Honourable Company: A History of The English East India Company

by John Keay

  It was also hard to avoid the impression that the Company was actually handling the China trade rather effectively. The export to Canton of raw Indian cotton was about to decline, but that of English products, especially woollens, steadily increased while that of Indian opium had grown so dramatically that it had redressed that adverse trade balance at Canton. In 1804 the value of British and Indian exports to China for the first time exceeded the value of its imports from China. At last the flow of bullion could be reversed and, as this favourable trade surplus grew, so did the flow of silver back to British India, there to be employed in the purchase of British manufactures.

  Where an existing monopoly was proving so beneficial, and where the consequences of its abolition could so materially affect the nation’s prosperity, deregulation was not an issue. Like the Lancashire cotton kings, the Government only invoked free-trade principles when confident of not losing by them.

  It was the same with Raffles in Singapore. Singapore’s remarkable growth is rightly attributed to Raffles’s insistence that it be constituted a free port, open to all nations and charging no duties. As such it became the model for Britain’s ‘Free Trade (or Informal) Empire’ of the mid-nineteenth century. It was, of course, ironical that this design originated with a servant of the Honourable Company; and it was also fortuitous. For until then Raffles had shown no sympathy with free trade. In Java he had actually championed what he called ‘the extension of our liberal and national principles of monopoly’ in relation to the spice trade, to the opium trade, and to the import of Indian cottons. Similarly at Benkulen in agriculturally backward Sumatra, he promoted colonization and a plantation economy in which the Company would remain as the purchasing agency. It was not The Wealth of Nations but the ideas of Dalrymple and the example of Penang, where for the first decade or so no duties had been charged, which inspired Singapore’s free-port status.

  James Matheson, already a country trader at the age of twenty-two, passed Singapore just four months after Raffles’s first landing. William Farquhar had been left in charge of the infant settlement and although there were as yet no British merchants in residence ‘this is a disadvantage which,’ opined Matheson, ‘as there are no duties or port charges, will soon vanish’. He saw a great future for the place under Farquhar’s ‘mild sway’ and dazzling prospects for anyone with a small capital to invest, Singapore ‘being within four miles of the direct tract to China’.

  As Matheson would soon appreciate, so long as the Company retained its monopoly of the China trade, this proximity constituted a double advantage. Or in other words, Singapore prospered courtesy of the Company’s remaining monopoly. For while the Company alone was entitled to ship European products direct to Canton and Chinese products direct to London, Singapore was treated as an Indian port from which direct trade with London was now permitted thanks to the 1813 charter concessions. Coupled with the long-established rights of the country traders in the port-to-port trade of the East, this presented a neat way of by-passing the China monopoly by using Singapore as a place of transshipment. Thus English manufactures, for instance, could now be legally shipped to Singapore by private traders, and there legally trans-shipped for forwarding to Canton as part of the country trade. The same worked in reverse, especially in respect of Chinese silks, although not for tea which remained a commodity monopoly of the Company. Transshipment soon became a mere formality of documentation and thus by 1830 non-Company shipping had already captured a sizeable slice of the China trade.

  But all this was as nothing compared to the inroads made by the country, or now ‘free’, traders thanks to the opium boom. Dr Michael Greenberg, whose researches into Jardine Matheson’s archives vividly illustrate the importance of opium, quotes from a contemporary work by James Phipps which describes the opium trade as ‘probably the largest commerce of the time in any single commodity’. From small shipments by tortuous supply routes in the eighteenth century, the export of Indian opium direct to China was by the 1820s showing profits high enough both to stifle any moral scruples felt by the British and to negate the prohibitions frequently invoked by the Chinese. In British India one-seventh of total revenue now derived from the Company’s continued monopoly over the manufacture and sale of Indian opium. And given that by 1828 the receipts from opium sales alone were sufficient to pay for the entire tea investment, at home that one-tenth of English revenues that derived from the duty on tea imports was also indirectly provided by opium.

  Although the Company managed all opium production in India, it played no part in the shipping or sale of a drug regarded by the Chinese authorities as contraband. To have done so would have been to jeopardize its trading rights at Canton and so its tea purchases. Instead the opium crop was sold to agency houses in India who then forwarded it for resale in China. On the other hand it was no secret that the Company’s tea purchases depended on opium sales. Occasionally the Company’s supercargoes used the argument that opium sales might be reduced if the Chinese would purchase more British manufactures. They did so but it had no measurable effect on the flood of opium. By the late 1820s when James Matheson and William Jardine, previously a surgeon on the Company’s ships, took over the agency house that had once been Cox and Beale, opium represented almost their entire import business. And it was the same with most of the other Canton agency houses.

  Once arrived in Chinese waters, opium was traditionally smuggled ashore from ships moored in Whampoa and further down the Canton river. The smuggling was conducted by Chinese using small craft and disbursing large bribes to Canton’s conniving mandarins. Imperial attempts to suppress the smugglers merely dispersed the trade. Instead of off-loading in the river, firms like Jardine Matheson moored surplus shipping among the off-shore islands that now constitute Hong Kong territory. These hulks became floating depots, adequately armed to repel war junks and supplied by fast sailing clippers shuttling back and forth to Calcutta and Singapore. Smaller clippers ran the ineffectual blockade of imperial junks to distribute the drug further up the coast.

  In 1830 William Jardine, now recognized as Taipan of the country traders, criticized both the Company’s monopoly and the Canton Co-Hong in the name of free ™ but it is hard to see how his main business, opium, was to benefit from an end to such monopolies. In fact the agency houses became distinctly ambivalent about the whole question of the Company, many seeing it as a useful front providing direct access to Canton and to the Chinese merchant community with whom they did business. When, finally and decisively, the demand for an end to the Company’s China monopoly was, as in 1813, taken up by the manufacturing interests at home, Jardine Matheson began to think again. It was now suggested that any such change must be accompanied by guaranteed access to China’s internal commerce or, failing that, by securing a permanent off-shore base to offset the loss of the Company’s protection in Canton. Jardine suggested Taiwan, Matheson the nearer island of Lintin.

  When in 1833 another renewal of the Company’s charter saw the manufacturing petitioners once again triumphant over the Company’s residual monopoly, this demand for an extra-territorial entrepôt on China’s doorstep was taken up with greater urgency. Ten years and an Opium War later, it was conceded in the shape of Hong Kong island. Like Singapore, Hong Kong fulfilled many of the requirements envisaged for places like Balambangan and Pulo Condore. It was also an obvious response to the demise of the Company’s unique position in Canton.

  A maritime empire based on free trade was an improbable legacy from a mercantilist and monopolistic entity like the Honourable Company. But perhaps no more so than the vast continental empire based on military supremacy that was the Raj. With a few exceptions, like Sir Josiah Child and Lord Clive, the Company’s servants had seldom craved political supremacy. Some form of informal commercial dominion had ever been closer to their ideals. Had James Lancaster or Jack Saris, Governor Methwold or Governor Pitt, been vouchsafed a glimpse of the future, they would scarcely have found the Raj enviable or comprehensible; but in off-
shore metropolises like Penang, Singapore and Hong Kong they must have rejoiced.

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  PART ONE

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  PART THREE

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