidirectional character of Eurasian trade (that is, the absence of significant Asian
demand for European goods) struck him as proof that, as Robert Marks expressed it,
manufacturers were capable of ‘flooding the world market with Chinese
manufactures.’xl
Kenneth Pomeranz does not see matters quite this way. He doubts the
importance of foreign markets for Chinese industrial production: ‘Even with silk,
domestic demand dwarfed exports…’ For him, Chinese foreign trade is a minor matter,
even a distraction. More importantly, he also doubts the claim that Chinese
manufactured goods were elastic in supply.
24
He argues that Qing China suffered from increasingly severe supply constraints.
For example, he notes that China produced vast quantities of tea, sugar, tobacco and
cotton and claims that per capita Chinese consumption of these goods in the Eighteenth
Century must have been higher than that of Europe. But, production of all of these
commodities stagnated and even declined, he argues, because food crops demanded
ever more land as China’s population grew. ‘China increasingly ran short of places in
which sugar (or tea or tobacco) production could keep expanding without reducing grain
output. Cotton and probably tobacco production in north China probably fell
significantly after 1750 as a burgeoning population needed more land for food.’xli
Pomeranz does not pursue the implications of these domestic supply constraints
for foreign trade, but if eighteenth-century China faced a trade off between basic food
versus luxury and industrial raw material production, it may also have faced a trade off
between production for domestic versus export markets. In this context, European
demand, while tiny when measured as a percentage of total Chinese and other Asian
production, may have been highly disruptive in the regional economies most affected.
c. Asian supply inelasticities
If Asian production superiority is not assumed—if, indeed, Asian exports diverted
resources from basic needs at home—the growing supply of goods from the East must
have been driven, for the most part, by rising European demand: high and growing
incomes in Europe that ‘suck in’ goods from Asia despite supply inelasticities, at least for
certain goods. This hypothesis has the virtue of being consistent with a repeated
pattern of Asian export goods being displaced in European markets by competing
sources of supply. Thus, European demand was robust; it rose faster than the one per
cent per annum long-term growth of Eurasian trade. But, while exposure to Asian goods
may well have initiated the new European tastes, the long term growth of European
demand often came to be satisfied by non-Asian suppliers, who offered the goods at
25
lower prices, learned to produce to Asian standards of excellence, and/or developed a
larger export-oriented production capacity. Consider the following examples.
Coffee: From Mocha to Java to Saint Domingue.
The only substantial commercial suppliers of coffee beans were in the Yemen, on the
Arabian Peninsula. Until the 1690s, Western and Central Europe were supplied with
coffee—in very small amounts—via the Levantine ports of the Ottoman Empire. As
European demand became significant, the English, French, and Dutch East India
Companies all began to visit the commercial center of Mocha to buy coffee directly (and
send it thousands of miles via the Cape route to reach markets that could be reached in
less than one quarter of the distance via the Levant). Table 2, which details the source
and volume of British coffee imports at various dates, shows how the supplies grew in
the first decades of the Eighteenth Century as the trade shifted from the Levant to East
India Company traders at Mocha. (Insert Table 2) But supplies at Mocha remained
nearly fixed, regardless of the price. Only later in the Eighteenth Century did coffee
supplies grow further, once the West Indian islands supplanted the Arabian suppliers.
Britain was not a major consumer market for coffee (most was re-exported to
continental Europe); the Dutch Republic was, and data from the Zeeland Chamber of the
VOC offers more detail about the changing sources of coffee supplies. (Insert Table 3)
Mocha’s coffee supplies peaked by 1720. A decade earlier the Dutch traders, frustrated
by persistently inelastic supplies and high prices, smuggled coffee plants from Mocha to
Java and set about acculturating the plants there with a view to developing coffee
plantations. In the course of the 1720s Javan supplies overtook Mocha. By 1726 Java
supplied 4 million lb (versus a few hundred thousand from Mocha) at one-third of the
price prevailing at Mocha. But Java, too, found its European market share eroded as
coffee cultivation developed with success on the Caribbean region. By the 1780s,
Surinam and Guyana accounted for 80 per cent of Dutch coffee imports. By then, the
26
world supply of coffee from all sources amounted to about 110 million pounds. Arabia
and Java each produced about 10 per cent of this volume; the West Indies supplied the
rest, half being produced on French Saint Domingue.
Indigo. From Toulouse to India to the New World.
India was a large producer of indigo, a source of blue dyestuff, primarily to supply its
large domestic textile industry. The European trading companies sent supplies to
Europe, where it successfully competed with European-produced woad, another source
of blue dye. By the 1640s, when woad (much of it from the region of Toulouse) had
been largely displaced from the market, consumers complained of the inelastic supplies
and unreliable quality of Indian indigo.xlii Higher indigo prices did not elicit increased
production in India. But the higher prices did encourage development of indigo
cultivation in tropical zones of the New World, which quickly became the dominant
supplier to the European market.
Porcelain. From Jingdezhen to Meissen to Staffordshire.
The hard-glazed porcelain of China had no direct equivalent in the European ceramics
industry. Chinese porcelain stands therefore as a classic example of a novel product
desired for its unique quality—a striking example of Eastern craftsmanship. From a
single Chinese production center, Jingdezhen, Europe was supplied, over the
Seventeenth and Eighteenth Century, with at least 70 million pieces of crockery, much
of it specifically fashioned to satisfy European tastes.xliii But Europe, even at the peak of
its demand, absorbed only a minor portion of exported Chinese porcelain. At the same
time that China catered to European tastes, it also produced specialized products for the
Japanese and Southeast Asian markets.xliv
27
The ‘demonstration effect’ of Chinese (and Japanese) porcelain on the European
consumer generated a vast demand for both the exquisitely decorated porcelain and for
more utilitarian earthenware that emulated the qualities of the Asian product. While
Chinese production satisfied a portion of this new demand, more and more came to be
supplied by European imitators (such as the luxurious royal porcelain works of Meissen,
Sèvres, etc.) and European producers of less costly substitutes (such as Delftware and,
later, the creamware of Josiah Wedgwood).xlv Speeding this process along was a rise in
the price of Chinese porcelain after 1750. By the end of the Eighteenth Century, import
substitution had reduced the original Asian porcelain to the position of a specialty item
in a large ceramics industry dominated by European producers. Maxine Berg
summarized the dynamic of demonstration effects and import substitution nicely: ‘If
selling Asian goods provided the model for new consumer goods retailing, then the
products and indeed their production processes provided the models for European
industrial development.’ xlvi
Silk. From fabric to raw material.
A similar story can be told of the trade in Asian silk fabric. Silk was produced in many
places, including Europe. But the Chinese product was esteemed in both Europe and
elsewhere in Asia as the finest available. The Spanish empire’s extraordinary AcapulcoManila galleons were all but wholly devoted to shipping Chinese silk to Mexico and
beyond, and the ships of the Cape route regularly supplied Europe with luxury silks.
There the Asian product—from Persia, India, and China—competed with Europe’s own
silk weaving industries, which responded to the new competition with improvements in
quality and design. Here, too, import substitution eventually marginalized the Asian
product; by the second half of the Eighteenth Century China’s silk exports were growing
rapidly, but the export was now primarily raw silk rather than the finished fabric. The
EIC then shipped only raw silk from India to Europe.
28
Cotton textiles. From India to Lancashire.
By far the most consequential example of import substitution, whereby the importation
of a novel and much-desired Asian product is replaced by a European imitation, is cotton
cloth. The conventional story begins with the introduction of Indian cotton fabrics to
Europe, the growth of demand for this fashionable and versatile fabric, and the long
dominance of Indian production centers as suppliers of vast markets in both Asia and
the Atlantic world. India’s superior craftsmanship was undercut, ultimately, by
England’s success in the mechanization of cotton spinning, followed by the
mechanization of weaving and the other seminal inventions of the Industrial
Revolution.xlvii The Industrial Revolution thereby causes the collapse of India’s major
export industry, which functioned as the motor of the entire subcontinent’s domestic
economy. In short order, Britain grew rich and India’s economy regressed.
The European trading companies certainly added substantially to India’s longexisting export trade in cotton cloth to Asian markets. Collectively, the companies sent
to Europe some 100-200,000 pieces annually in the 1660-70s, a volume that grew to
approximately 1,400,000 pieces by the 1750s. In later years, shipments to Europe never
exceeded this high-water mark, and by the 1790s began a steep decline.xlviii Thus, after
the mid-Eighteenth Century the continuing, if not accelerating, European demand for
cotton cloth was met less and less from India and ever more from Europe itself.
Ultimately, the dramatic events of the Industrial Revolution account for this
transformation, but India’s loss of market share in Europe predated these events by a
generation. India’s vast production capacity, venerable craft traditions, and long
commercial dominance in the world’s cotton textile markets did not prevent
inelasticities in supply from emerging that led to rising prices and quality-control
failures. Giorgio Riello’s recent study of the world cotton industry demonstrates that
the EIC’s average purchase price for Indian cotton textiles doubled over the century
29
after the 1660s. Over this same century, manufactured goods, including textiles
produced in Europe tended to decline in nominal price.xlix Riello also noted ‘sufficient
evidence that while prices increased quality worsened […] As consumption expanded in
Europe, there was an incentive to replace increasingly expensive Indian cottons with
competitively prices products produced in Europe.’l
Were goods from the East losing their European markets? Certainly not all of
them. Chinese tea flowed toward Europe in ever growing volumes (until the Nineteenth
Century, when alternative production centers in India, Ceylon (Sri Lanka), and Java
emerged—under colonial auspices—to become the dominant suppliers). A wide variety
of tropical commodities and fashionable furnishings also retained their hold on
European consumers. But, the relatively slow growth of the overall Asia-Europe trade
remains as a problem which calls for explanation. In all of the examples discussed
above, Asian goods appear to have enjoyed a European demand that grew faster than
Asian production centers could supply. Inelastic supply gave rise to higher prices and
sometimes quality problems. In time, alternative supply centers in Europe or its New
World colonies learned to produce competitive goods and gain control of most of the
market. Goods from the East exerted a ‘demonstration effect’ on European consumers,
changing tastes, and increasing the demand for the new goods. But, eventually a
process of ‘import substitution’ reduced the role of Asian suppliers in satisfying this
demand. In the long run, the European demand for goods introduced from Asia grew
considerably faster than did the supply of such goods from Asia.
The reason for this discrepancy may be, as suggested above, some failure of
Asian supply. But it may also have been caused by a failure of the European trading
companies to reduce the costs of bringing Asian goods to European markets. The costs
of contracting with Asian suppliers, enforcing contracts, transporting goods to Europe,
and so on—the ‘transaction costs’ of the Europe-Asia trade—were very considerable.
Arguably, these high costs placed Asian producers at a great disadvantage in serving
30
European markets, a disadvantage that only grew over time as goods from the East
shifted from being primarily costly luxuries to being goods sold to a broader public of
the ‘middling sort’. Were these stubbornly high transaction costs ‘unavoidable’ given
the technological and organizational capacities of the time? In the Atlantic trading
world transaction costs fell considerably over time as the early monopoly trading
companies gave way to a more competitive regime of private traders.li Why could such
a transformation not have been achieved east of the Cape of Good Hope?
The European trading companies vs private merchant ventures.
The European trading companies were monopolies in a specific, restricted sense: they
were national monopolies, possessing the sole right to conduct trade with Asia and
supply their home countries with goods from the East. But they generally compete with
each other in Asia (and with native Asian traders) in the acquisition of goods and they
also competed with each other to supply European markets. It may be more correct to
describe the English, Dutch, French, Danish, Swedish, and Austrian (Oostende)
companies as engaged in a form of oligopolistic competition. They were large enough
to influence the market by restricting the supplies of goods and by adjusting their sales
practices to the actions, or anticipated actions, of their competitors. Their short-term
supply-restricting behavior may have had long-term consequences on growth of EuropeAsian trade.lii
Probably more important to the long-term performance of the European trading
companies was their very limited capacity to reduce the transaction costs of EuropeAsia trade. Their national monopoly privileges clothed them with state-like powers in
Asian waters, and the exercise of these powers imposed a large overhead cost that bore
on their trading results. It is likely that it bore also on the entrepreneurial behavior, or
the lack of it, of company directors who were simultaneously merchants and
31
administrators of large and far-flung establishments of trading stations, territorial
dependencies and military forces.
In the Atlantic World, the monopoly trading companies that initiated the
settlement and commercial exploitation of the New World were gradually dismantled,
and replaced by private traders operating under an umbrella of state authority and
naval protection. Both the fall of transaction costs and the high rate of growth in the
Atlantic trades owe much to this liberalization (within mercantilist limits) of commercial
life. In Asia, the monopoly trading companies retained their hold on trade right to the
end of the Eighteenth Century. Company employees conducted private trade, licit and
illicit, as discussed above, and the French and Danish companies experimented with
limited privately financed shipping, but, overall, the trading companies retained a firm
hold on the Europe-Asia trade until a confluence of commercial, political, and military
events undermined this venerable structure of trade. Between 1783, when private
ships of the newly independent United States entered Asian waters, and 1815, when the
Napoleonic Wars ended and continental European states could begin to reestablish
trading relations with Asia, the organization of this trade changed fundamentally. Of
the old trading companies, only the English East India Company remained, although it,
too, had to admit private British shipping into what had been its exclusive preserve.
Thus, from 1815 onward, while shipping technologies, communications
technologies, and sailing routes remained as before, the commercial organization of
Europe-Asia trade was transformed from one of an oligopoly of companies to one
dominated by private merchant ventures. This transformation was made possible by
the security umbrella now provided by the Royal Navy, and as Peter Solar convincingly
shows, the commercial results were dramatic.
1. The long-term rate of growth of the volume of Asian exports to Europe more than
doubled after the 1790s.
32
As noted earlier, after three centuries of rather steady growth at about 1 per
cent per annum, the total annual volume of Asian shipments to Europe by the 1780s
reached 50,000 tons. The course of change thereafter was anything but steady, as war
in Europe cut off all but British ships from access to Asia and the continental European
trading companies were all liquidated. Britain’s East India Company, the last man
standing, continued the trade with Asia together with private American traders, and
they were joined after 1815 by a new Dutch trading company and a swarm of private
traders, deploying small, unarmed ships where the old trading companies had always
relied on large, usually armed, vessels. The total tonnage of Asian goods returned to
Europe quickly rose to over 100,000 tons, and the rate of growth, while volatile year-byyear, was nearly double its historical rate. The acceleration in growth was entirely
accounted for by non-company shipping.
2. The transaction costs of Cape route shipping fell rapidly.liii
The smaller, unarmed vessels of the Americans and private British and other
European merchants quickly achieved significant reductions in transportation costs.
With the removal of security concerns, these vessels functioned with smaller crews
(twice the tons per crew member as conventional East Indiamen). They made more
voyages to Asia before they were scrapped and, although they were no faster than
other ships, they spent less time in port and waiting to join convoys and thereby
completed more voyages per year. Capital costs, labor costs, and insurance costs all fell
substantially. By Solar’s calculation these savings lowered transport costs by half and
lowered the price at which Asian goods could be landed at European ports by 20-23 per
cent.
3. The composition of Asian exports shifted from manufactures to raw materials.
The reduced shipping cost of the early Nineteenth Century did little, if anything,
to restore the competitiveness of traditional Asian exports to Europe. Instead, it
rendered possible the long-distance shipment of relatively bulky raw materials: raw
33
cotton and silk, sugar, jute, and, of course, tea. Asia was on its way to becoming an
exporter of raw materials and an importer of manufactured goods.
Conclusion
The opening of the direct trade route connecting Europe to Asia via the Cape of Good
Hope ushered in a long era of trade expansion that has attracted historical interpreters
ever since. It is not a simple story. This chapter has sought to make an inventory of the
issues, muster such evidence as we now have, and venture some interpretations where
they seems warranted, and raise some questions where that seems necessary. In
general, the historical importance of this dramatic logistical enterprise now appears to
be found more in the realm of knowledge and information circulation than in ‘primitive
capital accumulation’, and in transformed tastes and material culture rather than in
technology transfers.
European trade with Asia in the Sixteenth and Seventeenth Centuries was almost
certainly more important for its ‘demonstration effects’ on European consumers than
for its direct economic contributions via company profits or commercial practices.
Goods from the East were as important for the information they conveyed as for their
direct satisfaction of wants. They helped to transform consumer demand in ways that
Asian suppliers could not keep pace with. This was partly a problem of high transaction
costs (a failure of the European trading companies) and partly a problem of inelastic
Asian supplies (a failure of the Asian economies). Commodity after commodity lost its
hold on European markets as import substitution within Europe and rival supply zones
in the New World undercut the original Asian product. This problem manifested itself
well before the radical cost-reducing innovations of the Industrial Revolution could have
played any direct role in bolstering European competitiveness in manufactures.
The overall rate of growth of the Asia-Europe trade across the Sixteenth,
Seventeenth, and Eighteenth Centuries was slow: slower that the growth of European
34
demand for many Asian goods; slower than the growth of the Atlantic trades; and rather
modest when compared to the rate of population growth, particularly in parts of Asia. A
‘trade boom’ is not the correct term to describe this trade, and the cause of the
moderate pace of trade expansion is partly attributable—though how large a part
remains a matter of debate—to the organization of the European trading companies.
Their commercial virtues in the Seventeenth Century were considerable, especially in
concentrating capital and amassing and assessing commercial and political information
across the vast littoral of maritime Eurasia. But, over time, their hierarchical
organizational forms and their characteristic conflation of political and economic
functions imposed heavy costs on trade. The size of this burden is revealed by the shock
of the Napoleonic Wars, which destroyed the old trading regime and offered an opening
for private western traders to enter Asian waters. In short order, transaction costs fell
enormously and the rate of trade growth doubled. This acceleration did not have to
wait upon the technological breakthroughs of steam ships, railways, and the Suez Canal.
It preceded these achievements by more than 50 years, and raises the counterfactual
question of how the Europe-Asia trade might have developed under a more liberal
trading regime in the Eighteenth Century. Moreover, when transaction costs did fall,
early in the Nineteenth Century, this did not act as a stimulant to the export of Asian
manufactures, but open new possibilities for the export of Asian raw materials.
Repeatedly, trade was just one of the factors at play as European and Asian societies
interacted at a distance. Until the long era of trade gave way to an era of empire, the
global economy remained firmly polycentric and trade’s role in advancing global
convergence remained distinctly limited. But the information that followed in the wake
of the trade flows could, under particular domestic conditions, set in motion
transformations in both consumer behavior and commercial organization with far
reaching consequences.
35
Figure 1. Europe’s intercontinental trades, by shipping tonnage, 1501-1795.
36
Table 1. Inter-continental bullion flows, 1601-1800.
Estimates of silver (and silver equivalent) entering Europe from the Western
Hemisphere, and entering Asia from Europe via the Cape route. Annual averages in tons
of 1000 kilograms.
European Arrivals
Asian Arrivals via
Asian Arrivals as % of
from New World
Cape Route
European Arrivals
1601-25
245
15
6
1626-50
290
17
6
1651-75
330
33
10
1676-1700
370
60
16
1701-25
415
109
26
1726-50
500
160
32
1751-75
590
141
24
1776-1800
600
150
25
Source: European Arrivals: Ward Barrett, ‘World Bullion Flows, 1450-1800,’ in James D.
Tracy, ed., The Rise of Merchant Empires (Cambridge, 1990), pp. 243-44. Asian Arrivals:
de Vries, ‘Connecting Europe and Asia,’ pp. 78-79.
37
Table 2. Coffee Imports, by source, to Great Britain, 1699-1787. In thousands of
pounds per annum.
Levant
1699-1701
Mocha
West Indies
Total
290
178
0
470
1722-24
64
1968
0
2032
1749-51
0
1110
30
1141
1772-74
0
359
6704
7059
1785-87
7000
Source: S.D. Smith, ‘Accounting for Taste: British Coffee Consumption in Historical
Perspective,’ Journal of Interdisciplinary History 27 (1996), pp. 183-214.
38
Table 3. Coffee Imports, by source, to the Dutch Republic 1710-1789, in thousands of
pounds.
VOC – Mocha
VOC – Java
West Indies
Total
1710-19
771
8
0
779
1720-29
1001
2064
144
3208
1730-39
144
3973
3446
6701
1740-49
182
3502
4884
8568
4412
17080
21492
1780-89
Source: Johannes Postma, ‘Suriname and its Atlantic Connections, 1667-1795,’ and Eric
Willem van der Oest, ‘The Forgotten Colonies of Essequibo and Demerara, 1700-1814,’
in Johannes Postma and Victor Enthoven (eds), Riches from Atlantic Commerce. Dutch
Transatlantic Trade and Shipping, 1585-1817 (Leiden and Boston, 2003), pp. 317, 35051; J.J. Steur, Herstel of ondergang (Utrecht, 1984), p. 243.
39
i
Immanuel Wallerstein, The Modern World-System: Capitalist Agriculture and the
Origins of the European World Economy (New York: Academic Press,1974), p. 42
ii Wallerstein, The Modern World-System, p. 330.
iii Eric Jones, The European Miracle: Environments, Economies, and Geopolitics in the
History of Europe and Asia (Cambridge: Cambridge University Press, 1981), p. 226.
iv Jones, The European Miracle, pp. 164-65.
v The ‘bullion sink’ concept is developed in the following: R.C. Blitz, ‘Mercantilist Policies
and the Pattern of World Trade,’ Journal of Economic History, 27 (1967), pp. 39-55; John
Maynard Keynes, Indian Currency and Finance (London: Macmillan, 1913); Charles
Kindleberger, Spenders and Hoarders (Singapore: Institute of Southeast Asian Studies,
1989).
vi Kenneth Pomeranz, The Great Divergence: Europe, China and the Making of the
Modern World Economy (Princeton: Princeton University Press, 2000); Andre Gunder
Frank, ReOrient. Global economy in the Asian Age (Berkeley; Los Angeles: University of
California Press, 1998); R. Bin Wong, China Transformed: Historical Change and the
Limits of European Experience (Ithaca, NY: Cornell University Press, 1997); R. Bin Wong
and Jean-Laurent Rosenthal, Before and Beyond Divergence. The Politics of Economic
Change in China and Europe (Cambridge, Mass.: Harvard University Press, 2011).
The California School also informs these more general works: Robert B. Marks, The
Origins of the Modern World. A Global and Ecological Narrative (Lanham: Rowman &
Littlefield, 2002), and Jack Goldstone, Why Europe? The Rise of the West in World
History 1500-1800 (New York: McGraw-Hill, 2008).
vii Not an unchallenged orthodoxy. For critiques, see: Peer Vries, Via Peking to
Manchester. Britain, the Industrial Revolution, and China (Leiden: Research School
CNWS, 2003); Peer Vries, ‘The California School and beyond: how to study the Great
Divergence?’ History Compass 8 (2010), pp. 730-751; Peter Coclanis, Jan de Vries, Philip
Hoffman, R. Bin Wong, Kenneth Pomeranz, ‘A Forum on Kenneth Pomeranz’s “The Great
Divergence”’, Historically Speaking 12 (September, 2011), pp. 10-25.
viii Frank, ReOrient, pp. 4-5.
ix Pomeranz, The Great Divergence, p. 251.
x Pomeranz, The Great Divergence, pp. 172-73, 194-95, 205-06; Prasannan
Parthasarathi, Why Europe Grew Rich and Asia Did Not. Global Economic Divergence,
1600-1850 (Cambridge, 2011), p. 182.
xi Pomeranz, The Great Divergence, p. 191; Parthasarathi, Why Europe Grew Rich, pp.
46-50, 266.
xii In addition to the Great Divergence historians, on finds this approach in global
historical such as: Chris Bayly, The Birth of the Modern World; John Richards, The
Unending Frontier. An Environmental History of the Early Modern World (Berkeley; Los
Angeles: University of California Press, 2003); Victor Lieberman, Strange Parallels.
Southeast Asia in global perspective, 800-1830, 2 vols (Cambridge: Cambridge University
40
Press, 2003 & 2009); Jos Gommans, ‘Continuity and change in the India Ocean basin,’ in
J. Bentley and S. Subrahmanyam (eds), Cambridge World History, Vol. VI: The
construction of a global world, 1400-1800 (forthcoming).
xiii Parthasarathi, Why Europe Grew Rich, pp. 37-45; Pomeranz, The Great Divergence,
p. 33; Rosenthal and Wong Before and Beyond Divergence, ch. 4.
xiv Stephen Broadberry and Bishnupriya Gupta, ‘The Early Modern Great Divergence:
Wages, Prices and Economic Development in Europe and Asia,’ Economic History Review
59 (2006), pp. 2-31; Robert Allen, Tommy Bengtsson and Martin Dribe, eds., Living
Standards in the Past: New Perspectives on Well-Being in Asia and Europe (Oxford,
2005).
xv Pomeranz, The Great Divergence, pp. 50-54; Robert Marks, Tigers, Rice, Silk, and Silt
(Cambridge: Cambridge University Press, 1998), pp. 180-83, 33-45.
xvi Kevin H. O’Rourke and Jeffrey G. Williamson, ‘After Columbus: Explaining Europe’s
Overseas Trade Boom, 1500-1800,’ Journal of Economic History 62 (2002), pp. 417-56.
xvii Leonard Blussé and Ivo Smits, eds., Bridging the Divide: 400 Years, the NetherlandsJapan (Leiden: Hotei Publishing, 2000).
xviii Niels Steensgaard, The Asian Trade Revolution of the Seventeenth Century: The East
India Companies and the Decline of the Caravan Trade (Chicago; London: University of
Chicago Press, 1974).
xix Woodruff Smith, ‘The Function of Commercial Centers in the Modernization of
European Capitalism: Amsterdam as an Information Exchange in the Seventeenth
Century,’ Journal of Economic History 44 (1984), pp. 985-1005. The gathering and
assessing of botanical information is the focus of Harold J. Cook, Matters of Exchange.
Commerce, Medicine, and Science in the Dutch Golden Age (New Haven: Yale University
Press, 2007); Matthew Sargent, ‘The Birth of Globalization: Cross-Cultural Knowledge
Transfer along Euroepan-Asian Trade Routes and the Rise of the Multinational
Corporatin (1250-1750),’ (Ph.D. Dissertation, University of California, 2013).
xx J.J. Steur, Herstel of ondergang. Voorstellen to redress van de VOC, 1740-1795
(Utrecht: HES Uitgevers, 1984), p. 75.
xxi Ulrich Pfister, ‘The great divergence, consumer revolution, and the reorganization of
textile markets: evidence from Hamburg’s import trade in the eighteenth century,’
(Univ. Muenster,, June 2012, unpublished MS).
xxii A related argument about the role of consumer choice in raising living standards is
developed in Jonathan Hersch and Hans-Joachim Voth, ‘Sweet Diversity: Colonial Goods
and the Rise of European Living Standards after 1492,’ (CEPR Discussion Paper no. 7386,
2011).
xxiii The concept sketched here is developed more fully in: Jan de Vries, The Industrious
Revolution (Cambridge; Cambridge University Press, 2008).
xxiv Jan de Vries, ‘Connecting Europe and Asia: a quantitative analysis of the Cape-route
trade, 1497-1795,’ in Dennis Flynn, Arturo Giráldez, and Richard von Glahn (eds), Global
Connections and Monetary History, 1470-1800 (Aldershot, Hants, 2003), pp. 35-106.
41
xxv
O’Rourke and Williamson, ‘After Columbus,’ use the term ‘trade boom’ in the title of
their article to describe the growth of Europe-Asia trade in the early modern era.
xxvi Fernand Braudel and Frank Spooner, ‘Prices in Europe from 1450 to 1750,’
Cambridge Economic History of Europe, Vol. 4 (Cambridge, 1967), pp. 374-486; Jan de
Vries, The Economy of Europe in an Age of Crisis, 1600-1750 (Cambridge, 1976), pp. 1415.
xxvii For a defense of these claims, see: De Vries, ‘Connecting Europe and Asia,’ pp. 5562. The ‘Europe’ I refer to here and elsewhere excludes the lands of the Ottoman and
Russian empires.
xxviii The population estimates cited here refer to ‘Europe’ west of a line from Königsberg
(Kalinen) to Trieste. It excludes easternmost Europe and the Balkans. Jan de Vries,
‘Population’ in Thomas Brady, et al. (eds), Handbook of European History, 1400-1600,
Vol. 1(Leiden: E.J. Brill, 1994), p.13.
xxix William Lavely and R. Bin Wong, ‘Revising the Malthusian Narrative: The Comparative
Study of Populatin Dynamics in Late Imperial China,’ Journal of Asian Studies 57 (1998),
pp. 714-48; Loren Brandt, Debin Ma, and Thomas G. Rawski, ‘From Divergence to
Caonvergence: Re-evaluating the History Behind China’s Economic Boom,’ London
School of Economics Working Papers 175/13 (2013).
xxx Carla Rahn Phillips, ‘The Growth and Composition of Trade in the Iberian Empires,
1450-1750,’ in Tracy (ed.), Rise of Merchant Empires: Long-Distance Trade in the Early
Modern World, 1350-1750 (Cambridge: Cambridge University Press, 1990), pp. 40-46;
M. A. Mola, ‘The Spanish colonial fleet (1492–1828)’, in H. Pietschmann (ed.), Atlantic
history: History of the Atlantic system, 1580–1830 (Göttingen: Vandenhoeck & Ruprecht,
2002), p. 373.
xxxi Curtin, The Atlantic Slave Trade: A Census (Madison, Wisc.: University of Wisconsin
Press, 1969).
xxxii Klas Rönnbäck, ‘An Early-Modern Consumer Revolution in the Baltic?,’ University of
Gothenburg Working Paper, 2010.
xxxiii The average value of a ton of Asian goods sold by the trading companies in 1780 was
1250 guilders, or 112 pounds sterling. 0.5 kg of a weighted average of all Asian goods
landed in Europe, generated 0.625 guilders (12.5 stuivers), or 0.056 pounds sterling (1
shilling 1.4 pence). De Vries, ‘Connecting Europe and Asian,’ p. 87.
xxxiv See wage data in Robert Allen, ‘The Great Divergence in European Wages and Prices
from the Middle Ages to the First World War,’ Explorations in Economic History 38
(2001), pp. 411-447.
xxxv Data drawn from: W.A. Mitchell and Phllis Dean, Abstract of British Historical
Statistics, p. 310; Pierre Butel, ‘France, the Antilles, and Europe in the Seventeenth and
Eighteenth Centuries: Renewal of Foreign Trade,’ in Tracy, Rise of Merchant Empires, pp.
163, 170; Jan de Vries and Ad van der Woude, First Modern Economy (Cambridge:
Cambridge University Press, 1997), p. 497, with corrections based on Wim Kloosters,
Illicit Riches. Dutch Trade in the Caribbean, 1648-1795 (Leiden: KITLV Press, 1998) p.
176.
42
xxxvi
Frank, ReOrient, pp. 126-27, 174-78.
Pomeranz, The Great Divergence, p. 191; Parthasarathi, Why Europe Grew Rich, pp.
46-50.
xxxviii De Vries, ‘Connecting Europe and Asia,’ pp. 78, 91.
xxxix Rosemary Scott (ed.), The Porcelain of Jingdezhen (London: Percival Foundation of
Chinese Art, 1993); Giorgio Riello, Cotton. The fabric that made the modern world
(Cambridge: Cambridge University Press, 2013), esp. pp. 87-109.
xl Frank, ReOrient, pp. 111-117; Marks, Origins of the Modern World, p. 16.
xli Pomeranz, The Great Divergence, p. 125.
xlii Ghulam Nadri, ‘Indigo in Euro-Asian Trade in the Early Seventeenth Century:
Challenges and Opportunities,’ in this volume; R. C. Nash, ‘South Carolina Indigo,
European Textiles, and the British Atlantic Economy in the Eighteenth Century,’
Economic History Review 63 (2010), pp. 362-92.
xliii Scott (ed.), The Porcelain of Jingdezhen; Robert Finlay, ‘The Pilgrim Art. The Culture
of Porcelain in World History,’ Journal of World History 9 (1998), pp. 141-87.
xliv C. Ho, ‘The Ceramic Trade in Asia, 1602-1682,’ in A.J.H. Latham and H. Kawakatsu
(eds), Japanese Industrialization and the Asian Economy (London, 1994), pp. 35-70.
xlv de Vries and van der Woude, The First Modern Economy, pp. 307-09; Lorna Wetherill,
‘The Growth of the Pottery Industry in England, 1660-1815,’ Post-Medieval Archaeology
17 (1983), pp. 15-46.
xlvi Maxine Berg, Luxury and Pleasure in Eighteenth-Century Britain (Oxford: Oxford
University Press, 2005), pp 75, 77.
xlvii Parthasarathi, Why Europe Grew Rich, pp. 90-114.
xlviii Riello, Cotton, Fig 5.3, p. 94
xlix Riello, Cotton, pp. 107, 116.
l Riello, Cotton, p. 108.
li Russell Menard, ‘Transport Costs and Long-Range Trade, 1300-1800: Was There a
European Transport Revolution in the Early Modern Era,’ in James D. Tracy (ed.), The
Political Economy of Merchant Empires (Cambridge: Cambridge University Press, 1991),
pp. 228-75.
lii O’Rourke and Williamson, ‘After Columbus’; Jan de Vries, ‘The Limits of Globalization
in the Early Modern World,’ Economic History Review 63 (2010), pp. 710-33.
liii This section is based on Peter Solar, ‘Opening to the East: Shipping Between Europe
and Asia, 1770-1830,’ Journal of Economic History 73 (2013), pp. 625-61.
xxxvii
43