by Sven Beckert
While it was still exceptional, diaspora networks were sometimes incorporated within firms, gradually lessening the importance of trust networks. The Rallis were such a case, and so, in a more limited way, were the Browns. Perhaps furthest ahead of its time, however, was a Swiss house that incorporated far-flung networks into their firm itself: Volkart Brothers. Founded in 1851 by Salomon Volkart simultaneously in the Swiss town of Winterthur—an important center of the cotton industry—and in Bombay, the firm began by purchasing raw cotton in India and exporting manufactured wares to India. As they opened more branch offices, Volkart Brothers increasingly organized the purchasing of cotton not only in India but also in other parts of the world, transporting that cotton to various European ports and then selling it to spinners. By the late 1850s, Volkart Brothers incorporated a whole range of selling and buying activities.71
The revolutionary vanguard: Salomon Volkart, Winterthur, Switzerland, transforms peasant agriculture. (illustration credit 8.5)
Yet at midcentury, Volkart was exceptional; most cotton was still traded between independent houses mediated by networks of trust. In the whirl of letters, face-to-face conversations, and travel, as these merchants developed a familiarity with and connection to people in many different parts of the world, they became in effect a cosmopolitan community. Unlike planters or manufacturers, merchants often had closer connections to people far away than to people in their home cities or immediate hinterlands. In a typical midcentury letter, E. Rathbone referred to business partners or relatives in such diverse places as Cairo, Aden, Palestine, Alexandria, and France. In Le Havre, as in Alexandria, Liverpool, and Bombay, the merchants came from all over the world—indeed, only a few of the large merchants were members of ancient families of Le Havre itself. Rathbone and other merchants inhabited a transnational community, in which they traveled with ease. People in distant cities and towns engaged in similar lines of business, dressed in similar ways, lived in houses not unlike those at home, read from a similar set of books, had similar views of human nature and political economy, and might have been part of the same family.72
Cohesive as a social class and fortified by the institutions they had built, these merchants also developed tremendous political clout from England to France to the United States. They understood early that their trade was deeply embedded within local, national, and global politics; they acted as if they understood instinctively that the state does not intervene in the market, but constitutes it. Their daily experience had taught them that global trade did not arise in a state of nature, but only flourished via careful, conscious regulation. As a result, according to Liverpool cotton broker Samuel Smith, politics was everywhere: “As our business involved much foreign intercourse, and was greatly affected by the course of foreign affairs, especially by wars and the fear of wars, we became as a matter of course keen politicians.”73
As merchants became “keen politicians” and realized the state’s importance for their grand project of integrating cotton cultivators, cotton manufacturers, and cotton consumers, they encountered rulers and bureaucrats who shared many of their inclinations. European states had become increasingly dependent for their very existence on the wealth generated by rapid capital accumulation, including in cottons. Statesmen were thus solicitous toward capitalists, and often submissive when these patrons of the state organized collectively. What set European states apart from other contemporary states such as Japan and China was not just their capacity, but also their responsiveness to the needs of industrial capital.74
Though merchants lobbied their governments about anything and everything, among the most important issues was the infrastructure of trade. The construction of docks, storage facilities, railways, and waterways was high on the merchants’ agenda, since they directly affected the speed at which goods and information moved through the emerging global economy—and that speed of circulation determined the speed of accumulation.75
Though it could seem haphazard and unregulated, subject to the whims of a few men, trade ultimately also depended on a legal infrastructure devised and enforced by states. Unsurprisingly, merchants spent much of their political energy on trying to strengthen this legal order and make it conform to their interests. In the process they increased, both wittingly and unwittingly, the capacity of the state. Conventions, although agreed upon by merchants themselves, needed enforceable rules, and merchants understood that no single actor was as efficient in enforcing these rules as the state. As New York lawyer Daniel Lord explained in detail in his 1835 “Law of Agency,” legal rules had allowed merchants to have agents and factors in distant places, and to act for them: “It is by this bringing into aid and subordination, the powers of others…that modern commerce touches at once the extremes of longitude, and subdues alike the Equator and the Poles; She crosses the oceans, tracks the African deserts, and conquers the plains of Asia.”76
The “law” became particularly important when it came to the actual transformation of the global countryside into a supplier of industrial raw materials and a market for manufactured goods. The more suppliers of cotton, the more consumers of cotton, the more trade. To make that transition possible, merchants yearned for a more powerful state presence, especially in the nonslave areas of the world. One of their most urgent obsessions was to inject the “law” into this global cotton-growing countryside, though their ability to do so was often frustrated in societies dominated by peasant production.
The importance of the law was clearest in colonial settings such as British India. In Bombay, merchants pressured the British government constantly for new rules and regulations regarding the Indian cotton trade. “The cotton legislation was not only chronologically the earliest economic legislation of British rule, it was also perhaps the most advanced legislation in the contemporary economic world,” observed one chronicler of the Indian cotton trade. The rules of the market, and thus the market itself, emerged at the intersection of merchant collective action and the state. Yet ironically, the more merchants succeeded in their project of extending the authority of the state, the less trade depended on the networks of trust that they had forged over prior generations.77
As the law increasingly infused the global countryside, and as state-sponsored infrastructure projects accelerated the movement of goods, merchants mobilized collectively to use state power to shape global markets to their benefit in other ways as well. Their industrial policy, in effect, was global. And it was the most global for British merchants and manufacturers. At the center of the empire of cotton, they believed that opening access to foreign markets was a core function of government. In 1821, for example, the Manchester Chamber of Commerce wanted the government to pressure Denmark to reduce its import duties on yarn; in 1822 they demanded freer trade to the East Indies; and later they agitated for the removal of duties between Britain and Ireland and debated “Brazil custom Duties,” “Duties on British Goods Imported into Batavia,” “duties at Monte Video,” trade with Morocco, and “duties at Shanghai.” Le Havre merchants pressured for the most unencumbered trade as well.78
While most merchants had a clear ideological commitment to free trade, which corresponded perfectly with their interest in market access and cheap labor, they could advocate just as forcefully for creating novel barriers to trade. In fact, their insistence on free trade was remarkably inconsistent. As early as 1794, a number of cotton merchants protested “against the export of cotton twist from England.” The export of spun cotton, according to them, threatened British prosperity, as the yarn was woven into fabrics in low-wage Germany, creating unemployment in Britain. In an eerily modern argument, they argued that “Germany’s cheaper food enabled them to manufacture by hand cheaper than our workpeople could, they had first deprived our hand loom weavers of employment and now were rapidly progressing with the other departments including spinning.” The Manchester Chamber of Commerce similarly opposed the emigration of “English Artizans” and “the free exportation of such Machinery as is empl
oyed in our own Manufactories.”79
Merchants appealed to their national governments to protect access to foreign markets, using both political power and military might. In 1794, the Manchester Society of Merchants talked about the importance of having the Royal Navy protect ships going into the Mediterranean with valuable local manufactures on board. In 1795 they appealed to the government to protect their trade with Germany, and the continent more broadly, by military force. In Manchester, merchants asked the government to protect ships in the Atlantic from pirates, and called for a “large Naval Force.”80
The merchants’ political vision, like their trade, was truly global, stretching from “sound dues payable upon cotton twist exported to the Baltic” to colonial debt laws bent on opening India as a market. In Britain, India soon emerged as the “chief question.” For cotton mill owner Henry Ashworth, the Indian market would provide unlimited opportunities, if opened by the proper governmental interventions: “Now, although I am as great a stickler perhaps as most here for adhesion to sound free-trade principles, it does not always follow that in dealing with people who are not as advanced political economists as ourselves, that we should delay our movements until they have become converted. (‘Hear’).” As a dabbling economist, Ashworth understood intuitively that economic thinking helps “format the economy”—makes possible the formerly impossible—which is exactly what it would do a few decades later in India.81
Calling for the state to convert Indian peasants into producers of cotton for world markets formed one part of merchants’ much larger project of bringing the state into the global cotton-growing countryside. They understood that unlike in the slave-dominated cotton-growing areas of the world, in India and elsewhere they needed the capacity of the imperial state to effect the transformations they hoped for. What they did not anticipate was that the more they furthered the state-building project, the more they were diminishing their own importance to the empire of cotton.
Henry Ashworth understood more explicitly than many others the way the world of trade rested on powerful states structuring global markets, and he unabashedly celebrated the involvement of the British state in the interests of its merchants and manufacturers. Industrializing states depended on a flourishing manufacturing economy for their strength and social stability. Even statesmen of no great vision could grasp the importance of securing a reliable supply of raw materials for domestic industry and of creating a market for its products. So fast was their rate of growth, and so fierce their competition, that European states sought to transform the global countryside simultaneously into a supplier of materials for their industrial enterprises and into consumers for the resulting products. Having transformed their own countrysides in the search for labor, they sought to deploy that experience to the rest of the world, making the particular form of that integration into nothing less than a “law of nature.”
This new, conveniently and divinely ordained mission unintentionally but no less surely lessened the dependence of industrial capitalism on some of the earlier mechanisms of war capitalism—especially the wholesale expropriation of native peoples and the mobilization of labor through slavery. With a greater capacity to lay down market-directed infrastructure, and a legal apparatus geared toward infusing European capital into the global countryside and mobilizing workers, merchants redoubled their efforts to reorient peasant agriculture toward the production of cotton for world markets. As states grew stronger, merchants were able to infuse unprecedented flows of capital, and with it the logic of industrial production, into heretofore independent hinterlands. The British merchant house of Baring by the 1840s diversified the sources of its cotton supply by importing from Bombay. European capitalists also entered the trade with the Egyptian cotton-producing fellaheen. In the late 1840s and early 1850s, with the weakening of the governmental monopoly on the internal cotton trade, merchants, especially of Greek heritage, penetrated the interior and began to purchase cotton from peasants directly. But perhaps most forward-looking was the model developed by Volkart Brothers. Their Indian cotton traders, riding on the coattails of an expanding imperial government, moved ever closer to local producers themselves, so that by 1875 the Volkarts and their European colleagues exported more than twice as much cotton as their once dominant Indian counterparts.82
Before European capital could find its partners in the imperial states of the late 1800s, however, the cotton empire would be shocked by the region of the world where slavery and industrial capitalism seemed most powerfully and profitably conjoined: the United States. Everywhere else, slavery and industrial capitalism seemed to coexist perfectly well. But everywhere else, as we know, these two engines of profit were separated by national boundaries. Not so in North America. For the United States, unlike any other part of the world, brought war capitalism and industrial capitalism within the same national territory. No political union could contain forever the contrary political forces of both systems.
As the United States found its economic footing, slave owners and industrial capitalists made increasingly different demands on the state. American manufacturers and a few of its merchants, like their counterparts in Britain and elsewhere, gained confidence that the mechanisms of industrial capitalism could be moved into the global cotton-growing countryside and could indeed secure sufficient supplies of the raw material. Boston cotton manufacturer Edward Atkinson became a fervent believer in wage labor, as he observed his ability to mobilize and discipline large numbers of workers in his mill. As elsewhere in the world, American industrialists like Atkinson hitched their political interests to a strengthening national government.83 Cotton-growing slave owners, on the other hand, favored the political economy of Atlantic trade, and depended on the state’s willingness to secure more lands for plantation agriculture and to enforce and support the institution of slavery. They feared that any strengthening of the federal government might interfere with their mastery over labor. Slavery, after all, required constant violence against potentially rebellious slaves, and that violence rested on the state’s willingness to condone it. Slave owners therefore felt an overpowering need to secure control over the state, or, at the very least, to keep the opponents of slavery out of the national halls of power.
Yet that control was increasingly elusive. A small but growing group of Americans who sought to construct a political economy of domestic industrialization emerged from the dynamic industrial economy of the northern states. Their political needs, like those of the planters, required control of state institutions. But unlike southerners, northern industrial capitalists drew increasing political strength from a relatively stable political coalition with commercial farmers and even segments of a rapidly expanding working class. These capitalists drew encouragement from the fact that a small but growing number of merchants, so long the planters’ most significant northern allies, were increasingly embracing the project of domestic industrialization as well—even though they hesitated to challenge the slave regime in the South directly. Tellingly, the United States’ most important cotton traders, the Browns, slowly began to specialize in the foreign exchange business and to invest in industrial enterprises—railroads, for example, but also the Novelty Iron Works in New York.84
Such moves made sense because their former commodity trade, with its low entry costs, was always open to new competitors who were willing to take on greater risks and operate on narrower margins. Low entry barriers created a cotton market that included a very large number of smaller operators, eventually pushing wealthier traders into emerging, even more profitable lines of business, that had greater capital requirements. Joining the Browns, foreign capitalists like the Barings also increasingly diversified, especially into railroads, coal mining, and manufacturing. They understood better than others that with the state’s capacity expanding, the role of merchant capital was diminishing, and that a future beckoned in which industrialists, in conjunction with the state, would be able to burrow even further into the global countryside to find still m
ore land and labor for the production and consumption of cotton. The most forward-looking manufacturers and merchants discerned that such new forms of domination would decisively weaken the power of commodity producers, and thus eliminate one of the most threatening sources of instability in the empire of cotton, and with it, global capitalism.85
This shifting balance of social power among different business groups proved momentous. The United States was unique in that the schism between economic elites was so great that, in a moment of great crisis, even merchant capitalists aligned with slave owners dropped their old allies. This was radically different from other slave-owning societies, such as Brazil, where planters and export merchants formed a unified political bloc, with agreement that domestic industrialization constituted a threat to their economic interests and that slave labor was indispensable.86
The realignment of the economic elites of the United States, along with the promise of tapping nonslave hinterlands as the Volkarts had done in India, threw the rising costs and diminishing benefits of combining slavery and industrial capitalism into high relief. In 1861, the mix exploded, and the ensuing American Civil War became a turning point not just for that young republic, but also for the history of global capitalism.