The Asian Trade Revolution: The East India Companies and the Decline of the Caravan Trade

The Asian Trade Revolution: The East India Companies and the Decline of the Caravan Trade

by Niels Steensgaard

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The Asian Trade Revolution: The East India Companies and the Decline of the Caravan Trade by Niels Steensgaard

In this work Neils Steensgaard combines an analytical economic approach with detailed historic scholarship to provide an imaginitive and important analysis of a central incident in modern world history. The event is the breaking of the Portuguese monopoly on Asian trade in the seventeenth century by English and Dutch mercantile interests. This change the author demonstrates, was not simply the triumph of the new powers over the old. Rather, the Dutch--English victory heralded a structural change in international trade: the triumph of entrepreneurial capitalism over the older economic mode of the "peddler-merchant."

Professor Steensgaard's study is divided into two major parts. The first examines the economic and political structure of the seventeenth century institutions in the Near East, Portugal, England, and the Netherlands. The author demonstrates that the rise to preeminence of the English and Dutch East India Companies over the Portuguese "State of India" was the result of the superior economic and bureaucratic organization of the former. The eclipse of Portuguese power in general, the author argues, is best understood as an institutional failure–an inability to adapt to changing patterns and demands of economic life.

The second part of Professor Steensgaard's study provides a detailed historical account of an important event in the fall of the Portuguese trading empire–the loss of the city of Hormuz in 1622. Hormuz, located at a strategic point at the entrance of the Persian Gulf, was a central port city on the Asian trade route. It fell to an English and Persian force. The author demonstrates why this event exemplifies the Portuguese institutional weaknesses that are discussed in the first part of the book.

Product Details

ISBN-13: 9780226771458
Publisher: University of Chicago Press
Publication date: 03/15/2017
Sold by: Barnes & Noble
Format: NOOK Book
Pages: 442
File size: 4 MB

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The Asian Trade Revolution of the Seventeenth Century

The East India Companies and the Decline of the Caravan Trade


By Niels Steensgaard

The University of Chicago Press

Copyright © 1973 Studentlitteratur, Niels Steensgaard
All rights reserved.
ISBN: 978-0-226-77145-8



CHAPTER 1

Chapter I: The Peddling Trade


Van Leur has provided the classical description of "the early Asian trade" – the peddling trade – in the following: "The international trade of southeast Asia was a small-scale peddling trade. The traders, shipping out with their goods by dozens on long voyages the periodicity of which was governed by the semi-annual monsoon winds, were pedlars with valuable high-quality products. They went out either as independent pedlars, perhaps in companies, or as traders on commenda." The criticism that has been levelled at van Leur has scarcely invalidated this description as a sociological model, and it will be used as the starting-point for discussion in this chapter. However, the question will be handled in a slightly different way than van Leur handled it. What interested the latter was the peddling trade viewed as a sociological concept, whereas it is the validity of the concept from the point of view of economic theory that is of interest here. The following discussion will therefore be concentrated on exploring those features that presumably would be decisive when the peddling trade was confronted with an entrepreneurial form built on entirely different institutional lines, i.e. on cost structure and price formation.


The Pedlars

Van Leur based his description on indirect evidence, and first and foremost on the descriptions and reports of actual market conditions provided by the employees of the Dutch East India Company. The caravan merchants themselves seldom left any source material; among the hundreds of accounts of journeys in Asia published in the 16th-18th centuries, only a handful have been written by merchants. This secrecy was probably intentional, the routes and market conditions constituting part of the merchants' misterio, but there must be other sources for the activities of the caravan merchants that have not yet been brought to light – accounts and letter books still lying unnoticed. A valuable source, at present unique, is the journal of the Armenian merchant, Hovhannes, which was unearthed and analysed by Khachikian a few years ago.

Hovhannes's journal provides a penetrating close-up of the work of a pedlar, but we know nothing of his person other than what the journal reveals. The journal describes his journeys between 19th December 1682 and 6th December 1693. We know from a single reference in the journal that he had previously made at least one journey to Smyrna. We may furthermore conclude from the journal that he had received a thorough education, but that he himself was scarcely wealthy, at least not at the beginning of his travels. He was the factor of two brothers, who may presumably be identified with two prominent Armenian merchants from the Isfahan suburb of Nor Jougha.

During the eleven years in which we can follow Hovhannes he travelled far afield. In 1682 he left Isfahan and travelled via Bandar Abbas (Gombroon) to Surat. From there he continued inland to Agra. In 1684 he again went to Surat and from there he returned to Agra. He spent the greatest part of the following year travelling in the neighbourhood of Agra, to which he returned at the end of the year. In 1686 he left for Tibet, arriving at the capital, Lhasa, in September. He remained in Lhasa for nearly six years until June 1692. Thereafter he retraced his steps as far as Patna, but from there he journeyed to Bengal, to Hooghli and Calcutta, where his journal comes to an abrupt end.

Hovhannes was not an isolated adventurer. He followed roads which other Armenian merchants had followed before him, and everywhere he went, even in Lhasa, there was an Armenian "nation", which he endeavoured to contact. We are scarcely entitled to conclude from this that he was none other than a "typical" Armenian caravan merchant, but there is nothing to indicate that he in any way differed from his contemporaries on the Asian caravan routes. That is, apart from the circumstance that his journal has been preserved.

At first glance Hovhannes's journeys appear to have been quite aimless, but on closer inspection they show a certain pattern. They can be divided into a preliminary journey from Isfahan to India, two business trips to the densely populated central Indian region around Agra, the great journey to Lhasa and, finally, the return journey from Lhasa to Bengal. For we must presume that it was the return journey he had begun at that time, and that it was his intention to seek a passage home to Persia on an English ship. The rhythm of these journeys corresponded with Hovhannes's business transactions. At his departure from Isfahan in December 1682 his capital was nominally 250 tomans – well over 3,000 piastres, including 18 English cloths at a total value of 217 tomans and the remainder as a bill of exchange drawn on Shiraz. The whole of that capital was given him on commenda, his own share being fixed by contract at 25% of the profit. He sold the cloth in India and bought indigo with the proceeds. The whole of the transaction – the conversion of three camel-loads of cloth into approximately as many loads of indigo – took nearly a year, and characteristic of Hovhannes's activity was the slow wandering from town to town following upon his arrival in India. He was in Surat from 23rd March to 15th May, in Aurungabad from 29th May to 15th July; he arrived at Burhanpur on 21st July and continued after some time to Sironj, where he stayed from 11th August to 24th November. He was in Agra from 2nd December to 6th January 1684. From Agra he made a detour to Khurja in order to buy indigo, and on 13th March he was back in Agra. Eight days later, on 21st March, he again left Agra, and this time the journey was without interruption and detours, for he was in Surat already on 12th April. The contrast between the outward and return journeys is revealing: the eighteen English cloths were retailed, piece by piece and yard by yard until it was time to purchase the indigo.

Hovhannes did not himself accompany the indigo all the way back to his principals, but he left it in Surat in the charge of another Armenian, who was commissioned to take part of it to Isfahan, presumably to the principals, and the rest to Basra to be sold. It is probable that he had received a new supply of commodities from Persia in the meantime, because on 29th May he left Surat once more in order to repeat the lengthy inland journey of the previous year, and this time he purchased cotton cloth, which he forwarded to Isfahan through his Armenian connections at the end of the season.

In 1686 he set off for Lhasa. Before leaving Agra he concluded an agreement with an Armenian business acquaintance; he apparently still considered himself as being dependent upon his principals in Persia, but after the journeys of the past three years he possessed some capital himself, since he contributed half of the 9,370 rupees, i.e. more than 2,000 piastres, which constituted his working capital in Tibet throughout the next six years. In Tibet he sold the commodities he had brought with him in small quantities, at the same time purchasing gold and musk. But he also carried on a considerable amount of passive business, lending or selling on credit to merchants of Armenian or other nationality, who were following the almost 1,250 mile long route from Lhasa to Sining on the Chinese border in order to buy tea and gold.


Hovhannes was not a specialist, neither as regards the areas he frequented nor as regards the commodities that passed through his hands. During the first years his biggest transactions were in cloth, indigo and cotton, but this did not deter him from also interesting himself in other commodities, and on the eve of his departure to Lhasa he possessed an extremely varied assortment of goods. Khachikian has identified 174 articles of trade in Hovhannes's journal, and in addition there are a number of items it has not been possible to identify with certainty. Van Leur's description: "pedlars with valuable high-quality products" appears appropriate. Hovhannes's capital is modest – 3,000 piastres on his departure from Isfahan; this was sufficient for him and his principals and his three camels. 4,000 piastres on his departure to Lhasa was sufficient to keep his business going for more than six years and, as far as we can judge, to ensure him a renumerative journey.

But this peddling trade should not be characterized as primitive. The technique may well be primitive, but the organization does not lack sophistication. Hovhannes acts a factor, as a partner in a company partnership, contributing his own capital, and he himself places capital at the disposal of other merchants. He does not have to accompany his goods to their destination, but can hand on part of the transport to others, at least on such frequented routes as Surat-Isfahan and Surat-Basra. He transfers money by means of bills of exchange, and some of the exchanges registered are pretty complicated. He does not use double-entry bookkeeping, but his accounts are meticulously kept, and he handles complicated calculations involving coins and measures with the greatest of ease.

Hovhannes is an Armenian, and his relations with the local Armenian communities, the Armenian "nations", are vitally important for his business. Everywhere he goes he makes contact with local Armenians, and he contributes to Armenian churches and institutions. He participates with Armenians in credit transactions and concludes important business deals using Armenians as witnesses. It is only with reluctance that legal disputes are referred to local authorities, usually they are settled among the Armenian merchants themselves. Even in far away Lhasa legal disputes are settled by a body of Armenians supplemented with merchants from Kashmir, rather than being brought before the local authorities. To belong to a "nation" was at once a protection and an organizational advantage; in the eyes of the local authorities the possession of a distinct law and nationality ensured the merchant extra-territorial rights, at any rate as far as internal disputes were concerned.

It is possible with regard to some transactions to calculate Hovhannes's gross profits; they were between 50–130% for those transactions that are identifiable. The lowest profit registered is on the large consignment of indigo he sent to Basra, this being at a gross profit of approximately 50%. The remainder of the identified transactions involved smaller sums, ranging from 17 to about 100 rupies.

Two rates of interest were charged for loans. When the lender and the borrower were staying in the same town, the customary interest was 3/4 % per month. When the borrower obtained a loan in connection with a journey the lender seems to have participated in the risk and has accordingly demanded a higher rate of interest.


At present Hovhannes's journal is our only source of direct information; and both as regards time and space it lies outside the sphere of greatest interest in the present context: transcontinental trade in the years around 1600. It is now necessary to determine whether the indirect evidence obtained from Western sources supports the assumption that he is none the less a representative of a peddling trade that carried the Asian commodities all the way to the trading towns on the Mediterranean.

Six English merchants, who travelled from Aleppo to Hormuz in 1583, had a working capital of £2,000 or approximately 9,000 piastres. Four Venetians on their way from Hormuz to Aleppo, whom the merchants met in Basra, were carrying 20 bales of cloves, long pepper, cinnamon, musk and ostrich feathers. In 1608 the Carmelite, Paul Simon, travelled from Isfahan to Baghdad together with some Armenian merchants who were on their way to Aleppo to sell four loads of silk. In 1613 a factor in the service of the East India Company, William Finch, who had great experience of trade in the Levant, left the Company's service in India in order to return home over land at his own expense. At the time of his death in Baghdad his estate comprised eleven mule loads of indigo and a few curiosities of lesser value. The many merchants, each with his small lot of bales and chests, became a feature of the carrying trade developed by the Companies between Surat and Gombroon following the fall of Hormuz. Thus in 1626/27 the Blessing carried six merchants with altogether 65 bales and chests from Surat to Gombroon, and on a similar journey in 1630/31 the Royal James brought 100 passengers with 689 bales to Gombroon and 70 passengers with 800 bales to Surat on the return journey. When in 1642 the Augustinian, Sebastian Manrique, wished to travel from India to Persia by way of Kandahar without attracting attention, his Indian friends advised him to disguise himself as a merchant. But if the disguise was to be foolproof "it was essential to purchase at least two thousand rupees' worth of the usual wares and load them on two camels ..." Anything less would be suspicious, but two camel loads on the six to eight months' long march between Lahore and Isfahan was obviously nothing unusual.

Hovhannes penetrates right to the production areas when purchasing his indigo and cotton cloth, and he frequently deals in small quantities. We cannot with any certainty find parallel features in the European source material, but it may be said with some justice to be the same tendency that manifests itself when English, Venetian and French merchants travel farther along the caravan routes to more distant markets in times of hard competition in Aleppo. For the Armenians the tendency to get as close to both producer and buyer as possible seems to have been characteristic. The Armenians used to buy up raw silk in the production areas by the Caspian Sea, but it is also said of the Armenians when they were purchasing indigo in North India that they rushed from one village to the other, "running and racing about like hungry folk". In his commentary on the Surat factors' plan to establish trade with Persia, the English Ambassador to the court of the Great Mogul, Sir Thomas Roe, draws comparison to these merchants: "to travel in an out like the merchants of Persia will neither become nor advantage them ..." And especially hard is the comment in Marseilles: "In order to earn a little bit more they are willing to run to the end of the world, and they live so miserably (si porque), that for the most part they only eat herbs."

However indirect and fragmentary our knowledge, there can scarcely be any doubt that van Leur's model is also valid for the Middle Eastern caravan routes. It is a prosperous trade plied by small people – a trade carried on by pedlars, buying and selling small quantities on continuous travels from market to market. The European material provides a large amount of evidence to this effect, and further confirmation is provided by the very silence of the sources as far as itinerant merchants carrying large quantities of merchandise are concerned. The only caravan merchants mentioned with more than a dozen loads in their charge are those the Shah of Persia occasionaly sent to Europe in order to sell silk (see below p. 103 ff).

But it would be wrong to characterize the peddling trade as primitive; the organizational sophistication documented in Hovhannes's journal is confirmed by the indirect evidence. Based on his observations in Goa in the 1580s Sassetti declares that 6–700 ducats were sufficient for that merchant who wished to undertake a journey, but that over and above their own capital they usually took 8, 10 or 20 thousand ducats with them as bills of exchange at 2% per month. The high level of interest is explained by the great risk. The second journey of the English merchant, Mildenhall, provides a concrete example of trade employing foreign capital. Following his arrival home from his first journey to India in 1609 Mildenhall applied for an appointment in the East India Company, but was rejected, presumably because his demands were too great. Instead he set out on a new journey along the caravan routes, at least part of his capital being placed at his disposal by four London merchants with great experience and interests in both Levant and Asian trade: Morris Abbot, Nicholas Leate, Richard Staper and Robert Offley. As time passed and nothing was heard from him the consortium grew uneasy, and in 1613 Richard Steele was sent out from Aleppo on Mildenhall's tracks in order to contact him and demand settlement. Steele found Mildenhall in "Tombaz, near the confines", presumably Tabas, three weeks' journey east of Isfahan, and took over on behalf of the consortium money and goods to the value of 9,000 piastres. No explanation as to the year-long stay in Persia is forthcoming, but we are informed that upon his death he left a wife and two children in Persia. He died in Lahore the following year, and his estate was estimated at about £500 or over 2,000 piastres. Mildenhall's year-long journey seems thus to have been undertaken with a capital of less than 10,000 piastres, and his own business capital at his death was little more than 2,000 piastres.


(Continues...)

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Table of Contents

Contents Preface Introduction Part I. The Fall of Hormuz, a Comparative Study The Pedlars The Economy of the Peddling Trade The Peddling Market "Publicans and Thieves" Persia The Ottoman Empire Estado da India The Redistributive Institutions and the Market The Redistributive Enterprizes The East India Company and the English Crown The East India Company in the International System The United East India Company and the Dutch Republic Power and Profit in the Policy of the United East India Company The Companies and the Market The Companies as Institutional Innovation Chapter IV. The Fall of Hormuz The Cape Route and the Caravan Routes around 1600 The Triumph of the Companies The Reversal on the Levant Markets The Fall of Hormuz Part II. The Loss of Hormuz. People and Events Chapter V. The Dream of a Great Alliance The Persian Initiative and Anthony Sherley The Christian Princes' Reply The Replies come in, War begins Seven Persian Ambassadors The Course of the War and the Crisis of Confidence 1607-08 Chapter VI. Hormuz is the Question The Carmelite Mission 1608 Robert Sherley Anthony Sherley's Projects The Augustinian Mission 1608 Robert Sherley in Rome and Spain Janghiz Beg and Gouvea in Spain In Persia 1608-13 The Crisis of Confidence 1613-15, Gombroon's Fall Robert Sherley 1611-15 Sherley's Second Spanish Embassy 1617-22 Figueroa in Persia British Beginnings The Loss of Hormuz Part III. After Hormuz The Demolishment of a Town The Portuguese Attempt at Revenge The Portuguese without Hormuz Sherley's Last Journey The Companies and the Persian Silk Trade Silk Purchases in Persia How Much? The Rise of Bandar Abbas The Companies and the "Early Asian Trade" Conclusion Appendix, Currency and Weights Manuscript Sources Printed Sources and Modern Works Index

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