Asia in the World Economy 1500-2030

7/26/2019 Asia in the World Economy 1500-2030

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2006 The AuthorJournal compilation 2006 Crawford School of Economics and Government, The Australian National Universityand Blackwell Publishing Asia Pty Ltd.

doi: 10.1111/j.1467-8411.2006.00181.x

BlackwellPublishingAsiaMelbourne,AustraliaAPELAsian-PacificEconomicLiterature0818-99352006 AsiaPacificSchool ofEconomicsand Government,TheAustralianNationalUniversityand BlackwellPublishingAsiaPty LtdNovember2006202ORIGINALARTICLEASIANPACIFICECONOMICLITERATUREMADDISONASIA INTHEWORLD ECONOMY15002030AD

Asia in the World Economy 15002030 AD

Angus Maddison*

Heinz W. Arndt Memorial Lecture, Canberra, November 10, 2005**

Until the nineteenth century, the impact ofEuropean colonialism in Asia was modest.Asias level of technology was much more

sophisticated and its major statestheOttoman Empire, Safavid Persia, the MoghulEmpire, China and Japanwere much betterequipped to resist conquest than were theAztecs, Incas and tribes of the Americas. Asiandestinations were much more remote than theAmericas, with a sailing time measured inmonths rather than weeks. In 1820 there weremore than 13 million people of Europeanorigin in the Americas. In Asia there were lessthan a 100,000.

The advent of the Europeans

As shown in Table 1, Portugal pioneered Europ-ean trade with Asia at the end of the fifteenthcentury and dominated this trade in the six-teenth century. Its trading empire was estab-lished by armed ships and a string of fortifiedisland bases: Elmina and Mozambique on theAfrican coast; Hormuz at the entry to the Per-sian Gulf; Goa on the northwest coast of India

(the headquarters of Asian trading operationsand of the Jesuit order); Malacca, which con-trolled trade and shipping between India andIndonesia; and Macao, which was the locus oftrade with China. There were also importanttrading posts at Jaffna in Ceylon, Nagasaki,Ternate and Timor. Portugal held Goa from1510 to 1961, Timor from 1613 to 1974, andMacao from 1557 to 1999.

Portuguese exports from Asia to Europewere heavily concentrated on pepper andspices. Initially, they were financed by bullionshipments as Asians had little interest inEuropean goods. An increasing proportion wasfinanced from fees levied on Asian traders,using ports controlled by Portugal and from

earnings in intra-Asian trade. The most lucra-tive items in intra-Asian trade were Chinesesilks and Japanese silver.

Portuguese penetration of the Asian oceanswas facilitated by the withdrawal of China and

Japan from international trade. At the begin-ning of the fifteenth century, Chinese navaltechnology was superior to that of Europe. From1405 to 1433, Chinese fleets were deployed in

* University of Groningen, the Netherlands.

** I am very pleased to give the Arndt lecture as Heinz was a friend for almost forty years, during which we exchangedwork in progress. We met in Canberra at fairly regular intervals from 1982 onwards.

Table 1Number of ships sailing to Asia from seven

European countries, 15001800

15001599 16001700 17011800

Portugal 705 371 196Netherlands 65a 1,770 2,950England 811 1,865France 155 1,300Otherb 54 350Total 770 3,161 6,661

a1590s.brefers to ships of the Danish, Swedish and Ostendcompanies, but excludes Spanish ships trading with Asiavia the Pacific from Acapulco.

Source: Bruijn, J.R. and Gaastra, F. (eds), 1993. Ships, Sailorsand Spices, NEHA, Amsterdam: 7, 17, 178, 183.


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ASIAN-PACIFIC ECONOMIC LITERATURE

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2006 The AuthorJournal compilation 2006 Crawford School of Economics and Government, The Australian National University

and Blackwell Publishing Asia Pty Ltd.

spectacular voyages throughout the IndianOcean and down the East African coast. There-after, China concentrated on internal trade via

the reconstructed Grand Canal, and more orless abandoned international trade and con-struction of sophisticated ships. From 1639 tothe middle of the nineteenth century, Europeantrade with Japan was restricted by the Tokugawaregime to a small Dutch trading settlement atDeshima, near Nagasaki.

When the Portuguese arrived in the IndianOcean, there was no powerful naval forceto oppose them. They were attacked by anEgyptian fleet in 1509, but it was decisively

defeated at Diu off the coast of Gujarat. TheAsian traders with whom the Portuguese werecompeting belonged to merchant communitiesoperating without armed vessels or significantinterference from governments. Althoughsouthern Indiawhere Portugal began its Asiantradewas ruled by the Empire of Vijayanagar,conditions in coastal trade were set by rulersof small political units, who derived incomefrom offering protection and marketingopportunities. The incomes of the rulers ofVijayanagar and the Moghul Empire were

mainly derived from land taxes, and they hadno significant financial interest in foreign trade.In Indonesia, political power was fragmented;the Hindu state of Majapahit was in declineand uninterested in foreign trade. However, inChina and Japan the situation was differentand the Portuguese had to negotiate a limitedentry, cap in hand.

Portuguese trade in Asia declined in theseventeenth century. They lost their bases inHormuz in 1622 and Muscat in 1650. The Dutch

took over the trade monopoly with Japan in1639 and captured Malacca in 1641. They drovethe Portuguese out of Sri Lanka between 1638and 1658, when they finally took Jaffna. Dutchcompetition weakened Portuguese interests inBengal and on the west coast of India. Never-theless, Goa and Macao were retained formore than 400 years and Portugal was com-pensated for its Asian losses by developing anempire in Brazil.

The total volume of European shipping inAsian waters was four times larger in theseventeenth century than it had been in the

sixteenth century, and nine times larger inthe eighteenth century. Portugal became amarginal participant, with about 12 per cent of

trade in the seventeenth century and 3 per centin the eighteenth century. The Dutch accountedfor one-half of the expanded trade, the Britishfor about one-quarter. France and three smallEuropean companies (Danish, Swedish andOstend) accounted for the remainder.

The Dutch Company (VOC) accounted for45 per cent of the European voyages to Asiafrom 1500 to 1800 and a higher proportion ofthe tonnage. It was given a monopoly charter(in 1602), which it needed in order to organise

trade with heavy capital outlays over extendedperiods. Each 30,000 mile return voyage to itsAsian headquarters in Java (Batavia) took atleast 18 months. The ships were armed and thecompany had the power to wage war, maketreaties with Asian rulers, establish fortified ports,and enlist soldiers and administrators.

The company had six shipyards in theNetherlands and maintained a fleet of about100 vessels. On average, vessels were replacedafter ten years, during which time each wouldhave made four return trips to Asia. Over the

lifetime of the company, 1,500 ships were con-structed for the Asian trade. Dutch losses fromshipwreck and seizure were below 3 per centover the whole period 16001800, which was avery much lower figure than that of thePortuguese. By 1750, the company employedmore than 12,000 sailors and 17,000 soldiers aswell as its administrative personnel in Asia.Over the period 16001800, the VOC sent nearlyone million sailors, soldiers and administratorsto its 30 Asian trading posts. This was about

the same as the combined total for the otherEuropean companies. The proportion of thecompanys personnel who returned to Europe(about one-third) was a good deal lower thanthat of other companies. This was largely dueto the greater role of intra-Asian trade in theVOCs operations and the higher proportionof VOC personnel who remained in Asia; butit also seems likely that the mortality rate washigher. During the course of the eighteenthcentury the incidence of malaria rose dramat-ically in Batavia as the area of swamp landaround the city increased.


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After the British took over the governanceof Bengal in 1757, their discrimination againstDutch operations weakened VOC trade with

India. Its position in China trade was alsogreatly inferior to the British, who used opiumshipments from India to finance tea purchasesin Canton, whereas the Dutch had to pay in

bullion for tea delivered by Chinese traders toBatavia. The outbreak of the Napoleonic warsled to the British takeover of Dutch interests inIndia, Malacca, Ceylon, South Africa, and,temporarily, in Indonesia.

By the second half of the eighteenth cen-tury, the VOC had ceased to be a profitable

organisation. It collapsed into bankruptcy in1795, after several decades of distributingdividends larger than its profits. The profitdecline had several causes. The company hadvery high overheads in hiring military, navaland administrative personnel to run whathad become a territorial empire. Its officersdiverted profits to themselves by conductingan increasingly larger private trade of theirown in the companys ships. There was also agood deal of corruption, which benefited thestaff rather than the shareholders. Given the

changing commodity structure of trade andthe locus of operations, Batavia was no longerthe ideal headquarters it had been initially,when the spice trade was predominant.

The impact of Asian trade on Europe

Asian trade stimulated the European shippingindustry and improvements in navigationtechniques. It created employment opportuni-

ties and provided new kinds of consumergoods for which demand was highly elastic.Tea and coffee improved social life. To theextent that they replaced gin and beer, theyincreased life expectancy. Asian textiles andporcelain created new fashions in clothing,domestic utensils, decorative fabrics and wall-paper. Familiarity with these new goods even-tually sparked European import substitution,particularly in textiles, pottery and porcelain.

1

The most striking thing about the operationof European companies from 1500 to 1800 wasnot their exploitation of Asia, but their enmity

towards each other. This was most extreme inrelations between the Portuguese and theDutch, but it was also visible in BritishDutchand BritishFrench actions and attitudes. Apartfrom the cost of armed struggles there wereheavy military commitments to deter conflict,monopolistic interdiction of European markets,and the creation of separate networks oftrading posts, which raised the costs andreduced the benefits of trade to Europeansas well as Asians. This situation contrasted

unfavourably with conditions in the tradingworld of Asia before European entry, and thewidespread acceptance of free trade in Asia

between the 1840s and 1920s.

The impact of Europe on Asia

European trading posts in Asia were nearly allon the coastal periphery and, until the eight-eenth century, infringements on Asian sover-eignty were generally limited. In the secondhalf of the century a major change occurredwhen Britain took over the administration andrevenues of part of the collapsing MoghulEmpire. In Indonesia, the Dutch achievedmonopoly control of the spice islands early inthe seventeenth century by slaughtering theinhabitants and establishing plantationsoperated by slave labour. Elsewhere in Indo-nesia there was a lesser degree of coercion andcontrol until after the Napoleonic wars. Europ-eans posed no challenge to Chinese sovereignty

until the nineteenth century.The companies created new markets in

Europe for Asian products. Prakash (1998)estimates that British and Dutch purchases oftextiles accounted for about 11 per cent oftextile employment in Bengal in the period16781718. New cities were established ascentres of commerce. However, there wasrelatively little demand for European goods inAsia. European purchases were financed by

1 See OBrien, Griffiths and Hunt (1991) on the effect of imports in creating a market for cotton textiles in England, andthe stimulus to domestic production which derived from import prohibitions on printed and painted wares.


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transfer of precious metals or earnings fromintra-Asian trade; although the export of silverto India and China helped to monetise theireconomies. The most obvious adverse economicimpact of the European companies on Asia was

to displace shipping and marketing activitiesof Asian traders.

To understand the European impact it isuseful to compare the experiences of India,Indonesia, China, and Japan, which togetheraccounted for 84 per cent of Asias populationin 1500 (see Table 2).

The British impact on India

The British connection with India began in 1600with the creation of the East India Companys

(EIC) monopoly in Asian trade. For the firstcentury and a half, it operated around theIndian coast and created new townsMadras(1639), Bombay (1668) and Calcutta (1690)astrading bases. By the middle of the eighteenth

century its main exports were textiles and rawsilk from India and tea from China. Purchasesof Indian products were financed mainly byexports of bullion, and purchases from China

by the export of opium and raw cotton fromBengal. After 1757, when the EIC took over thegovernance of Bengal, the British relationshipwith India became exploitative, as exports toBritain and opium exports to China werefinanced out of the tax revenue from Bengal.

Until the eighteenth century the British gen-erally maintained peaceful relations with theMoghul Empire, whose authority and military

Table 2Population of Asian countries, 15002003, (000s)

1500 1700 1820 1950 2003

China 103,000 138,000 381,000 546,815 1,288.400Japan 15,400 27,000 31,000 83,805 127,214India 110,000 165,000 209,000 359,000 1,049,700Bangladesh & Pakistan 85,094 294,575Indonesia 10,700 13,100 17,927 79,043 214,497South Korea 5,470 8,342 9,395 20,846 48,202North Korea 2,530 3,858 4,245 9,471 22,446Philippines 500 1,250 2,176 21,131 84,620Sri Lanka 1,000 1,200 1,935 7,533 19,742Thailand 2,000 2,500 4,665 20,042 63,271Taiwan 200 1,000 2,000 7,981 22,603

Hong Kong . . 20 2,237 6,810Singapore . . 5 1,022 4,277Other East Asia 15,200 19,450 21,760 78,580 237,707Total East Asia 266,000 380,700 685,228 1,322,600 3,484,084Arabiaa 4,500 4,500 5,202 9,483 52,466Iran 4,000 5,000 6,560 16,357 67,148Iraq 1,000 1,000 1,093 5,163 24,683Turkey 6,300 8,400 10,074 21,122 68,109Other West Asia 2,000 1,900 2,218 7,722 36,403Total West Asia 17,800 20,800 25,147 59,847 249,809Total Asia 283,800 401,500 710,375 1,382,447 3,733,894Western Europe 57,332 81,460 133,040 304,941 394,656

a

Arabia includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates and Yemen.Sources: Data for 15001700 are from Maddison, A., 2001. The World Economy: a millennial perspective, OECD, Paris andMcEvedy, C. and Jones, R., 1978.Atlas of World Population History, Penguin, Middlesex; for 18201950, Maddison, A., 2003.The World Economy: historical statistics, OECD, Paris; and thereafter from US Bureau of the Census.


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power was too great to be challenged. Afterthe death of Aurangzeb in 1707, Moghul controldisintegrated. The later Moghul emperors weretoken suzerains. Provincial governors became

de facto

rulers as nawabs

of successor states.At the height of its power, under the Emperor

Akbar (15561605), and his successors Jehangir(160527) and Shah Jehan (162758), the MoghulEmpire practiced religious tolerance. This is

one of the reasons why it was more successfulthan the earlier Muslim sultanates of Delhi inestablishing an extensive domain in a largecountry with great racial, linguistic and religiouscomplexity. Aurangzeb (16581707) abandonedthe policy of religious tolerance, destroyedHindu temples, reimposed the jizya

(a capita-tion tax on non-Muslims) and confiscatedsome non-Muslim princely states when titleslapsed. After his death, there was a series ofwars over the spoils of empire. In westernIndia, the Mahrattas established an independentHindu state with their capital at Poona. The

NizamulMulk

, a high Moghul official whoforesaw the collapse of the Empire, installedhimself as the autonomous ruler of Hyderabadin 1724. In 1739, the Persian emperor NadirShah invaded India, massacred the populationof Delhi and took away so much booty(including Shah Jehans peacock throne andthe Kohinoor diamond) that he was able toremit Persian taxes for three years. He also

annexed Punjab and set up an independentkingdom in Lahore. Punjab was later captured

by the Sikhs. In other areas that nominallyremained in the Empire, for example, Bengal,Mysore and Oudh, the power of the Moghulemperor declined, as did his revenue. Continu-ous internal warfare greatly weakened theeconomy and trade of the country.

It was because of these internal politicaland religious conflicts that the EIC was able togain control of India. It exploited the differ-ences skilfully by making temporary alliancesand picking off local potentates one at a time.

Table 3Per capita GDP in Asian countries, 15002003 (1990 international $)

1500 1700 1820 1950 2003

China 600 600 600 439 4,392Japan 500 570 669 1,921 21,218India 550 550 533 619 2,160Bangladesh 540 939Pakistan 643 1,881Indonesia 565 580 612 840 3,555South Korea 600 600 600 770 15,732North Korea 600 600 600 770 1,127Other East Asia 544 548 557 828 4,458Average East Asia 567 571 580 665 4,177Arabia 550 550 550 2,065 6,313

Iran 600 600 588 1,720 5,539Iraq 550 550 588 1,364 1,023Turkey 600 600 643 1,623 6,731Other West Asia 645 645 645 2,234 7,707Average West Asia 590 591 607 1,776 5,899Asian Average 568 572 581 712 4,292

Source: Maddison, A., 2001. The World Economy: a millennial perspective, OECD, Paris: Appendix B and Maddison, A., 2003.The World Economy: historical statistics, OECD, Paris (updated with modification of the 1820 estimates for Hong Kong, thePhilippines, Singapore, Sri Lanka, Taiwan and Thailand. I assumed that the average per capita movement 15001820 forChina, Japan, India, Indonesia and Korea combined was valid for all the other countries of East Asia.)


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Most of its troops were local recruits who werewell disciplined and paid regularly. They con-quered the Moghul province of Bengal in 1757,

took over the provinces of Madras and Bombayin 1803, and seized the Punjab from the Sikhsin 1848. They also succeeded in marginalisingtheir European commercial rivals, the Frenchand Dutch, in Indian trade. However, the Britishgovernment did not establish direct rule untilafter the Indian Mutiny in 1857, when the EastIndia Company was dissolved.

After its military victory at Plassey in 1757,the EIC operated a dual system in Bengal inwhich the nawab

was their puppet. The main

objectives of the Company were to enrich theirofficials and finance their exports from the taxrevenues of the province instead of shipping

bullion to India. The extension of the EICsterritorial conquests changed its role fromtrading to governance. However, its operationswere subjected to parliamentary surveillancein 1773, and the nawab

was replaced by aGovernor General (Warren Hastings) in directcharge of administration, but with Indianofficials. The Companys trading monopolywas revoked in 1813 in India and in 1833 in

China.Hastings was dismissed in 1782, and his

successor, Cornwallis, created a new system ofcolonial governance which was closer in spritto the meritocratic bureaucracy of China thanto anything that existed in the UK at that time.All high level posts were reserved for theBritish. A civil administration was created thatwas more or less incorruptible, cheaper, andmuch more effective in maintaining law andorder than that of the Moghuls. From 1806 the

Company trained its recruits at HaileyburyCollege near London. From 1833 nominees wereselected by competitive examination. After 1853,selection was entirely on merit. In 1829, thesystem was strengthened by establishing dis-tricts throughout British India small enough to

be controlled by an individual British officialwho exercised autocratic power as revenue col-lector, judge and chief of police.

The British raj was operated by remarkablyfew people. There were only 31,000 British inIndia in 1805 (of which 22,000 were in thearmy and 2,000 were in civil government). In

1931, there were 168,000 (60,000 in the armyand police, 4,000 in civil government, and60,000 employed in the private sector). They

were never more than 0.05 per cent of thepopulation.

There was a strong streak of Benthamiteradicalism in the EIC administration. JamesMill, John Stuart Mill and Macaulay wereinfluential Company officials, and Malthuswas the professor of economics at HaileyburyCollege. Bentham himself was consulted onthe reform of Indian institutions and theutilitarians used India to try experiments andideas (for example, competitive entry for the

civil service) that they would have liked toapply in England. After the Indian Mutiny in1857, when the British government took overdirect control of India, these radical Westernis-ing approaches were dropped and policy becamemore conservative. There was no attempt atfurther extension of direct rule over nativestates ruled by Indian princes, but they weresubject to guidance from official British resi-dents. There were several hundred native stateswith about one-fifth of Indias population. The

biggest were Hyderabad, Jammu and Kashmir,

and Mysore. The Portuguese retained Goawith 0.15 per cent of Indias population andthe French had an even smaller toehold atPondicherry.

The failure of the 1857 mutiny had an adverseimpact on the position of Muslims in India.The Moghul Empire was liquidated and theBritish ceased using Muslims in the Indian armyor in jobs associated with British governance.

The changes that the British made in thesystem of governance had major socioeconomic

consequences. They took over a Moghul taxsystem that provided land tax revenue equalto 15 per cent of national income. But by theend of the colonial period, land tax was only1 per cent and the total tax burden 6 per centof national income. The main gains from taxreductions and associated changes in propertyrights went to upper castes in the village econ-omy, tozamindars

who became landlords, andto village moneylenders. The wasteful warlordaristocracy of the Moghuls was eliminated andreplaced by a small westernised lite with asmaller share of national income. Until the


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1920s, the new lite was almost entirely British,with British consumption patterns. This greatlyreduced the demand for the luxury products

of Indias traditional handicrafts. The damage toIndias main industry was greatly reinforcedin the nineteenth century by duty-free importsof British cotton textiles.

The drain of resources from India to theUnited Kingdom as a consequence of havingforeign governance was a major target of criti-cism by Indian nationalists from the end of thenineteenth century. The resource drain can bemeasured by the size of the Indian exportsurplus, which was about 1 per cent of Indian

national income from 1868 to the 1930s. Thismeant a transfer of about one-fifth of Indiasnet savings, which might otherwise have

been used to import capital goods (thetransfer stopped after independence). Evenmore important was the fact that 5 per cent ofthe national income went to British personnelin India. Most of this would have gone to anIndian lite if the British had left India 50 yearsearlier and been replaced by an Indian litepursuing policies more conducive to Indiandevelopment. However, if the British had not

ruled India from the mid-eighteenth to thelate-nineteenth century, it seems unlikely thata modernising lite or the legal and institu-tional framework for its operation wouldhave emerged from the ruins of the MoghulEmpire.

The Moghul social structure

Muslims were the ruling lite in India from the

thirteenth century until the British takeover.The Moghuls had the military power to squeezea large surplus from a passive village society.The ruling class had an extravagant life stylewhose luxuries were supplied by urban artisansproducing high quality cotton textiles, silks,

jewellery, decorative swords and weapons.Members of the Moghul aristocracy derivedtheir income from the land. They were nothereditary landlords but derived their incomefrom jagirs

(allocations of tax revenue from acollection of villages). Part of this was for theirown sustenance, the rest was paid to the

central treasury in cash or in the form of troopsupport. Moghul practice derived from thetraditions of the nomadic societies that had

created Islam. Nobles were regularly postedfrom onejagir

to another and their estates wereliable to royal forfeit on death. This system ofwarlord predators led to a wasteful use ofresources and negligible levels of productiveinvestment. There was little motive to improvelanded property. The nobility lived in walledcastles with harems, gardens and fountains.They maintained polygamous households withlarge retinues of servants and slaves and hadhuge wardrobes of splendid garments in fine

cottons and silk. The emperors built magnificentpalaces and mosques at Agra, Delhi, FatehpurSikri and Lahore. Jagirdars

therefore had anincentive to squeeze village society close tosubsistence, to spend as much as possible onconsumption, and to die in debt to the state.There were also Hindu nobles (

zamindars

) whoretained hereditary control over village reve-nues, and Hindu princes who continued torule and collect revenues in autonomous stateswithin the Empire.

The reason why the Moghuls could raise so

much revenue from taxation, without having aruling class that directly supervised the pro-duction process, was that the rural population(mostly Hindus) were very docile. Villageswere defensive, self-contained units designedfor survival in periods of war and aliendomination. Villagers paid taxes collectivelyto whoever held state power. Conquerors ofIndia had a ready source of income and noincentive to change the system.

The chief characteristic of Indian society

that differentiated it from others was the insti-tution of caste. It segregated the population intomutually exclusive groups whose economicand social functions were clearly defined andhereditary. Old religious texts classifiedHindus into four main groups: brahmins,

a casteof priests at the top of the social scale whosepurity was not to be polluted by manuallabour; next in rank came warriors (

kshatriyas

),traders (

vaishyas

) and farmers (

sudras

). Belowthis there were outcastes (

melechas

) who per-formed menial and unclean tasks. Membersof different castes did not inter-marry or eat


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together and kept apart in social life. Thissystem had an adverse effect on productivity

because it pushed village living standards to a

level that reduced physical working capacity;allocated jobs on a rigid basis of heredity ratherthan aptitude; prompted a ritualistic rather thana functional attitude to work; and maintainedtaboos on animal slaughter (see Lal (2005), onthe origins and impact of caste).

In relations with the state, the village usu-ally acted as a unit. Land taxes were generallypaid collectively and the internal allocation ofthe burden was left to the village headman oraccountant. The top group in the villages were

allies of the state, co-beneficiaries in the systemof exploitation. In every village the bottomlayer were untouchables, squeezed tight againstthe margin of subsistence. Without the castesanctions, village society would probably have

been more egalitarian, and a more homogene-ous peasantry might have been less willing toput up with such heavy fiscal levies.

Below the village society, about 10 per centof the population lived in a large number oftribal communities. Aboriginal tribes led anindependent pagan existence as hunters or for-

est dwellers, completely outside Hindu societyand paying no taxes to the Moghuls.

As a result of the social system, the Indianeconomy was characterised by long-termstagnation and negligible levels of productiveinvestment. The irrigated area was about5 per cent of the total, compared with one-third in China. Animal dung was rarely usedas manure, and a largely vegetarian popula-tion got little benefit from large numbers ofsacred cows. There were no agricultural hand-

books or state attempts to bolster agriculturalproductivity. Crop yields seem to have beenstagnant.

One of the most significant differencesbetween China and India was the availabilityof land. In India, the area suitable for cultiva-tion was much greater in relation to popula-tion than that in China. An economy withrelatively abundant land is more likely to usecoercive institutions (like the caste system orslavery), than where land is much scarcer,such as China and Japan where rural propertyrelationships were very different.

The British impact on Indianagriculture

The colonial government modified traditionalinstitutional arrangements in agriculture bycreating property rights whose character wasmuch closer to those under Western capital-ism. Except in the autonomous princely states,the old warlord aristocracy was dispossessed.Their income fromjagirs

and that of the Moghulstate were appropriated. In the Bengal Presi-dency (that is, modern Bengal, Bihar, Orissa andpart of Madras) the second layer of Moghul

property rights belonging to tax collectors(

zamindars

) was reinforced. They acquired here-ditary status so long as they paid their landtaxes, and their tax liabilities were frozen atthe 1793 level. In the Madras and BombayPresidencies, the British dispossessed most ofthe old Moghul and Mahratta nobility and big

zamindars

, and vested property rights and taxobligations in the traditionally dominant castesin villages. Lowercaste cultivators becametheir tenants.

Because of the emergence of clearer titles, it

became possible to mortgage land. The statusof moneylenders was also improved by thechange from Muslim to British law. There had

been moneylenders in the Moghul period, buttheir importance grew substantially under Brit-ish rule, and over time a considerable amountof land changed hands through foreclosures.

Over time, two forces raised the income oflandowners. One of these was the increasingscarcity of land as population expanded. Thisraised land values and rents. The second was

the decline in the incidence of land tax. As aresult of these changes, there was an increasein incomes and a widening of inequality withinvillages. The village squirearchy received higherincomes because of the reduced burden of landtax and the increase in rents; the income of ten-ants and agricultural labourers declined becausetheir traditional rights were curtailed and their

bargaining power was reduced by greaterland scarcity. The class of landless agriculturallabourers grew in size under British rule.

The colonial government increased the irri-gated area about eightfold. Eventually, more


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than one-quarter of the land of British Indiawas irrigated, compared with 5 per cent inMoghul India. Irrigation was extended both

as a source of revenue and as a measure tomitigate famines. A good deal of the irrigationwork was in Punjab and Sind. The motive wasto provide land for retired Indian army per-sonnel, many of whom came from Punjab, andto build up population in an area that borderedon the disputed frontier with Afghanistan. Theseareas, which had formerly been desert, becamethe biggest irrigated area in the world andmajor producers of wheat and cotton, both forexport and for sale in other parts of India.

Improvements in transport facilities (railways,steamships and the Suez Canal) helped agri-culture by permitting some degree of speciali-sation in cash crops. This increased yieldssomewhat, but the bulk of the country stuck tosubsistence farming. Plantations were devel-oped for indigo, sugar, jute and tea. These itemsmade a significant contribution to exports, butin the context of Indian agriculture as a whole,they were not very important. In 1946, the twoprimary export items, tea and jute, were lessthan 3.5 per cent of gross value of Indian crop

output. Thus the enlargement of marketsthrough international trade was less of astimulus in India than in other Asian countriessuch as Burma, Ceylon, Indonesia or Thailand.

Under British rule, the Indian populationremained subject to recurrent famines andepidemic diseases. In 187678 and 18991900famine killed millions of people. In the 1890sthere was a widespread outbreak of bubonicplague, and in 1919, a great influenza epidemic.In the 1920s, and 1930s there were no famines,

and the 1944 famine in Bengal was due to warconditions and transport difficulties rather thancrop failure. However, the greater stabilityafter 1920 may have been partly due to a lucky

break in the weather.

The British impact on Indianindustry

Although European contact with India wasquite extensive from 1500, there was very littletransfer of European technology before the

nineteenth century. European companies inIndia were not directly involved in productiveactivity in the pre-colonial period. Their orders

for Indian goods went through Indian mer-chants and brokers, so they had little influenceon techniques of production (see Habib 1978:9and Qaisar 1982). Education in India wasconfined to a narrow group; it was not secular,

but religious, for both Muslims and Hindus, sothere was little chance of acquiring new tech-nical knowledge through reading.

The Jesuits brought a printing press to Goain 1556. They presented a polyglot bible to theEmperor Akbar in 1580, but did not succeed in

arousing much curiosity. The English East IndiaCompany brought a printer to Surat in 1675,but was not able to cast type in Indian scripts,so the venture failed. Printing was not consid-ered seriously by the aristocratic patrons ofIndian scribes and manuscript illuminators.

There was an interest in European handguns,muskets and artillery. Indian rulers employedEuropean technicians in this field, and Indianartisans were quite adept in copying and devel-oping many items. However, Indian troopsseldom acquired weaponry equivalent to that

of the Europeans. Their gunsmiths did notsucceed in casting iron suitable for artillerypieces, which continued to be cast in bronze.

The Portuguese built ships of Europeandesign in India for sale to local merchants. TheBritish built ships in Surat for use by the EastIndia Company, and English ships carpentersseem to have transmitted their knowledge toIndian artisans. However, they had little seri-ous impact on traditional Indian ship design.India already had astrolabes and other naviga-

tional devices, and made little attempt to copyEuropean instruments.

Land transport was unaffected by Europeantechnology before the introduction of railways.Bullocks remained the basic draught animal.Horses were not used for carts and carriages.India did not replicate the horse harnessdeveloped in Europe in the tenth century, and,in China, much earlier. The wheelbarrow had

been invented in China in the third centuryand in the twelfth in Europe, but long after thecontact with Europe, India continued to moveloads by head or hod. The Indian glass industry


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also seems to have been immune to Europeantechnology. Lanterns, mirrors, telescopes andeyeglasses were foreign curiosities and rarities,

not produced in India. Indians made no attemptto replicate European clocks.

Moghul India had a bigger industry thanany other country that became a Europeancolony and was unique in being an industrialexporter in pre-colonial times. A large part ofthis industry was destroyed as a consequenceof British rule.

Modern cotton mills were started inBombay in 1851, preceding those in Japan by20 years and in China by 40 years. Production

was concentrated on coarse yarns that weresold domestically and to China and Japan.Exports were half of output. India began tosuffer from Japanese competition in the 1890s.Exports to Japan were practically eliminated

by 1898. Shortly after, Japanese factories inChina began to reduce Indias market there.By the end of the 1930s, Indian exports ofyarn to China and Japan had disappeared,piece goods exports had fallen off, and Indiaimported both yarn and piece goods fromChina and Japan.

If the British had been willing to give tariffprotection, India could have copied Lancashirestextile technology more quickly. Instead,British imports entered India duty free. By the1920s, when Indian textile imports were com-ing mainly from Japan, British policy changed.By 1934 the tariff on cotton cloth had beenraised to 50 per cent with a margin of prefer-ence for British products. As a result there wasa considerable substitution of local textiles forimports. In 1896 Indian mills supplied only

8 per cent of Indian cloth consumption, 20 percent in 1923, and 76 per cent by 1945. By thelatter date there were no imports of piece goods.

Modern jute manufacturing started in 1854and the industry expanded rapidly in thevicinity of Calcutta. It was largely in the handsof foreigners (mainly Scots). Between 1879 and1913 the number of jute spindles rose tenfoldmuch faster than growth in the cotton textileindustry. Most of the jute output was forexport.

Coal mining, mainly in Bengal, was anotherindustry that achieved significance. Its output,

which by 1914 reached 15.7 million tons,largely met the demands of the Indian rail-ways. In 1911 the first Indian steel mill was

built by the Tata Company at Jamshedpur inBihar. The Indian industry started 15 yearslater than in China, where the first mill was

built at Hangyang in 1896. The first Japanesesteel mill was built in 1898. In both China and

Japan the first steel mills (and the first textilemills) were government enterprises.

Indian firms in industry, insurance andbanking were given a boost from 1905 onwardsby the swadeshi

movement, which was a nation-alist boycott of British goods in favour of

Indian enterprise. During World War I, lack ofBritish imports strengthened the hold of Indianfirms on the home markets for textiles and steel.After the war, under nationalist pressure, thegovernment started to favour Indian enterprisein its purchase of stores and it agreed to createa tariff commission in 1921, which began rais-ing tariffs for protective reasons.

Many of the most lucrative commercial,financial, business and plantation jobs in themodern sector were occupied by foreigners.Long after the EICs legally enforced monopoly

privileges were ended, the British continuedto exercise effective dominance through theircontrol of the banking sector. In 1913, foreign

banks held over three-quarters of total deposits;Indian Joint Stock Banks less than one-fourth.In the eighteenth century there had been verypowerful Indian banking houses (dominated

by the Jagath Seths) which handled revenueremittances and advances for the MoghulEmpire, the Nawab of Bengal, the East IndiaCompany, other foreign companies and Indian

traders, and which also carried out arbitragebetween Indian currency of different areas andvintages. These indigenous banking houseswere largely pushed out by the British.

The system of managing agencies, origi-nally set up by former employees of the EastIndia Company, was used to manage industrialenterprises and to handle most internationaltrade. They were closely linked to British banksand insurance and shipping companies.Managing agencies had a quasi-monopoly inaccess to capital, and they had interlockingdirectorships which gave them control over


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supplies and markets. They dominated theforeign markets in Asia. They had better accessto government officials than did Indians.

The agencies were in many ways able to makedecisions favourable to their own interestsrather than those of shareholders. They werepaid commissions based on gross profits ortotal sales and were often agents for the rawmaterials used by the companies they man-aged. Thus the Indian capitalists who emergedwere highly dependent on British commercialcapital and many sectors of industry weredominated by British firms, for example,shipping, banking, insurance, coal, plantation

crops and jute.Indian industrial efficiency was hamperedby the British administrations neglect of tech-nical education, and the reluctance of Britishfirms and managing agencies to provide train-ing or managerial experience to Indians. Evenin the Bombay textile industry, where most ofthe capital was Indian, 28 per cent of themanagerial and supervisory staff was Britishin 1925, and the British component was even

bigger in more complex industries. This raisedproduction costs. At lower levels there was

widespread use of jobbers for hiring workersand maintaining discipline. Workers weregenerally unskilled and had to bribe the jobbersto get and retain their jobs. There were alsoproblems of race, language and caste distinc-tions between management, supervisors andworkers. The small size and very diversifiedoutput of the enterprises hindered efficiency.It is partly for these reasons (and the overvalu-ation of the currency) that Indian exports haddifficulty in competing with Japan.

It is interesting to speculate about Indiasfate if it had not had two centuries of Britishrule. There are three major alternatives thatcan be seriously considered. One would have

been the maintenance of indigenous rule witha few foreign enclaves, as in China. Given thefissiparous forces in Indian society, it is likelythat there would have been major civil warsand the country would probably have split up.Without direct foreign interference in itseducational system, India would probably nothave developed a modernising intelligentsia,

because Indian society was deeply conservative

and did not have a homogeneous civilisationaround which to build their reactive national-ism. If this situation had prevailed, population

would certainly have grown less, but the averagestandard of living might possibly have been alittle higher because of the bigger upper classand the smaller drain of resources abroad.

Another alternative to British rule couldhave been conquest and maintenance of power

by some other Western European country suchas France or Holland. This probably would nothave produced results very different in economicterms from British rule. The third hypothesis isperhaps the most intriguing, that is, conquest

by a European power, with earlier accession toindependence. If India had had self-governmentfrom the 1880s, after a century and a quarter ofBritish rule, it is likely that both income andpopulation growth would have been acceler-ated. There would have been a smaller drainof funds abroad, greater tariff protection, morestate enterprise and favours to local industry,and more technical trainingthe sort of thingsthat happened after 1947. However, Indiawould probably not have fared as well as Meiji

Japan, because the fiscal leverage of govern-

ment would have been smaller, zeal for masseducation less, and religious and caste barrierswould have remained as important constraintson productivity.

The Dutch impact in Indonesia

The Portuguese were the first Europeans tomake direct contact with Indonesia. Albu-querque captured the strategic port of Malacca

on the west coast of Malaya facing Sumatra in1511. Malacca dominated the narrow straitsthat linked the trading worlds of the IndianOcean and the China seas and was the mainemporium for trade between them.

At that time there was no central power inIndonesia. Sumatra had once been the seat ofthe Srivija Empire, which had long disap-peared. It was divided into a number of pettyislamicised states. The Hindu kingdom ofMajapahit was on its last legs in eastern Javaand most of the Javanese coastal trading areaswere controlled by Muslim rulers.


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Initially, the main commercial attraction tothe Portuguese was the spices of the Moluccas(Ternate, Tidore, Makian, Moti and Bacan),

the Banda islands, Ceram and Ambon. Thesesmall volcanic islands had a world monopolyof cloves, nutmeg and mace. These high-valueproducts were sold in Asia and exported insmall but growing quantities to Europe from1400 by Arab traders via Egypt. Reid (1993)suggests that spice exports to Europe increasedabout fourfold between 1400 and 1500, fellsharply around 1500, then rose to about fivetimes their previous peak around 1600.

The Portuguese established a fortified base

in Ternate in 1522 and in 1529 bought out theSpanish, who had an outpost in Tidore. Theywere able to restore and enlarge the flow ofspices to Europe, but were forced out of Ternatein 1575 by a native revolt.

The first four Dutch ships arrived at Bantamon the western tip of Java in June 1596. Theyinvited the local merchants aboard: a multi-tude of Javanese and other nations as Turks,Chinese, Bengali, Arabs, Persians, Gujarati, andotherseach nation took a spot on the shipswhere they displayed their goods, the same as

if it were on a market (Van Leur 1955:3). TheDutch were sufficiently impressed by thepotential for Asian trade that they set up a

joint stock company, the VOC, in 1602, with amonopoly in Asian markets. At that timePortugal had been annexed by Spain. TheDutch were at war with Spain in Europe andparticularly eager to end the Iberian presencein Indonesia. They were able to do this ratherquickly, though they did not capture Malaccauntil 1641. Their Asian headquarters were

established at Batavia near Bantam in 1619 andthey took aggressive action against indigenoustraders, and Portuguese, Spanish and Englishshipping.

2

In 1621, they killed or enslavedalmost all the nutmeg producers of the Bandaislands and replaced them with Dutch planters

with slave workers who delivered their wholecrop to the VOC. In 1623, the chief factor of theEnglish East India Company at Ambon and 20

of his associates were beheaded.At the beginning of the seventeenth cen-

tury, three-quarters of Dutch exports fromAsia consisted of spices and pepper. The profitmargin on spices was particularly high becausethey had cornered the market. Pepper produc-tion was expanded in Java and Sumatra incompetition with India. In the peak year, 1670,more than 4,000 tons of black pepper and 60tons of white pepper were shipped to theNetherlands (Glamann 1981). By the end of the

seventeenth century, the relative importanceof spices and pepper had fallen.

3

The mostimportant exports to Europe were silk andcotton goods from China and India for whichdemand was more elastic, and Dutch earningsfrom intra-Asian trade had become important

because of their privileged position in Japan.The Dutch introduced sugar production to

Java in 1637. They found it difficult to competewith producers in Brazil and the Caribbean

but found a limited market in Asia. Theyintroduced coffee at the end of the seventeenth

century.When the Dutch arrived in Java there were

important sultanates in Bantam and Cheribon.The central Javan kingdom of Mataram hademerged, but none of these had anythinglike the authority of the rulers of China, Indiaor Japan. Their administrative and militaryorganisation was weaker, inland communi-cations were poorer, and the institutionalarrangements by which the ruling classsqueezed a surplus from the population were

more feeble. The economy was much lessurbanised and monetised than that of India,China or Japan. Fiscal levies were in kind or inthe form of labour services rather than landtax. Within villages, the control mechanismsfor extracting tribute were weaker than in the

2 Batavia was the headquarters of VOC operations throughout Asia. It was 13 miles from Bantam, 38 from Cheribon, 82from Palembang, 96 from Surabaya, 160 from Malacca, 300 from Ambon, 325 from Banda, 350 from Ternate, 328 fromThailand, 430 from Colombo, 496 from Cochin, 600 from Bengal, 738 from Japan, 900 from Mocha, 1483 from the Capeof good Hope, and 3,500 from the Netherlands (see Glamann 1981:26).

3 The spice islands lost their monopoly in the last quarter of the eighteenth century when a French diplomat smuggled outsome seedlings. Today they are grown in Grenada, Madagascar, Sri Lanka and Tanzania.


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caste-bound Indian villages with their clearerhierarchy and religious sanctions. The volcanicsoil was very fertile in Java and at that time

land was relatively abundant. As a consequence,peasants probably worked less than in India,and found it easier to migrate or overthrowrulers who imposed too great a squeeze.

In the seventeenth and eighteenth centuriesthe Dutch had only a marginal impact on theIndonesian economy and its native rulers. Theirincome was derived from captured incomefrom trade previously enjoyed by the Portu-guese and Asian trading communities. In 1795the VOC went bankrupt. In 1801 the Indies

became a Dutch colony and there were signifi-cant moves towards the creation of a territorialempire. Control from Batavia was reinforced,the separate governorship in Semarang andthe sultanates of Bantam and Cheribon wereabolished, and the status of Dutch representa-tives in the successor states to Mataram(Jogjakarta and Soerakarta) was strengthened.In 1810, the Netherlands was occupied byFrance, and the Indies came under Britishadministration. Raffles took over as Lieutenant-Governor. He continued to westernise the

administration and introduced legislation forland taxation. In 1817, Raffles published his twovolumeHistory of Java

, which was a remarkablestatistical survey and guide to its economicpotential.

There were two phases of Dutch policy inthe nineteenth and twentieth centuries. Bothinvolved intensive development of tropicalcrops for export. In 182530, they had to dealwith the Diponegoro revoltthe Indonesianequivalent of the Indian Mutiny. Thereafter,

they abandoned the westernisation of prop-erty rights and land taxation that Raffles hadenvisaged. Instead, they adopted a policy ofdual administration, retaining traditional rul-ers, law and custom as major instruments oftheir rule.

Phase 1: the cultivation system, 18301870

The first phase, from 1830 to 1870, was the so-called Cultivation System (

cultuurstelsel

) whereclaims on indigenous income were exercised

by forced delivery of crops or compulsorylabour service. To prevent evasion or flight,

the movement and residence of the indigenousand Chinese populations were controlled from1816 onwards by pass-laws designed to main-

tain labour discipline and enforce ethnic apart-heid. The Dutch kept a government tradingmonopoly, fearing that most of the profitswould have gone to British or other foreignmerchants under an open-trade regime. Exportprices for sugar and coffee rose after the aboli-tion of the African slave trade in the 1830s,which ruined their competitors in the Caribbean.Indonesian GDP per capita rose very littlefrom 1820 to 1870, but the Dutch share of GDProse from 2 to nearly 7 per cent and the

number of resident Dutch nationals rosefivefold. Half of the government revenue inIndonesia was remitted to the Netherlandsand the Dutch King received income from hismonopoly in shipping export crops. The gov-ernment dominated production of sugar andcoffee and sold monopoly franchises to opiumdealers, but most of the tobacco crop was inprivate hands. Favoured individuals weresubsidised to create sugar processing factories.

There were ample opportunities for corrup-tion amongst the 76 local regents and heads

of the 34,000 villages of Java. This element ofprofit from the regime was not part of the drainfrom Indonesia, but strengthened class differ-entiation within the indigenous population.Traditional levies of tribute on village societywere reinforced by more efficient Dutch

bureaucratic techniques.

Phase 2: the plantation economy,18701929

From 1848, when the Netherlands acquired a

more democratic political system, there wasgrowing criticism of exploitative practices and

bureaucratic cronyism in Indonesia. In 1870,the opening of the Suez Canal and the devel-opment of steam shipping made it clear thatIndonesian potential was not being fully used,and the Dutch authorities decided to open thecolony to private enterprise and investment.Thereafter there was a considerable accelera-tion of economic growth.

From 1870, as private enterprise establisheditself in plantation agriculture on a commercial

basis, costs and benefits were assessed more


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rationally and agronomic research helped toraise yields, particularly for sugar. Europeanswere allowed to acquire heritable leaseholds

for plantations for a 75-year period, and theDutch community grew very fast. In 1870, thegovernment had been responsible for 55 percent of export crop production; by the early1890s the share had dropped to zero. From theturn of the century, there was rapid develop-ment of new commodity exports from Sumatra(petroleum, rubber and tin), which by thenhad been fully incorporated into the DutchEast Indies as a result of the trade-off with theBritish (who ceded their claims in Sumatra

against those of the Dutch in the Gold Coast),and a costly 30-year war between the Dutchand the Atjehnese. There was substantialforeign investment (mainly Dutch), which washigher on a per capita basis than in other Asiancountries, except Malaya and the two Japanesecolonies, Korea and Taiwan.

From 1870 to 1937, Indonesian per capitaproduct rose more than three-quarters and percapita exports grew fivefold. Per capita incomeof the indigenous population rose by abouthalf, due in part to more intensive labour input.

The average per capita income of the Chinesecommunity (whose contribution to small-scaleentrepreneurship was an important componentof growth) rose about 60 per cent. The biggestgains were made by the resident Dutch com-munity, whose average per capita income dou-

bled to a level 50 times that of the indigenouspopulation. Their share of domestic productrose from around 7 to nearly 16 per cent. Therewas also a growth in remittances to the Neth-erlands. These represented profits from foreign

investment and efficiency in production andmarketing. In the cultuurstelsel

period theyrepresented plunder.

At the end of the colonial period the Dutchpresence in Indonesia was proportionatelyhigher than in any of the European colonies inAsia, except Malaya. It was eight times largerrelative to population than the British presencein India. The number of European army per-sonnel was about the same proportionately,

but the number of Europeans in the civiladministration was nearly 15 times higher thanin India. The Dutch presence in the private

sector (particularly in mining and plantations)was also much bigger. They also had a highertendency to settle as families, with a higher

proportion born in Indonesia.

The ethical policy

At the end of the nineteenth century there wasextensive discussion of the exploitative charac-ter of the colonial regime and the governmentembarked on a so-called ethical policy in 1900,which in theory was intended to raise nativewelfare. The authorities were all the more

willing to increase their spending and tightensurveillance of their allies in the native admin-istration, as there had just been a majorcolonial war in Sumatra, and there was anincreasing need to deal with nationalist politi-cal activity.

The main impact of the policy was toincrease the size and pay scales of the existing

bureaucracy, to add new specialist technicalservices, and to raise government investment.A good deal of this investment went on irriga-tion works whose benefits flowed mainly toWestern sugar plantations. Until 1932 thegovernment maintained a coolie ordinancewhich bolstered the supply of cheap labour toplantations (mainly in Sumatra) and enforcedpenal sanctions on runaway workers. Levelsof spending on social services and educationfor the indigenous inhabitants remainedabysmally low. In 1930, according to the cen-sus, only 6.4 per cent of the indigenous popu-lation were literate, and only 0.32 per cent inthe Dutch language.

The Dutch managed to integrate the enfeebledremnant of the native ruling class into their

bureaucratic system by running a dual admin-istration with European officials in the

binnenlands bestuur

and a parallel nativeadministration with hereditary regents at thetop and their cronies lower down the scale.Control was exercised by a thick layer of Europ-ean officials who spent a good deal of time aswatchdogs over a native administration whoseostensible dignity and regalia camouflagedtheir basic role as Dutch puppets. The nativestates (

Vorstenlanden

) had 20.6 per cent of the


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population in 1930 compared with 24.2 per centin the Indian native states. The latter had moreautonomy; their rulers had bigger incomes and

maintained separate armed forces.

Japans response to the West

The Japanese reaction to western contact wasdifferent from that of other Asian countries. Itwas more carefully controlled and manipulated

by the Japanese, and they were much moreinterested in borrowing western technology.

Japan remodelled its society and economy in

1868 in an attempt to catch up with the westeconomically and militarily. It had alreadydemonstrated a capacity to remodel its societydrastically at the end of the sixteenth century,and there was another drastic change afterWorld War II.

The first Western contact occurred in 1543,when Portuguese sailors were shipwrecked onTanegashima island, below the southernmosttip of Kyushu. They had firearms unknown in

Japan. The potential of this new weaponrywas quickly appreciated by the military who

managed to copy the guns and manufacturethem in Japan. The guns were important indeciding the outcome of the Japanese civil warswhich began in 1467 and ended in 1573. The

Japanese were also interested in Portugueseships, maps and navigation techniques. Thetechnology and behaviour of the southern

barbarians were displayed most clearly on verylarge, multipanelled, lacqueur screens.

At this time, opportunities for Portuguesetraders as intermediaries in ChineseJapanese

commerce were particularly favourable. TheChinese had severed trade relations with

Japan, whose ships could only trade indirectlywith China via Korea, the Ryuku islands andVietnam. Enmity between the two countrieswas heightened by political changes in Japan.By the middle of the sixteenth century theAshigawa shogunate, which had accepted nom-inal Chinese suzerainty, was on its last legs. Itwas succeeded by three ruthless militarydictators, Nobunaga (157382), Hideyoshi(158298) and Tokugawa Ieyasu; the lastnamed ruled Japan from 1598 to 1616, wiped

out potential enemies, and created a powerfulnew system of government.

These political developments occurred at

the time Japan became a major silver producer.Rich deposits were discovered in the 1530s,and a new technology for extracting metal fromlow grade ores was widely diffused shortlyafter (see Innes 1980). By the end of the fifteenthcentury, China had abandoned its hugelyinflated paper currency in favour of silver. Thegold to silver price ratio was much morefavourable there than in Japan. As China wouldnot allow Japanese ships to enter its harbours,silver was shipped by Chinese smugglers and

the Portuguese. Portuguese ships were ableto bring Indonesian spices from Malacca toMacao, sell them in China, buy Chinese silksand gold, go from Macao to harbours in thesouth of Japan (first Hirado and then Naga-saki), sell these products, buy Japanese silver,sell it in Macao, and buy silk again for ship-ment to Japan.

Portuguese traders were soon followed byJesuit missionaries. Francis Xavier was the firstto arrive, in 154951. The Jesuits were verysuccessful in making converts. Eventually, the

number of Japanese Christians rose to about300,000 (many more than the Jesuits convertedin India or in China). In 1596, the Spanishauthorities in Manila sent a mission of Francis-can missionaries to proselytise. The Japanesegot the impression that Spain might want totake over Japan as it had the Philippines, andon Hideyoshis order the Spanish missionariesand 19 of their Japanese converts were crucifiedat Nagasaki. From that point on, Japan becameincreasingly hostile to Portuguese missionary

activity, and made contact with English andDutch traders who were much less intrusiveand had no religious ambitions. EventuallyChristianity became illegal. The Jesuits and thePortuguese were expelled in 1638. The Englishhad pulled out in 1623. Henceforth, trade withthe Japanese mainland was confined to Chineseand Dutch traders. Japanese were forbidden to

build ocean-going vessels or to travel abroad.However, trade with Korea continued via the

Japanese island of Tsushima, and trade withthe Ryuku islands (Okinawa) was organised

by the Satsuma domain in southern Kyushu.


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The Dutch were the only Europeansallowed to trade in Japan between 1639 and1853. From 1641 they were confined to a small

artificial island (Deshima) in the harbour ofNagasaki. The profitability of this trade fadedat the end of the seventeenth century becauserising costs led to a fall in silver production,and demand for Chinese silk and porcelain fell

because of the growth of import-substitutingindustries in Japan. The importance of foreigntrade fell, but the small Dutch outpost wasuseful to Japan. In the course of their long stayin Japan, the Dutch stationed three very dis-tinguished scientists in Deshima: Engelbert

Kaempfer (16902), an adventurous Germansavant and scientist; C.P. Thunberg (177576),a distinguished Swedish botanist, and FranzPhilipp von Siebold (182329 and 185962), aGerman physician and naturalist. These schol-ars wrote books that were important sourcesof Western knowledge about Japan. But theDutch also had a significant impact in trans-mitting knowledge of European science andtechnology to Japan.

The Japanese did not have the culturalinhibitions that existed in China and India

against things foreign. They had alreadyadopted many things Chinese, and when theyfound anything better, were willing to con-sider it seriously. In the seventh century, Japantried to model its economy, society, religion,literature and institutions on those of TangChina. It created a national capital at Nara, onthe model of Chinas Chang-an. It adoptedChinese style Buddhism and allowed itsreligious orders to acquire very substantialproperties and income. It adopted the Chinese

ideograms, the kanji script, the Chinese liter-ary style, the Chinese clothing fashions, theChinese calendar and the methods of measuringage and hours. There was already a substantialsimilarity in the crop-mix and food consump-tion, with a prevalence of rice agriculture, andmuch smaller consumption of meat and meatproducts than in Europe. There was greater landscarcity in Japan and China than in Europe orIndia, so the agriculture of both countries wasvery labour intensive.

However, Japanese economic performanceremained inferior to Chinese until the end of

the eighteenth century. Unlike China, it didnot create a meritocratic bureaucracy and hadno educated secular lite. Knowledge of print-

ing was available almost as early as in China,but there was little printed matter except forBuddhist tallies and talismans. From 1185, theEmperor was shunted aside, and the effectivegovernance of the country fell into the handsof a hereditary shogun and a decentralisedmilitary lite. As a result, property relations inagriculture had a closer resemblance to that offeudal Europe rather than China. The divisionof Japan into particularistic and competingfeudal jurisdictions meant that farming and

irrigation tended to develop defensively onhillsides. The manorial system also inhibitedagricultural specialisation and development ofcash crops.

Japan also lagged in industry. Whilst theChinese had switched from hemp to cottonclothing in the fourteenth century, the changedid not come in Japan until the seventeenth.Until the seventeenth century, the Japaneseproduction of silk was small, and consumptiondepended on imports from China. Shipping andmining technology remained inferior to that in

China until the seventeenth century.The old regime collapsed after a century of

civil war. The old capital, Kyoto was largelydestroyed and a new order emerged from thewreckage, with a new capital in Edo (Tokyo).Ieyasu established the Tokugawa shogunate in1603, after serving Nobunaga and Hideyoshi,who had developed some of the techniques ofgovernance which he adopted. Hideyoshi car-ried out two cadastral surveys between 1582and 1590. The surveys assessed the productive

capacity of land in terms of koku

of rice equiv-alent (150 kg, enough to provide subsistencefor one person for a year). This kokudaka

assessment was the basis on which shogunssubsequently allocated income to the daimyo

(hereditary lords). The income initially repre-sented about 40 per cent of the harvest.

The Togugawa Shogunate, 16031867

The effective ruler was a new type of shogun,with much tighter control over a unified


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country. He and his leading retainers (

hatamoto

)occupied land which generated about a quarterof the countrys rice revenue. The puppet

emperor, the imperial household and the aris-tocracy in Kyoto had only 0.5 per cent. TheShinto and Buddhist temple authorities shared1.5 per cent (a great deal less than they hadpreviously enjoyed). The rest of Japan wasruled by the 270 daimyo

, whose administrationwas carried out by their warrior vassals (

samu-rai

) from castle towns. About a third of the ricerevenue was allocated to relatively small (

fudai

)

daimyo

, and the rest to more powerful andmore distant (

tozama

) lordsleading members

of the military lite who had survived the civilwar (see Hall and McClain 1991). Some of the

tozama daimyo

had opposed Ieyasu in the deci-sive battle at Sekigahara in 1600. The biggestof these were Choshu in southern Honshuand the Satsuma in southern Kyushu. Ieyasureduced the size of their holdings, rather thanrisking further conflict with domains whichcould muster a large force of samurai

. Theyaccepted the situation as they were autonomouswithin their own domains. However, underthe sankin-kotai

system, all daimyo

were required

to spend every alternate year with their retainersin Edo, and keep their families there perma-nently as hostages for good behaviour.

This system was an onerous obligation.Roberts described its incidence on the Tosadomain in southern Shikoku in the 1690s: Tosaannually moved from 1.5 to 3 thousand peopleand their baggage the 500-mile trek overmountain, sea and coastal highway betweenhome and great metropolis of Edo. In the springof 1694, a time of Edo residence, the domain

population statistics recorded 4,556 Tosa peo-ple in Edo. It can be said without exaggerationthat well over half of Tosas expenses wererelated to the costs of the alternate residencesystem. (Roberts 1998:18)

Daimyo

domains varied greatly in size. Theshoguns income was seven million koku(overa million tons). The minimum income of thesmaller daimyo was 10,000 koku (1,500 metrictons) of rice, but 28 daimyohad annual incomesranging from 100,000 to over a million koku. Atthe end of the Togugawa period, the largestwere Kanazawa, Sendai, Satsuma and Choshu

(Craig 1961; Reischauer and Fairbank 1958).The daimyoexchanged part of the rice stipendsfor cash from rice merchants. Over time they

became increasingly indebted to these mer-chants and bankers who were concentrated inOsaka.

It was a system of checks and balances thatestablished internal peace. Rural areas werecompletely demilitarised. Hideyoshi carriedout a sword hunt in 1588, which disarmed all

but the samurai, and after a period of gradualsuppression of their production the use of fire-arms was banned in 1615. The shogun heldunchallenged hegemonic power after 1615

when he killed Hideyoshis surviving relativesand destroyed their castle in Osaka. The daimyoand their samurai were compelled to live in asingle castle town in each domain, destroytheir smaller fortified settlements, and abandontheir previous managerial role in agriculture.As compensation they received stipends inkind (rice) supplied by the peasantry in theirdomain. Daimyo had no fixed property rightsin land and could not buy or sell it. The Sho-gun could move them from one part of thecountry to another, confiscate, truncate or

augment their rice stipends in view of theirbehaviour (or intentions as determined byshogunal surveillance and espionage). Between1601 and 1705, some 200 daimyo had beendestroyed; 172 had been newly created, 200had received increases in holdings; and 280 hadtheir domains transferred (Hall and McClain1991:1501). The shoguns magistrates directlyadministered the biggest cities (Edo, Kyoto,Osaka and some others), and controlled foreignrelations and the revenue from gold and silver

mines.

The impact on agriculture

Under the new regime, the farm populationwere no longer servile households subjected toarbitrary claims to support feudal notablesand military. Rice levies were large, but moreor less fixed, and fell proportionately over timeas output expanded. The ending of local warfaremeant that it was safer to develop agriculturalland in open plains. There was greater scope


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for land reclamation and increases in area undercultivation. This was particularly true in thepreviously under-developed Kanto plain sur-

rounding the new capital Edo.The dominant cultivation unit was about

one hectare per family, but there was consider-able inequality in villages with dominance ofthe local headman and his lieutenants. Onlypeople on the land registers paid the land taxand could participate in the village assembly.Tenantry was significant, but tenants weresocial inferiors to landowners. Land tax waslevied on the village as a whole, and the bur-den was distributed by the village assembly.

The termination of feudalism brought sub-stantial social changes which led to acceleratedpopulation growth in the seventeenth century:

. . . family formation became common, a populationexplosion was kindled, and the seventeenthcentury saw a baby boom in villages. Servantswho spent their lifetimes unmarried graduallydisappeared and the proportion married increased.A single household came to be composed of asingle married couple and their lineal relations,and, as a result, mean household size decreasedsignificantly. This phenomenon is clearly evident

in village population registers from 1670on . . . During the Tokugawa period, almost allof the arable land, which makes up about 15per cent of Japans total area, was converted intocultivated land, and only a few areas of levelpasture and forest remained. The populationgrowth also sent large numbers of men andwomen into the abruptly created cities (Hayami1986:3).

Printed handbooks of best practice agriculturestarted to appear on Chinese lines. Nogyo Zen-sho(Encyclopaedia of Farming1697) was the ear-

liest commercial publication, and by the earlyeighteenth century there were hundreds of such

books (see Robertson 1984). Quick-ripeningseeds and double cropping were introduced.There was increased use of commercial fertiliser(soybean meal, seaweed, etc.), and improve-ment in tools for threshing. There was a majorexpansion of commercial cropscotton, tobacco,oil seeds, sugar (in South Kyushu and theRyuku islands)and a very substantial increasein silkworm cultivation. These changes inagricultural practice involved a significantincrease in per capita labour input in agriculture,

and there was also a substantial growth ofrural industrial by-employment.

Some idea of the progress of agricultural

production in Tokugawa Japan can be derivedfrom the cadastral surveys. In 1598, total out-put was estimated to be 18.5 million koku. Atthe beginning of the eighteenth century, thetotal had risen to 26.1 million, more or lessequivalent to the increase in population (seeHall and McClain 1991). Nakamura (1968)made an estimate of cereal production for 1600to 1872 which showed that cereal output percapita increased by a quarter over the Toku-gawa period as a whole. In 1874, rice and other

cereals were 72 per cent of the value of grossfarm output. Other traditional products were10.7 per cent, and relatively new crops (cotton,sugar, tobacco, oil seeds, silk cocoons andpotatoes) 17.2 per cent. Most of the latter wereabsent in 1600 and escaped taxation, so theirproduction grew faster than cereals. If oneassumes that these other items were about 5per cent of output in 1600, this would imply agrowth of total farm output per capita of about40 per cent for the Tokugawa period as awhole. For the period before 1600 there is no

real quantitative evidence, but it seems likelythat there was little growth in agricultural out-put per head in the sixteenth century, whichwas so severely plagued by civil war.

Interpreting the eighteenth centurydemographic slowdown

In the eighteenth century, there was a signifi-cant deceleration in Japanese population growth.

Population grew by less than 15 per centfrom 1700 to 1820, after a 46 per cent increasefrom 1600 to 1700. The older interpretationwas Malthusian and attributed the slowdownto increased mortality from famine and dis-ease as a result of land scarcity.

The modern interpretation, based on villagestudies of fertility, mortality and life expectancyis very different. There were famines in theeighteenth and early nineteenth century, butthe demographic slowdown seems to have beendue to voluntary checks: greater incidence ofcelibacy, birth control within marriage, and


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later marriage. There is evidence that the 1720sto the 1840s were characterised by low birthrates, death rates that fluctuated around the

birth rates, and a life expectancy (about 34years at birth) near that in western Europe atthat time (36 years) and much higher than inChina and India (24 and 21 years). As a result,the age structure was favourable to high labourinputs: 60 per cent or more of the populationwas in the age group 15 to 64, two thirds ofthe population were active, and only one thirdwere dependents. The counterpart was anincreased standard of living for the mass of thepopulationattributable to increases in

cultivated area, yields, fertilisers and tools,increased activity in industrial and service by-employment, and increased commercialisationand specialisation.

Urbanisation

In 1600, 4.4 per cent of the Japanese lived intowns of 10,000 and over. By 1800, more than12.3 per cent lived in such cities. The changewas due in large part to Tokugawa policy. Edo,which had been a village, became a city of amillion inhabitants. About a quarter of thesewere daimyo relatives and dependents, whowere compelled to live there (see Smith 1986).More than two hundred castle towns werecreated, half of whose population were samu-rai. Most of them had not been cities before1600. Kanazawa and Nagoya were the biggestwith populations over 100,000. Kyoto and Osaka

both had populations over 300,000 in themid eighteenth century. Kyoto was the seat of

the emperor and his court and the centre ofa prosperous agricultural area; Osaka had

become a large commercial metropolis. Thethreefold increase in the urban proportion wasdue in part to the concentration of samurai incastle towns, and to the obligation on daimyoto maintain a second residence in Edo. But italso reflected growth in the standard of living.

The urban centres created a market for thesurrounding agricultural areas. They also cre-ated demand for servants, the service trades,entertainment and theatres. Merchants ceasedto be mere quartermasters for the military, and

acted as commodity brokers, bankers andmoneylenders. They were active in promotingsignificant expansion of coastal trade, and

shipping in the inland sea (see Crawcour 1963).Thus there was a large increase in many typesof service activity.

Education and interest in Westernknowledge

There was a substantial increase in levels ofeducation, with an emphasis on secularneo-Confucian values rather than Buddhism.

There was also a huge increase in book pro-duction and circulation of woodblock prints.Between the eighth century and the beginningof the seventeenth century fewer than 100illustrated books appeared in Japan; by theeighteenth century there were large editions of

books with polychrome illustrations and 40per cent literacy in the male population.

The Japanese had depended on Chinesebooks for knowledge of the West (Chinesetranslations of works by Matteo Ricci and other

Jesuits in Peking), but in 1720 the shogun,Yoshimune, lifted the ban on European books.An important turning point occurred in 1771when two Japanese doctors observed the dis-section of a corpse and compared the bodyparts (lungs, kidneys and intestines) withthose described in a Chinese book and a Dutchanatomy text. The Dutch text corresponded towhat they found. The Chinese text was inaccu-rate. As a result translations of Dutch learning(rangaku) became an important cultural influ-ence. Although they were limited in quantity,

the translations helped destroy Japanese respectfor things Chinese, and accentuated curiosityabout things Western. The Dutch window onthe Western world was influential in preparingthe ground intellectually for the Meiji Restora-tion of 1868. Dutch learning (painfully acquired)was the major vehicle of enlightenment for

Japans greatest westerniser, Yukichi Fukuzawa(18321901), whose books sold millions ofcopies, and who founded Keio University onwestern lines.

Although the Tokugawa regime had apositive impact on growth, and helped Japan


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catch up and pull ahead of Chinese per capitaGDP, it had serious drawbacks. It involved themaintenance of a large lite (about 6 per cent

of the population) whose effective militarypotential was very feeble in meeting the chal-lenges that came in the nineteenth century,and whose lifestyle involved extremely lavishexpenditure. Their consumption representedabout a quarter of GDP. The Meiji regimewas able to capture substantial resourcesfor economic development and military mod-ernisation by dismantling these Tokugawaarrangements.

The system of hereditary privilege and big

status differentials, with virtually no merito-cratic element, meant a large waste of poten-tial talent. The frustrations involved are clearlyillustrated in Fukuzawas autobiography. TheTokugawa system was inefficient in its reli-ance on a clumsy collection of fiscal revenue inkind and over-detailed surveillance of economicactivity. It also imposed restrictions on thediffusion of technology. The most importantwas the ban on wheeled vehicles on Japaneseroads and the virtual absence of bridges. Theserestrictions were imposed for security reasons,

but made journeys very costly and time con-suming. There were restrictions on the size of

boats, which inhibited coastal shipping andnaval preparedness. There were restrictions onproperty rights (buying and selling of land),arbitrary levies by the shogun, and debt defaults

by daimyoand samuraiwhich could push bank-ers and merchants into bankruptcy. The policyof seclusion, rebuffing all direct or diplomaticcontact with the west, was due to security con-siderations but was a serious constraint on

economic growth.

The first Western shock, 18531869

The Tokugawa regimes policy of seclusionbroke down as a result of Western intrusion.In June 1853, Commander Perry of the USNavy entered Tokyo Bay with four warshipsand a request from US President Filmore tonegotiate a Treaty of Amity and Commerce.The regime hoped to shake off the Americansas it had done with earlier Western attempts to

penetrate Japanese ports. However, the pres-ence of foreign warships was new and the

Japanese knew that China had been opened

up to trade by military and naval aggressionin the Opium War of 1842. The shoguns advi-sors realised that they must be cautious astheir weaponry was no match against thewesterners. They tried to procrastinate, but inMarch 1854 Perry returned with nine ships.The shogunate agreed to a limited treaty whichopened two ports to foreign ships for suppliesand repairs. It made no provision for trade,

but authorised the presence of an Americanconsul general. Harris, the consul, arrived in

1856, and pushed for a more ambitious treaty.He pointed to the British and French attack onChina (185660) as a further warning againstnon-compliance. A new treaty was signed in

July 1858 which opened six ports to foreigntrade, admitted American consuls to all the portswith extraterritorial privileges, and allowedonly moderate import and export duties. Withina few weeks Japan was pressured to signsimilar treaties with France, the Netherlands,Russia and the UK. They were on the samelines as the treaty the British had forced on

China, except that they made no provision foropium imports.

These treaties created major internal polit-ical problems for the shogunate. There was lossof face for abandoning the policy of seclusionunder foreign pressure. The shoguns chiefcouncillor circulated a copy of the 1853 Amer-ican proposals to all daimyoand solicited theirviews on the nature of the Japanese response.In doing this he undermined the shogunsprerogative of determining foreign policy

unilaterally. The answers showed there wasa strong feeling in favour of continuing theexclusionist policy. Nevertheless, this firsttreaty was signed. When the more ambitious1858 treaties came up, the new chief council-lor, Ii Naosuke, sought the approval of theemperor. Normally, this would have been aformality, but the emperor, under pressure fromthe exclusionist faction, refused. Nevertheless,these treaties were also signed. In 1860, Ii wasthe victim of a well-organised assassinationand the anti-Tokugawa movement gatheredmomentum. It was reinforced by the fact that


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the shogun had died in 1858, and was replacedby a 12 year-old.

In an attempt at conciliation, the shogunate

abandoned the sankin kotairequirement of dualresidence in 1862, and the number of daimyoresiding in Edo dropped precipitously. Finally,the two large tozamadomains of Satsuma andChoshu allied with key figures at the imperialcourt and declared a restoration of the Emperoras effective ruler. After a short struggle the lastTokugawa Shogun Yoshinobu (who succeededin 1866 and had already offered to resign) wasoverthrown in November 1867. The regimechange was accomplished relatively smoothly

without a civil war,

Asia in the World Economy 1500-2030

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