Splendid Exchange, A

by Bernstein, William L

  And when I was taken to an opium den by a smooth-talking Eurasian, the narrow, winding stairway up which he led me prepared me sufficiently to receive the thrill I expected. I was introduced into a neat enough room, brightly lit, divided into cubicles the raised floor of which, covered with clean matting, formed a convenient couch. In one an elderly gentleman, with a grey head and very beautiful hands, was quietly reading a newspaper, with his long pipe by his side. . . . [In another room] four men squatted over a chess-board, and a little further on a man was dandling a baby. . . . It was a cheerful spot, comfortable, home-like, and cozy. It reminded me somewhat of the little intimate beer-houses of Berlin where the tired working man could go in the evening and spend a peaceful hour.25

  Academic research on opium consumption in China bears out Maugham’s observation: it was largely a social drug that harmed only a tiny percentage of users. One modern scholar estimates that although as many as half of men and one-fourth of women were occasional users, in 1879 only about one Chinese person in a hundred inhaled enough opium to even be at risk of addiction.26

  The emperor and the mandarins did express some moral outrage over the debilitation caused by opium, but they were far more concerned about the drug’s damage to their balance of trade. China subscribed to European-style mercantilism as faithfully as any seventeenth-century Western monarchy. Before 1800, the tea trade was, at least in the terms of the mercantilist ideology of the day, grossly favorable to the Chinese. The EIC’s records pinpoint 1806 as the year when the silver flow reversed. After that date, the value of opium imports exceeded that of tea exports, and Chinese silver began flowing out of the Celestial Kingdom for the first time. After 1818, silver constituted fully one-fifth of the value of Chinese export goods.

  In the 1820s, a powerful group of mandarins began to support legalizing opium as a way to reduce its price and staunch the outflow of silver. One of them, Hsü Nai-chi, wrote a memo to the emperor noting that some users were indeed enfeebled, but the fiscal damage to the nation was far worse. He recommended legalization, with the stipulation that opium should be purchased only by barter (presumably for tea), not with silver. The wide circulation of this memo among Canton’s foreign traders gave them hope that legalization was imminent. Hsü’s proposal was defeated, however, in a bitter battle at the imperial court.27

  In the early nineteenth century, the British controlled only a small part of the Indian subcontinent, and it was not long before Parsi merchants, particularly Jamsetjee Jeejeebhoy, got around the EIC’s opium monopoly in Bengal by shipping their local product, called malwa, out of Malabar and Gujarati ports. (Malwa was the generic term for non-EIC opium shipped out of the western ports, as opposed to the EIC-branded Patna and Varanasi blocks exported from the eastern port of Calcutta.) Eventually, the Company realized the advantage in centralizing malwa shipments from its convenient Bombay wharves, and after 1832 it began collecting a modest transit duty from local merchants.

  By the early nineteenth century, cracks had begun to appear in the Honourable Company’s monopoly. In addition to using private traders to ship opium to China, the EIC began to license a few private “country traders” to conduct legitimate trade to Whampoa as well, using what was left of its monopoly power to keep these entrepreneurs under its thumb. American fur merchants, led by John Jacob Astor, forced some of the first openings in the monopoly system with seal and sea otter skins from the Pacific Northwest, items highly prized in China.28 The EIC, afraid to offend the fierce, unpredictable independent nation which had handed the mother country a stinging defeat in the Revolutionary War, left the Americans alone.

  Even before the appearance of the former colonials, other English private merchants had hit on a ruse for getting around the EIC’s monopoly: foreign diplomatic cover. In 1780, an Englishman, Daniel Beale, sailed to China under Austrian colors bearing an appointment as Prussia’s consul. He would use his appointment to engage in the profitable country trade between India and China, free of EIC control. Another Englishman, John Henry Cox, the preeminent importer of singsongs to China, attempted to avoid interference from the EIC with a Swedish naval commission; when the Company still refused to let his vessel enter, he replaced the Swedish flag with a Prussian one. Poland, Genoa, Sicily, and Denmark would graciously and, presumably for a price, extend diplomatic privileges to British traders.29

  When Jardine returned to London in 1817 and left the service of the Company a wealthy man, he formed a partnership with another former EIC ship’s surgeon, Thomas Weeding, who had obtained a prized license from the Company to engage privately in the country trade. The two joined forces with a Bombay Parsi, Framjee Cowasjee, and in 1819 Jardine left for Bombay, where he assembled 649 chests of malwa that the partnership then sold for $813,000 in Canton.30 (Henceforth, in this chapter, the dollar-sign signifies eight-real pieces, or Spanish dollars. This familiar sign probably has its origins in the coat of arms inscribed on these coins). It would be the first of many profitable smuggling ventures for Jardine. In Bombay, he reconnected with Jeejeebhoy, with whom he would also have a long and lucrative commercial relationship. There, he also met James Matheson; the two would later found the great firm that still bears their names—Jardine Matheson and Company.

  Matheson came from a Scottish family wealthy enough to afford the necessary EIC license to privately ply the country trade. This allowed him to avoid the long apprenticeship with the Company endured by Jardine. Eventually, Matheson became the “Danish consul” in Canton, a position that enabled him to escape altogether the strictures imposed by his EIC license.

  Matheson also invented another ruse, which would later assume global importance. Whereas the transport of goods directly from India to China by private traders violated the EIC’s China monopoly, it was perfectly legal to ship merchandise sent from, say, Calcutta to the Strait of Malacca or from the strait to Canton. In 1822, the wily Scot first took advantage of this legal nicety by transferring his cargoes from ship to ship at the newly settled port of Singapore, just three years after Stamford Raffles had founded it on a marshy, malarial island.31

  Matheson’s wealth gave him the freedom to pursue both scholarship and journalism. Like many bright young merchants of his day, he adopted the free-trade ideology espoused by Adam Smith in Wealth of Nations. In 1827 Matheson founded the first English-language newspaper in China, the Canton Register, a broadsheet that printed local shipping news, tabulated opium prices, and editorialized against the tyranny of the EIC. That same year, after the death of his original partner, a Spaniard, Xavier Yrissari, he informed his Chinese customers that henceforth the overall management of the business would be undertaken by William Jardine. By 1830, the new firm, Jardine Matheson and Company, was smuggling about five thousand chests of opium per year into China, and like any young, vigorous organization, it sought efficiency in every direction.

  It fell to a remarkable member of Jardine Matheson, the linguist and medical missionary Karl Friedrich August Gutzlaff, to blow apart the Canton System. He did so by operating from small smuggling craft that ranged as far up the coast as Manchuria, selling malwa to local merchants, in direct defiance of the Chinese authorities.32 Gutzlaff, an intensely anglophilic Pomeranian Lutheran who spoke most of the major Chinese dialects, successively married three Englishwomen and believed strongly in the ability of commerce to bring salvation to the pagan Chinese.33 Unfortunately for his historical reputation, he chose opium as his preferred vehicle of Christian redemption.

  The historian Carl Trocki provides this vivid glimpse into everyday life on one of the coastal opium clippers. After anchoring in a secure bay, the crew of one ship found it

  overrun with Chinese, while [the captain], the shroff [a tester and changer of coins], and another European sat up far into the night selling opium to “all comers, high and low.” While waiting, some smoked opium and fell asleep on the couch in his cabin and others occasionally napped on the floor while the abacus rattled, and Chinese and Europeans communicated by sign
language. In four days, [the crew] sold opium worth . . . about $200,000.34

  Although the EIC was steadily losing market share to private traders, it pioneered a sailing advance that would have momentous economic and historical impact. For nearly two thousand years, the monsoon allowed mariners only one annual round-trip between India and China. This limitation would be conquered not by the new steam technology, but rather by improved hull and sail design. During the War of 1812, the Americans came up with a revolutionary vessel whose speed enabled their privateers to ravage English shipping and outrun blockades—the Baltimore clipper. The most famous, the Prince de Neufchatel, seized numerous British merchantmen before being cornered by three Royal Navy frigates just prior to the war’s end. The British towed the clipper to drydock and plumbed the secrets of its speed: a clean, narrow hull that kept the ship upright sailing into the strongest winds; and massive, tightly hung sails, characteristics easily visible in racing yachts even today. The fatal mistake of the Prince de Neufchatel’s captain, in fact, had been to overload the boat with too much weight in canvas sail, which had to be hauled down during the blustery conditions that prevailed during its final engagement.35

  A Royal Navy skipper, William Clifton, eventually came into possession of the clipper’s specifications. After leaving the navy, he commanded EIC vessels and realized that the Baltimore clipper’s sleek hull and tight sails were just the ticket for conquering the monsoons. In 1829 the EIC, with the backing of its governor-general, Lord William Bentinck, commissioned production of the Red Rover, a 255-ton craft that combined a Baltimore clipper–type hull with the bark (or barque) sail configuration favored by the navy.36 On January 4, 1830, the sleek new vessel slipped its moorings on the Hooghly River and headed downwind to Singapore, arriving just sixteen days later. Less than a week after that, it sailed north into the teeth of the monsoon and arrived in Macao in only twenty-two days. Clifton went on to complete three round-trips between India and China that year, a performance that earned him acclaim and a £10,000 prize from the EIC.37 The Red Rover finally met its end, along with all hands, in a stormy Bay of Bengal in 1853, an unusually long career among China clippers that spent much of their careers beating into the rough monsoons.38

  Clipper ships, to be sure, did not come cheap. One vessel, the Lanrick, cost the firm $65,000. But it carried 1,250 chests of opium, which would have earned $25,000 per voyage, thus paying off the entire purchase price of the ship by its third round-trip: that is, within one year.

  Although the EIC introduced clipper ships into the China trade, in the end the private companies most successfully exploited the new vessel’s potential. Jardine Matheson and others in the country trade had learned that it was more profitable to act as go-between and connect the sellers of malwa in Bombay to the buyers on Lintin Island. The commission, $20 per chest, was more reliably profitable than directly buying and selling opium themselves.39

  In 1830, a coalition of country traders and Manchester factory interests, led by an eager Jardine, eyed the coming expiration of the EIC charter and petitioned Parliament in favor of a “new commercial code.” In the spirit of the times, Parliament complied. The EIC’s monopoly on Eastern trade finally lapsed permanently in April 1834. Almost immediately, the private merchants, already in control of opium, captured the venerable and profitable trade in tea, the Company’s last major protected product.

  What a difference 150 years had made. In 1700, the Honourable Company was in the vanguard of free trade, while England’s protectionist textile industry sought to maintain its eroding monopoly. By the early nineteenth century, these positions had been reversed: the sclerotic EIC desperately sought to maintain its privileged position, while the cotton producers pushed for unrestricted commerce, envisioning that “if we could only persuade every person in China to lengthen his shirt tail by a foot, we could keep the mills of Lancashire running around the clock.”40 Before 1700, the globalist creed of Child and Martyn gained remarkably little public traction, but by 1830, Adam Smith’s free-market principles, as personified by Willam Jardine and James Matheson, carried the day. For centuries before the arrival of the Europeans, the emporia of the Indian Ocean had known reasonably open markets. Now the West, wielding superior new military and maritime technologies, would forsake its armed monopolist ways and embrace free trade, whether or not the Chinese and Indians wanted it to.

  The year 1828, for which we have particularly good records, provides us with a snapshot of the China trade just before the abolition of the Company monopoly. Of roughly $20,000,000 worth of imports into Canton, over three-quarters was carried by the private country traders, and three-quarters of that was opium. In other words, opium made up over half of the British trade, the lion’s share of which was in private hands. Over 99 percent of the EIC’s exports from China consisted of tea, which before 1834 the private merchants, who were paid mainly in silver, were not allowed to carry.41

  After 1834, with the Company monopoly gone, private traders expanded the scope of their operations; they were now free to ignore the Canton System, which had been enforced almost as vigorously by the EIC as by the emperor. The sleek, fast clippers proved ideal for high-value cargoes such as opium and tea. By the late 1830s, these ships allowed companies such as Jardine Matheson to control both the older country trade and the newer coastal trade pioneered by Gutzlaff. Opium imports had grown relatively slowly from about four thousand chests per year in 1800 to about ten thousand in 1825. After the private companies took over the China trade from the EIC, volume mushroomed to forty thousand chests in the late 1830s.42

  When the EIC relinquished its monopoly in 1834, its select committee, which regulated English trade, gave way to a superintendent of British trade in China, who was appointed by the crown and was greatly influenced by the powerful private traders and their hatred of the Chinese government. The misadventures of the first superintendent, the inept Lord William John Napier, symbolized the cultural gulf between China and the West. Napier arrived unannounced at the EIC’s factory in Canton at 2 AM on July 25, 1834; by daybreak, he had already hoisted the Union Jack, a gross affront to the Chinese. This faux pas was only the beginning. Napier next had an introductory letter translated into Chinese and delivered to the local Chinese governor-general. Within forty-eight hours of his arrival in Canton, the superintendent had thus violated several imperial edicts relating to barbarians: he had traveled upriver to Canton without approval, taken up residence there, delivered a letter to the governor-general directly (not through the hong merchants), and written in Chinese (instead of in English). The Chinese rebuffed Napier, shut down all commerce with the English, and fired on English vessels. Jardine and the other private traders, who had egged Napier on, realized that they had overplayed their hand and mollified the Chinese by negotiating the hapless envoy’s hasty exit.43

  Four years later, it was the emperor’s turn to overreach, when he appointed the brilliant but equally maladroit Lin as commissioner and set the stage for a far more disastrous confrontation between the two governments. Even before Lin’s appointment, the Chinese authorities had begun to jail large numbers of local opium smugglers, and brought trade to a standstill. In March 1839, Lin increased the pressure by making foreign merchants criminally liable for any illicit shipments. Shortly thereafter, Lin ordered the public beheading of Chinese opium dealers under the eyes of horrified Europeans and then held all the resident foreigners—English, American, Parsi, and French—hostage in their factories for several weeks until they agreed to turn over more than twenty thousand chests of opium. Only after Lin’s forces had destroyed the huge haul were the foreigners released.

  The new superintendent of trade, Charles Elliot, was a retired Royal Navy captain and a veteran of the West African anti-slave patrols. (At one point he held the office of “protector of slaves.”) A strict Calvinist who deplored opium, he compartmentalized his religious beliefs and official duties well enough to mollify the increasingly desperate private traders by compensating th
em for their confiscated opium. This action drew the English government directly into the fray.

  Just a spark sufficed. Several months later, in August 1839, following the murder of a local villager by a drunk English seamen, Lin cut off food and water to the British naval forces and demanded that the sailor be handed over for trial. Elliot refused and instead submitted the defendant to a British jury of merchants, who meted out a fine and a six-month sentence, to be served in England. (When the sailor arrived in England, he was set free on the grounds that the jury, which included James Matheson, had been improperly constituted.44) At about noon on September 4, Gutzlaff, under orders from Elliot, presented letters to the commanders of two Chinese junks off Kowloon and informed them that if supplies were not forthcoming within thirty minutes, their ships would be sunk. No food or water arrived, and HMS Volage fired on the vessels. In retaliation, Lin ordered that all trade with Britain be forever banned and that English ships would be fired on.

  Meanwhile, Jardine and other veterans of Lin’s blockade of the Canton factories made their way back to England. On arrival, they asked the cabinet of the Whig prime minister, Lord Melbourne, to demand an apology from the Chinese and negotiate a more “equitable” treaty that would open several other ports to the West. Dispatches from Elliot, whose pride and reputation were stung by Lin’s ham-handedness, also favored taking a firm hand with the Chinese.

  Jardine and his allies further recommended that their demands be backed up with naval force. All that remained was a means to finance the war. Thomas Babington Macaulay, the war minister, supplied it: have the Chinese pay reparations. Melbourne dispatched a force consisting of a dozen men-of-war and several thousand marines that arrived in China in June 1840.