Mainstream
economic history is still coming to grips with the importance of Asia and the
history of economic growth outside of European frames of references.
Through the lens of a single organization one sees the effects of monetary expansion (American silver) on trade flows and the development of bureaucratic multinational machinery. One also observes the unfolding of colonial conquest and the peculiar results that emerge when market power is wedded with political power. The Honourable Company has beguiled writers since the eighteenth century and the secondary literature alone would constitute a considerable library. But no future investigator of the East India Company or its complicated legacy will be able to progress far without engaging Chaudhuri's "magisterial" (Raychaudhuri 1980, 433) Trading World of Asia.
Chaudhuri was the first to analyze the Company as a principally commercial enterprise. He first trained as a classicist and commands Sanskrit, Latin, and Greek, plus four European and at least two South Asian languages. His linguistic prowess made accessible to him the records of all the major European groups who traded with South Asia. In shifting to the early modern period, Chaudhuri displayed his distinct mathematical bent and brought a new formalism to the topic.
Trading World of Asia places Chaudhuri in the tradition of W.R. Scott (1910),
the distinguished analyst of English chartered companies of the seventeenth
century (1). It has been said that Chaudhuri did for the East India Company
what Kristoff Glamann did for the Dutch East India Company (VOC), Ralph Davies
for the Royal African Company, and E.E. Rich for the Hudson's Bay Company --
that he performed the role of Company historian, defender and critic.
Chaudhuri's authority, like those of the other Company historians, rests on his
command of the source material. The sheer magnitude of the East India Company
materials makes its comprehensive history extraordinarily difficult to achieve.
Furthermore Chaudhuri brings to the subject an intimate knowledge of the
regions in which the trade goods were acquired. He understood his Asian input
markets -- their language, history, and customs -- better than historians of
other chartered companies understood their overseas markets. His analytic
approach, his enormous devotion to the sources, and his understanding of the
very different societies joined by trade make the Trading World of Asia
a most remarkable achievement.Through the lens of a single organization one sees the effects of monetary expansion (American silver) on trade flows and the development of bureaucratic multinational machinery. One also observes the unfolding of colonial conquest and the peculiar results that emerge when market power is wedded with political power. The Honourable Company has beguiled writers since the eighteenth century and the secondary literature alone would constitute a considerable library. But no future investigator of the East India Company or its complicated legacy will be able to progress far without engaging Chaudhuri's "magisterial" (Raychaudhuri 1980, 433) Trading World of Asia.
Chaudhuri was the first to analyze the Company as a principally commercial enterprise. He first trained as a classicist and commands Sanskrit, Latin, and Greek, plus four European and at least two South Asian languages. His linguistic prowess made accessible to him the records of all the major European groups who traded with South Asia. In shifting to the early modern period, Chaudhuri displayed his distinct mathematical bent and brought a new formalism to the topic.
The
book's objectives are threefold: 1. to reconstruct "the Company's own
history for the period from 1660-1760" 2. to analyze "the economic
life of those countries in Asia where the Company had established trading
relations" and 3. "to discover through the records and the activities
of the East India Company the general problems of long-distance trade in
pre-Industrial Revolution societies" (p. xv-xvi).
As
Company history, Trading World of Asia provided a fresh perspective. In
contrast to earlier treatments that emphasized the Company's role as a vehicle
for British imperial aims (2), Trading World of Asia gazed unflinchingly
at the structure of the Company's organization and its decision-making process
-- at home and abroad. Using a systems analysis approach, Chaudhuri tells how
the firm worked. Tasks were divided among seven committees that reported to the
Court of Directors. The Court was made up of 24 directors who were elected
annually by the General Court of Proprietors. He explains the specialized duties
of the committees in London and the Presidency-factory system in place across
Asia.
For
each institutional unit within the firm, Chaudhuri identifies its access to
information and its generation of specific decision-variables. He also
identifies the time lags involved between one "subsystem" of the
Company and another. For example, to decide how much bullion was required to
fill the current order lists, the Directors would need to know the amount of
cash reserves on hand at the Presidencies. Delays in receiving such information
would likely result in an over or under allocation of funds, implying less or
more reliance on Indian capital markets. The Directors would face this problem
year in and year out. The recurrent nature of the problem would over time
encourage them to establish decision-rules for minimizing the discrepancy.
Institutionally this would link transactions in the Treasure Committee with
those in Asian Presidencies and ultimately with those in the Accountant
General's Department. In terms of Chaudhuri's model, this would illustrate the
interaction between subsystem I (London) and subsystem II (Asia) and then
between subsystem II (Asia) and subsystem III (London). By mapping
decision-variables and information flows to specific units, Chaudhuri
formalizes the management structure into a "trading model." The
technique gives him a global view of the Company's operations and leads him to
conclude that "the economic success of the East India Company was in large
measure the result of a systematic process of decision-making, communication,
and control." (p. 33).
The
Company history extends through a description of the pattern of commercial
settlements in Asia as Chaudhuri describes the various methods of acquiring
goods. In Bengal a system of brokers and middlemen was used to contract textile
production, while in China goods were purchased onboard ships commanded by
supercargoes. He provides quantitative analysis on the long-term fluctuations
in the volume of imports and exports and in the "terms-of-trade." He
describes the politics of foreign trade in Mughal India, the Company's pursuit
of trading privileges and the private trade of the Company's servants. The
shipping schedule, the export of treasure -- nearly every aspect of trade with
Asia is addressed. As Company history, the work is "detailed and
definitive" (Prakash 1980, 139).
The
second objective is more ambitious than the first. Chaudhuri hoped to analyze
the economies of Asia that traded with the Company. This would include the
"Arab world, the Persian Empire, the Mughal dominions, South East Asia,
and China" (p. 55). Given the heterogeneity of these economies and the
constraints of space, it is not surprising that his discussion is truncated to
the specific markets in which the Company operated. His subsequent works Trade
and Civilization in the Indian Ocean (1985) and Asia before Europe
(1990) however are not Company-centric and greatly illuminate the study of
comparative Asian history.
Still
Trading World of Asia makes important contributions in specific areas of
Asian economic history, namely in dispelling the van Leur thesis and in the
study of the Indian textile industry in the seventeenth and eighteenth
centuries. In his 1955 classic Indonesian Trade and Society, J.C. van
Leur characterized the Asian merchants as peddlers and Asian trading ports as
overburdened with a multiplicity of currency, weights, measures, and customs.
The overall picture is one of small-scale traders eking out a living in the
face of crippling transactions costs. Van Leur's thesis went unchallenged for
decades and was crucial to Niels Steensgaard's 1973 study of the decline of the
trans-Eurasian caravan trade.
Chaudhuri
contextualizes van Leur's argument. He shows how the peddler characterization
depends on a selective use of Dutch sources, the diary of a single Armenian
merchant, and a handful of travelers' accounts. Chaudhuri counters that the
type of Indian merchant most often discussed in Dutch and English company
sources resembles "the Indian equivalent of the Medici family, or Fuggers,
and the Tripps" (p. 138). As for the nature of Asian trade centers,
Chaudhuri points out that a multiplicity of weights, measures, and regulations
was common in European cities as well. More importantly, Chaudhuri argues that
however large the European companies were relative to their Asian counterparts,
they were never substantial enough to "command the market" (p. 139)
without resort to violence. Later substantiated by empirical research,
Chaudhuri's argument did much to undermine the then prevalent misconceptions
about the nature of Asian merchants communities (3).
A
second major contribution to Asian economic history is the astute analysis of
the Indian textile industry of the period. Chaudhuri describes the four major
regions of India (Punjab, Gujarat, Coromandel Coast, and Bengal) that
specialized in the production of cloth for export. He explores the organization
of the industry, including the very high degree of specialization of labor and
the role of merchants in financing the different stages of production and
marketing the finished products. He also explains the juridical tradition that
gave rise to the system of commercial advances common in the period. After
exploring the cost structure of handicraft production he considers the impact
of European purchases of textiles on the wages of weavers. The a priori
expectation that wages would rise in the face of growing international demand
is complicated by the fact the sources speak almost categorically of the
impoverished state of the weaver. The discussion of Indian textile producers
raises, if not fully answers, many important questions. Finally, he addresses
the issue of technological stagnation. Indian textile output increased over the
eighteenth century not by process innovation but by the expansion of the labor
force (and implicitly the replication of specialized human capital). Chaudhuri
argues that workmen in India lacked economic incentives to shift to
capital-intensive techniques so long as the appropriation of producer surplus
remained acute. He writes, "Specialization had gone so far that it would
have required very great incentives to induce such men to change their
production methods and habits drastically" (p. 275). Morris Morris
described Chaudhuri's "analysis of production and marketing activities in
Asia," as "by far the best available" (1980, 390).
The
third objective of the book is to identify the "general problems of
long-distance trade in pre-Industrial Revolution societies" (p. xvi).
Chaudhuri does this by exploring the role of the monsoon winds and the
techniques used to minimize shipping expenses (pp. 71-4, 193, 201-2, 330) and
by examining the persistent communication and control problems within the
Company (pp. 32-3, 74-7, 208-213, 298-9, 302). The problem of forecasting
future demand and determining which commodities in what quantities should be
ordered(pp. 278-81, 299-305, 331-2) would also fall under the rubric of
"general problems of long-distance trade." Unfortunately, Chaudhuri
does not bring these and other recurrent challenges under a single heading.
They jointly constitute one of the unifying themes of the book, yet the
problems are scattered across many chapters, in many differing contexts. This
is a weakness in the organization of the theme and not in the sophistication
with which Chaudhuri handles it. A careful reader will find all the elements
there.
As
Chaudhuri admits, his method of analysis can be disorienting. "The
methodology adopted was exceptionally complex, though not by itself but because
of its combinations. It is easier to say what the book is not than to say what
the book is. It is not true narrative history. It is not pure economic
analysis, nor is it economic history in the conventional sense" (Chaudhuri
1983, 10). He uses neoclassical economic analysis and yet borrows insights from
Polanyi and Marx. The influence of Braudel, quite marked in Chaudhuri's later
works, can be traced here. Trading World of Asia situates the Company
primarily in terms of its economic activities (the markets which it engaged).
It also emphasizes the physical or geographic space (the Asian littoral) and
the cultural space (the language, customs, and mentalité of the directors,
their agents, Asian merchants, and even the Mughal aristocracy) the Company
occupied. To this Chaudhuri reiterates the importance of time, investment
cycles, monsoon season, harvest season, and the arrival and departure of ships.
His ability to discern almost at once the many dimensions of cross-cultural,
transcontinental exchange makes the Trading World of Asia a
methodological hybrid.
Systems
analysis receives prominent attention. He writes of the Company as a trading
system, one in which the decision-rules employed by management can be mapped to
a sequence of physical inputs and outputs, suggesting the Company operated like
an engine. Systems analysis enables him to test statistically a series of
hypotheses, such as "average costs are a decreasing function of the volume
of trade, the cost price of goods, and of time, with an associated level of
fixed costs" (p. 486).
The
approach looks rather alien to those who learned industrial organization from
Tirole (1989) or Stigler (1968) a generation earlier. It is not typically
taught in economics or in history departments though it is widely used in
information systems management and environmental engineering. System analysis
requires the investigator to redefine structural and functional relationships
on a firm-by-firm basis. What surprises (and annoys) the economist is the
absence of a theory of the firm. The cost functions in Appendix 3 are
hypotheses relating costs to accounting and physical variables. They do not
imbibe the idea that costs functions arise from production functions and must
include opportunity costs.
Can
systems theory be useful to economic history? Certainly. It requires a much
lower level of abstraction than conventional microeconomics and can be
particularly useful when a researcher needs to make a detailed plan of a
complex organization. This is precisely the sense in which computing
professionals in the business world use the theory. The emphasis on information
flows and functional relations across different subsystems can help organize
data-gathering efforts. And this is precisely how the theory was useful to
Chaudhuri. Chaudhuri (1983, 14) writes, "The historical material was
collected and analysed with very strict adherence to the concept of the model.
The exposition was then 'translated' into the idiom of historians." The
gargantuan task of synthesizing the thousands of volumes of records pertaining
to the Company over the period indeed required a coherent approach embedded in
a structural model of the Company's various operations.
The
drawback to systems theory is that it is a static model of the organization and
it therefore offers no guidance on how to ask the deeper questions about
efficiency or organizational change. Writes Chaudhuri, "For a model cannot
without destroying itself take account of the passage of time which affects its
structural boundaries and parameters" (p. 41). Theories of institutional
change are of fundamental concern and those that are not amenable to changes
over time appear to have little explanatory power. Thus while useful as an
organizing heuristic, systems analysis seems rather unlikely to yield insights
regarding organizational change.
Beyond
systems analysis and econometric estimation, much of the book uses a
traditional narrative approach. His presentation of the Company's overall
financial position, for example, is alive with illustrative examples,
contextualized by contemporary opinion, and balanced by principles of modern
accounting. One reviewer considered such treatment as "a model of how
"Old" and "New" methods of economic history can be
fruitfully combined" (Ambirajan 1981, 79). Chaudhuri's six chapters on
individual commodities also move smoothly between general and specific, between
theory and evidence. One of the book's "special virtues," as Curtin
(1980, 508) rightly says is "the way in which [Chaudhuri] maintains a
counterpoint between central aggregates and the intimate detail."
The
most long-lasting contribution of the book is the stunning amount of
quantitative data on commodities and specie flows between Britain and Asia.
Appendix 5 provides the annual time series for nearly a dozen commodities
originating from six locations -- representing a fraction of the 400 tables
originally produced. Chaudhuri's research involved tracking more than 91
different textiles, 7 types of tea, and 30 other commodities imported into
London. On the export side, he followed the course of 12 products plus
treasure. By following the order lists and invoices of literally every Company
ship between 1660 and 1760, he and his assistants made available data that had
been scattered across hundreds of volumes of financial records and thousands of
volumes of correspondence. Clive Dewey wrote that Trading World of Asia
"represented the work of a lifetime, not only -- or even mainly -- in the
sense that it took a significant proportion of [the author's] working life to
write, but in the sense that such a book is only likely to be written once in a
lifetime" (Chaudhuri 1983, 11). Ten productive years of archival work
(involving English, French, Dutch, Belgain sources) went in to the production
of Trading World of Asia and that staggering effort alone will ensure
its longevity.
The
book influenced numerous literatures within economics and history. Chaudhuri's
emphasis on the efficiency of the East India Company resonates in the
literature on the origins of the multinational organization and on the
character of the English chartered companies. While Chaudhuri used systems
theory, others (Anderson et. al. 1983 and Carlos and Nicholas, 1988) have
employed transactions cost analysis, agency theory, and Chandlerian analysis of
firm structure to argue that the East India Company was an organizational
innovation on par with a modern multinational firm such as General Motors. They
emphasize the efficacy of the firm's internal operations as its main commercial
legacy. They de-emphasize the firm's imperial legacy. Other studies by contrast
have highlighted the significance of "merchant empires" to European
expansion. These works have also drawn on Chaudhuri's insights.
The
contribution of Trading World of Asia to the study of the foreign impact
on the Indian economy has also been fruitful. Most notably, Chaudhuri's
argument that India's, and in particular Bengal's, textile production increased
through an expansion of employment has resulted in several important
monographs. Om Prakash (1985) builds directly on the claim by asking how much
did Bengal's employment rise as a result of European demand for textiles. His
qualified answer: about 10%. Numerous studies have focused on the economic
dislocation experienced by weavers and other groups connected with the Company's
trade. From the perspective of the Mughal ruling classes it was certainly
difficult, if not impossible, to separate the Company's commercial purposes
from its political ones. For example, in dealing with Asian powers, the
Company, Chaudhuri explains, had every incentive to present itself as having
the delegated power of the British Crown. In the Indian economy, the East India
Company employees insisted on special treatment and trading privileges.
This
brings us back to indigenous commerce. Chaudhuri effectively utilizes European
archival sources to discern the contours of Asian trades and traders. In this
way Trading World of Asia contributed to the growth of Indian Ocean
studies such as Das Gupta and Pearson (1987) in which the European chartered
companies are viewed as one among many participants in the emporia trade.
Chaudhuri's later books (Trade and Civilization and Asia before
Europe) take a long view of the structure of Indian Ocean commerce and the
merchants involved. These works have helped replace Van Leur's peddler paradigm
with a fuller identification and appreciation of diasporic communities, about
the ways community norms mitigate problems of long-distance trade, and about
the comparative advantage of family firms (Levi, forthcoming). Rather than an
ill-informed, itinerant peddler, the early Asian trader is now recognized as a
"portfolio capitalist" (Subrahmanyam, 1990) enjoying political and
social along with spatial mobility. By bringing to the foreground the Asian
commercial milieu Chaudhuri helped initiate new literatures in Asian history.
For
the range and importance of its findings, its unique method, and its empirical
bounty, Trading World of Asia deserved the unanimous praise it received
upon publication in 1978. For those same reasons and for its lasting impact on
economic history, Trading World of Asia certainly deserves its present
distinction -- one of the most significant works of the twentieth century (4).
Notes:
1.
Philip Curtin (1980, 507) remarked, "Chaudhuri intended from the beginning
to present a case study of a large, bureaucratic, pre-industrial trading firm
as a contribution to the history of European business institutions in
general."2. See for example The Cambridge History of India, Volume V (1922), Bal Krishna, Commercial Relations between India and England (1924), and S. Bhattacharya, The East India Company and the Economy of Bengal (1954).
3. My "Market Power and the English East India Company in Bengal" presented at the 1995 SSHA Conference estimates the residual supply curves faced by the Company in the cotton textile, raw silk, and saltpeter markets. In the first two markets, the firm faced high elasticities of supply suggesting little price-setting ability. The findings are consistent with Chaudhuri's position that the East India Company was not large enough to determine input prices.
4. Before his recent retirement, Chaudhuri was affiliated with the European University Institute. The bulk of his career, however, was at the School of Oriental and Asian Studies, University of London.
Ann Carlos and Nicholas, Stephen. 1988. "'Giants of an Earlier Capitalism': The Chartered Trading Companies as Modern Multinationals," Business History Review. 62 (Autumn): 398-419.
K. N. Chaudhuri. 1978. The Trading World of Asia and the English East India Company, 1660-1760. Cambridge: Cambridge University Press. K. N. Chaudhuri. 1983. "The Trading World of Asia and the English East India Company, 1660-1760: A review of reviews." South Asia Research (London) 3 (1) (May): 10-17.
K. N. Chaudhuri. 1985. Trade and Civilization in the Indian Ocean: An Economic History from the Rise of Islam to 1750. Cambridge: Cambridge University Press.
K. N. Chaudhuri. 1989/90. "Indian History and the Indian Ocean (Professor K. N. Chaudhuri Interviewed by Ranabir Chakrabarti)." Calcutta Historical Journal. 14 (1-2) (Jul 1989-Jun 1990): 78-83.
K. N. Chaudhuri. 1990. Asia before Europe: Economy and civilisation of the Indian Ocean from the Rise of Islam to 1750. Cambridge: Cambridge University Press.
Ashin Das Gupta and M. N. Pearson, editors. 1987. India and the Indian Ocean. Calcutta: Oxford University Press.
J. C. van Leur. 1955. Indonesian Trade and Society: Essays in Asian Social and Economic History. The Hague: W. Van Hoeve.
Scott Levi. Forthcoming. The Indian Diaspora in Central Asia and its Trade, 1550-1900. Leiden: E.J. Brill.
Om Prakash. 1985. Dutch East India Company and the Economy of Bengal, 1630-1720. Princeton: Princeton University Press.
W. R. Scott. 1910. Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720, 3 vols. Cambridge: Cambridge University Press.
Niels
Steensgaard. 1973. Carracks, Caravans and Companies: the Structural Crisis
in the European-Asian Trade in the Early Seventeenth Century. Lund:
Studentlitteratur.
George Stigler. 1968. Organization of Industry. Chicago: University of Chicago Press.
Sanjay Subrahmanyam. 1990. Merchants, Markets, and the State in Early Modern India. Delhi: Oxford University Press.
Jean Tirole. 1989. Theory of Industrial Organization. Cambridge: MIT Press.
Reviews
of The Trading World of Asia:George Stigler. 1968. Organization of Industry. Chicago: University of Chicago Press.
Sanjay Subrahmanyam. 1990. Merchants, Markets, and the State in Early Modern India. Delhi: Oxford University Press.
Jean Tirole. 1989. Theory of Industrial Organization. Cambridge: MIT Press.
S. Ambirajan. 1981. Australian Economic History Review. XXI (1) (March): 77-79.
Philip D. Curtin. 1980. Journal of Modern History. 52 (3) (September): 506-508.
Morris D. Morris. 1980. Journal of Asian Studies. 39 (2) (February): 388-390.
Om Prakash. 1980. Indian Economic and Social History Review. XVII (I) (January-March):139-142.
T. Raychaudhuri. 1980. Economic Journal. 90 (358) (June): 433-435.
Henry G. Roseveare. 1980. "The East India Trade." Journal of Imperial and Commonwealth History. VIII (2) (January): 131-134.
