Empire of Cotton

by Sven Beckert

  Pressured by manufacturers who sought to cut transaction costs, the myriad intermediaries who had moved cotton from the plantation to the factory before the 1860s consolidated, to be replaced by a few vertically integrated cotton dealers. New characters now strode onto the cotton empire’s stage, people who would connect growers directly to manufacturers. The old-style importers and brokers declined. Some, such as the Browns, in a savvy move, had already mostly exited the cotton business before the Civil War. Others, such as the Rathbones, accumulated huge losses after the war, and then retreated from the trade. Lower transaction costs meant lower profits for people invested in the cotton trade, giving a premium to those able to secure a vastly increased quantity of goods. One of the nineteenth century’s greatest authorities on the global cotton trade, Thomas Ellison, estimated that between 1870 and 1886 transaction costs, as a percentage of the value of the traded cotton, fell by 2.5 percent.13

  The role of merchants also changed because, as the result of the state-driven transformation of the countryside, connecting growers and producers of raw cotton had become much simpler. As we have seen, states projected themselves into the world’s countryside, using contract law, new forms of property rights in land, railroads, and the imperial control of territory, giving manufacturers a more direct and immediate access to the world’s countryside and its increasingly marginalized cotton growers.

  The importance of old-fashioned importers, brokers, and factors within the empire of cotton declined even more as the global cotton trade was increasingly dominated by a small number of cotton exchanges. Trades on these exchanges no longer rested on trust networks forged by religious, kin, or place-of-origin solidarities. Instead, these institutions were impersonal marketplaces in which anyone at any time could trade in any quantity and quality of cotton for immediate or future delivery, or could speculate on the future price movements of cotton that had not been shipped, or perhaps not even grown. Such cotton exchanges spread rapidly across the globe: In 1869, the New York Cotton Exchange opened, followed by the New Orleans Cotton Exchange in 1871, and further exchanges in Le Havre, Bremen, Osaka, Shanghai, São Paulo, Bombay, and Alexandria. These exchanges specialized in the trading of contracts on the future delivery of cotton. Such “to arrive” trading, as we have seen, had already emerged in a sporadic way before the 1860s, but now “futures” took off to become the dominant mode of the global cotton trade, made possible by the accelerated speed at which information traveled around the globe, facilitated, most crucially, by the laying of the first transatlantic telegraph cable in 1866.14

  These emerging commodity markets were sophisticated institutions. They would have been unrecognizable to the Holts and Drinkwaters, and their counterparts, who hurried around the port of Liverpool in the 1810s inspecting sacks of cotton arriving from the Americas. Now trade was highly abstracted from the actual physical cotton and highly standardized, the great variety of nature molded through conventions and contracts into categories that corresponded to the abstractions capital required to make it commensurable.

  Most important was the standardization of cotton itself. The huge natural variety of cotton, for the purposes of trades in futures, was impossible to handle and thus was fictitiously reduced to just one—“middling upland”—and contracts were standardized to specific lot sizes of this quality. These standards, as we have seen, had been defined in the years before the American Civil War by the Liverpool Cotton Brokers’ Association. In the 1870s its successor organization, the Liverpool Cotton Association, took over this definition of quality and the implementation of standards—a direct consequence of the city’s central position in the global cotton empire. Detailed rules for the classification of cottons, and mechanisms for the arbitration of disputes between sellers and buyers, made both the knowledge and the trust networks of previous generations of merchants much less central. As historian Kenneth Lipartito notes, the “speculation in futures helped to impose worldwide supply and demand conditions on local markets, thus moving the entire cotton trade towards the ideal of a single market with a single, internationally determined price for each grade of cotton.”15

  A dockworker weighing cotton in the Port of Liverpool (illustration credit 11.5)

  As a result of this restructuring of the global cotton market, business grew rapidly. While the New York Cotton Exchange traded contracts for the future delivery of 5 million bales in 1871–72 (slightly more than the actual harvest), it traded contracts on 32 million bales ten years later—an amount seven and a half times the actual cotton harvest. The global cotton trade now took place not in securing actual cotton, but in speculating on future price movements of the commodity. That speculation was made possible by the exchanges’ ability to create one “world price” for cotton, a price available at any minute of the day in all cotton-growing and -manufacturing centers.16 No longer was the trade in cotton shaped by the leisurely pace of importers, factors, and brokers walking the streets of port towns throughout the empire of cotton—now the rhythms of industrial capital and, increasingly, of finance dominated the cotton trade.

  The New York Cotton Exchange, 1923 (illustration credit 11.6)

  The role of merchants diminished not least because many of their core functions were usurped by states. Even the all-important standards on which contracts increasingly rested, based as we have seen on private contractual arrangements of merchants and enforced by the Liverpool Cotton Association, were after the turn of the century increasingly defined and enforced by state classifiers in the United States. The shift of the all-important power of definition from private associations such as the Liverpool Cotton Association to the state, from England to the United States, was the result of the growing U.S. influence on the global economy, and also the political pressure of cotton producers in the United States, who felt disadvantaged by Liverpool’s rules. In 1914, the “Official Cotton Standards of the United States” were created, their use required for all futures transactions. In 1923, the Cotton Standards Act made it illegal to use any other standards for American cotton in interstate or foreign commerce, and as a result these standards also guided transactions on European cotton exchanges. With government classifiers in government classing rooms housed in cotton exchanges, the state had entrenched itself in the very heart of the global cotton trade.17

  Moreover, the state also became an important supplier of statistics that made the market more legible, rendering much less central the sophisticated networks of information gathering and exchange that merchants had forged through huge investments in time and treasure. Beginning in July 1863, the U.S. Department of Agriculture issued monthly reports on cotton production. In 1894 it launched the annual Agricultural Yearbook, a huge compendium of statistics, and by 1900 it was issuing crop reports collected by “41 full-time, paid statistic agents and their 7,500 assistants. 2,400 volunteer county correspondents and their 6,800 assistants and 40,000 volunteer township or district correspondents.” Two years later, the Census Bureau was charged by Congress to collect annually “the statistics of the cotton production of the country as returned by ginners.” By 1905, there was even an International Institute of Agriculture with its own statistics bureau, created by none other than the king of Italy. The state, centrally concerned with the reliable flow of inexpensive raw materials into the vortex of manufacturing enterprises, now quite literally made the market.18

  Not content with marginalizing both cotton growers and older merchant networks, imperial statesmen, manufacturers, and new kinds of commodity dealers also worked diligently on their long-term project of destroying the older worlds of cotton that still persisted in many regions. They drove a complex dynamic of deindustrialization in the now global countryside. Each spinner and weaver who gave up her or his handicraft created a potential new market for European and North American manufacturers, who, as we have seen, had already ousted Indian textiles from world markets earlier in the century. But now, in the last third of the nineteenth century, statesmen, manufacturers, an
d dealers broke through local barriers to foreign cotton consumption in the former heartlands of the worlds of cotton. Rural cultivators and former spinners and weavers in many parts of the world became first-time buyers of European, North American, and eventually Japanese yarn and cloth.

  No market was more important than the ancient home of the world’s cotton industry. Asia’s cotton markets were vast, and winning them was the grand prize that British, French, Dutch, Spanish, and American imperialism bestowed, not just on Lancashire manufacturers, but on some continental European, North American, and Japanese manufacturers as well.19 India in particular became a huge market—already in 1843 it was for British manufacturers their most important customer, and it remained central for about a century thereafter. By 1900, 78 percent of the total production of the British cotton industry was exported, much of it to India.20

  European manufacturers’ success was the more remarkable in light of their earlier failures. In the early decades of the nineteenth century, high transportation costs had made inland markets in Asia as well as Africa largely inaccessible, and even in markets open to European merchants, selling European cotton goods was difficult. A typical story of these early years suggests the reasons why: British merchant Richard Kay, who traded cotton with India and China, went to Calcutta to sell yarn. There he was overwhelmed by the difficulties he encountered, annoyed by the “tribe of native merchants.” He suffered from the heat, and became sick on his travels to outlying villages. When he went to Allahabad, he complained about being “pestered with all sorts of dealers, viz cloth merchants.” In the vast Indian subcontinent, the Asiatic Journal reported, “Nearly the whole inland trade in European goods is in [local merchants’] hands, and they furnish at present the principal medium for procuring an extended circulation for our broadcloths, cotton, copper, iron, & c.” As a result, “British manufactured goods have as yet displaced, but to a very limited extent, the Native cotton cloth manufactures of Western India, and it is impossible for them to do so until improved means of transit and communication enable the respective manufacturers to compete on more equal terms.”21

  Yet already by the 1830s, in a great reversal of one of the world’s oldest trade patterns, larger quantities of British-manufactured cottons began to flow into places where for centuries and even millennia hand spinning and weaving had flourished, to be followed by French, Swiss, and other products. When “free trade” was imposed upon the Ottoman Empire in 1838 and British cloth “flooded the market in Izmir,” local cotton workers lost their ability to maintain their old production regime. In coastal southeastern Africa, cotton yarn and cloth imports also began to devastate the local cotton textile industry. In Mexico, European cotton imports had a serious impact on local manufacturing—before tariffs enabled Mexican industrialization, Guadalajara’s industry had been, as one historian found, “virtually eliminated.” In Oaxaca, 450 out of 500 looms ceased operating. In China, the 1842 Treaty of Nanking forced the opening of markets, and the subsequent influx of European and North American yarn and cloth had a “devastating” effect, especially on China’s hand spinners.22

  Capturing the Asian market: British cloth exports to India and China, in millions of yards, 1820–1920 (illustration credit 11.7)

  India was the grandest market of them all. By 1832, the great house of Baring, never one to miss a chance for profit, partnered with a local merchant house in Calcutta, Gisborne and Company, to export British yarn. It also financed the yarn and cloth trade to China and Egypt. Thanks to the efforts of merchants like Gisborne, increasing quantities of British cottons flowed into the Indian market, “to an extent that might have been previously considered impossible,” according to the Bombay Chamber of Commerce in 1853. Tellingly, Manchester manufacturers McConnel & Kennedy, who had earlier in the century found most of their yarn customers in continental Europe, by the 1860s were corresponding mostly with customers in Calcutta, Alexandria, and similarly distant parts of the world, while Fielden Brothers expanded production so rapidly that they began to think about sending cloth for the “mass of poor people” to Calcutta. Machine production demanded ever more markets to remain profitable.23 Yet despite these efforts, in the first half of the nineteenth century the older centers of the world of cotton still retained significant handicraft production. By 1850, Britain’s market share in India, it has been estimated, was only 11.5 percent.24

  Capturing these ancient markets took many decades, the final breakthrough only occurring on the backs of imperial states. Indeed, creating markets for metropolitan manufacturers was a conscious project of colonial administrations. The global South was to be a market for metropolitan industry, not a competitor, and a supplier of raw materials and labor, and both required the destruction of indigenous manufacturing. Colonial governments created systems of tariffs and excise duties that discriminated against indigenous producers. They also prioritized the construction of new infrastructures tailored not to local needs but to global market access. They also devoted significant time and money to the study of foreign cloth markets to help their manufacturers compete in distant places. The Bombay Chamber of Commerce had urged in 1853 “to ascertain, if possible, what are the principal seats of consumption for each particular description of goods, and what the route by which such goods arrive at their respective ultimate destination…. It is a matter of great interest, both to the Merchants of Bombay and to Manufacturers at home, to know more definitely to what extent and in what direction the import trade of Western Indies is being extended.” Twenty years later, in 1873, J. Forbes Watson’s Collection of Specimens and Illustrations of the Textile Manufacturers of India (Second Series), a beautiful four-volume set of books, contained hundreds of samples of Indian cloth, including detailed descriptions, with length, width, weight, and place of origin. Some samples even list their price per yard—all to enable European manufacturers to compete in Indian markets by copying these fabrics. And in 1906 “the secretary of state deputed an India office official to examine the products of the handlooms of India with a view to ascertaining whether any of the Indian-made goods could not be profitably supplied by the power-loom industry of Great Britain.”25

  Agents of deindustrialization: K. Astardjan, cotton merchants of Armenian heritage, with branch offices in Constantinople, Manchester, and elsewhere, presenting samples of Manchester cloth to customers in Haskovo (in modern-day Bulgaria), 1886 (illustration credit 11.8)

  Selling cotton yarn to India: Volkart Brothers markets to local tastes. (illustration credit 11.9)

  China’s markets were just as tempting. In 1887, a British bureaucrat stationed in Ning-po issued a “Report on the Native Cotton Manufacturers of the District of Ning-Po” to the Manchester Chamber of Commerce in which he “furnish[ed] samples of the cotton cloths…in common wear here.” The British consul in China years earlier had already forwarded two boxes of “ordinary clothing worn by the labouring population of several districts of China, to the Manchester Chamber of Commerce, including accounts of the costs of these.” It was exhibited in Manchester at the Chamber of Commerce for two days and “received many visitors.” And the efforts of manufacturers and imperial governments were successful. Britain’s market share in India increased to about 60 percent in 1880. Bengali merchants protested against the wave of British imports, but to no avail.26

  As cotton yarn and cloth from the heartlands of the world’s cotton industry flowed into the world’s cotton-growing areas newly constituted as backwaters, they brought with them a tsunami of deindustrialization. “The importation of cheap machine-made piece goods has in many parts driven the native spinners and weavers altogether out of the market, and many have had to take to working on the roads, or have been engaged as farm-labourers,” observed Berar cotton commissioner Harry Rivett-Carnac in 1869.

  Clothing the colonial and neocolonial world: cotton cloth exports from the UK, 1820–1920, by destination (illustration credit 11.10)

  In the middle of the nineteenth century, millions of peopl
e still spun and wove by hand, as they had done for centuries. Competition from industrially produced yarn and cloth had begun to undermine that production in the first half of the century, especially in Europe and North America, and it had effectively destroyed cloth production for export in India. In the centers of the old worlds of cotton, however, where people produced yarn and cloth within households for local consumption, these changes still seemed remote. But now in the last third of the nineteenth century this was about to change. Usually these changes unfolded slowly and were at first hardly noticeable—a new railroad line opened bringing in yarns from faraway factories, for example—but sometimes they could also occur quite suddenly. In India the American Civil War was such an event. During that war, many spinners found themselves unable to compete with the market price for their crucial raw material. The Madras Chamber of Commerce in its 1863 report observed that “the enhanced price of Cotton has rendered the position of the Cotton Weavers of this Presidency one of great difficulty.” As a result, the number of weavers decreased by as much as 50 percent during the American war, with former weavers moving into agricultural labor. Thus in a large swath of India, integration into the world market went hand in hand with widespread “peasantization,” not, as one might expect, proletarianization.27