chapter 3 trade and commerce Flashcards
why did free trade come to dominate economic thinking?
In the first half of the 19th century, the highly regulated protectionist system of mercantilism had been dismantled, under the influence of new theories of ‘free trade’ advocated in Adam Smith’s book, The Wealth of Nations. It was arguing that wealth was indefinitely expandable and freedom from commercial restrictions was the only way to maximise prosperity. It was regarded as the vital ingredient for British prosperity. Britain was the worlds foremost trading nation and so it benefited from free trade and was active in supporting
free trade agreements around the world, even ready to resort to threats to achieve them. Some other nations were willing to grant them; when they were reluctant the navy enforced the British terms. Economic dominance was sustained by a limited application of force. The idea of free trade was closely linked to the other humanist ideas of free labour and the attack in the slave
trade and slavery. It encouraged the British to see themselves as liberators
what were the consequences of free trade?
Many colonies continued trading with Britain, party out of loyalty, partly out of ease. Trading patterns were already well established and the Empire used a common language, currency and commercial law. Borrowing in London capital markets was also cheaper because British possessions were trusted. Free trade saw imperial trade and investment grow enormously creating an ‘industrial empire’. Britain
imported foodstuffs and raw materials (approx. 20% came from British colonies), and manufactured goods were exported back out (approx. 1/3 of British exports went to its Empire). London became the world’s financial capital and sterling became the main currency of international trade. Technological improvements supported the growth in trade: there was innovation in banking and company
organisation; improvements in shipbuilding made it quicker to sail; telegraph lines and underwater cables
improved communications; railways allowed for the quick transportation of goods; improved refrigeration enabled meat and dairy products to be imported from Australia and New Zealand and new armaments made it easier to deal with hostile forces. The economic benefit of Britain enforcing free trade could have been as high as 6.5% of gross national product
why were railways crucial for economic development?
The building of railways was key to economic development and ensure British control. They brought new
areas of land into Britain’s reach. Railways provided the largest single investment of the period in the self-governing colonies of Canada, Australia, New Zealand and South Africa as the opened up the Canadian provinces, enabled Australia to export wheat and wool and offered South Africa a change to expand into territories and commercial interests.Railways were themselves trading commodities, investments in railways provided ‘invisible’ trade and the
spread of railways facilitated commercial enterprise. Around 70% of British investment was in transport
infrastructure, particularly railways
what percentage of British investment was in transport infrastructure, particularly railways?
70%
what agricultural goods did Britain gain from its colonies?
Canada, Australia and New Zealand had vast tracks of land permitting the production of cheap foodstuffs and
raw materials, that were available in Europe, but at a lower price e.g. wool
Tropical colonies, such as South Africa, produced goods that weren’t available in Britain such as sugar, coffee, cocoa, groundnuts, copra and palm oil.
There was plantation for sisal in Kenya and Tanganyika, coffee and tea in Ceylon and Kenya, tea in India,
sugar in Mauritius and Natal, rubber and palm oil in Malaya and North Borneo, coconuts in the Solomon Islands and sugar in Fiji and Queensland
what mineral goods came from empire?
Tin in Nigeria, gold along the Gold Coast and diamonds in Sierra Leone helped develop those colonies .Copper was found in what was to become Northern Rhodesia and coal and gold was found in Southern Rhodesia.
In 1886, gold deposits were found in South Africa prompting a gold rush to the previously poor Dutch-Boer
republic in the Transvaal.
Diamonds were later discovered in the area leading to the Kimberly Diamond Syndicate in 1890. Gold was discovered in New South Wales in 1851 and by 1866 Victoria was producing £124 m worth of gold (1/3 of the world’s production). This began to run dry in the 1860s but more gold was found in New Zealand in the 1860s and in Western Australia in the 1880s
evidence that trade inside the empire was important to Britain?
By 1875 20% of all imports came from colonies. The Empire provided raw materials and foodstuffs needed by British industries.
By 1875 1/3 of all exports went to the colonies. Empire provided markets for British industries. India was essential to Britain’s economy. Tropical African colonies provided valuable agricultural materials, foodstuffs and minerals. British commerce profited from Empire. Tropical colonies produced goods not available in Britain that had high profit e.g. cocoa and coffee. The value of British imports of raw cotton from India increased from £1.6 m in 1854 to £5.8 m in 1876. Mining of precious material such as gold and diamonds brought in wealth
evidence that trade inside the empire was less important to britain?
British financers invested heavily in other countries considered part of the ‘informal empire’ e.g. Argentina. As the world’s foremost trading nation Britain didn’t have to initially worry about threats to free trade with
other countries that were no colonies – it was cheaper than formal annexation. Trade outside the Empire was far greater than trade inside it. Some of the new African colonies had very little economic value (the whole of Africa only amounted to 1.2% of trade). In 1887 Britain rejected its free trading empire with trading preference for ins colonies at the 1887 Colonial Conference. Several self-governing colonies introduced tariffs to protect their industry against British manufactures e.g.
Canada in 1859. Many of the investments in railways and other forms of commerce happened outside the formal limits of the
empire.
how did British trade positively affect indigenous people?
It provided benefits which no other power could match and to which colonies would not have had the same
access to if they weren’t in the Empire. Britain was the worlds leading source of technology and capital and the most important trading centre. Britain could provide every economic service that the colonies might need. Britain was the key to establish profitable export staples which provided the resources that could be used to
create an effective infrastructure. Trade created jobs on plantations and in mines. Railways in India were developed
how did British trade negatively affect indigenous people?
industries (e.g. Indian cotton mills) which were in no position to compete which led to the consequent destruction of livelihoods and commodities. Britain did not invest in other manufacturing industries because they wanted to limit competition. Undeveloped areas were propelled to modernise but their economic development was cured by the way it was controlled and
exploited by Britain
why did chartered companies become important from the 1870s?
Attituded changed in the 1870s when Britain’s economic supremacy faced challenges in the form of European and American industrialisation and the onset of the economic depression. The idea of the Chartered companies was thus revived as a way of extending Britain’s trade and control
what was the Imperial Federation League and when was it founded?
It was founded in Britain in 1884, set up to promote colonial unity and support for Chartered Companies. It rapidly established branches throughout the county to try and attract support from the business community
North Borneo Trading company?
In 1881, the Company received a charter for the purpose of administrating the territory. North Borneo benefitted from deposits of coal, iron and copper and had coffee and tobacco plantations. It represented key strategic site for Britain in the South China Sea and as a mid-point between India and Hong Kong. The main figure was Alfred (and Edward) Dent, hey used Sikh soldiers to establish control in the area. Slavery was removed and railways were built to support trade. Borneo suffered badly in WWII so Britain took over to fund repairs as the company couldn’t afford t
Royal Niger Company
It was originally the United Africa Company (set up in 1879). George Goldie founded the company and pushed the government for a charter. However, it wasn’t granted a charter until 1886. It was finally granted one in order to protect British trade from
the growing German and French influence in the wake of the Berlin Conference. Giving the company the charter was a cheap way for Britain to show ‘effective occupation’. The Companies main area of interest was the Niger River basin in West Africa, it had over 30 trading posts
along the river. They mainly traded for palm oil (used for lubricating machinery in factories among other things) and cocoa. The Company secured its interests by making treaties with local chiefs which gave the company access to trade in return for offering protection to the local rules. They made over 400 such treaties. They introduced large tariffs and licencing fees to eliminate competing firms. They seized land in order to control all aspects of the production and trade of palm oil, cocoa and coffee by establishing their own plantations. The charter was revoked in 1900 but by this point Goldie had established British control in what became the colony of Nigeria
Imperial British East Africa Company?
It was granted a charter in 1888 largely as a response to growing German interest in East Africa. It was founded by William Mackinnon who had made his money in shipping. He was not motivated by power or money but rather by spreading Christianity and ‘civilisation’. Its area of interest was what was to become the British colonies of Uganda and Kenya as well as Zanzibar. They set about trying to build trade with East African chiefs and open up new markets in the interior of Africa. They hoped to facilitate the introduction of tea and coffee plantations in the region. The company made treaties with local chiefs to gain access to land and open up trade. They made plans to build a railway to improve trade with the interior of East Africa. This would eventually connect Lake Victoria with Mombasa on the coast. The Company ultimately failed in its financial aim to develop British trading and commercial interests in the area and its charter was revoked in 1894. However, it had established control in Kenya and Uganda
