The start of foreign mud

Submitted by Andrew Craig-Bennett on Sat, 05/01/2010 - 09:24

The HEIC had supported the Macartney Embassy - really a trade mission - because they desperately needed to persuade the Chinese to buy something.

There was a problem with the HEIC's monopoly of the British trade with China - rather a familiar one. China exported without importing. The exports were tea, porcelain and silks. Everyone in Europe wanted those. The only thing that China wanted in exchange was silver.

This was happening on such a scale (it is worth noting that in the later 18th century a quarter of the total revenues of the British Government came from taxes on tea imports!) that the world's supply of silver was piling up in China.

Most of the world's silver came from Latin America, where it was mined, and whence it was shipped to Spain, annually on the "Flota". On arrival there, of course, it destroyed the Spanish economy by making the Spanish reale the hardest currency on the planet, which is why the "Piece of Eight" (8 reales)  later called the silver Dollar, came into near universal use as the basis of international trade.

The Spanish had occupied the Philippines as a base for trading with China; Chinese merchants sailed to Manila with silks and porcelain and once a year the Manila Galleon, built in the Philippines. sailed for Panama with these goods and returned with Mexican silver which ended up in China. The streets of Intramuros in Manila are paved with the stone ballast of Chinese junks.

The collapse of the Spanish economy under the influence of silver and religious intolerance (throwing out the Jews was not a good move...) is not my theme, however...

We have a mountain of silver in China and no means of getting the stuff back into circulation...

In 1757, shortly before Alexander Dalrymple's visit to Macau, Robert Clive had won the Battle of Plassey, thereby bringing Bengal under the rule of the HEIC. Bengal was a bit of a mixed blessing to the HEIC, who found themselves in the act of acquiring an Empire in the course of "a fit of absence of mind" - or to be more precise, as a side effect of protecting their trading position with the Mughal Empire from attack by the French.

The problem with Bengal was that despite its vast extent and its fertile climate and soil there was no easy way for the HEIC to make money out of it - there was nothing for its rulers to tax, because its farmers had no cash crop that they could sell, so they had no cash to pay taxes with. The HEIC is a business, run on business lines, and it needed to make money to pay dividends to its shareholders.

One crop that the climate and soil of Bengal is well suited to is the opium poppy. Raw opium is a convenient item to carry by sea in a sailing ship, as it combines high value, reasonable durability, fairly light weight and low volume in one convenient package.

Opium was entirely legal in Britain and in India, and was widely used in western medicine in the form of a tincture in alcohol - laudanum - as a pain killer. Indeed, in the forms of morphine and codeine, it still is.

It was not, however, legal in China, where it had been first imported in the fifteenth century and where it was banned, by Imperial edict in 1729, for all except medicinal purposes.

Gradually, the lack of an export cash crop in Bengal and the abundance of silver in China occur to the commercially minded nabobs of the HEIC as presenting an interesting opportunity to kill two birds with one stone. If the Bengal opium crop were to become a monopoly of the HEIC,who would buy it from the farmers, and if it were to be exported to China, the balance of trade with China would be restored, silver would no longer pile up in China and Bengal would become profitable for the HEIC, which, owing to its impoverished farmers failing to provide a decent tax base, it had not been.

Indian exports of opium to China had risen from 15 tons, at the start of the 18th century, to about seventy tons in 1773 when the HEIC imposed a monopoly on the opium export trade.

They were about to rise a good deal faster.

There was however the little matter of opium being illegal in China, which meant that the HEIC could not sell it there in exchange for the goods they wanted; they still had to pay in silver.

The solution was simple; the HEIC sold opium in Bengal to private merchants, on credit. Those merchants smuggled the drug to China and collected payment in silver. They then supplied the silver to the Masters of HEIC ships visiting China, in settlement of their notes drawn on Calcutta.

So, fast forwarding to the 1820's, Bengal is now supplying China with about nine hundred tons of opium per year and the HEIC is not unhappy with the situation - in fact, owning to the incredible cost of governing India, the China trade is the only bit of the HEIC that is really making money...

In 1813 the HEIC lost most of its trading functions, apart from the China trade, under a new Act of Parliament and under another such Act, in 1833, it lost these commercial monopolies also. This was because of the influence of the theory of free trade, not because of any local considerations.

This removal of the HEIC from the scene meant that opium smugglers such as the British Jardine and the American Russell could now deal directly and make even more money. Business boomed...

All goes splendidly well for the British and American opium smugglers (please note - lots and lots of US involvement in the trade) until the Emperor becomes quite seriously alarmed. Whether he was alarmed by the loss of silver from China or by the growth of addiction amongst his population depends in part on whose account you choose to read.

At all events, a particularly distinguished Chinese civil servant, Lin Zexu, was appointed as Commissioner at Canton (Guangdong) with orders to stop the trade in opium.

He is opposed by Captain Charles Eliot, RN, with orders to continue it...

We won't go into the whole of the First Opium War, except to note that at quite an early stage some British and American sailors on shore leave in Tsimshatui, Kowloon, (does this sound familiar...) found their way into a drinking den, got drunk, vandalised a temple and killed a man who tried to stop them. This is the "Kowloon Incident!" - China demanded the right to try the seamen and Britain and the USA both refused (they got off scot free).

As part of the run up to the war, which, as noted I won't go into in detail, the Portuguese administration in Macao, under Chinese pressure, deported the British merchants there.

The British merchants did not go far; led by William Jardine, they decamped across the estuary to Heung Gang and anchored their ships in the harbour, building houses and store sheds ashore.

The time has come to mention one of my favourite episodes in Anglo-Chinese relations.

Quite early on in the hostilities, Commissioner Lin was dismissed, on the grounds of the utter failure of his policy, which had resulted in a war that China was evidently losing, and replaced by Qishan as Governor General of Guangdong and Guanxi Provinces, with orders to negotiate a Peace Treaty.

Qishan and Eliot met at Chuenpeh and agreed terms - Britain would get Hong Kong Island and China would pay Britain six million dollars (silver dollars).

The terms were referred to their respective Governments; neither government agreed and both men were dismissed.

The war went on for another year, and the eventual peace treaty (the Treaty of Nanjing) was pretty much the same, plus a few bells and whistles, like no right for China to tax foreigners or subject them to Chinese law. The USA and France signed very similar treaties soon afterwards.

Charles Eliot was appointed HM Charge d'Affaires to the State of Texas and Qishan was appointed Imperial Resident in Lhasa.

(In other words, both men had, as Hilaire Belloc puts it, been told to "Go off and govern New South Wales"!)

Soon afterwards, a visitor to Lhasa, Father Evariset Regis Huc*, met Qishan, and was told, "Such a pity that Eliot had his head chopped off over that treaty - he was a decent man".

Eliot, for his part, said just the same thing about Qishan.

In other words, both sides assumed that the other side were barbarians; in fact both had sophisticated bureaucracies. There is a lesson here, of fairly universal application...