Many Brexiteers wish for the ‘good old days’ when free trade made Britain, and somehow all other countries, rich. In my previous posts I explained that this free trade, due to the industrial revolution in the UK and the resulting abundance of goods and their quality and prices, was especially beneficial for British traders. But it did not stop there.
As today many so-called liberals did not protect free trade itself, where all market participants can pursue their own wishes and needs freely. Instead, under the guise of beautiful ideals, they created a system in which the law of the strongest ruled. In other words, mainly British interests were enforced. To illustrate the mechanisms let me tell you two stories.
The first one is about salt. And about a hedge of monumental proportions, which would probably have been forgotten, if not for Roy Moxham and his beautiful book "The Great Hedge of India".
But let’s start with some basics. We probably all have a pack of salt in the kitchen. In our affluent society, it is cheap and available in great quantities. We consume so much salt that we associate it primarily with health problems. But its basic building blocks, sodium and chlorine, are needed for many processes in our body, for example in the nervous system, digestion or to regulate water balance.
Salt deficiency first manifests itself in headaches and muscle pain, dizziness or vomiting; later it can lead to unconsciousness or brain pressure, and in some cases, death. But even minor salt deficiency can have consequences if diseases such as cholera or typhoid deprive the body of additional salt. It also plays an important role in the care of farm animals and the preservation of food.
Salt is an important resource that everyone needs. The market is gigantic, always and everywhere, whether today in Europe or two hundred years ago in India... although, especially in the latter. After all, people lose a fair amount of minerals when they sweat. And the subcontinent is warm, to say the least.
The constant demand made salt an ideal commodity for taxation in many states. But the British East India Company (EIC) had taken taxation to a new level. Around 1780, the EIC got the salt trade in Bengal under its control. In the following years, it increased the tax to more than ten times the original amount through various mechanisms.
It is difficult to say exactly how much salt an average person needs per year, or what the exact median income in the region was at the time. But it is safe to say that many families had to raise one or several months' income just to pay the tax for the year's supply of salt.
The high tax even made it economical to import salt from Britain. Around 1850, almost half of the salt consumed in Bengal is said to have been imported from England [1].
Not surprisingly, many locals tried to evade the tax, among other things by smuggling in salt from other parts of the subcontinent. To dry up the black market, the British first set up customs houses at important border crossings. But these did little good. Next, guard stations were built along the border. In addition, obstacles were erected, such as ramparts or deadwood hedges.
Of course, the customs line did not disappear when India became a crown colony. In the meantime, living hedges with thorns were also planted to protect it, so dense they could not be penetrated. In some areas it reached a height of three metres and a thickness of four metres. In 1878, the living hedge probably stretched over a length of more than 1,300 km, the entire system over 2,400 km. For comparison, the German wall had a length of just under 1,400 km. That large border had to be built, maintained and patrolled. In 1872, over 14,000 people were employed for this purpose. These figures alone show how lucrative the salt tax must have been [1].
In 1879, the Inland Customs Line was largely abolished, because smuggling and thus its control was no longer worthwhile. The British had brought the entire Indian salt production under their control. In many places, local taxes were harmonised, at a high level of course.
The chronic lack of salt among the Indian population, and the resulting impaired health, is said to have been one of the reasons for the extremely high death rates in India during the epidemics of the following decades. During the Spanish flu, the pandemic of the 20th century at the end of World War I, estimates put the death toll at about 14 million, only in the parts of India under direct British rule [2] (That number would correspond to more than 5 per cent of the population.)
In the 1930s, Gandhi used the salt monopoly to demonstrate against British rule. His salt march made the conditions in India known to the world, heralded the end of the monopoly and was a milestone on the path to Indian Independence.
The second story is about tea. In the 18th century, tea grew increasingly popular in Great Britain and eventually became the national drink. It had to be imported from China, because in India there were hardly any cultivated tea plants; tea grew mainly in its wild form. The subcontinent could supply neither the quantity nor the quality needed for consumption in the UK.
The British traders would have liked to offer their own goods in exchange, but China showed little interest in these, or in foreign cultures. To limit foreign influence, foreign trade was only allowed in Canton (Guangzhou). And it meant that foreigners had to pay for Chinese goods with silver and gold. (Besides tea, silk and porcelain were also in high demand.)
Over time, the exchange caused problems. Tea, for example, is a renewable resource. Silver and gold, on the other hand, are difficult to mine and finite. The traders slowly ran out of the precious metals. There were three solutions to their dilemma. They could cultivate and grow Indian wild tea, they could buy tea plants from the China and grow them, or they could interest the Chinese in their goods after all.
The first two options could only be considered as long-term solutions. Establishing tea plantations took time, as did cultivating wild tea. And obtaining plants or seeds from China was dangerous. Their export was strictly forbidden. Both approaches were ultimately successful. Assam tea developed from wild plants, Darjeeling from stolen... imported seeds, but they only became relevant in the second half of the 19th century.
"Fortunately", the British traders did find a product that met a high demand in China: opium. Many Chinese were hooked to the drug. The company had the substance grown, processed and packaged in India before selling it, ready for transport, to non-associated traders who brought the drug to China. The Chinese authorities repeatedly banned the trade and tried to prevent smuggling, but to no avail. Between 1801 and 1839, the imported quantity increased almost tenfold [3]. As a result, the foreign trade balance of the China collapsed, and silver began to flow out of the country in great quantities [3].
In 1839, the Chinese government sent a letter to Queen Victoria asking to stop the trade. The letter was ignored or never arrived. Eventually, on the emperor's orders, all opium in the country was confiscated, including any in the possession of foreign traders. In the weeks and months that followed, violent clashes broke out in Canton where British troops were already stationed.
It took a while for the British to come up with a response. One group was outraged by state support of drug traffickers. Another saw the British as victims and the Chinese intervention as an attack on free trade.
In addition, the traders had been promised compensation payments by local government representatives. But where to get the money from? Using taxes to compensate drug barons would have tremendously increased the criticism.
However, those that saw free trade threatened, prevailed. An expeditionary force of government and company troops was sent to China to enforce the demands of the British side. These included payments to British merchants, the opening of more ports to foreign powers, a preferential status for Britain as a trading partner and the cession of an island off the Chinese coast to serve as a British base.
The British troops were superior to the Chinese in many respects. The foot soldiers were better equipped and supported by naval artillery. The ships not only had more firepower than their counterparts but were more manoeuvrable, thanks to steam engines. In other words, the British could do whatever they wanted. They blockaded ports and rivers, captured forts and entire cities. Gunboat diplomacy was born.
The Chinese government had no choice but to give in. Compensation payments were made, more ports were opened, Hong Kong fell to the British. The drug smuggling continued. Almost 15 years later, the opium conflict led to another war. At its end, China had to make further concessions, including the legalisation of opium. “Free trade" had won.
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[1] Roy Moxham, "The Great Hedge of India", Constable (2001)
[2] Siddharth Chandra et al., “Mortality From the Influenza Pandemic of 1918–1919: The Case of India”, 857-865, 49(3) Demography (2012), https://doi.org/10.1007/s13524-012-0116-x
[3] Man-houng Lin, “China Upside Down: Currency, Society, and Ideologies, 1808–1856”, Harvard University Asia Center (2006)
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