‘Free trade and the pursuit of hegemony: imperial Britain in global rubber markets, 1860-1922’

Emma Reisz, Christ’s College, University of Cambridge

(EmmaReisz@aol.com)

Supervisor: Professor Martin Daunton

This paper is a brief outline of one aspect of a wider case study, considering a single commodity in imperial and global context. Rubber is worthy of study in itself, as a product of considerable strategic and economic significance in the first half of the twentieth century.[1] After the invention of vulcanisation in 1843, rubber became by far the world’s most useful plastic.[2] For one expert, ‘nothing has been discovered which would even be a substitute for it’.[3] Its elasticity made it an incomparable shock-absorber for railways, tyres and guns until the 1930s, while other properties made it necessary in electrical engineering, pipe construction, and numerous further uses. The value of rubber to industrial innovation ensured that it attracted the attention of government, and empire provided an obvious means to ensure a steady supply. It is also suitable for such a study because it exemplifies many of the potential economic benefits of tropical empire; it can only be grown in regions of year-round wet heat, but is purchased primarily by manufacturers for high-technology products.[4] This paper concentrates on the reasoning behind several of the key British government decisions between 1860 and 1922. As this paper shows, arguing that the logic of comparative advantage ensured benefits for all, in 1876 Britain broke Brazil’s monopoly on top-quality rubber and began producing it across the British tropical empire. Yet having established international dominance in the industry, in 1922 Britain introduced controls on rubber production. Having distorted the rubber market into overcapacity largely for fiscal reasons, imperial Britain chose in the 1920s to cushion capacity reduction at the behest of the economic interests it had created. This paper uses this continuity to suggest that the sharp change in official economic rhetoric exaggerates the divide in British willingness to intervene in global markets between the two periods. Further, this paper points out that government in 1922 made little attempt to defend its actions by reference to the global economy. Classical ideas of free trade, which had never gone unchallenged, had by 1922 lost their intellectual hegemony; but, equally importantly, Britain was losing its own hegemonic international position, and its pretensions as the world’s economic policeman.

            Rubber is additionally suitable for this study because of chronological coincidence. It became a commodity of global significance alongside the mid-Victorian high tide of British enthusiasm for free trade. Vulcanised rubber was discussed extensively by experts in the 1840s, but became well-known to a wider public at the 1851 Great Exhibition. At the stall of Macintosh & Co., one of the largest rubber manufacturers in Britain, Prince Albert was presented with a rubber tablet engraved with a long excerpt from William Cowper’s 1782 poem ‘Charity’.[5] The engraving amounted to eighteen lines, beginning,

‘The band of commerce was design’d

T’associate all the branches of mankind…

Each climate needs what other climes produce,

And offers something to the general use…’

The poem was a popular one from a well-known, if long-deceased, hymnist and religious writer; but it was particularly relevant to the product upon which Macintosh’s had engraved it.[6] Rubber was, in the cliché of the time, a supremely useful article, a fact noticed by enthusiasts for natural theology.[7] Rubber fitted equally neatly into a natural theology of commerce, or, the notion that, as Cowper had put it, ‘God opens fruitful Nature’s various scenes’.[8] The unity of the Garden of Eden had been lost, but free trade allowed its agricultural advantages to be rediscovered, albeit with higher transaction costs.

            Yet during the 1850s Thomas Hancock, owner of Macintosh’s, became increasingly concerned that, even with free trade, Brazilian rainforest dwellers would cease to provide rubber in the quantities required by British manufacturing industry. He argued that price regulation of demand was failing to distribute rubber efficiently, and instructed his fellow manufacturers that as rubber was ‘not unfrequently [sic] applied to purposes where neither its impermeability nor elasticity are required’ they should ignore price and simply restrain themselves from ‘perversion of so valuable a substance as rubber from its legitimate use’.[9] A more intractable problem was the deficiency of price as a means of influencing supply. Hancock was concerned that the complex supply routes which brought rubber from Amerindian collectors, through middleman traders to Brazilian ports, were incapable of carrying sufficient information to stimulate modification of the product to meet British business demands.[10] However, he argued, as ‘this substance [rubber] is destined to take an important place in the manufactures of this country… any chance that may obstruct one source, may cause great inconvenience.’ The invisible hand of the market seemed to need a gentle prod, and Hancock pointed ‘the attention of competent persons’ to the question of rubber cultivation ‘in Jamaica and the East Indies’.[11] Hancock’s good connections to scientists ensured that his suggestion began to attract attention from those working in a public, as opposed to purely private, capacity.  Sir William Hooker, the Director of the publicly-funded Kew Gardens, committed himself to ‘render any assistance in his power to parties disposed to make the attempt’ to move the Amazonian rubber plant from Brazil to territory in the British empire.[12]

Yet after fifteen years business had shown little enthusiasm to transport rubber. Obtaining rubber from Brazil required botanical expertise and jungle hardiness, and the comparatively low price (see Figure 1 below) did not appear to justify the cost.[13]

Figure 1

In the absence of a price surge, the British government became concerned about rubber supply only after 1870, and only under pressure from the Indian authorities. Three coincident processes served to interest Calcutta in rubber production. First, the railway boom was increasing rubber consumption in India.[14] The Indian government became increasingly keen to substitute Indian manufactures in place of expensive British imports.[15] The size of the trade was big enough to concern the Indian government, paying for it more or less directly, but not large enough to worry Whitehall, despite the latter’s general concern to prop up British manufactured exports to India, notably of cotton.[16] A second factor in Calcutta’s policy was the declining size of Indian rubber forests. Indian rubber was of comparatively low quality, but had nonetheless gone some way to satisfying domestic demand and sizeable amounts had been exported to Britain and elsewhere. Scientists expressed concern about Indian rubber supplies as early as 1851.[17] Indian exports peaked in 1869 and then declined rapidly as the rubber forest retreated under extraction pressure. In 1869, Gustav Mann, Assistant Conservator of Forests in Bengal, claimed rubber tappers would fell trees ‘with axes, or, if this was too troublesome, collect firewood and burn them down, so as to render the operation of tapping more convenient than it would have been had the trees been left standing’.[18] Thirdly, the India Office in London was adopting an increasingly technocratic approach to natural resources. The 1860s had seen a raft of forestry legislation, which, though too late to effectively conserve India’s rubber, had dramatically increased the influence of forest officials on policy.[19] The presence of scientifically-inclined officials such as Clements Markham at the India Office consolidated intervention as standard policy. [20] Markham had argued hard from 1858 for the necessity of transporting cinchona to India, the need to provide cheap quinine to control malaria overriding the imperative of laissez-faire.[21] He became convinced that rubber, though of less medical use, was also worthy of an Indian government project to obtain it.[22] Consequently in 1871, Markham and Richard Strachey, who had taken a hand in designing the Indian forest regulation system, commissioned a report from a London chemist with an interest in rubber, James Collins, probably after reading or hearing an 1869 talk by him.[23]

            In his report, Collins followed Hancock in concluding that production would be unlikely to keep pace with demand, influenced more in this conclusion by the rapid increases in British imports (see Figure 2 below) than by market prices. Collins suggested that supplies of labour in Amazonia were irregular and dependent on the strength of other parts of the economy. Tappers, Collins claimed, resented their lot, and after a drunken binge a tapper might destroy ‘all the trees

Figure 2

he meets with on his road’.[24] Collins concluded that to sustain supply in the face of such            recklessness, Brazilian rubber had to be transported to other countries.[25] During the cinchona transfer, Markham had complained of ‘molestation on the part of the authorities… from feelings of jealousy and from an idea that it is robbing the country of one of its sources of wealth’.[26] This mercantilist perspective was given equally short shrift by Collins, who wrote of rubber that ‘recourse must be had, sooner or later, to… acclimation [in new countries], in order to keep up necessary supplies of all necessary vegetable products’. Global demand, on this view, necessitated that vital economic products should not be retained as the exclusive property of their native country. Moreover, the idea of comparative advantage further justified rubber’s removal to different territories. With the increase in global demand, Collins wrote, ‘acclimation in localities where the various conditions… are more controllable than in their native habitat… becomes the more necessary for the sustentation and improvement of trade and manufactures’.[27] Meanwhile the introduction of rubber to India could be defended on fiscal grounds given the cost to the taxpayer of importing rubber manufactures for railways, and the necessity of the railways as public goods. On this basis, in 1873 the India Office undertook to obtain Brazilian rubber at the expense of the Indian public.[28] A substantial state aid to British agricultural investors had been presented as entirely compatible with the notion of laissez-faire.[29] The direct cost to Indian taxpayers was over £1,000, but the assistance to agricultural investment in the British empire was worth considerably more, as the rubber project relied on the expertise of many scientists and others who gave their knowledge to the state cheaply or for free.[30]

            Brazilian rubber was sent to British Asia by a British planter, Henry Wickham, in 1876.[31] Despite the assistance offered by British botanists, it was some while before rubber became a popular plantation crop.[32] New land codes in Malaya, notably that of 1898 and the special terms for rubber land from 1897, hastened the emergence of an estate rubber industry.[33] Europeans held more rubber acreage in Malaya than Asians throughout this period.[34] British business in Malaya also benefited from the toleration by the Federated Malay States government of the indentured labour system, despite the complaints of the Indian government about the working conditions of its nationals.[35] An estate-dominated rubber industry in Malaya could be taxed to balance the costs of expansion in the region, and provided opportunities for British capital investment; but it could be claimed that the policies adopted, providing new landholding arrangements and scientific research, offered sound governance without favouritism to special interests. This support for the rubber industry was initially balanced by the rapid increase in demand, particularly with the development of automobiles. However after 1910 the price of rubber on the London market collapsed (see Figure 3 below). By 1921 dividends were suffering severely and so was the financial position of the government in Kuala Lumpur, which was obliged to request permission to issue bonds in the City of London.[36]

            In the changed intellectual climate of the interwar period, free trade could be openly and successfully challenged. Control schemes in several products, notably rubber, had operated during the war itself with apparent success, creating a peacetime legacy of optimism about their viability and desirability.[37] The committee convened under Sir James Stevenson in 1922 to consider rubber prices concluded that while ‘advocates of the laissez-faire policy desire to see a survival of the fittest… [they] disregard entirely the hardships which must fall on the tens of thousands of shareholders in this country alone’; hardly a surprising conclusion given several

Figure 3

members of the committee were leading rubber growers.[38] It was no longer necessary, as it had been in the 1870s, to argue that government assistance to agricultural business served to lubricate the global economy.[39] Few arguing for control pointed out that an overcorrection could damage

future supply in an industry where new investment took five to seven years to reach maturity.[40] Instead the Stevenson Committee simply pleaded poverty for shareholders, and relied on the implausible assumption that global rubber consumption would stagnate throughout the 1920s to argue for a control scheme of indefinite duration.[41] Shareholder interests were increasingly contrasted with those of non-European producers. One grower argued that compulsory restriction would be necessary as smallholders ‘do not understand the situation’.[42] A member of the Stevenson committee complained that the scheme had been necessary because the voluntary efforts of European estates had been ‘defeated by native producers’.[43] Reduced production costs on smallholdings were obvious even to the Times, which noticed that ‘the owner of the garden or plantation gets his work [labour] for nothing, and the workman or tapper makes 10 or 12 times the wages he would get working as a servant or coolie on a European-owned estate’.[44] Concerns about smallholders undercutting estates could have been dealt by proposing their supply would be unreliable, as had been done fifty years earlier with Amazonian production, and so construed as damaging to the global economy. Instead arguments concentrated more or less bluntly on the unfairness of Malay competition and the desirability of legislation to protect against it.

            Complex official ideas of the role of free trade in the global rubber economy had given way to a simpler emphasis on the balance sheets of large companies, in a world where globalisation no longer seemed a force so malleable to British governmental will. By 1926, for one serving member of the restriction committee, ‘restriction ought never to have been imposed’. In attempting to control rubber supplies, Britain had taken ‘a mad dog by the ears, and we could not let go’.[45] Ironically, many rubber producers themselves always suspected that rubber restriction would be disastrous to their interests, precisely because of Britain’s declining global influence.[46] Britain could not prevent Americans, who now purchased three-quarters of Malaya’s rubber output, from turning to other sources for their rubber. Nor could Britain hope to prevent New York displacing London as a global rubber-trading centre.[47] Without including Dutch producers in the scheme, and without obtaining the support of American purchasers, it was never anything more than a subsidy from the most efficient British estates to growers outside the British empire, and to the (mainly Chinese) smugglers within it, and in 1928 the scheme was abandoned.[48] The power of the British imperial state had been used to establish production self-sufficiency within the empire, and briefly global dominance. The government-sponsored creation of an imperial rubber industry had been driven by fears of malign neglect or interference by other states in international rubber markets; the power of the empire had secured the trading freedom of the British capitalists within it. Fifty years later, the desire to intervene was rendered more explicit, but much of the capacity to do so had gone.[49]