False Economy - Alan Beattie [103]
The state had to make a trade-off, judging the value of regular imports from a chartered company against the cost of granting that company a monopoly in the home market. Sometimes governments struck a balance by moderating the company's power with early versions of antitrust law. The Hudson's Bay Company, for example, which traded furs from North America, was allowed to sell the furs it brought back only in small lots in fixed auctions, to prevent its manipulating the market by creating shortages and driving up prices.
Eventually, these institutions would outlive their value, as the cost of granting monopolies at home outweighed the benefits. But they endured for a remarkably long time. The British East India Company did not lose its monopoly over Asian trade until the nineteenth century. (A descendant of the Hudson's Bay Company is still in existence, running a chain of department stores in Canada, though its grip on the North American fur trade is not what it was.) Over shorter distances, where the volume of private trade could build up to a critical competitive mass, the chartered companies were superseded by what we might recognize as a more modern, free-market system of trade. Transatlantic trade was one of the first to resemble this, in the eighteenth century, with the exception of the longer routes to the north operated by the HBC.
Underlying this growth and change in supply chains and trade routes over the centuries, whatever form they took, technological forces were at work. Faster, more reliable means of transport played an obvious role in shortening journey times and improving the flow of information between traders. But technological change was not, and is not, manna from heaven that benefits all societies and industries equally. It needs to land in the right environment, populated by clever businesspeople who can seize and exploit its potential, with governments that encourage them.
The nineteenth century saw the rapid growth of transoceanic trade in bulk commodities. It was this that essentially started the transformation we saw above, in the chapter on water—that of turning countries like Egypt from local breadbaskets to global consumers. The reason is not difficult to see: the railroad opened up the Argentine pampas and the American prairie, and steam-powered ships radically decreased the time and cost, while increasing the reliability, of long-distance sea travel.
The latter point perhaps deserves particular emphasis. One of the most frustrating aspects of maritime transport before steam power was not the time but the uncertainty. Windpower is of course weaker than steam, but it is also far more variable.
The influence of the wind on trade and commerce was graphically demonstrated by the nature of one of the earliest economic indicators used to steer the economy. To this day, in the ornate room in the Bank of England where the institution's governing body meets is a dial affixed high on the wall and connected to a windvane on the roof. In the early nineteenth century, the direction of the wind was used to set monetary policy. If the breeze was blowing up the Thames and ships were able to come in to port, the Bank would need to extend more credit (the early equivalent of cutting interest rates) to enable merchants to buy the arriving goods.
Just how much the inception of steam power changed the rules of the game is evident from the accounts of seafarers before it became widely used. Henry Wise, a chief officer of the Edinburgh, a ship in the East India Company's service, was so frustrated with the vagaries of the trade winds that in 1839 he published a collection of the logs of longdistance voyages undertaken by the Company's ships. The book was a thinly disguised excuse to