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Research Project
Wealth and Power:
Trajectory of Economic Institutions in Historical and Comparative Perspectives,
Europe-Asia, 17th-19th Centuries
Francois GIPOULOUX (CNRS)
Ecole des Hautes Etudes en Sciences Sociales, Paris
Centre Chine Corée Japon
The primary objective of this project is to identify a set of economic institutions which have played a crucial role in 17th-19th
century maritime Asia and to compare their role and evolution with key economic institutions in Europe during the same period.
Institutions can be defined as a set of rules that establish the base for production and exchange. In other words, they are the rules
of the game imposed on all economic actors. We will rely on the theoretical corpus of the new institutional economic history and
on the historical and comparative institutional analysis and its attempt to explain institutions as endogenously and self-enforcing
outcomes of a complex and non-linear historical process (North and Weingast, 1989; Greif, 2005; Qian and Weingast, 1997).
The time is ripe for a systematic study of a full set of economic institutions in early modern Asia. This will lay the foundations
for a comprehensive and fruitful comparison with the development path followed by Europe during the same period. Many
primary sources regarding early modern and modern China and Japan are now available. Thanks to recent historiographic pathbreaking work by Japanese researchers (for example, Oka, 2001) a rich collection of private archives from the Suetsugu and
Shimai merchant family is going to be edited. A very dense corpus is also available with the publication of the minutes of the
Kong Koan or Chinese council of Batavia/Jakarta (Nie, Blussé, 2003-2010), The Deshima Diaries of Nagasaki (Blussé, Vialle,
1992-2003) and the sources edited by the Imperial Palace archives in Taipei. Furthermore the Notarial Archives of Batavia
(1624-1830) in the Arsip Nasional at Jakarta contain a wealth of information on contracts made between Asian and European
traders.
The study of these sources will considerably enrich the comparative analysis of European, Chinese and Japanese key economic
institutions. In particular, a full indexation and translation of the main documents will permit a systematic comparison with a
corpus of similar contracts, edited by Balard (1978) in his monumental work on the archives of notary contracts held in Caffa at
the end of the 12th century and with other sources, relating to the economic history of the European continent, edited by Lopez
and Raymond (2001) on medieval trade in the Mediterranean world. Moreover, it will allow us to measure the social, political,
cultural, and in some cases religious attributes of what we usually consider as economic institutions in two distinctive
environments: Europe and Asia in the early modern and modern period. The proposed research method will seek to foster both
theoretical and empirical analyses. It also will mobilise contributions from history, law, anthropology and religion to understand
the embeddedness of economic institutions. How and why do these idiosyncrasies matter? What are their links to historical
contexts? How have they evolved in response to changes in the economy, and to legal and political frameworks? Indeed, legal,
political and economic institutions have remarkable influences on economic performance.
It is therefore necessary to conduct a thorough investigation into original documents in order to depict the profusion and
complexity of economic institutions pertaining to the overall development of China and Japan during the period under
consideration. The purpose is to understand the complex process of economic change within diverse environments by analysing
the beliefs, norms and rules that a given socio-economic structure creates in the pursuit of its distinctive goals.
I have chosen to focus on two maritime worlds — The Mediterranean and the East Asian seas. In so doing, it will be possible to
identify similar tools of economic exchange (for instance the Mediterranean commenda and its Chinese and Japanese equivalent,
gongsi or nagegane; bill of lading (huodan), pancada [auctions] or ito wappu etc.) and to observe the conditions of their
emergence, along with the trajectory over a relatively long time span. In some cases there is a striking symmetry between
economic institutions and business practices in those two environments. In other cases, distinctive institutions appear to cope
with specific constraints and to attain peculiar goals. Even in the case of symmetric institutions within 2 socio-economic
environments, the main question to address is why they have diverged. Why has commenda evolved into shareholding
companies and ultimately into limited liability corporations, and why have comparable institutions in Asia like gongsi or
nagegane not?
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In order to explain the factors determining the dynamics of the market and market-supporting institutions, Avner Greif (1994)
has provided a productive distinction between two sets of institutions. Firstly, there are “contract-enforcement institutions”,
arising spontaneously from the pursuit of individual interests. Their primary function is to secure exchanges. Secondly,
“coercion-constraining institutions” refrain actors from abusing the property rights of others. The dynamics between these two
sets of institutions determine the evolution of markets and political institutions.
It is necessary to further explore the operability and the relevance of this dichotomy in the specific framework of Chinese and
Japanese maritime economies. In particular, what are the factors that have determined the dynamics of market expansion?
Conversely, what are the obstacles that have, in the particular case of China, prevented early successes from transforming into
subsequent economic development?
One paradox of Asian maritime trade is that we find extremely wealthy merchants, without seeing any steady process of capital
accumulation. To put it more bluntly, situations where capital is periodically confiscated abound, as shown in the case of
Suetsugu Heizo, in 17th century Japan; in China, accumulated wealth was frequently converted into land purchases or
philanthropic donations, and more generally, wealthy merchants aspired to send their sons into mandarin careers.
Regarding the above-mentioned paradox, we will test three main hypotheses.
1. The first is linked to the issue of high interest rates.
a) At first sight, high interest rates are linked to risk. Risk is generally high in maritime ventures. But in China’s or
Japan’s case, the risk is even higher because there are no institutional mechanisms that allow its management and its mitigation:
contract enforcement through the courts, legal instruments, etc. One common feature of nagegane contracts is their high interest
rates. While maritime ventures have always been a risky business, involving high interest rates, one fact is striking: with the
appearance of elaborate financial tools such as fully transferable and negotiable bills, between the end of the 15th century and
the end of the 16th century, interest rates in Europe were cut by half, from around 25% to 12% (Munro, 2003). However, in both
Chinese and Japanese maritime ventures, interest rates were fairly high, ranging from 35% to 80% annually, according to the
level of security provided by the borrower.
b) However, another explanation needs to be explored. Credit was the great lubricant of the commercial revolution
which occurred in Europe at the end of the 13th century (Lopez,1971). But in China, capital was in high demand and expensive,
because it was rare. One reason for this scarcity was the under-development of an efficient capital market. In the case of China,
and to some extent in Japan, serious doubts can be raised regarding the extension of capital markets and the availability of credit.
We will explore the birth, expansion and operating modes of capital markets in both China and Japan.
c) One clear-cut difference between European and Asian political systems should be taken into account here. In
Europe, capital markets were developed early, through public debt. There was of course a structural difference between Europe
and China, and to some extent Japan, at that time. European royal courts were chronically in debt. Thus the development of
capital markets, and the continuous improvements to financial instruments were, in some sense natural outcomes of this
necessity.
At the end of the Middle Ages, the function of the public debt in Italian cities was thus to transform private wealth into military
power, and to build or to enlarge a territorial state in order to control a greater economic zone and its resources. This chemistry
took place through public credit. Compared with European monarchies, the cost of credit in the maritime republics was,
relatively low, from 5% to 7% (Pezzolo, 2005).
By contrast, until the mid-19th century, the level of debt of the Chinese administration was fairly low, and there was no need for
a public debt market. This situation hampered the development of capital markets (Wong, 2000). It was fundamentally different
from that of France or England for instance, where monarchies were heavily in debt to merchants, bankers, and the public. In this
respect the Japanese counter example also offers an interesting case, because the Tokugawa regime became progressively
indebted to the merchant class.
2. The second hypothesis relates to the peculiar chemistry which transforms savings into capital. The close relationship between
law and economics is at the core of this process. What role is devoted by contractual arrangements to capital formation, business
organisations as well as resource distribution in Asian and European contexts? In China, did the lack of formal arrangements, as
codified by law, prevent the constitution of long-lasting commercial associations? Were the mutually binding obligations derived
from geographic origin, family or kin affiliations efficient substitutes? How was wealth accumulated and passed on? Special
emphasis will be given to the transmission of assets in the great Fukienese merchant families through genealogies, and
testaments in China but also in colonial urban settlements like Manila, Malacca and Batavia/Jakarta.
3. The third hypothesis will investigate the following issue: why were there no super companies in Asia? The question was
raised by K.N. Chaudhuri (1985), in his masterwork on trade and civilisation in the Indian Ocean. Part of the answer is that the
establishment of the early modern chartered East India Companies was directly related to aggressive European overseas state
policies which were lacking in the East Asian political sphere. Yet the specific features of the corporation should also be taken
into consideration. Modern companies are generally identified by four characteristics: limited liability for investors, free
transferability of investor interests, legal personality, and centralised management. If we can detect a continuity between
commenda and corporation —through a lengthy and non-linear process evolving from commenda to compagnia, and ultimately
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shareholding companies— then the issue at stake becomes: while commenda brought in by Muslim and Jewish traders has
migrated from the Mediterranean world to the Indian ocean, and the East Asian seas, how is it that it has not evolved into a more
elaborated impersonal and efficient economic institution akin to the corporation in this new environment?
a) The first sub-hypothesis to be tested here deals with the differences in the legal and religious environments in
the two regions (Mediterranean and East Asian seas, and more widely, between western Europe and East Asia). It will be done
by confronting, at the theoretical level, the Berman (1986) thesis and recent anthropological research by Katz (2009) and Wang
Mingming (2009) on the strong overlapping between religion and legal matters in China.
b) The second sub-hypothesis concerns the functions of family and kinship. Did particularistic ties as delineated
by clan affiliations or geographical origins prevent the emergence of efficient types of shareholding arrangements. Following
pioneering research by So (2002) and Zheng Zhenman (2001) on family lineages in maritime trade and in southern Fujian
province, it can be argued that family lineages transformed themselves into institutions providing capital and business
opportunities, and were also lowering the risks linked to investment, as well as investment costs. We will try to see whether this
new form of lineage can be found in maritime trade through research on the lineages and economic organization of large
merchant families in Fujian province and the way they accumulate wealth.
c) This leads to the third sub-hypothesis: do lineage estates or lineage trusts designate the assets of the kinship
organization? Are they the equivalent of the European business organization, with their rules of conduct, the power to regulate
their members? In other words, did there exist non-European corporations relying on indigenous growth, i.e. do we have
corporations in disguise in non-European worlds?
Finally, this research programme will provide fruitful insights on the following issues:
1. The evolution and the diffusion of trade instruments in different geographic and socio-economic contexts. What is the
degree of permeability of economic instruments used in maritime trade in Europe and Asia? A case in point here is the system of
commenda which migrated from the Mediterrenean area to the Indian Ocean zone, and ultimately to the South China Sea where
it became respondencia, or bottomry, or nagegane, a form of insurance on the ship used by Portuguese (most likely under the
influence of Genoese traders established in Lisbon) in their trade with Asia, and widely used by Japanese and (maybe) Chinese
merchants. How did an institution as crucial as joint investment partnership permeate different trade milieus?
2. The impact of the dichotomy between central and local policies on economic development in China. Political
centralisation in China has always co-existed with a remarkable vitality of local cultures. Conversely, medieval Europe appeared
politically fragmented but was made up of regions or countries trading with one another on a wide scale (Brittany with Flanders,
or with Cadiz, for instance). These divergent contexts strongly shaped the profile of the city in Medieval Europe and Asia. While
the fragmentation of polities in Europe led to a large autonomy of the city and its merchant communities – in medieval Europe
the city was basically a legal concept - the city in China was the symbol of the majesty of power, or a microcosm, the miniature
of the heavenly order (Wang Mingming, 2009). How did different political and religious visions lead to divergent paths for
urbanisation and urban markets?
3. The profile of entrepreneurs. The research will delineate several profiles of East Asian entrepreneurs, especially in
Tokugawa Japan and Ming-Qing China: what were their operating modes? How to set up a typology of merchants — traders,
brokers— through the analysis of their commercial instruments, the assessment of their financial power, and the strength of their
military capabilities? This classification is also strongly influenced by intense interweaving between different actors, great
merchant families, local officials, overseas trading networks and foreign merchants, especially Portuguese and Dutch.
4. What factors determine the social ascension of merchants? Considering the integration into local elites through mandarin
examinations, or the purchasing of official charges, the rich Huizhou archives (Anhui) on merchant activities deliver a complex
career trajectory: investing in educational institutions or after becoming officials, merchants were able to protect their original
peers, and influence imperial administration.
This research programme will mobilise often disconnected disciplines (history, economy, business history, anthropology,
historical geography) and introduce a comparative dimension. Interdisciplinarity will play a strong role in this research. This
research also aims to evidence convergence and rupture between European and Asian models of economic institutions and
business practices. It will also underline filiations and elements of continuity between the past and the present in Chinese and
Japanese business practices.
An international team of eight researchers and doctoral students will be established to carry out this project.
Senior scholars associated with the research include: Bin WONG, Professor of history and Director, UCLA Asia Institute, who
has examined at length Chinese patterns of political, economic and social change, especially since the eighteenth century, both
within Asian regional contexts and compared with more familiar European patterns. NIE Dening, Professor and Vice-Dean,
Research School for Southeast Asian Studies, Xiamen University; the editor, with L. Blussé, of the “Archives of the Chinese
Council in Batavia, Prof. NIE wrote extensively on Chinese merchants in Batavia, and on the multilateral trading ties between
China, Ryukyu and Southeast Asian Countries during the early period of Ming Dynasty”; Leonard BLUSSE, Professor of
History of Asian-European Relations, (History Department at Leiden University. He authored or edited 40 books among which:
Visible Cities: Canton, Nagasaki and Batavia and the Coming of the Americans. Cambridge: Harvard University Press, 2008,
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and with Nie Dening, Gong An Bu – Minutes of the Board Meetings of the Chinese Council, 8 vols., Xiamen: Xiamen
University Press. 2002-2009. Paola CALANCA, Assistant Professor at the Ecole Française d’Extrême Orient, is a specialist of
maritime administration in Ming China. She has extensively published on pirates and illegal trade in China (16th-18th centuries).
Mihoko OKA, Assistant Professor, The Historiographical Institute of the University of Tokyo, is specialising in Maritime and
Economic History in East Asia in relation with European Countries.
Sources:
This research will draw on a set of primary sources in Chinese and Japanese which have never been systematically exploited or
translated. Whilst some of them have been published, no comprehensive work has hitherto covered all periods of trade through a
selection of significant illustrations of business practices and accounting methods drawn from a wide range of places and archives.
A selection of sources includes:
- Private archives of the Suetsugu and Shimai families, Historiography department, University of Tokyo. (contracts of joint
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investments in maritime ventures, loans to Chinese and Portuguese merchants, 17 -18 centuries).
周凯：《厦门志》
Gazetteer
of
Xiamen,
comp.
by
Zhou
Kai
(comp.
around
1820),
卷五、船政略：战船，商船，渔船，小船，洋船，番船；卷八、番市略：东洋，东南洋，南洋，西南洋；卷十五、风
俗记：岁时，俗尚。（vol. 5, administration of junk; vol. 8, a brief introduction on overseas trade; vol. 15, records of
customs）.
- 《吧城华人公馆（吧国公堂）档案丛书：公案簿》，The Chinese minutes of the Chinese Council of Batavia (1780-1920),
edited by Prof. Blussé (Leiden University) and Prof. Nie Dening (Xiamen University). Particularly interesting are numerous
topical cases about economic issues, such as disputes over obligations, the distribution of property (inheritance) of Chinese
merchants in Batavia
- Original Chinese letters from Chinese ship owners preserved in the Dutch colonial archives.
- Notarial documents in the Amsterdam and Arsip Nasional Republik Indonesia archives.
- Japanese source material on the early modern entrepreneur Suminokura Ryoi, (1554-1614) a wealthy merchant from Kyoto who
was granted a license for overseas trade with Annan (present day Vietnam).
- 林玉茹、刘序枫编：《鹿港郊商许志湖家与大陆的贸易文书 1895~1897》（The Trade Letters of the Hsu Family
between Port of Lugang (Taiwan) and Mainland China in 1895-1897, edited by Lin Yuru & Liu Xufeng, There are 90 trading
letters including family letters, lists of merchandise, shipping bills, mate's receipts, bills of sale and so on. It is first-hand data
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on the Chinese junk trade in Taiwan in the end of the 19 century.
The final task will be writing up a monograph made of illustrative documents translated from Chinese and Japanese sources
dating from 17th-19th centuries. It should offer university students and scholars conversant in comparative economic studies the
first set of wide sources covering all aspects of trade and finance in maritime Asia, involving Chinese, Japanese and overseas
Chinese traders. Through the translation of a rich collection of contracts, account books, bills, letters, minutes of legal cases,
genealogies, testaments, etc., it will include an extensive introduction and notes for each set of documents, classified into the
following themes:
1. The forms of partnerships in Asian maritime trade ventures—nagegane and hegu contracts; 2. Loans and interest rates; 3.
Agents and intermediaries; 4. Commercial correspondence; 5. Bills of lading (huo dan) and maritime insurance contracts; 6.
Owners and managers: The liability issue; 7. Accounting methods; 8. Rules of good conduct and the art of relations; 9. Trade
dispute resolutions; 10. The economic roles of temples and religious congregations; 11. The power of the administration and its
involvement in business operations;12.The transmission of wealth and its accumulation.
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