Financial History 145 Spring 2023 - Page 28

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Britain ’ s misfortunes , in China , they accelerated Americans ’ entanglement in British imperial schemes .
In its first decades of the American China trade , the business decisions for each voyage were managed by a supercargo , a floating agent for the ship ’ s investor-owners who oversaw all transactions in return for a share of the profits . As the business grew , more firms found that having a resident agent in Guangzhou — rather than just aboard a ship — provided an advantage .
Living in the segregated “ foreign quarter ” neighborhood designated by Qing officials for overseas traders , resident merchants developed a better knowledge of local conditions . Cultivating closer relationships with Chinese business partners , they secured better prices and earned higher profits . After the Napoleonic Wars , the dominant US firms in the trade all relied upon resident merchants , who soon started exploring new lines of business .
No one wrung more from changed conditions than John Perkins Cushing . Cushing ran the Guangzhou outpost of Perkins & Co ., a Boston-based merchant firm with representatives all over the world , and quickly made the China office one of the network ’ s critical nodes . During his nearly 30 years in China , Cushing devised new smuggling methods , helping flood Guangzhou with opium and revolutionizing the China trade .
Cushing ’ s new system was a response to British colonial policy . In the late 18th century , the British East India Company noticed a new market for smokeable
Opium pipe and paraphernalia .
opium in Southeast Asia and began forcing Indian peasants to cultivate opium poppies to supply it . Opium provided the company with a new source of revenue and helped balance their purchases of tea in China . The East India Company avoided directly violating China ’ s longstanding bans on opium importation by selling the finished drug to “ country ” traders in India . These private third parties moved the drug into China proper .
Americans ’ first experiments importing opium into China used different methods . Excluded from Indian opium sales until 1813 , they instead turned to the Ottoman port of Izmir ( Smyrna ) for their supply . The so-called “ Turkey ” that Americans imported from the Anatolian coast was of lower quality than Indian opium , but it helped expand the market by contributing to early gluts , lowering prices . When the British East India Company ’ s monopoly on Indian trade was withdrawn in 1813 — during wartime — American resident merchants in China got directly into the India business . Cushing was a critical figure , using his firm ’ s capital to float pioneering American dealers in Indian opium , notably Samuel Russell of Russell & Co .
But Cushing didn ’ t just supply loans to opium traders ; he built them a system . From his years in residence , he knew that Chinese officials had a tight grip on Guangzhou ’ s official port , Whampoa , but that policing lower down the Pearl River was less effective . So , he and other merchants set up a shadow port around a river island called Lintin , where they anchored warehouse ships to receive opium . In
Guangzhou proper , they sold chits to Chinese brokers , who went to Lintin to pick up the opium before selling to consumers .
Opium imports nearly quadrupled in a decade . The boom cemented the drug as the “ keystone ” commodity for the China trade , doing for the creation of modern capitalist market dynamics in Asia what tobacco and sugar had done in the Atlantic world . Opium increasingly replaced silver in Western merchants ’ exchanges for teas and silks in China .
Or , at least , it did so as a trade good . Viscous , bulky and easily recognized as contraband , the drug did not serve well as currency . Instead , credit instruments took the place of silver money — mostly bills of exchange drawn on London . Americans had intermittently used bills before the War of 1812 , but started to rely on them more often as their ability to draw on credit in London grew — itself a result of the growth of Southern slave-grown cotton exports to Britain . Biddle ’ s East India bills accelerated this process .
The rise of bills as a medium of exchange at Guangzhou meant that even those who were not directly involved in the opium trade relied on the infrastructure they created . “[ E ] very one trading ” at Guangzhou , Robert Bennet Forbes explained to his wife Rose , depended on bills to “ get money ” for purchases : “ the Opium Trade affect [ s ] every one trading here .” By the late-1820s , this improvised circuit of global commodity exchanges had crystallized into a new system . As the historian Jacques Downs explained , “ Americans drank Chinese tea paid for by Southern cotton through the medium of London bills and Asian opium .”
This system was quite profitable , but it eroded state authority in both China and the United States .
In China , American merchants ’ involvement in the opium trade pushed them into closer collaboration with British traders — and into conflict with Qing officials policing smuggling . Chinese administrators were increasingly convinced that opium imports were the cause of the silver exports that they thought were destabilizing the Qing empire ’ s money supply . The complicating factor was that smuggling facilitated the growth of the legitimate tea trade and , thus , expanded the revenues for Beijing . Healthy tax receipts hid the corruption that drug trafficking spread . Or , it did until things came to a head in
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